Massachusetts Rules on Collection of Default Service Costs in Distribution Rates

The Massachusetts DPU has issued an order addressing the collection of certain default service costs in distribution rates payable by all customers, including those on competitive supply.

Specifically, in a proceeding reviewing the design of certain reconciliation mechanisms, the DPU affirmed that the current collection of the basic service (default service) reconciliation factor from all distribution customers shall continue.

The Retail Energy Supply Association had argued that the electric distribution companies should be required to cease collecting the basic service reconciliation factor from all distribution customers and, instead, collect those costs only from basic service customers.

"As part of the Department's initial investigation into the pricing and procurement of basic service, the Department found that basic service is intended to act as a safety net for all customers even if they do not currently receive generation supply from a distribution company. In addition, the Department found that, because customers on basic service frequently change, collecting or refunding basic service reconciliation costs from or to basic service customers may not collect or refund the costs from the actual customers that caused the costs. This outcome could result in large swings in the basic service price because basic service load may vary significantly from one month to the next. Accordingly, the Department found that, because basic service benefits all customers, the reconciliation of basic service costs should be recovered from or returned to all customers," the DPU noted.

The DPU said that RESA is incorrect in its assertion that recent legislation addressing reconciliation factors prohibits distribution companies from collecting any basic service-related costs in distribution rates. "Section 51 addresses how costs that are currently recovered from all distribution customers must be allocated (i.e., using cost-based criteria where cost causation is clear). Section 51 does not require the Department to revisit any prior policy determinations regarding where costs are appropriately collected (i.e., basic service versus distribution rates)," the DPU said.

"Accordingly, the Department finds that RESA's proposal to change the way that basic service reconciliation costs are collected is outside of the scope of this proceeding,"

Similarly, the DPU denied RESA's proposal to collect Long-Term Renewable Contract Adjustment Factor (LTRCA) costs from basic service customers instead of distribution customers

Docket D.P.U. 12-126-A