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Utilities Propose Menu of Pricing Plans for Default Service Customers (Shopping Customers Would Subsidize)

August 20, 2015

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

As part of smart meter deployment plan filings, several Massachusetts electric utilities have proposed offering default service customers a menu of pricing plans, with the options subsidized by all distribution customers.

The Massachusetts DPU has previously ordered that, once AMI is deployed, the default basic service product will be a Time of Use rate with critical peak pricing, with non- basic service customers able to elect a flat rate with a peak time rebate

Nstar and Western Massachusetts Electric Company (Eversource), however, proposed an alternative menu of basic service pricing plans, citing the DPU's directive that utilities were free to present alternatives in their AMI plans.

Specifically, for residential and small C&I customers, Eversource proposes to retain the current flat rate basic service options (six-month fixed price or monthly variable), with two Time of Use options offered on an opt-in basis -- a critical peak pricing rate, and a second TOU rate Eversource called a Targeted Time-of-Use plan (which has more narrowly defined peak hours).

"These two options balance the Department’s desire to more closely match price signals in the wholesale market with Basic Service prices with the need to recognize that many customers may not be comfortable with the potentially extreme price swings that accompany CPP pricing or the long duration of traditional peak period pricing," Eversource said of its proposal

Notably, under both TOU options proposed by Eversource, pricing would be determined administratively (designed to be revenue neutral with respect to the default basic service rates), and not through separate basic service solicitations for those specific products.

Moreover, Eversource proposes to include revenue from the TOU options with all other basic service revenue in the determination of any year end reconciliation. "Basic Service reconciliation would continue to be recovered from all customers per the provisions of the NSTAR Electric Default Service Adjustment tariff and the WMECO Basic Service tariff," Eversource said.

Under Eversource's critical peak TOU option, there would be three time periods: off-peak, peak (12 pm to 6pm) and critical peak hours (varying by demand). Prices for each period would be fixed for a six-month period (January to June, July to December), with the critical peak prices set much higher for the July to December period.

Using an illustrative example of a 10¢/kWh basic service rate for flat basic service, Eversource's critical peak TOU option would result in peak prices of about 27¢/kWH, a January to June critical peak price of 55¢/kWh, and a July to December critical peak price of 87¢/kWh

Eversource's Targeted TOU plans would consist of a two-tier TOU structure with targeted peak hour pricing with no critical peak events called. The target peak would be condensed into three available two-hour tranches to be selected by the participant: 2 pm to 4 pm, 3 pm to 5 pm, and 4 pm to 6 pm. All other hours including weekends would be considered off-peak.

While Eversource proposes offering these TOU options to basic service customers, Eversource forecasts minimal customer uptake of the TOU options, at only 5%. Therefore, Eversource does not propose to conduct a full territory-wide deployment of Advanced Metering Infrastructure (AMI), citing the costs of full deployment, instead proposing to address any metering needs from TOU customers on an individual basis.

National Grid presented the DPU with several alternatives regarding AMI deployment. Specifically, National Grid filed four different grid modernization plan scenarios for consideration by the Department: (1) a "Balanced Plan" with full roll-out of AMI within 5 years along with advanced technology distribution investments affecting 30% of delivery customers; (2) an “"AMI-Focused" scenario with full roll-out of AMI with more limited application of advanced technology distribution investments affecting only 10% of customers; (3) a "Grid-Focused" scenario that implements AMI when the same advanced distribution technologies as in the Balanced Plan scenario are rolled-out to 30% of the customers, with AMI available to other customers on an opt-in basis; and (4) an "AMI Opt-In" option that focuses on advanced distribution technologies from the Balanced Plan roll-out to 30% of customers, with all customers having the ability to opt-in to AMI.

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