Update: Electric distribution rates to drop for businesses
PITTSFIELD -- The owners of Berkshire commercial and industrial businesses could see as much as a 14 percent reduction in the distribution portion of their electricity and natural gas bills starting this month.
New statewide legislation has changed the way those costs are allocated to commercial and industrial customers.
The change will affect the commercial and industrial customers in the Berkshires who receive their electricity and natural gas from Western Massachusetts Electric Co. and National Grid.
Gov. Deval Patrick signed the rule change into law in July 2012, but the state Department of Public Utilities, which regulates the delivery rates charged by investor-owned public utilities, didn’t approve the new rates for WMECo and NSTAR customers until last month. Those changes went into effect on Jan. 1.
Sen. Benjamin B. Downing, D-Pittsfield, who chaired the Senate committee that created the legislation, said WMECo and NSTAR customers will see the decrease in their distribution rates sooner because when those companies merged in April 2012 it slowed down the way their rates were calculated. NSTAR and WMECo are both operated by Northeast Utilities.
National Grid customers are expected to experience the changes over the coming months, according to Associated Industries of Massachusetts, which supported the legislative change.
"I think the impact will be felt sooner in WMECo territory," Downing said.
The change only affects the distribution portion of a commercial or industrial customer’s utility bill, which reimburses electric and gas utilities for the price of their infrastructure, and is the only part of the bill that is regulated by the DPU. The generation and transmission charges on utility bills are regulated by the federal government.
Under the previous rate making process, the distribution portions of both medium and large commercial and industrial customers increased dramatically, according to AIM. Some of those increases were driven by "reconciling factors," that are also known as "trackers," and include items like pension adjustments, smart grid pilots, net metering, storm costs, and some low-income programs that utilities have little or no control over.
Under the new law, the DPU requires each utility to identify its trackers, then change the way each one is allocated to reflect the true cost of providing that service to customers, regardless of how much energy is used, AIM stated in a news release.
"It was unfairly costing the commercial users more to pay for parts of the energy system that everyone needs," said Michael Supranowicz, the president and CEO of the Berkshire Chamber of Commerce, which also advocated for the rate change.
Under the old system, Supranowicz said the owners of commercial and industrial businesses in one area of the county would be asked to help pay for storm damage that a utility may have experienced in another part of the Berkshires.
"For instance, say there’s a snowstorm and 10 poles get wiped out, and it’s in a residential neighborhood," Supranowicz said. "The utility comes in and fixes that, then goes to the DPU and says, ‘We need to be reimbursed for that cost.’ The cost is based on how much everyone uses.
"A company in Great Barrington is paying for an increase in the cost of a distribution system in Pittsfield when it hadn’t even lost electricity," he said.
"We thought it was unfair," Supranowicz added. "A natural disaster affects everyone in the same way. Why should a commercial or industrial member pay more for that."
Based on testimony before the Senate Committee on Telecommunications, Utilities and Energy, Downing said legislators believed the formula for calculating the distribution rates needed to be "more transparent."
"It was a complicated formula and wasn’t simply based on the amount of energy you used," he said.
Supranowicz said he didn’t know how much of a reduction Berkshire commercial and industrial customers would see in their electric or natural gas distribution rates.
"But the distribution side of the bill is typically at or above the cost of the actual energy," Supranowicz said. "If you’re bill is $4,000, typically over half of that is for distribution alone."
Patricia C. Begrowicz, the president and owner of Onyx Specialty Papers Inc. in Lee, said her company hasn’t received its January utility bills yet. But based on the changes, Begrowicz said her company could see a 10 to 14 percent discount in its distribution rates.
"That is not insignificant considering the amount of electricity we use every month," she said.
That decrease could save Onyx around $100,000 a year.
"We can do a lot of things" with those kinds of savings, Begrowicz said. "It will allow us more money to invest in equipment and upgrade our capability. We now have 144 people, but $100,000 makes us more comfortable [adding] 1 1/2 to 2 additional workers. Right now, we’ll probably turn around and invest the money or put more into our capital plan."
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