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FAQs on Managing Weather Emergencies

Posted by Tom Jones on Jan 26, 2015 5:31:00 PM

Major weather events like the one now taking place raise a diverse set of questions for employers from employee pay to partial or full day closures. Here are frequently asked questions along with answers.

Snow.FactoryQ. The business will be closed for the entire week because of bad weather. Must exempt employees be paid?

A. No. The US Department of Labor DOL regulations state that: "Exempt employees need not be paid for any workweek in which they perform no work." However, this is unlikely to apply since most exempt employees will have worked at least Monday and perhaps other days this week.

Q. An exempt employee performs work at home when the office was closed because of bad weather. Must the employee be paid?

A. Simple answer, yes. The FLSA regulations make it clear that “An exempt employee must receive his or her full salary for any week in which he or she performs work, without regard to the number of days or hours worked. There are exceptions but none of them apply in this case.

Q. A nonexempt employee performed work at home when the office was closed because of bad weather. Pay or no pay?

Pay, but only for the hours actually worked. The challenge an employer may face is determining a satisfactory method to track the time. It makes sense to establish a method to track the time in advance so that there is no dispute about how much time was actually worked. The DOL permits employers to track time in any method as long as it is “complete and accurate”. Given it is likely too late to develop a system this week, using emails reporting time worked is an option.   

Q. The office opened but one of my exempt employee’s couldn’t get to work because of bad weather. Pay or no pay?

A. No pay, if the employee indeed does no work at home. An employee who is absent due to inclement weather is absent for personal reasons (one of the recognized exceptions to the FLSA pay requirement referred to in question 2) and need not be paid if the employee is absent for a full day(s). Again it is crucial to remember this only applies if the workplace is open.

Q. The office opened today but an exempt employee couldn't make it in because of bad weather. Instead the employee worked at home for a few hours and spent the rest of the day shoveling snow. Pay or no pay?

A. Pay. Work at home is also work. Furthermore, anytime an exempt employee misses less than a full day of work because of snow or other adverse weather conditions, his/her salary may not be docked.

Q. May an employer require an exempt employee to use vacation or accrued leave for part of the day in this situation?

A. Yes according to a DOL Opinion Letter from 2005. This is different from a deduction in that the employee still gets a full day’s pay, just from two separate accounts. It may help eliminate some misunderstandings later about an employee’s remaining time off if you make it clear to your employees that you are charging their vacation or PTO account. How you handle this issue is more likely to be an employee morale issue than a legal issue given the lateness of your decision.

Q. We opened today but an exempt employee couldn't make it in due to bad weather. After spending 90 minutes waiting for a bus, the employee gave up and went home. Pay or no pay?

A. Qualified no pay. Commuting is never working time but if the employee did actual work (i.e. more than a de minimis amount of work) while waiting for the bus (e.g. checking emails, making phone calls), the employee is working and must be paid for the day.

Q. Work is open today but a nonexempt employee is unable to arrive due to the bad weather. Pay or no pay?

A. No pay. If a nonexempt employee performs no work, they are not required to be paid.

Q. Work is open today but a non-exempt employee couldn't make it in because of bad weather. After spending two hours trying to commute the employee gave up and went home. Pay or no pay?

A. A qualified no pay. Commuting is not working time. However, see question 7 above. If the employee does more than a de minimis amount of work while trying to commute, the employer must pay for the time worked.

Q. We are closing early due to bad weather. Should our nonexempt employees be paid?

A. Only for the hours actually worked but see question 11 below.

Q. What do we do if a nonexempt employee reports for work and we send him/her home?

A. Massachusetts has regulations governing reporting or show up pay. The regulation states that “a nonexempt employee who is scheduled to work for three or more hours, reports for duty at the time set by the employer, and that employee is not provided with the expected hours of work, must be paid for at least 3 hours on such day at no less than the minimum wage”. As per the AIM wage survey, many employers pay their employees 3 or 4 hours at their regular rate   

Q. We closed early but some essential nonexempt personnel were asked to stay later. I know I owe them for extra time worked but must I pay them for the difference between their normal commute time and the extra time it takes them to get home in the bad weather?

