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Boston Requests DPU Withdraw Prior Direction For City To Cease Marketing A Low-Income Discount Associated With SMART Program As Part Of Boston's Municipal Aggregation

April 30, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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The City of Boston has filed a letter directed to Massachusetts DPU Chair Matthew Nelson requesting that Nelson withdraw a December letter which directed the City to stop marketing the discount Boston is working to offer to low-income (R-2) customers in its op-out municipal aggregation, using SMART Incentive payments, as the City said that the DPU's cease and desist letter, "interferes with the City’s clear right and responsibility to set rates for the Boston Community Choice Electricity program ('Program') in an equitable manner."

See our prior story for details on the letter from the DPU Chair to the City of Boston

Among other concerns, the DPU letter stated that the City's low-income discount may be inconsistent with G.L. c. 164, § 134(a) and Department rulings. Although the DPU did not further detail how the low-income discount offering may be inconsistent with G.L. c. 164, § 134(a), such statute, among other things, provides that a municipal aggregation must provide for "universal access" and "equitable treatment of all classes of customers."

Notable in the City's response is the City's observation that, "The Department has repeatedly held that rate-setting within a municipal aggregation program rests entirely with municipal officials and is an area where the Department has no authority or jurisdiction."

In a response filed with the DPU today, the City of Boston said, "As you know, the City’s goal is to offer the Discount to its Program’s more than 20,000 low-income customers as soon as possible to help make electricity more affordable to a particularly vulnerable part of Boston’s population. In consultation with DPU staff, we have learned that the Department intends to prevent implementation of the Discount until it issues an order in Docket 20-145, which the Department does not expect will be before the end of 2021."

"As an initial matter, the City objects to the linkage of the low-income solar SMART Incentives to DPU Docket 20-145. Developers of all other types of solar projects are permitted to apply to the SMART program; it is only the project developers that would benefit low-income customers that are prevented from applying to the SMART process. Since all other solar project developers are allowed into the SMART queue and will fill the SMART program blocks, but developers of low-income municipal aggregation projects are sidelined; missing out on the opportunity to receive higher incentives," the City said

"The Discount the City had under contract was expected to flow to customers starting in the spring of 2021, continue for approximately 20 years and to deliver between $20-50 million dollars in savings for literally thousands of our most vulnerable residents. The City is proud of its role in developing and implementing this innovative and extraordinarily beneficial opportunity. Unfortunately, due to the delay, the City has, to date, lost the opportunity to support at least 12MW of solar generation, reducing the aggregate potential discount available to our low-income customers by $6 million and has delayed low income customers from receiving any savings at all. Further such lost opportunities are expected unless the Department takes the steps described below," the City said

"The Discount will be delivered by simply applying SMART Incentive payments received from one or more developers to reduce the price that each low-income customer pays for each kilowatt hour of electricity; the Program Supplier will receive the incentive from the solar developers to reduce the amount each of the Program’s low-income customer pays for each unit of electricity. As such, this Discount represents rate setting by Boston which under state law is its exclusive responsibility," the City said

"While Boston was the first City to announce a low-income discount using the SMART incentives, it understands that numerous other towns and cities will implement similar programs. This SMART low-income discount will finally allow low-income customers to benefit from the solar market. The City believes that its proposed approach will deliver more benefits to low-income customers than the DOER’s SRECI, SRECII and SMART programs have in aggregate to date for the entire Commonwealth," the City said

"It is critical to the achievement of the Commonwealth’s and the City’s climate change goals consistent with equity principles that the City be permitted to move forward with this Discount. The City is fully committed to providing this substantial benefit to its low-income customers. The City had spent considerable effort and time to seek to resolve your concerns informally, but that approach has not been fruitful to date. The City hopes that this letter provides you with the factual background on the City’s proposed structure to deliver these benefits and that all parties can work together to finally deliver savings to our most vulnerable neighbors. The City was ready to make the savings available in a matter of weeks had your letter not directed us to cease marketing activities. Now that the City has responded to your concerns, please do note that it is prepared to take other procedural or legal actions to implement the Discount. To reiterate, the City’s primary aim here is to provide this substantial benefit to our low-income residents as soon as possible," the City said

