Regulator Proposes Applying Default Service Bill Recalculation To Municipal Aggregation Customers, Except When Aggregation Starts Coincident to New Default Service Term

The Massachusetts DPU has proposed that the basic service bill recalculation apply to all municipal aggregation electric customers, except in cases where the aggregation is initiated coincident with the start of one of the basic service pricing terms.

The basic service bill recalculation retroactively applies monthly basic service rates to the customer's prior usage (instead of the fixed rate the customer had been paying). This can result in a charge or credit to the customer based on basic service pricing.

The DPU recently eliminated the basic service bill recalculation for residential and small C&I customers; however, in doing so, as first reported by EnergyChoiceMatters.com, the DPU said that it would further consider treatment of the basic service bill recalculation with respect to municipal aggregations.

The DPU said, "due to the cumulative electric load of municipal aggregation customers, the risks to distribution customers associated with switching municipal aggregation customers from basic service to competitive supply is similar to the risks of a large C&I customer switching to competitive supply."

"Therefore, the Department recognizes that similar to large C&I customers, switching municipal aggregation customers in bulk at the initiation of a municipal aggregation program from basic service to competitive supply may result in a significant cost shift to all distribution customers," the DPU noted.

"To strike a balance between minimizing customer confusion and dissatisfaction with bill recalculation and mitigating potential cost shifts to other customers, the Department proposes to not apply the bill recalculation requirement for customers that are automatically switched from basic service to competitive supply at the initiation of a municipal aggregation program if the municipality initiates its municipal aggregation program coincident with a residential and small C&I basic service term," the DPU said

The DPU noted that, "Although a municipality may intend to initiate its municipal aggregation program coincident with a basic service term, as a practical matter customers are enrolled in the program on the date of their meter read. Therefore, under bill recalculation, if a municipal aggregation program is initiated coincident with a basic service term, a customer's bill will be calculated based on the variable rate for usage between the first day of the new basic service term and the date of the customer's meter read. Our proposal eliminates this bill recalculation when a municipal aggregation program it initiated coincident with the new basic service term."

The DPU said that when an aggregation service term starts coincident to a basic service pricing term, "the municipal aggregation is not attempting to 'game the system;' accordingly, it is appropriate to eliminate bill recalculation under this scenario."

"The Department, however, considers it appropriate to continue to apply the bill recalculation requirement if the municipality initiates its program at another point during a residential and small C&I basic service term. Maintaining the bill recalculation provision in these instances mitigates the potential to shift significant costs to other customers," the DPU said

The DPU sought comments on its proposal.

Several notable issues were not explicitly addressed by the DPU.

First, although for customers shopping outside of a municipal aggregation the elimination of the basic service bill recalculation was limited to residential and small C&I customers, the DPU's elimination of the basic service bill recalculation for municipal aggregation customers when service starts coincident to a default service pricing period as described above is not explicitly limited to residential and small C&I customers (a passing reference is made to the six-month basic service pricing term, applicable to only residential and small C&I customers). Though many municipal aggregations exclude large C&I customers, a cursory review of the municipal aggregation statute does not indicate that municipal aggregations are excluded from serving large C&I customers on an opt-out basis. And while many large C&Is are on monthly variable basic service (and no recalculation would apply), some take fixed price default service, and under the DPU's proposal as written, if such large C&Is are included in a municipal aggregation with a term starting coincident to a basic service pricing term, they would escape the basic service bill recalculation, while they would be subject to the recalculation if shopping outside of an aggregation.

The DPU's proposal is also focused on the start of the aggregation itself, but customers may join the aggregation after the start date. In one case, where customers voluntarily opt-in after the start of the aggregation, such customers could arguably be covered by the current elimination of the basic service bill recalculation for customers who shop outside of an aggregation, since such customers were not automatically enrolled in the aggregation.

However, to the extent that there are customers who are automatically enrolled into the municipal aggregation after its start date, the treatment of such customers is not explicitly addressed. Though we are not certain of this treatment under the statute, presumably newly energized distribution accounts in an aggregation territory are automatically enrolled with the aggregation (subject to opt-out) after some initial period on basic service. The DPU is not explicit in how the basic service cost recalculation will be handled with respect to these customers

In proposing that municipal aggregation customers be subject to the basic service bill recalculation, except where an aggregation term starts coincident to the start of a default service pricing term, the DPU said, "The Department, however, identifies one important factor that distinguishes customers enrolled at the initiation of a municipal aggregation program from customers that choose their own competitive supplier. Customers that choose their own competitive supplier are typically targeted by competitive suppliers through a 'mass-marketing' strategy and, therefore, likely do not discuss with the supplier the potential benefits of strategically switching between basic service and competitive supply. In contrast, municipal officials overseeing a municipal aggregation program typically hire consultants and electricity brokers to identify advantageous times to initiate municipal aggregation programs, and transfer municipal aggregation customers in bulk to competitive supply based on favorable market conditions"

DPU 14-140-B