A. No.

Q. The office closed hours ago because of bad weather, and some non-exempt essential personnel who were asked to stay later are now stuck here for the night. Pay or no pay?

A. It depends.

  • If the employees are completely relieved from duty and are able to use the time for their own pursuits (there is food available, relatively comfortable places to sleep, a television or other entertainment, etc.) then you do not need to pay them for that time.
  • If they are relieved from duty but there is absolutely nothing they can do with their time, not even somewhere to sleep (besides the hard floor), then an argument can be made that you have to pay. Even then, you would only have to pay the minimum wage, not the employee's regular wage rate but again see question 11 above.

While these Q & A’s address many of the questions about work and blizzards, it may not address your particular case. In that case, should you have any questions about this or any other HR related question please contact the AIM Hotline at 1-800-470-6277.

Commission: Change the Way Employers, Consumers Pay for Health Care

Posted by John Regan on Jan 23, 2015 9:58:00 AM

The commission overseeing health-care policy in Massachusetts is calling for widespread adoption of new payment methods that reward doctors and hospitals for results rather than the number of procedures they order.

health_careThe Massachusetts Health Policy Commission reports that such cost-saving payment plans have been adopted more widely within public insurance programs such as Medicare and Medicaid than in the commercial insurance market. The commission, in its 2014 Cost Trends Report released last week, sets a goal that 60 percent of people insured through health maintenance organizations be covered by so-called Alternative Payment Methods by next year.

Also included in the commission report are recommendations to increase the information available to employers and consumers, and to push hospitals to address the significant variations in cost that exist for the same medical procedures with the same outcomes.

“The commission’s recommendations are important to employers as Massachusetts strives to maintain a world-class health care system that is affordable,” said Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts and the employer representative on the Health Policy Commission.

“Health-care costs have moderated, but are projected to accelerate again in the next several years. The ability of Massachusetts to address structural issues in the health care market will in turn determine the ability of employers to provide good health-insurance benefits to workers.”

The 11-member Health Policy Commission is an independent state agency that develops policy to reduce health-care cost growth and improve the quality of patient care. The commission also monitors the commonwealth’s health care market, providing data on the impact of health care mergers, guidance for reform of the delivery and payment systems, and investments into community hospitals.

The report’s conclusions include:

  • Between 2012 and 2013, total healthcare expenditures grew at a rate of 2.3 percent per capita,
    a rate that is lower than the statutory benchmark of 3.6 percent.
  • Hospitals vary widely in prices charged for an episode of care with similar quality outcomes. For hip and knee replacements, for example, academic medical centers are 23 and 15 percent more expensive than New England Baptist, respectively, without substantial differences in quality outcomes.
  • Five hospital systems accounted for 56 percent of commercial discharges in 2014, up from 51 percent in 2014.
  • The rate at which patients are treated and later re-admitted to Massachusetts hospitals is higher than the national average, and the federal government will penalize approximately 80 percent of all hospitals in Massachusetts for higher-than-expected Medicare readmission rates in fiscal year 2015.
  • Almost half of all emergency room visits were avoidable in 2012. Rates of overall emergency department use varied by a factor of two across regions of the state.
  • Behavioral health is a critical factor in overall medical usage and cost. The commission indicates that the spending differential between patients with and without behavioral health conditions is pronounced for many medical conditions.

The Health Policy Commission echoed the advice that AIM regularly provides to employers - offer employees plan choices that include value-oriented products, or embed value-based concepts into their chosen plan offering. Value-oriented plans encourage employees to seek high-quality care in reasonably prices settings such as community hospitals.

The commission maintains that health care costs are crowding out important initiatives in both the private and public sectors.

“The rising cost of health care has resulted in increasing government dollars going to health care and away from other priorities. This phenomenon does not solely apply to government; businesses and consumers have to squeeze their budgets to pay for health care,” the report says.