"For several years the City of Boston has been working with a diverse group of citizens and stakeholders to develop and implement its Program. The Program reflects and includes a thoughtful set of Principles and Values, which have been incorporated in Section 3 of the Plan. The Principles and Values include enhancement of electricity price stability and consumer protection while also securing important environmental benefits associated with the greenhouse gas emissions reductions that result from additional local and regional renewable energy investments. The City’s clearly-stated objective has been for the Program to secure benefits for citizens over the long term, responding to emerging opportunities in the competitive market to advance our energy-related goals and objectives," the City said

"After carefully following all established procedural requirements and pursuing an unprecedented level of stakeholder participation, on June 20, 2019, the City filed the Program for approval by the Department. The City used well-accepted and repeatedly approved forms and received unprecedented statements of support from extraordinarily diverse representatives of our neighborhoods, community groups and environmental advocates. The Department completed its initial review of the Program on July 22, 2020. The City launched Program service in February, 2021, after extensive and unprecedented consultation and coordination during Program development with the City’s distribution utility Eversource, the Department of Energy Resources (DOER), the office of the Attorney General and the Department," the City said

"The City and its consultant, consistent with the express terms of the approved aggregation plan, have sought to identify and implement market opportunities within established and accepted practices that also bring new and additional benefits to our residents. An emerging and extraordinarily beneficial opportunity identified in this process is for the City to employ the standard form Electricity Service Agreement (ESA) to secure two substantial benefits: (i) a material and long-term price reduction to the electricity cost for each and every low-income customer participating in the Program; and (ii) the indirect support of a range of new solar electric generating facilities. In this simple financial structure, solar developers will direct a portion of incentive payments they receive pursuant to the DOER’s SMART regulations to the Program’s electricity suppliers to facilitate their provision of a lower price for all participating low-income customers, again as is provided for in the City’s approved plan. This approach adheres and conforms to both DOER SMART regulations and the Department’s long-held requirement for equitable treatment across customer classes. There is no new or added role required of Eversource. There is no plan nor any need to utilize any so-called 'on-bill credits,' including the Alternative On-Bill Credit currently made available pursuant to Eversource’s Solar Massachusetts Renewable Target tariff. The City takes absolutely no financial or operational risk and strictly complies with established municipal aggregation practices. Low-income customers have not, to date, benefitted from the ongoing solar development and have effectively subsidized other customers (see DOER SMART Presentation, September 5, 2019, Slides 19-20). The City’s proposed arrangement will finally change this outcome," the City said

"The City carefully and thoughtfully developed this structure, which should be a model for other aggregation plans. The City’s representative has been discussing this structure with senior officials at DOER for more than 20 months. The City believed that this approach was permissible even prior to the DOER’s recent revision to the SMART program. The revised terms for the SMART program adopted last year only confirmed that conclusion. The City’s consultant expressly requested that DOER confirm the validity of the approach, which DOER did in the form of a so-called 'pre-determination' letter dated October 20, 2020. In addition, the City does not require any changes to the currently effective utility tariffs that implement SMART. As discussed below, recently filed revisions currently under Department review are not relevant to this matter; the City does, however, request that the Department be careful not to adopt any provisions within that ongoing tariff review that inappropriately restrict beneficial opportunities such as the City’s low-income customer initiative," the City said

"The City expected to formally advise the Department of this program at the traditional time, namely with the submission of the consumer notification form for the planned low-income customer rate change. Instead, the Chairman’s Letter noted that, after review of certain 'publicly available materials' related to the Program, the Department directed the City to 'cease' the marketing of a lower rate to the Program’s low-income customers. The City was not provided any notice or opportunity to be heard, particularly to question the Department’s action, what evidence it relied upon, what specific findings of fact or law were made as a basis for your directive (which, notably, was not joined by other Commissioners). The Letter cited three concerns, each of which could have been fully explained had the Department requested additional information, which the City will now address. First, the Letter noted that updated SMART implementation tariffs had recently been filed and were under review by the Department (in D.P.U. 20-145). The structure implemented by the Program to deliver a lower rate to low-income customers is not dependent upon the revised tariff terms, but instead relies upon the currently effective tariffs that are not proposed to be revised in the pending Department review. This conclusion was confirmed by the Distribution Companies’ joint Initial Supplemental Filing dated February 11, 2021," the City said

