Retail Suppliers Seek to Terminate "Unsustainable" Nstar Green Generation Option

Retail suppliers have asked the Massachusetts DPU to terminate the Nstar Green optional generation rate, given the unsustainable nature of the program and emergence of competitive alternatives.

Nstar has sought changes to the program, calling the present structure "unsustainable." The Nstar Green program is fairly unique because, unlike other green options offered to default service customers, the Nstar program relies on PPAs with wind developers, rather than simply matching customers with third-party REC providers who add a charge for their RECs onto the standard basic service rate.

Because it sources green power under the PPAs, and sells such power into the spot market, Nstar Green has a unique generation rate which can vary substantially from the basic (default) service rate. The current Nstar Green rate is well above market, and customer participation is declining as a result.

Nstar offered two alternatives to the DPU. One option is to eliminate the Nstar Green Service entirely. In that event, the output of the Nstar Green contracts (energy and RECs) would effectively be applied to basic service rates and the net contract costs (REC costs +/– the energy settlement) would be recovered from basic service customers.

A second and "preferred" alternative is to modify the Nstar Green Program, "in order to preserve a voluntary retail green power offering for Residential and small C&I Basic Service customers that presently lack competitive green power options," Nstar said. Specifically, Nstar proposes that for 100% Nstar Green Service, the customer be charged a fixed cents/kWh retail rate to correspond to the cost of both the contract energy plus RECs on a per kWh basis. The rate would be set to reflect the total weighted average of the fixed long-term contract cost of the renewable energy, which the company determined equates to 10.3 cents/kWh.

For Nstar Green subscription at the 50% level, the rate per kWh would not be fixed, but would be set for six months every January and July (to coincide with changes in Basic Service rates) at the arithmetic average of 10.3 cents and the prevailing fixed basic service rate.

Unrecovered costs of the Nstar Green PPAs under this proposal would be recovered from all basic service customers through an annual surcharge included as part of the basic service cost adder, Nstar said.

Retail suppliers, however, urged the DPU to terminate the Nstar Green program, noting that the residential competitive market has grown significantly since 2008, when the DPU adopted Nstar Green due to concerns competitive alternatives were not viable for small customers.

The Retail Energy Supply Association noted that at the beginning of 2008, approximately 10% of residential customers were being served by competitive suppliers statewide, while, as of March 2013, approximately 16% of residential customers were served by competitive suppliers statewide.

"Moreover, once Massachusetts implements a purchase of receivables ('POR") program, the number of smaller customers receiving service from competitive suppliers is expected to increase exponentially," RESA said.

"While there is no centralized Internet portal listing competitive energy offers in Massachusetts, residential and small commercial customers are able to buy renewable energy products in the competitive market," Green Mountain Energy added. "For example, Just Energy and Viridian Energy both have several renewable options for residential and small commercial customers in Massachusetts, including 20 percent and 100 percent renewable content on variable and fixed terms. Green Mountain will offer its pollution-free brand of renewable energy products to Massachusetts residential customers upon approval of its license amendment by DPU."

Retail suppliers opposed Nstar's recommendation to continue the Green program with a new pricing mechanism, as Green Mountain Energy said that the new pricing methodology would subsidize a lower price for Nstar's Green program offerings through all ratepayers. "Allowing NSTAR to subsidize its Green program price on non-Green customers would give the company an advantage over other competitive retailers offering green products, who are not able to impose the costs of unprofitable contracts onto a large base of ratepayers," Green Mountain Energy said.

To the extent the DPU accepts Nstar's preferred approach of a new pricing mechanism, retail suppliers stressed that any unrecovered costs of the Green program must be bypassable, and not allocated to customers on competitive supply.

Green Mountain Energy also proposed a retail opt-out auction for customers remaining in the Nstar Green program, and other retail market enhancements, see related story linked below:

See Related Story Today: Retail Supplier Proposes Retail Auction in Massachusetts, Other Retail Market Enhancements