“From Fiscal Year 2004 to Fiscal Year 2014, government spending on health care has crowded out other government priorities, a trend that continued into FY 2015. With the exception of direct spending on health services for individuals, every other area of government spending was cut or grew more slowly than Gross Domestic Product (GDP).”

10 Trends to Watch in International Business

Posted by Kristen Rupert on Jan 22, 2015 9:38:00 AM

international.flagssmallLower oil prices, Europe tipping into possible recession, trade deals, Cuba and cybersecurity—these developments will affect Massachusetts businesses engaged in global trade in 2015.  Here are the top international stories that Bay State employers should follow this year:

  1. Lower Oil Prices—The 50 percent drop in oil prices is good for consumers and manufacturers in the U.S. and Japan, which are energy users/importers, and bad for oil producing countries like Venezuela, Saudi Arabia and Russia.  Some U.S. companies are shifting freight to truck, versus rail, because of lower fuel costs.  Energy companies are pulling back investments in domestic drilling and financial markets are unsettled.
  2. Europe Falling into Recession—Never fully recovered from the recent global recession, Europe is currently in an economic slump with many countries struggling with high unemployment and slowing economies.  Even Germany, with the strongest economy in Europe, is experiencing zero percent economic growth.  Europe’s woes affect Massachusetts exporters because Western Europe is the largest overseas destination for our exports.
  3. Economic Downturn in Russia—After Russia’s incursion into Crimea, the U.S. and Europe imposed sanctions which, coupled with lower oil prices, have sent the Russian economy tumbling.  The ruble has plummeted in value and Russian companies are having difficulty getting financing.  Massachusetts firms exporting to Russia are experiencing slow payments from customers.  Russia is a major energy supplier and exporter to Europe and sanctions are having a negative impact on the European economy.
  4. Global Trade Deals—The November elections that left Republicans in control of both houses of Congress increased the chances of passage for two major trade deals: the Trans-Pacific Partnership (TPP) involving 12 countries, and the Trans-Atlantic Trade & Investment Partnership (T-TIP) between the U.S. and the European Union.  Trade Promotion Authority (TPA), or “Fast-Track,” is first up for approval.  TPA gives the president the ability to seek a simple yes or no vote on trade deals, with no amendments permitted.  This makes trade pacts easier to negotiate with foreign partners.
  5. Cybersecurity—Cybersecurity is now a priority for businesses around the world.  This past year, Home Depot, Target, Nieman Marcus and Sony Pictures suffered major security breaches affecting millions of customers.  The cybersecurity industry, with a significant presence in Massachusetts in firms such as AIM-member companies EMC/RSA and CyberArk, is racing to develop solutions to protect customer and company data for firms worldwide.
  6. China—Labor costs in China have increased, economic growth has slowed, and many US companies are looking elsewhere in Asia for manufacturing.  China nevertheless continues to be a powerful global player.  Ocean Spray, an iconic Massachusetts brand, recently partnered with big-box retailer Costco in China and saw sales soar as Chinese consumers, eager to purchase American goods, made Ocean Spray’s 48-ounce package of dried cranberries the single biggest seller on Alibaba (China’s largest on-line commerce company) in October.
  7. Ebola—Ebola has had a global impact as public health experts around the world struggle to prepare for potential cases on their soil.  Tourism, trade and investment have slowed or stopped entirely in many sub-Saharan Africa countries.  Cutting-edge Ebola genomics research is being conducted in Cambridge at the Broad Institute while non-profit Diagnostics for All, a Boston-based partnership of Harvard, UMass, GE Healthcare and Cambridge Consultants, is developing a fast, simple, low-cost test for diagnosing Ebola.
  8. Cuba—The Cuba-U.S. relationship is ripe for change following President Obama’s order to restore full diplomatic relations.  Eighteen months of secret talks, helped along by Pope Francis, led to the historic announcement.  The initial U.S.-Cuba trade embargo was put in place by President Eisenhower 54 years ago.  Many challenges lie ahead before US companies can do significant Cuba trade.  Massachusetts exports to Cuba peaked at $3.4 Million in 2005.  From 2009-2013, the Bay State had no Cuban-bound exports.  In 2014, however, some diagnostic, medical and pharmaceutical products were exported to Cuba.  This year may bring more.
  9. MASSPORT Grows International Flights—Massport last year announced new non-stop flights, to start in 2015, between Logan Airport and Tel Aviv, Mexico City and Hong Kong.  This brings to 14 the total number of new international non-stop flights inaugurated by Massport since 2007.  Future destinations now being negotiated include Brussels, Singapore, Sao Paulo, Shanghai, Mumbai and Delhi.
  10. New Massachusetts Governor—With pressing budgetary challenges, Governor Charlie Baker is unlikely to put international travel on his near-term agenda. International business will continue, however, with visits to Massachusetts by foreign government officials and business leaders, overseas firms investing in the commonwealth and opening offices here, and local executives pursuing new global markets. During his eight years in office, former Governor Deval Patrick led trade missions to 15 countries to promote exports and foreign investment.  AIM expects that Governor Baker will eventually travel abroad to open new markets for Massachusetts businesses.

