National Grid – which just finished announcing that ratepayers in Massachusetts would pay 9 percent more on their bills this winter than last winter – released word on November 6 that, in order “to continue investing in the electricity distribution system and improving service to its 1.3 million residential and business customers across Massachusetts,” the utility has requested approval from the Massachusetts Department of Public Utilities (DPU) to raise its electricity distribution rates (D.P.U. 15-155), effective October 1, 2016.
By this filing, National Grid is requesting a change in delivery rates designed to recover an annualized net increase of $142.9 million in delivery revenue. If approved by the DPU, the proposed change would represent a 21.8 percent increase in those revenues, or an annual increase of 7 percent for Massachusetts Electric residential customers and 6.6 percent for Nantucket Electric residential customers.
For the typical residential customer using 500 kilowatt-hours (kWh) per month, this would entail an increase of $7.75 per month and an increase ranging up to 1.4 percent for small commercial and industrial (C&I) customers; 3.3 percent to 7.8 percent for medium C&I customers; and 0.9 percent to 3.9 percent for large C&I customers, depending on the amount of their usage. The company’s most recent general distribution rate proceeding took place in D.P.U. 09-39 (2009).
The utility claims that it is “currently operating at a significant revenue deficiency and, therefore, the increase in rates is necessary for the company to meet its critical responsibilities in providing safe, reliable, and efficient energy delivery to customers, consistent with the Commonwealth’s energy policy initiatives.”
“Through projects that make the system more resilient and an overhaul in the way we communicate with our customers, we have moved closer to the kind of service our customers expect on blue sky days and during storms,” said Marcy Reed, president of National Grid in Massachusetts, adding, “As the costs of providing this service to our customers have increased, our distribution rates have remained stable over the last six years. We are no longer recovering our investments. While it is never a good time to raise rates, it is critical that we review real, current costs now to be able to attract investors who shoulder the up-front investments in the system and allow us to deliver electricity safely and reliably.”
Distribution rates represent about one-quarter of a customer’s bill. This charge covers the cost of running National Grid’s business, including the operation and maintenance of the poles and wires that distribute electricity from the beginning of the company’s distribution system to its customers.
In addition to the increased costs of operating and maintaining the system, the proposal includes other costs, such as the recovery of the company’s Massachusetts property taxes – which, management said, “have doubled since our last rate case in 2009.”
Distribution rates are separate and distinct from the electricity supply portion of customer bills, which reflects the cost of electricity supply in the market. While distribution rates have remained stable, supply prices have been volatile in recent years, largely due to natural gas pipeline constraints. The supply price is adjusted twice a year for residential and commercial customers in accordance with the DPU’s procurement rules.
Electricity commodity prices, which can account for up to two-thirds of a customer’s bill, are market-based costs that National Grid does not control. On November 1, supply prices for National Grid customers increase from about 9 cents per kWh to 13 cents per kWh.