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Landmark Law Cuts Electric, Gas Bills for Many Businesses

Posted by Robert Rio on Jan 8, 2014 12:48:00 PM

Businesses that purchase electricity or natural gas from NSTAR or Western Massachusetts Electric Company could see the distribution portion of their bills drop by as much as 14 percent as Massachusetts ends the practice of commercial/industrial customers subsidizing the power system to the tune of tens of millions of dollars each year.

Electric RatesWhile individual bills may vary, commercial/industrial electric customers in NSTAR and Western Mass Electric Company territories (both operating companies of Northeast Utilities) will collectively see reductions of more than 20 million dollars on the distribution portion of their bills. Some customer classes will see reductions as high as 7 percent in NSTAR territories and as high as 14 percent in Western Massachusetts Electric territory.

These are permanent reductions resulting from changes in the way costs are allocated.

The Massachusetts Department of Public Utilities (DPU) approved the new NSTAR and Western Massachusetts Electric rates late last month effective January 1.  Customers in National Grid and Unitil territories will see changes over the next few months, as will gas customers in all utility territories.

“The law and the new rates usher in a fair and efficient energy system in Massachusetts,” said Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts.

“AIM and other business groups - including the Western Mass Industrial group, PowerOptions and the the Energy Consortium - along with the office of the Attorney General acting in her role as the ratepayer advocate, participated extensively in the DPU process, submitting testimony and filing comments to ensure the intent of the law was carried out.”

The change in the law corrected a longstanding problem with the way electric and gas costs were allocated to customers.

Under the previous rate-making process, medium and large commercial and industrial (C&I) customers saw the “distribution” portion of their electric and gas bills - the part that reimburses electric and gas utilities for the cost of maintaining their infrastructure – rise dramatically. Some of the price increases were driven by “reconciling factors,” also known as “trackers” that are costs over which the utility has little or no control - pension adjustments,  smart grid pilots, net metering, capital investments, storm costs, and some low-income programs.

The Department of Public Utilities historically ordered that these “tracker” costs be paid by ratepayers on a volumetric basis - the more energy a customer used the more the customer paid – even though there was no cost causation between the amount of energy a customer used and the reconciliation factor revenue requirement.

The policy has resulted over time in an unfair cross-subsidy of tens of millions of dollars per year.

The new law required the DPU to order each utility to identify trackers (there were several within each utility) and change the way each is allocated to reflect the true cost of providing the service to customers, regardless of how much energy is used. Each customer class pays only that portion of these reconciliation factors based on the relative cost of the rate class on the distribution system.

“AIM would like to thank the legislature, particularly Representative John Keenan and Senator Ben Downing and the Attorney General for their roles in ensuring that real rate reform and fairness is now embedded in utility rate design,” Lord said.

Topics: Electricity, Natural Gas, Energy

Midwest Air Pollution Raises Costs for Massachusetts Companies

Posted by Robert Rio on Dec 16, 2013 6:42:00 AM

Renewed efforts by Massachusetts and seven other eastern states to force reductions in the air pollution that blows in from the Midwest are a welcome development to anyone who cares about the Bay State business economy.

AirpollutionThe Northeastern and Mid-Atlantic states, members of what is known as the Ozone  Transport Region (OTR), filed a petition last week with the Environmental Protection Agency, to require nine upwind states (Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, Virginia and West Virginia) to join the OTR and adopt pollution control strategies to reduce pollutants that form ozone – something that members of the OTR states have been doing for many years.

EPA Administrator Gina McCarthy,  a former Massachusetts environmental regulator, is required to approve or reject the petition within 18 months.

The OTR states include Connecticut, Delaware, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.

AIM has long supported efforts by the Massachusetts Department of Environmental Protection and others to force Midwestern states to control ozone pollution that drifts East and adds billions of dollars to the cost of doing business here. So-called transport pollution means that Massachusetts employers who have spent significant amounts of money to conform to stringent environmental control standards must pay again to clean up someone else’s mess.

EPA modeling shows that as much as 70 to 98 percent of the ozone air pollution problem in Massachusetts is blown in from upwind states. Parts of some downwind states would remain in violation of federal standards even if they eliminated all of the pollution generated within their borders.

The cost of removing an additional ton of pollution in downwind states is estimated at between $10,000 to $40,000 - compared to as little as $500 a ton in upwind states, where even some basic control technologies have not been installed, according to the petition.

AIM took court action on transport pollution in the 1990s, intervening on the side of the EPA in a case in which Midwest states challenged the agency’s authority to find that the transport of ozone precursor emissions from certain identified states contributed to non-attainment in other states. The Midwestern states had sought to block EPA’s ability to require ozone producing states to adopt emission control strategies.

The OTR action came the same week the Supreme Court heard arguments on the EPA’s so-called “good-neighbor” rule, which would require coal-producing states to implement measures to reduce smog and soot. The Obama administration issued the new rule in 2011, but 15 states challenged it in court; it was struck down by the U.S. Circuit Court of Appeals in D.C.

Topics: Environmental Protection Agency, Associated Industries of Massachusetts, Environment

Massachusetts Revises Burdensome On-Site Hoisting Rules

Posted by Robert Rio on Nov 22, 2013 2:32:00 PM

The Massachusetts Department of Public Safety has released final regulations that will exempt some manufacturing and warehouse companies from burdensome rules for licensing people who operate forklifts, overhead cranes and other hoisting equipment on company property.