Video Blog | What Do Business Leaders Think about the Massachusetts Economy?

Posted by Christopher Geehern on Jan 21, 2015 11:31:02 AM

Associated Industries of Massachusetts conducted its 2015 Economic Outlook program on January 9 and asked a group of distinguished business executives for their views about the Massachusetts economy. Moderator Anthony Silva of WBZ radio spoke about a range of issues with Eric Roman, General Manager, Research and Applied Markets, GE Healthcare; Patricia Begrowicz,CEO of Onyx Specialty Papers; and John Harthorne, CEO of MassChallenge.

A Step Toward Better Regulation

Posted by Rick Lord on Jan 20, 2015 7:25:26 AM

One of the key recommendations of AIM’s Blueprint for the Next Century is for Massachusetts to establish a world-class state regulatory system that ensures the welfare of society in a manner that meets the highest standards for efficiency, predictability, transparency and responsiveness.

WolfMeadowFarmThe Baker administration took an important first step toward that objective last week when it imposed a temporary freeze on new state regulations until March 31. The ban underscores the governor’s determination to embark upon the kind of long-term regulatory reform he discussed at the November 14 AIM Executive Forum.

Administration and Finance Secretary Kristen Lepore was particularly encouraging in a memo to Cabinet secretaries. She said the administration's goal is to "modernize and simplify" state regulations "in a manner that enables rather than encumbers" the state's citizens.

"A regulation should be straightforward, effective, and no more burdensome than necessary to achieve its purpose," Lepore wrote. "No regulation should be adopted (or remain in place) unless it is easy to understand and meets a specific, discreet need."

Amen.

AIM is develping a plan to provide Massachusetts with a world-class regulatory system. Our suggestions inlude:

  • The governor should appoint an independent ombudsperson to review comments, suggestions and complaints from employers about ineffective state regulations and/or the manner in which those regulations are enforced. The ombudsperson would have the authority to determine which regulations and/or enforcement issues represent real impediments to growth and recommend changes to the Legislature or the executive branch.
  • Encourage regulators and employers to adopt “smart partnerships” to ensure that government-business interactions solve problems instead of propping up bureaucracies.
  • Engage willing employers who are global leaders in productivity and process improvement to streamline the operation of state government agencies. General Electric, an AIM member, provided just such a service for the New York State Highway Department at the request of Governor Andrew Cuomo. GE Capital used its expertise in lean process to help the Highway Department reduce the processing time for curb-cut requests from 70 days to three days.

We look forward to the debate and welcome the initial action by the new administration.

Topics: Regulation, Charlie Baker

AIM Seeks Clarification of Sick Days Law

Posted by Brad MacDougall on Jan 16, 2015 2:44:31 PM

The mandated sick-days law approved by Massachusetts voters on November 4 touched off a wave of confusion among employers anxious to comply with the statute while maintaining a competitive benefits program.

