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State's Inspector General: Lack of Muni Aggregation Oversight Leaves Customers Vulnerable to, "Fraud, Waste, Abuse and Mismanagement"

December 11, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Massachusetts DPU's position that it may only narrowly review opt-out municipal aggregation plans to determine whether they conform to specific statutory criteria, "creates a substantial void in the regulatory and oversight structure for municipal aggregators, a void that leaves ratepayers and municipalities vulnerable to fraud, waste, abuse and mismanagement," the Massachusetts Office of the Inspector General said in a letter to the DPU.

The Inspector General's warning came in response to the DPU's refusal to consider concerns about the Cape Light Compact raised by the Attorney General in connection with the Compact's revised aggregation plan.

The AG has alleged three main concerns regarding the Compact:

• An "operational adder" charged by the Compact amounts to an unlawful fee or improper tax.

• The exclusion of municipal customers from the aggregation (who have opted out) means similarly situated customers are not treated equitably as required by statute, since municipal customers have unique rates (although the municipal customers have opted out, the AG alleges that the Compact opt-out aggregation is nevertheless still used as the vehicle to procure the supplies for municipal customers, since the Compact is not licensed independently as a broker to undertake such activities)

• Benefits and costs of the aggregation do not result in equitable treatment of customers, as required by statute, because customers paying the operational adder are not those who benefit from the adder. The AG alleges that the adder funds projects that disproportionately benefit municipal customers

The DPU has repeatedly refused to consider these allegations in review of the Compact's revised aggregation plan, finding them to be outside of the DPU's authority to review aggregation plans for compliance with specific statutory provisions.

The Inspector General said that as a result of this approach, "DPU is placing itself in a position of approving an aggregation plan that may violate state laws."

"DPU's position also creates a substantial void in the regulatory and oversight structure for municipal aggregators, a void that leaves ratepayers and municipalities vulnerable to fraud, waste, abuse and mismanagement," the Inspector General said.

"Simply having an aggregation plan on file should not be the ultimate goal of regulatory authorities. In fact, protecting taxpayer interests, ensuring accountability and transparency, and verifying compliance with the letter and the spirit of the law should be regulatory goals," the Inspector General said.

The Inspector General noted that it is also conducting a review of certain aspects of the Compact and its operations.

DPU Docket 14-69

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