The City further said, "Second, the Letter suggested that an alternative rate for a customer class (here cast as a 'discount') is somehow not permissible either 'in connection' with the SMART program or 'otherwise.' However, providing the discount equitably to all low-income customers in Rate Class R-2 through a per-kilowatt-hour discount is consistent with the City’s approved plan which provides at Section 8.1: 'The competitive bid process will seek prices that will differ among the rate classifications established by Eversource tariffs. The terms and conditions of service may also vary among rate classifications.'"

"The City is permitted by its Plan to rely on the classifications established by Eversource and upon the assignment of customers by Eversource to particular customer classes. Just as the City could have different rates for commercial or industrial customers and different types of commercial or industrial customers, so too it can have different rates for residential (R-1) and low-income residential (R-2) customers," the City said

"The Letter then went on to suggest that Department 'review' or authorization of the offering was required. This conclusion was reached without seeking to understand the actual structure to be employed by the Program, which, as described above, is an equitable class-wide discount for low-income customers. The City contends that this understanding could have been reached had the Department simply asked the City for further information," the City said

"There is clear and substantial precedent that aggregation plans may set pricing at differing levels for their various customer rate classes. The Letter seems to suggest that any change in pricing or a decision to charge different prices to different rate classes requires a formal Department review of the plan document amendment. This is a very different view from the statute and the Department’s own prior findings; the Department has held that the Department must be focused on the contents and descriptions within the aggregation plan and, thereafter, an aggregation plan such as the Program is intended and able to participate in the competitive electricity market. City of Lowell, D.P.U. 12-124 (2013) (pp. 26, 29, 47) and Interlocutory Order on Attorney General’s Motions to Compel Discovery (April 4, 2013). (p. 6). Not only is the Letter’s suggestion inconsistent with the law and its own precedent; it is entirely impractical. The Department current approach often requires an entire year or more to review modest changes to aggregation plans," the City said

"Finally, the Letter made the general and broad assertion that the Program’s savings opportunity 'may be inconsistent' with the relevant statute governing municipal aggregation plans or prior Department precedent. Again, the City carefully and diligently applied established precedent and accepted practices. See City of Lowell, D.P.U. 12 -124 (2013). The Department has repeatedly held that rate-setting within a municipal aggregation program rests entirely with municipal officials and is an area where the Department has no authority or jurisdiction," the City said

"The City requests that the Department promptly withdraw the Chairman’s Letter and replace it with a statement by the Department signed by all three Commissioners which clarifies that the City’s planned delivery of lower price service to its low-income customers is permissible pursuant to the City’s established Program and consistent within the relevant statute governing municipal aggregation plans. The City further requests that, pursuant to standard aggregation plan practices, the Department confirm that it will address any concerns it may have at the time of the City’s submission of the consumer notification form for review and approval," the City said

"Section 134 empowers communities to actively participate in the competitive market through customer aggregation. Moreover, the City’s program advances the Commonwealth’s ability to meet the mandates of the Global Warming Solutions Act. Without the Departmental statement that the City requests, the Department risks sending a confusing and mixed signal to developers of needed solar generation facilities and their lenders, which will also frustrate the achievement of important climate-related goals. The Letter’s directive delays elements of consumer protection recognized by the Department itself (see the Department’s December 16, 2020 presentation in D.P.U. 19-07, slides 9-16, which demonstrated the magnitude of the consumer benefits available pursuant to the Program). The City remains fully committed to the delivery of benefits to the Program’s low-income customers and respectfully requests that the Department take the requested and clarifying steps necessary to advance the goals of the City and the Secretary. Please note that the City makes this request with the full reservation of its right to pursue other procedural redress," the City said

Docket 19-65

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