Two_WomenThat’s why AIM today filed legislation to clarify the ballot language for both employers and workers before the law takes effect on July 1. The corrections bill does not represent an attempt to circumvent the will of the voters, but rather to provide employers with a clear roadmap on issues such as eligibility and how the new statute works with existing paid time off benefit plans.

John Regan, Executive Vice President of Government Affairs, says the measure reflects thousands of comments that the association has received during seminars, Web conferences and other conversations with member employers during the past two months.

AIM’s bill addresses the following concerns voiced by employers.

  • Employers were concerned that interns, independent contractors, and employees paid on commission would be counted as part of the employee threshold and would be eligible for earned or paid sick time.  The bill would remove those types of workers as part of the total count of employees and would place leave benefits for those people at the discretion of the employer.
  • Employers were concerned that the ballot language does not incorporate current payroll systems or the various types of shifts that manufacturers or nurses have.  Some manufacturers track employee time by the minute. Many nurses work 12-hour shifts.  The current law would allow an employee to take earned time off in minutes, a practice that would disrupt transportation of goods and delivery of vital services in the health care arena.  The bill would clarify that employees could take leave for a full work day or in a portion of the day, rather than minutes or a several hours of a shift.
  • Employers were concerned that the law would require them to eliminate their current Paid Time Off (PTO) systems, which are popular among employees.  The AIM bill would allow employers to integrate existing PTO systems with the new Act.
  • Employers were concerned that the documentation and administrative provisions would negatively impact attendance incentive plans.  The bill would provide employers flexibility on when or if documentation is needed. It would also give employers the ability to take disciplinary action when an employee does not comply with notification and documentation provisions of the Act.
  • Employers were concerned about when earned sick time would start to accrue and how much earned sick time an employee could use during the transition year.  The bill ensures that an employee may only be compensated for up to 40 hours of earned sick time during the transition year while allowing an employer to opt for a greater benefit during the transition year if it so chooses.

 

Topics: Employment Law, Human Resources, Paid Sick Days

Energy, Health-Cost Bills Highlight AIM Agenda

Posted by Christopher Geehern on Jan 16, 2015 1:03:00 PM

Measures to control electric rates and the cost of health care highlight a package of 19 bills filed with the state Legislature today by Associated Industries of Massachusetts.

ThumbThe AIM filings include bill designed to clarify details of the paid sick leave law approved by voters on November 4.

The association filed the bills on behalf of its 4,500 member employers as the Senate and House of Representatives begin a two-year Beacon Hill session that will run through July 2016. It is a session that will play out amid uncertain political dynamics among with newly elected Republican Governor Charlie Baker, newly elected Senate President Stanley Rosenberg and incumbent House Speaker Robert DeLeo.

The AIM health-care bill would limit the growth of medical spending to two percentage points below overall economic growth. The 2012 Massachusetts Health Cost Containment law currently sets a benchmark equal to the growth of Gross State Product.

The energy legislation seeks to stabilize the cost of electricity by reorganizing the Department of Public Utilities into an independent agency and requiring that at least one DPU commissioner have experience in commercial and industrial ratepayer issues.

“Moderating the costs of health insurance and electricity is a central objective of AIM’s Blueprint for the Next Century,” said John Regan, Executive Vice President of Government Affairs, referring to the long-term economic strategy AIM is developing in connection with its 100th anniversary.

“We’re wasting no time in getting these critical issues before the Legislature as the 2015-2016 session gets underway.”

AIM lobbied aggressively in 2012 to limit the growth of medical spending to “GSP minus two” but lawmakers eventually approved, and Governor Deval Patrick signed, a compromise measure setting the target initially at GSP, moving to half a percentage point below GSP in 2018. Medical spending during the first year of the cost-control law increased 2.3 percent, well under the 3.6 percent growth rate for the economy.

“The system is showing that two percentage points less than overall growth is certainly a reasonable target, especially since experts agree that one-third of medical spending is wasteful,” Regan said.

