Regulator Declines To Allocate More Costs To Default Service in Rate Case

The Massachusetts DPU in an order on National Grid's electric rate case declined to assign more costs to bypassable basic service rates, rejecting arguments made by Direct Energy

Direct Energy had argued that National Grid was not including certain supply-related costs in the bypassable Basic Service Administrative Cost Factor as set forth in the Basic Service Adjustment Provision (BSAP), resulting in distribution customers (who are assigned such costs in delivery rates) subsidizing basic service customers

However, the DPU maintained its precedent regarding the allocation of certain costs related to basic service, and also rejected Direct's arguments with the specific amounts assigned by National Grid

For example, Direct Energy had recommended an allocation to the BSAP of at least 57 percent of the billing system and related billing costs and 25 percent of customer care costs

"The Department has clearly set forth the types of costs that are included for recovery through the BSAP and those that should be excluded. D.T.E. 02-40-B at 16-18. In particular, indirect retail costs, such as costs 'associated with the provision of customer service and billing to [basic] service customers,' are not included in the calculation of BSAP prices. D.T.E. 02-40-B at 17. Therefore, based on Department precedent, the Company is not required to allocate billing and billing-related costs and customer care costs to the BSAP," the DPU said

The DPU also said that National Grid properly assigned costs related to basic service supply procurement.

National Grid has proposed to assign approximately $580,000 through the BSAP, which represents a variety of costs associated with administering basic service. Direct Energy had stated that this amount translates into about two or three mid-level utility employees to manage the basic service business, which Direct said is unreasonable for a company the size of National Grid. According to Direct Energy, it is more reasonable to expect 75 or more employees to administer basic service

However, the DPU found that National Grid provided persuasive evidence to demonstrate that the costs attributable to administrating basic service are commensurate with the scope of work performed by the EDC

While declining to assign additional costs to basic service rates at this time, the DPU said, "Regardless of the specific outcome offered here, however, the Department reemphasizes its commitment to developing the competitive supply market in order to offer customers more diverse products, price certainty, and lower prices. In this regard, we recognize the importance of fully identifying and accounting for all of the direct costs incurred in the procurement, administration, and billing of basic service. The Department looks forward to future opportunities to work with suppliers and the supplier industry groups to learn from other markets, adopt best practices, and continue to develop a fair and competitive market in the commonwealth."