Backs higher monthly fees for delivering electricity
National Grid proposes new rate structure
NATIONAL GRID on Friday proposed a radically different rate structure for delivering electricity to Massachusetts customers that relies more on fixed monthly charges and less on fees based on electricity usage.
The utility, which serves 1.3 million electric customers in Massachusetts, filed a proposal on Friday with the Department of Public Utilities to increase its so-called distribution rates. Company officials said those rates have not been increased since 2009, and current revenues are no longer covering the company’s costs for operating and maintaining the poles and wires that deliver electricity to homes and businesses.
National Grid’s distribution rate consists of a flat monthly customer charge plus a rate based on how much electricity is consumed. The company currently charges a $4 monthly fee to residential customers plus a fee of 4.3 cents a kilowatt hour for the first 600 kilowatts of electricity used and 4.9 cents a kilowatt hour for consumption above 600 kilowatts. For a residential customer using 500 kilowatt hours a month, the current distribution charges add up to $25, or about a quarter of the overall electrical bill. Most of the charges on the overall bill are assessed by power suppliers who generate the electricity that is delivered to homes and businesses by National Grid
National Grid is proposing a two-step process for raising its distribution rates. In the fall of 2016, the company is proposing to raise the monthly charge for residential customers to $5.50 plus a single rate of 5.5 cents a kilowatt hour for electricity usage, which works out to a total monthly charge of $33 for the typical customer, an increase of $7.50 over the current rate.
In early 2017, the company wants to start charging 4.2 cents a kilowatt hour and a tiered monthly customer charge based on usage — $6 for those using less than 250 kilowatt hours a month, $9 for those using between 251 and 600 kilowatt hours, $15 for those using 601 to 1,200 kilowatt hours, and $20 for those using more than 1,200 kilowatt hours. For the customer using 500 kilowatt hours, the tiered rate structure would yield a charge of $30.
Company officials said the rate changes proposed for 2017 would bring in the same total amount of money as those proposed for 2016, but a greater percentage of the money with the 2017 changes would come from fixed fees.
Utilities across the country are embracing higher fixed fees – some utilities are charging a flat monthly charge of as much as $25 to all customers – as they confront a marketplace where demand for electricity is flat and may start declining as energy efficiency measures reduce consumption and more residents produce their own power with solar panels.
Environmental advocates are wary of the shift to fixed monthly charges because they fear the flat fees, as opposed to charges based on usage, will provide less incentive to consumers to conserve energy and embrace solar.
“The fees are not aligned with our broader objectives of reducing energy consumption and promoting distributed generation,” said Peter Shattuck, Massachusetts director of the Acadia Center, an environmental advocacy group. Distributed generation is industry jargon for non-power plant energy production, such as homeowners putting solar panels on their roofs or municipalities putting them on capped landfills.
National Grid officials said the company’s distribution charges are separate from the electricity supply portion of the bill, which accounts for about two-thirds of the total cost.Electricity supply costs have been volatile the last two years, while distribution charges have not increased since 2009 at National Grid. Company officials said National Grid’s overall distribution charges need to rise $143 million, or nearly 22 percent, to cover higher costs the company is facing today. Marcy Reed, president of National Grid Massachusetts, said the company’s property taxes have doubled to $58 million over the last six years, while the cost of utility poles and transformers has increased 9 and 20 percent, respectively. She said labor and other costs have also increased.