Regulator Orders Municipal Aggregations To Disclose Adder Paid To Consultant In Opt-Out Notices, State That Rates Not Guaranteed To Beat Default Service

The Massachusetts DPU has issued orders requiring electricity municipal opt-out aggregations to disclose, in customer opt-out notices, administrative adders that are used to compensate the aggregation's consultant, and revised the treatment of new customers moving to the aggregation service area.

In addressing an aggregation plan filed by the Town of Lexington (Docket 16-152), the DPU ruled that an opt-out notice filed by the town, "does not prominently identify all Program charges."

"Specifically, it does not identify the administrative adder that will be used to compensate the Consultants," the DPU said

"To address this issue, the Town shall file a further revised exemplar opt-out notice that prominently identifies the administrative adder," the DPU ordered

The DPU also ordered further disclosure regarding that aggregation rates are not guaranteed to be lower than default service rates.

"General Laws c. 164, § 134(a) further provides that municipalities must fully inform customers about the plan, including the benefits and consequences of municipal aggregation. Certain municipal aggregations may seek competitive supply rates that provide savings for participating electric customers compared to basic service rates. Due to changes in market conditions and differences in contract terms a municipal aggregation cannot guarantee customers cost savings compared to basic service over time. Accordingly, the Town must clearly explain that customers are not guaranteed cost savings compared to basic service," the DPU ordered

During the case, the town had filed a revised opt-out notice that contains language that: (1) states, in the only instance where cost savings or lower rates are referenced, that such savings cannot be guaranteed; (2) identifies the applicable dates of NSTAR Electric’s next basic service rate changes; (3) explains that the aggregation price is guaranteed to remain below the basic service rate only until that date; and (4) describes how to access the basic service rate

Apart from the additional requirement to disclose the administrative adder to compensate the aggregation's consultant, the DPU found that this revised opt-out notice meets the requirement to explain that customers are not guaranteed cost savings compared to basic service

The DPU also modified how new customers in an aggregation service area, located within Nstar, are treated, ending the ability of municipal aggregators to immediately serve such new customers at service initiation. Instead, new customers will at first be placed on basic service (unless they informed the EDC they wished to continue with their existing competitive supplier). This change brings the Nstar territory in line with the treatment of new customers in aggregation territories at the other EDCs.

Previously, the DPU had allowed the Cape Light Compact to immediately serve new customers in its service area under its aggregation, with customers later informed of their ability to opt-out. However, the DPU explained that this policy was adopted under a prior statute which limited a municipal aggregation's rate to a rate not to exceed the default service rate (absent a demonstration that the aggregation's rate would be lower than default service in future years).

Since that time, the municipal aggregation statute has been revised. As part of the Green Communities Act, the Legislature amended G.L. c. 164, § 134(a) such that municipalities are no longer constrained in the price they may charge for aggregation service.

"Accordingly, automatic enrollment in a municipal aggregation plan’s standard offering will no longer ensure that new customers receive the least expensive supply option available. New customers who are automatically enrolled may pay more for supply service as compared to basic service, even only if for a short period of time while waiting for the municipality to comply with the opt-out notice requirements," the DPU noted.

"Accordingly, in order to ensure that participation in an aggregation program is voluntary and, further, to ensure consistent treatment of new customers across all distribution company service territories, the Department finds that it is appropriate to reconsider its previously-approved treatment of new municipal aggregation customers in NSTAR Electric’s service territory. Going forward, all new customers that move into a municipality within NSTAR Electric’s service territory and have not previously informed the distribution company that they wish to maintain service with their existing competitive supplier shall initially be enrolled in basic service. Then, once the municipality (through its competitive supplier) has complied with the applicable opt-out notice requirements, the municipality may enroll the new customers in the aggregation program if the customers have not opted out," the DPU said

The Cape Light Compact had already made this change in a revised aggregation plan, but the DPU had not addressed the policy generally until now.

The DPU also made the same findings with respect to an aggregation plan filed by the Town of Walpole