Filing of the electricity bill comes as Massachusetts employers and homeowners face increases of up to 37 percent in their electric bills because of natural gas pipeline capacity issues. Representative Patricia A. Haddad, D-Somerset, filed a separate omnibus energy bill on Friday, signaling that the cost of power will be a major topic of debate for lawmakers during the next 18 months.

“Average electric rates in Massachusetts are the third highest in the nation for industrial ratepayers, according to the United States Department of Energy’s Energy Information Administration. AIM looks forward to working with Representative Haddad and other members of the Legislature to lower electricity prices while increasing the use of clean energy,” said Robert Rio, Vice President of Government Affairs at AIM.

Regan stressed that the paid sick leave corrections bill does not represent an attempt to circumvent the will of the voters, but rather to provide employers with a clear roadmap for complying the with new law.  AIM has received questions from thousands of employers since November on issues such as eligibility and how the new statute works with existing paid time off benefit plans.

The AIM bill would:

  • Clarify who is eligible for leave and how the leave is appropriately taken.
  • Clarify the accrual process and use of earned sick time in a manner that conforms to current payroll systems.
  • Provide flexibility for companies to integrate existing Paid Time Off (PTO) systems with the law.
  • Clarify documentation and disciplinary actions.
  • Provides a smooth transition year when the earned sick time law becomes effective

Video: The 2015 State of Massachusetts Business Address

Posted by Christopher Geehern on Jan 13, 2015 9:23:43 AM

Richard C. Lord, President and Chief Executive Officer of AIM, delivered his annual State of Massachusetts Business address to an audience of 250 business leaders last week.

Lord said that a strengthening economic recovery provides Massachusetts policymakers with a rare opportunity to address the long-tern structural issues that will shape the Bay State business climate for the next century. 

Economic Recovery Provides Opportunity to Address Long-Term Challenges

Posted by Christopher Geehern on Jan 9, 2015 9:46:38 AM

An economic recovery that finally feels like a recovery provides Massachusetts policymakers with a rare opportunity to address the long-tern structural issues that will shape the Bay State business climate for the next century, the president of Associated Industries of Massachusetts said today.

lord_alternate.mediumRichard C. Lord, in his annual State of Massachusetts Business address, said that the future of Massachusetts is built upon an encouraging present, much as it was 100 years ago when AIM was founded by a visionary group of industrialists. He said that AIM will begin its second century by seeking solutions to persistent challenges to economic growth such as the shortage of skilled workers, harnessing innovation and the ability to compete in global markets.

“Associated Industries of Massachusetts begins a yearlong celebration of its 100th anniversary today by honoring the determination of our founders to solve the big issues that determine the ability of Bay State residents to create a life for themselves and their families. AIM embraces with our founders the dictum of Theodore Roosevelt, who said ‘We should not forget that it will be just as important to our descendants to be prosperous in their time as it is to us to be prosperous in our time.’ ” Lord told an audience of 250 people at the AIM Economic Outlook Forum.

Speaking one day after new Governor Charlie Baker took the oath of office in Boston, Lord outlined four key long-term growth strategies for Massachusetts contained in AIM’s Blueprint for the Next Century, a document intended to commemorate the organization’s centennial:

  • Government and business must develop the best system in the world for educating and training workers with the skills to allow Massachusetts companies to succeed in a rapidly changing global economy.
  • Massachusetts must create a competitive economic structure across all industries, geographic regions and populations rather than picking winners and losers.
  • Establish a world-class state regulatory system that meets the highest standards for efficiency, predictability, transparency, and responsiveness.
  • Massachusetts must find a way to moderate the substantial burden that health care and energy costs place on business growth.

Lord said the strategies are intended to create an economy that benefits all Massachusetts residents and spreads prosperity to all corners of the state. He noted that one of the immediate challenges for policymakers is to address the economic imbalance that has developed between the thriving Cambridge-Boston innovation beltway and the rest of the commonwealth. 

