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Green Communities Act Pushes Up Energy Costs with Few Benefits

Posted by John Regan on Nov 9, 2011 7:07:00 AM

Massachusetts employers and residents who already pay some of the highest electricity bills in the nation face additional and potentially catastrophic rate increases to fund a hodgepodge of ill-conceived and conflicting programs created by the 2008 Green Communities Act.

Electricity CostsAssociated Industries of Massachusetts will today urge a legislative committee to look critically at the Green Communities Act and to modify elements that do not create benefit for ratepayers. The association believes that Green Communities, which was intended to provide stable electricity prices with the promise of renewable energy to moderate costs, has in many cases raised electricity bills that already run 86 percent above the national average.

The price increases caused by Green Communities are discouraging job creation, driving companies to other states and inhibiting the weak economic recovery in Massachusetts.

According to the Department of Energy Information Administration (EIA), the average electricity price in the U.S. for industrial customers in July 2011 was 7.39 cents per kilowatt hour (kWh).  The average price in Massachusetts was 13.87 cents per kWh, the highest rate in the continental United States.

The difference for commercial customers is about 35 percent, with Massachusetts the third highest. By comparison, North Carolina is 6.62 cents per kWh for industrial customers.

Green Communities contains vivid examples of inefficient solutions in search of a problem -  initiatives that spend significant money on “high hanging fruit” in hopes of improving the environment.

Equally problematic is the fact that the programs operate independently and without any review.

For example, the programs called net metering, smart grid, utility owned solar are all implemented on a per-utility level – each utility running its own program. These costs are not transparent on customer bills, but are buried in the distribution charge, making it impossible for consumers to understand. Some of these programs would benefit from being coordinated (if they are worthy of being kept at all).

Similarly, long term contracts for renewable power have been implemented in a way that not only defies logic but also impacts competition. NSTAR competitively solicited for renewable power under Section 83 and received multiple bids that ultimately resulted in costs close to parity with non-renewable power. National Grid, on the other hand, separately negotiated with Cape Wind for what is currently the highest price ever recorded in Massachusetts for power.

Green Communities programs are rationalized by the need to reduce greenhouse gases, even though Massachusetts is responsible for less than 1 percent of the carbon dioxide emissions from power plants in the United States. All of New England, in fact, contributes less than 1.8 percent of U.S. carbon emissions from power plants (sulfur dioxide and nitrogen dioxide are similar), meaning that Massachusetts has a negligible impact on the global emission profile. Reducing pollutants here will have a minuscule impact on worldwide levels.

“Businesses in Massachusetts are frustrated - frustrated because they feel they are being held responsible for reducing greenhouse gases far in excess of any other state and paying the brunt of the bill in a state that already is one of the top in the nation for clean air. This is combined with a perception that here in Massachusetts we will continually strive to outdo others no matter what the cost,” said Robert Rio, Senior Vice President at AIM.

Green Communities is also preventing patepayers from receiving the benefit of recent decreases in the price of natural gas. A three-year price decline that should have provided Massachusetts employers and residents with a 20 percent reduction in electricity costs has instead produced no reduction as ratepayers have been forced to fund Green Communities initiatives as part of the distribution and transmission portion of their bills.

And it gets worse - already on-the-books increases in transmission and distribution will add another 20- 30 percent to the price of electricity over the next one to two years.
 
AIM has suggested many changes to the Green Communities Act since it was passed. Our changes center around three major themes:

  • First, any program must use ratepayer money efficiently.
  • Second, all programs must have demonstrated benefits to the ratepayer and the cost must be transparent to the ratepayer.
  • Third, programs must be consistent with and maintain a vibrant competitive market that has been the law of the land here in Massachusetts for over 13 years.

“Clearly, we are risking an unprecedented increase in embedded utility costs from programs that are in some cases conflicting, overlapping or simply not cost-effective,” Rio said.

“In the end, the fundamental question to be answered is “Are the electricity policy decisions we are making the right decision for Massachusetts?”

 

Topics: Issues, Environment, Energy, Cape Wind

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