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Nstar Says New Design of Massachusetts Default Service Will Increase Retail Rates
The Massachusetts DPU's "anticipated policy framework" for time-varying default service rates, "will not produce the savings anticipated by the Department and is likely to increase the cost of electricity to Basic Service customers," Nstar and WMECO said in comments to the DPU.
As previously reported, the DPU proposed making the default basic service rate a time-varying rate (TVR) with a peak and off-peak price, with critical peak pricing. Customers would also be permitted to opt onto a flat basic service rate with a peak time rebate.
"The TVR Framework Order is not consistent with the wholesale electric market structure ... Adoption of the proposed TVR framework will not produce the savings anticipated by the Department and is likely to increase the cost of electricity to Basic Service customers," Nstar and WMECO said (the NU companies)
"If the Department elects to require Basic Service suppliers to bid differentiated rates to further TVR directives, then it will increase the risk and thus the associated cost of serving Basic Service customers," the NU companies said.
"The timing, duration and magnitude of critical peak pricing ('CPP') events or periods in which peak time rebates ('PTR') may occur are highly uncertain. While Basic Service suppliers would be required to offer a CPP or PTR product, they will be unable to efficiently manage the market exposure associated with that product. Wholesale suppliers that elect to supply Basic Service under a TVR framework will likely increase their risk premiums which will then be passed on to Basic Service customers, possibly further eroding whatever modest savings customers may be able to achieve under TVR. Alternatively, wholesale suppliers may decide not to bid to supply NSTAR Electric and WMECO's Basic Service entirely if they are forced to price their product in a manner that is inconsistent with the cost structure of their portfolio and deem the risks introduced by TVR to be unacceptable," the NU companies said.
"Currently, 51 percent of NSTAR Electric and 59 percent of WMECO small and medium C&I energy is purchased through Basic Service, while 77 and 89 percent, respectively, of residential purchases are through Basic Service. If wholesale market suppliers decline to serve load under the proposed TVR Framework, or if the Department requires the Companies to serve customers through the real-time market, these customers will be denied the benefits of being supplied by a managed portfolio and be subject to highly unpredictable electricity costs," the NU Companies said.
"Given the inconsistencies with the wholesale electric market, and the negative financial implications for NSTAR Electric and WMECO's customers that the TVR Framework will introduce to Basic Service, the Companies respectfully request that the Department retract the proposed TVR Framework. As noted previously, TVR is not necessary to advance the Department's grid modernization objectives, and, rather than impose significant financial hardships on customers, the Department and EDCs should explore other avenues to continue to modernize the grid for the benefit, not detriment, of customers," the NU Companies said.
ADVERTISEMENT Copyright 2010-
July 8, 2014
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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com
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