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Massachusetts Department of Energy Resources, Utilities Oppose Deferral of National Grid Basic Service Rate Increases

October 21, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

The Massachusetts Department of Energy Resources and several utilities have opposed proposal to defer National Grid's basic service rate increase, which will see residential rates double starting November 1, stating that deferral will exacerbate challenges caused by the increase.

"DOER recognizes that the basic service rates scheduled to take effect on November 1, 2014 will be a challenge for ratepayers, many of whom will face difficulties in paying their electric bills. DOER believes this challenge will be exacerbated by deferring rates. DOER recommends that the Department not defer basic service cost recovery for two reasons: (1) Department review of the Basic Service Filing is limited to the solicitation process itself, is not a review of rates, and DPU precedent does not support deferral in this instance; and (2) assisting customers to reduce their load is preferable to additional costs resulting from merely delaying collection," the Department of Energy Resources said.

DOER is the Massachusetts executive agency generally responsible for establishing and implementing the Commonwealth's energy policies and programs.

DOER noted that in addition to statutory impediments to a deferral, a deferral, "would almost certainly increase the total cost of supply to ratepayers, as carrying costs would be added to whatever amount is deferred."

"While customers would experience initial relief from increased rates during November to April, they would ultimately pay more to cover the carrying costs applied as a result of National Grid carrying debt. Traditionally, electric supply costs decline during the May through October period for National Grid. In deferring partial rate recovery, residential ratepayers would pay for the portion of deferred rates and associated carrying costs at a time when they expect rates to be at the low-point for the year. However, as that supply is not fully contracted for and electric prices continue to rise in the region, there is no guarantee that rates will be significantly reduced come May (particularly in light of pending generator retirements in the region)," DOER said.

DOER's opposition to a deferral included specifically opposing the use of a weighted average cost basic service rate (via deferral and proxy of future costs), which was the proposed alternative cited by the DPU in a notice seeking comments.

"DOER also recommends distribution companies provide information on competitive suppliers available in their service territories. Competitive suppliers face similar pricing challenges as distribution companies; however, their contracting methods and term lengths may allow for potential savings to their customers over the course of a year."

However, DOER also, "encourage[d] distribution companies to continue to seek diverse sources of electric supply, including in-region renewable generation and large-scale hydroelectric energy."

National Grid, Nstar & WMECO, and Unitil, in separately filed comments, all oppose a deferral of basic service rate increases as well. Among other things, the utilities warned of negative impacts on the competitive wholesale and retail markets, and unintended consequences from large-scale migration to and then from basic service if winter rates are deferred to be significantly below market, but then summer rates significantly exceed market prices.

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