Nstar Expresses Concerns About Default Service Risk Premiums Under Latest City Of Boston Opt-Out Aggregation Schedule, If City's Supply Agreement Not Signed By April 30

March 13, 2020

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Nstar (Eversource or "the Company") filed comments with the Massachusetts DPU stating that the City of Boston's latest proposed schedule for the City's municipal opt-out aggregation plan still exposes Nstar basic service customers, and shopping customers, to risk premiums, if the City does not execute a supply agreement, for a January 1, 2021 start date, by April 30, 2020

Nstar said, "Eversource’s next Basic Service procurement for residential and small commercial customers is scheduled for bids to be received on May 12, 2020. The May 2020 procurement covers 50% of the Eversource Basic Service load for two time periods: July-December 2020 and January-June 2021. The Company’s planned November 2020 Basic Service procurement will also cover two time periods: January-June 2021 and July-December 2021. Essentially, in each procurement the Company procures 50% of its needed load for the near term six month period, and 50% of its long term needs for the subsequent six month period. Eversource’s Basic Service providers bid a price based on their estimate of the load to be served. As outlined below, the Company recommends that the Department establish a program start date for the City’s Aggregation Program that is both consistent with the Company’s basic service implementation date, and will allow for two basic service solicitations to take place after the City enters into an Electric Supply Contract ('ESA'), this will ensure that by the time the City’s aggregation plan is implemented, the basic service procurement process has fully accounted for the City’s plan and will help mitigate any risk premium associated with the plan."

Nstar agreed that, if the City is able to secure an ESA and notify Nstar by April 30, 2020, and if the planned implementation date of said ESA is January 1, 2021, the impact of the Plan on Basic Service will be mitigated, and the 'risk premium' described in Nstar's August 20, 2019 Initial Comments will be reduced.

However, Nstar expressed concerns with the impact of the aggregation on default service if the City does not secure an ESA by the date described above

"[T]he Company does not agree with the City’s proposed timing request number 4, which states that if the City is not able to secure an ESA in the timeframe described above, it 'will work in good faith to execute an ESA later in 2020 similarly for a January 1, 2021 commencement date.' Motion at 8. The City further states that in this scenario, 'Eversource, consistent with its own recent practices, should be encouraged to undertake appropriate adjustments to its Spring or Fall default basic service procurement process.' Such a suggestion will not mitigate the risk premium encountered by the Company in its Basic Service solicitations, as it will not provide sufficient time between the Basic Service procurement and the planned commencement date," Nstar said

"The Company explained in its August 20, 2019 Initial Comments that the timing of when the City load switches from Basic Service to the municipal aggregator is extremely important because if not done in a scheduled manner, significant cost impact would occur. If the switch date is uncertain, wholesale suppliers may not submit bids to provide Basic Service, and those that do bid may build into their bid price a risk price premium with the switch load date being unknown. This risk premium would not only have a negative impact on Eversource’s Basic Service customers throughout Eastern Massachusetts, but also on customers receiving competitive supply, as competitive suppliers benchmark their price offerings against the Basic Service price and thus could raise prices for new or re-enrollment of customers," Nstar said

"While the Company initially focused on the January 1, 2021 start date in its initial comments, for any order issued after November 1, 2019, that focus was premised upon the Department issuing an Order after November 2019, but before the Company’s May 2020 basic service solicitation. If the City is not able to secure a supplier prior to the Company’s May 2020 solicitation, a program start date for January 1, 2021 is inappropriate. The Company, therefore, recommends that the Department’s Order on the City’s Plan, to the extent it follows the City’s Motion, revise Item 4 to reflect that if the City is unable to obtain an ESA by April 2020, its program start date shall be July 1, 2021," Nstar said

"Dictating the start date of the City’s Plan to be consistent with the Company’s Basic Service procurement, and to be timed appropriately so that two Basic Service procurements can take place prior to the Plan’s implementation date may help to mitigate the pricing issues that will inevitably result from such a large number of Basic Service customers potentially migrating to receive service from the Plan," Nstar said

Nstar also said that the City's desire to be provided with a list of customers on competitive retail supply, to whom the aggregation would be promoted (along with what the City has called "educational" materials about "predatory" retail supplier marketing), is not authorized by the DPU's prior order concerning customer lists, and would require a change in the Nstar tariffs. Nstar said that any such potential tariff change should occur in a separate proceeding with an opportunity for stakeholder comment, and not the docket considering the City's aggregation plan

EnergyChoiceMatters.com had exclusively reported that the City of Boston is seeking "full" customer lists from Nstar, with the list including competitive retail supply customers, so the City can contact and "educate" customers about risks from retail supply and potential responses to "predatory marketing" by retail suppliers (see prior story here for details)

D.P.U. 19-65

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