He told the audience that “at a time when there is frequent discussion of income inequality, and the need to create what Boston Mayor Marty Walsh last month called an inclusive recovery that makes us better and not merely bigger, it is important to remind ourselves that the Massachusetts economy boils down to the nexus of a person, a job and an employer,” he said.

A panel of business leaders responded to Lord’s speech.

“A job with a future remains the only sustainable strategy for raising the long-term economic prospects of thousands of our fellow residents who may not yet be sharing in the recovery.”

Eric Roman, General Manager for Research and Applied Markets for GE Health Care Life Sciences, said Massachusetts was a logical place for the division to consolidate its headquarters and 500 high-value jobs.

 

“We wanted to pick a place close to customers, education and the strong work force that will allow us to grow both in the short term and in the long term,” said Roman, who will head up the new operation in Marlborough.

“GE is not looking at the short term here, we are making a long-term commitment.”

Patricia Begrowicz, CEO and co-owner of Onyx Specialty Papers in South Lee,  said her company just completed a “very strong” fifth year and looks forward to another good year moving forward. Costs remain a challenge, however, as the company now pays half a million more for electricity and $300,000 more for health insurance each year than it did when she purchase the business five years ago.

“We’ve seen positive development on the market side, but the cost side has also grown,” said said.

John Harthorne, founder and CEO of the MassChallenge, said the startup accelerator would not have become a global force outside of Massachusetts. He noted that MassChallenge launched during the depths of the recession.

“We had very deep motivation to save the world,” he quipped.

The enterprise has expanded to Israel and plans to move into London and other markets during the next several years.

Topics: Massachusetts economy, AIM Executive Forum

NU, National Grid Terminate Cape Wind Contracts

Posted by Bob Rio on Jan 6, 2015 9:12:00 PM

“Very bad news for Cape Wind. Very good news for Massachusetts ratepayers.”

WindTurbinesOceanSmallThat’s how one opponent of the proposed Nantucket Sound wind farm characterized the decisions by Northeast Utilities and National Grid yesterday to terminate their long-term contracts with the offshore wind farm. The two companies cited the fact that Cape Wind missed a December 31 deadline to obtain financing and begin construction, and chose not to put up financial collateral to extend the deadline.

This is one case of buyer’s remorse that will benefit virtually every Massachusetts employer and homeowner who buys electricity – the contracts would have placed ratepayers on the hook to buy Cape Wind power at an average of 25 cents per kilowatt hour over 15 years, more than twice the rate of power generated by on-shore wind facilities.

AIM and its 4,500 member employers, who have long opposed the contracts, strongly endorse the decisions by the two power companies to terminate their Cape Wind deals.

“Northeast Utilities and National Grid deserve tremendous credit for taking actions that will save customers billions of dollars that would otherwise have been spent buying electricity at the highest power price ever negotiated in Massachusetts,” said John Regan, Executive Vice President/Government Affairs at AIM.

“AIM has consistently supported economically beneficial renewable power projects that provide energy to commercial, industrial and residential customers at reasonable rates. The association opposed the Northeast Utilities and National Grid deals with Cape Wind - and challenged one in court – because the staggering costs of the project would have saddled ratepayers for decades to come.

“AIM thanks both Northeast Utilities and National Grid for their leadership in protecting the interest of ratepayers while committing to vibrant clean energy programs.  “ 

 

Northeast Utilities and NSTAR agreed to buy 27.5 percent of Cape Wind’s production amid withering pressure from the Patrick Administration during regulatory review of the two companies’ proposed merger. National Grid had previously signed on to purchase 50 percent.

AIM believes Cape Wind is symptomatic of state energy policies that have failed to live up to their promise while driving up electric bills for both employers and homeowners. The association believes that energy initiatives must benefit customers, who already pay some of the highest electricity rates in the country:

  • Long term contracts must be competitive bid. There should be no option for individual negotiations outside the bidding process.
  • The allocation of above market or below market costs of the long-term contracts needs to be fairly distributed across customer classes with no one class subsidizing the others.
  • Cost-effectiveness of long-term contracts should be defined clearly.

Topics: Environment, Energy, Cape Wind

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