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Mass. DPU Dismisses Attorney General Claims Against Cape Light Compact Muni Aggregation, But "Strongly Encourages" Review With Other Agencies

May 6, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Massachusetts DPU approved a revised municipal aggregation plan for the Cape Light Compact, dismissing various concerns raised by the Attorney General, as either irrelevant to the aggregation plan itself, or outside of the DPU's jurisdiction.

As previously reported, 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 affirmed prior preliminary rulings that certain issues related to these allegations are not appropriately addressed in reviewing the aggregation plan (which must only meet discrete statutory criteria), or by the DPU at all.

Additionally, the DPU noted that no party questions the Compact’s ability to charge a per kWh charge (i.e., the Operational Adder) to aggregation customers to cover the administrative and operational costs of the aggregation. Prior to 2013, the Compact determined the amount of the Operational Adder as part of the supply contract negotiation process. The Operational Adder is now set through the Compact’s Governing Board’s budget process.

Rather, the Attorney General alleges that the Compact’s use of a portion of the funds generated through the Operational Adder to support certain renewable energy projects and intervene in certain administrative proceedings may not be permissible under municipal finance law.

"Even if a court finds that the Attorney General’s allegations are valid, the Compact will not necessarily be required to file a revised municipal aggregation plan. If a court finds that the Compact’s Operational Adder constitutes an illegal tax because the Compact funds certain renewable projects and advocacy efforts through the adder, the Compact, consistent with the Plan, can adjust the amount and specific uses of the Operational Adder. These potential changes may not require a revised municipal aggregation plan because the Plan will still contain an accurate description of the organizational structure of the Compact’s funding (i.e., a per kWh charge to fund its administrative and operational costs associated with the Program)," the DPU said.

Nevertheless, "the Department strongly encourages the Compact to review its use and accounting of the Operational Adder with the appropriate administrative agencies (e.g., Department of Revenue and the Office of the Inspector General) to ensure that the Compact is complying with all applicable laws."

As the Compact's plan meets the statutory requirements for aggregation plans, the DPU concluded that the plan must be approved, as it reiterated that it does not possess the authority to review and approve municipal aggregation’s rates or charges.

Given its various concerns, the AG had asked that the DPU require the Compact to conduct a new opt-out mailing under the revised aggregation plan.

However, the DPU ruled that the Compact is not statutorily required to send opt-out notices to existing customers upon approval of a revised municipal aggregation plan.

Moreover, the DPU did not agree that specific instances regarding the Cape Light Compact require a new opt-out notice.

"Contrary to the Attorney General’s characterization, the Compact’s Operational Adder, support of renewable energy projects, and advocacy are not significant changes to the Compact’s operations. The Compact’s original municipal aggregation plan provided for a per kWh charge to fund administrative costs, renewable energy activities, and energy efficiency programs. The principal differences between the adder that the Compact proposed in its original municipal aggregation plan and the Operational Adder in the 2014 Plan is (1) the name, and (2) the process the Compact will use to determine the amount of the adder, not the use of the funding. Similarly, the Compact’s original plan also provided for the support of the development of renewable energy projects and advocacy before the Department. Also, approval of the Plan will not change the rates or service that existing customers are currently receiving under the Program," the DPU said.

The Compact explained that it will notify customers of the execution of all supply contracts and changes in prices through website postings, press releases, social media, and public notices. The DPU did require that the Compact, "shall remind customers that they may opt out of the Program in these notices, and promptly post on its Program website notice that customers may opt out of the Program and return to basic service by contacting the Compact’s supplier."

Regarding the availability of different supply rates to municipal accounts who have opted out of the aggregation, the DPU merely directed that reference to such rates, not available to aggregation customers at-large, shall be removed from the aggregation plan.

D.P.U. 14-69

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