Eversource proposes hefty rate hikes
By Kate Galbo, Programs Manager
Eversource is proposing a rate case that would increase their revenue by $96 million dollars – about two-thirds of that increase in NSTAR territory and one-third in Western Massachusetts Electric Company (WMECo) territory. The proposal raises more revenue for the utility company by increasing demand charges.
Your monthly electricity bill consists of two parts:
1. Energy charges—for the total amount of electricity you use
2. Demand charges—for “peak usage”
If you tend to use a lot of power over short periods, your demand charges will be larger. If you use power at a more consistent rate throughout the month, your demand charges will be smaller.
Utilities use demand charges to cover the fixed costs of providing energy to their customers at peak demand (think of the hottest day in July when every customer runs their AC or fan). While increasing customers’ demand charges is one way for utilities to cover these costs, there are plenty of other ways utilities can reduce them. Utilities have to maintain enough energy to supply all that energy at once, requiring a vast amount of equipment and transmission capacity. Distributed energy resources like solar, energy storage, energy efficiency, and other grid modernization technologies are a proven method for increasing reliability and reducing peak demand.
Eversource is proposing higher demand charges for all small business customers and new distributed energy customers. Starting in 2018, Eversource plans to single out solar customers through what they call a “Minimum Monthly Reliability Charge” or an added bill on renewable energy customers.
Eversource is also proposing that their guaranteed return on equity increase to 10.5%, among the highest rate of any utility in the country. The return on equity (or return on their investments), part of the allowed rate of return, is ultimately what utilities keep as profit. Rate of return regulations do not effectively motivate utilities to function efficiently and reduce their operating costs, but actually incentivizes them to make unnecessary large capital investments.
Over five-years (2010-2015), Eversource’s shareholders received a cumulative total return of 89%, yet NSTAR and WMECo ratepayers continue to pay higher distribution rates than similarly situated National Grid customers.
Many parts of this rate case proposal would be negative for small business customers and solar customers. The Massachusetts Attorney General, Maura Healey, disfavors the proposal and many believe that Eversource’s total revenue should actually be decreasing, not increasing.
About the author: Kate Galbo joined CABA in September of 2015 after receiving a degree in Environmental Policy and Analysis from Boston University. Previously, she conducted research for Policy Studies Institute to help bridge the gap between sustainable development research and society. Kate has previously interned for other Massachusetts non-profit organizations. As Programs Manager, Kate focuses on engaging with our member businesses to take targeted policy action, achieve meaningful emissions reductions, and foster a sense of community.