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State looks to control electricity rate spikes

By: Douglas Moser |

The state agency charged with regulating electric utility rates is investigating ways to prevent or mitigate future large and sudden rate hikes like Massachusetts consumers saw last fall after electric prices surged as a result of a spike in natural gas prices.

The Department of Public Utilities in its order to investigate will look into pricing and purchasing of basic electric service and wants to evaluate whether other options for how electric companies bid for electricity can even out price increases.

At the same time, two local state legislators asked the department for information on its decision last fall to allow electric utilities, including National Grid, to raise its electric rates by more than one-third.

“The fact of the matter is we have been approached by residents since the winter about those costs,” said state Sen. Kathleen O’Connor Ives, D-Newburyport. “This is exactly the type of initiative that’s necessary.”

O’Connor Ives, whose district runs from the coast to Haverhill, Methuen and part of North Andover, and state Rep. Diana DiZoglio, D-Methuen, asked DPU for information about its decision last year to approve the rate hikes the utilities sought in order to determine whether the hike was necessary or could have been done differently.

“I fully support this investigation,” DiZoglio said. “The residents of my district have been calling me regarding exorbitant increases and I’m very concerned about those residents.”

Jake Navarro, a spokesman for National Grid, would not comment on whether the company supports any of the ideas in the investigation, but said the price of natural gas will be the biggest determinant in electricity prices.

“We’re actively participating in the proceeding related to that investigation,” he said. “We’re certainly supportive of ways to help lower the costs of energy for customers in New England.”

The House Committee of Post Audit and Oversight also is investigating the approved rate increase, though O’Connor Ives and DiZoglio said they have not been working with the committee yet.

DPU’s investigation, ordered on April 9, will focus on high costs and a low number of bids utilities get from electricity suppliers. Less competition potentially could result in higher electricity prices. The order laid out three potential actions to address those two issues, but they focus on allowing the utilities more flexibility in soliciting electricity bids.

One of the options would allow utilities more flexibility on how and when they ask for bids, which now happens every three or six months, to entice more electricity suppliers to bid while keeping the price from fluctuating in very short time periods. It looked to Rhode Island’s system for the idea.

DPU said in its order that it investigated, at then-Attorney General Martha Coakley’s request, whether last fall’s rate hike could have been spread out over a greater period of time, meaning the price increase could have been lower but longer lasting.

“After review and consideration of comments, the department concluded that such a deferral would not be in the public interest,” DPU said in its investigation order.

It cited potential “unintended consequences,” such as higher basic service prices “due to increased regulatory risk for suppliers.”

Utilities have pointed to the lack of capacity in gas pipelines as a major contributor to cost spikes, because during the winter residential heat sucks up much of the gas that flows into the state, leaving some power generators without a source of fuel.

With the closing of several coal-fired power plants, Massachusetts relies heavily on natural gas, which because of supply constraints can become much more expensive during the winter when demand is higher.

Secretary of Energy and Environmental Affairs Matthew Beaton said the lack of natural gas is a “regional problem,” and he said the governors of New England are to meet soon to discuss regional energy policies.

Department of Public Utilities Chairman Angela O’Connor said the department had removed a so-called “recalculation” to bills that sometimes resulted in additional costs when residential or small business customers switched from a utility’s basic service to another service called competitive supply. The recalculation will remain in place for larger businesses, O’Connor said.

Hoping to eliminate the need for customers to “hunt around” for a competitive supplier of electricity, O’Connor said the department is putting together a website where customers can shop and compare.

Material from State House News Service was used in this report.