HoistingState law previously required individual licenses for every operator of even small pieces of hoisting equipment commonly used in manufacturing facilities, retail outlets, warehouses and warehouse- type stores. AIM worked with state regulators two years ago to pass a law - signed by Governor Deval Patrick on October 14, 2010 – to allow the Department of Public Safety to streamline the regulations.

The proposed new regulations would expand the current exemption from the licensing and permitting requirements for public utilities to include companies operating certain hoisting equipment solely on company property, provided certain conditions are met. One key condition is that a company must maintain an employee training program approved by the commonwealth.

Individuals or organizations seeking to offer continuing education courses for individuals to be licensed to operate hoisting machinery must submit an application to the Department of Public Safety. All courses must be monitored by a Massachusetts hoisting license holder and must offer a curriculum that, at a minimum, complies with detailed requirements for each class of hoisting machinery, as outlined in the proposed regulation.

The state regulations are in addition to any federal Occupational Safety and Health Administration requirements that cover hoisting equipment. The rules also impact temporary permits that may be issued by a short-term rental entity for the operation of compact hoisting machinery.

If a company is not able to take advantage of the new exemption, then traditional licensing requirements will apply.

Employers need to pay attention to these new rules and carefully understand their applicability. Because state officials have rarely enforced the hoisting rules over the years, many companies will find themselves confronting the regulations for the first time. These companies may have no idea what the hoisting regulations are all about or why they may apply to their business.

You may comment below or email me at rrio@aimnet.org with questions.

Topics: Regulation, Hoisting, Safety

Obama Climate Plan Could Benefit Massachusetts Employers

Posted by Robert Rio on Jun 25, 2013 4:25:00 PM

The climate-change plan and proposed carbon dioxide emission standards announced today by President Barack Obama represent one of those rare occasions when new regulation may benefit Massachusetts employers.

Climate changeThe reason - Massachusetts ratepayers and employers have already borne the brunt of stringent Massachusetts-only carbon standards and taxes that have resulted in the highest electric rates in the country. Now that other states are faced with increased costs and regulation, Massachusetts businesses may see some competitive relief.

AIM has long supported action at the federal level to level the playing field for Massachusetts customers. Depending on the programs included in the Obama plan and how they are structured and financed, Massachusetts ratepayers could actually benefit from several elements.

The blueprint has several priorities:

  • Carbon dioxide emission standards for new and existing power plants and development of clean energy
  • New mileage standards for trucks and buses and advanced transportation technologies
  • New energy efficiency standards and investments
  • Other programs related to reduce hydroflourocarbons and methane, both very potent greenhouse gases and related to federal agencies


Massachusetts power plants are already the cleanest in the country, and because the Obama plan focuses on coal-fired power plants, any emission reductions are unlikely to have much of an impact in the Bay State. Massachusetts only has one significant coal-fired plant left (Brayton Point in Somerset) and it is already complying with the most stringent emission limits in the country. Federal standards will probably have little cost impact on operations here.   

Savings could also come to ratepayers from new federal efficiency standards and energy efficiency programs, which may eliminate ratepayer financed subsidies. Ratepayers currently pay more than $700 million per year to finance energy efficiency programs in Massachusetts that provide rebates for equipment upgrades. To the extent that federal initiatives duplicate the Massachusetts programs or render them unnecessary, it may reduce costs for consumers.

Research on new energy technologies and carbon-capture technologies may also result in money being directed to universities in the area.

A properly designed national program could benefit Massachusetts ratepayers while reducing greenhouse gas emissions. AIM will work with state and federal agencies to make sure that the programs are cost-effective and use taxpayer and ratepayer money to get measurable reductions.

Topics: Barack Obama, Issues, Environment

Proposed Rules Could Ease Burden on Licenses for Forklifts, Cranes

Posted by Robert Rio on Oct 19, 2012 2:04:00 PM

The Massachusetts Department of Public Safety has developed proposed regulations that could exempt hundreds of manufacturing and warehouse companies from burdensome rules for licensing people who operate forklifts, overhead cranes and other hoisting equipment on company property.

HoistingState law requires individual licenses for every operator of even smaller pieces of hoisting equipment commonly used in smaller manufacturing facilities, retail outlets, warehouses and warehouse- type stores. AIM worked with state regulators two years ago to pass a law - signed by Governor Deval Patrick on October 14, 2010 - allowing the Department of Public Safety to streamline the existing regulations.

The proposed new regulations would expand the current exemption from the licensing and permitting requirements for public utilities to include companies operating certain hoisting equipment solely on company property - provided certain conditions are met. In order for the exemption to apply, the company must, among other requirements, have an employee training program approved by the commonwealth that meets the specifications of the new regulation.

The rules also impact temporary permits that may be issued by a short-term rental entity for the operation of compact hoisting machinery.

Individuals or organizations seeking to offer continuing education courses for individuals to be licensed to operate hoisting machinery must submit an application to the department. All courses must be monitored by a Massachusetts hoisting license holder and must offer a curriculum that, at a minimum, complies with detailed requirements for each class of hoisting machinery, as outlined in the proposed regulation.

The Department of Public Safety will be hold a public hearing to solicit comments on the proposed regulation on December 3 at 10 am at One Ashburton Place,  Boston. Written comments are due by December 3. These new regulations may offer significant relief for entities using this equipment solely with the confines of their own property, but AIM urges all employers to review the proposed rules and contact us with comments.

The proposed regulation can be found here.

You may comment below or email me at rrio@aimnet.org.

Topics: Issues, Safety, Manufacturing

Lawmakers Can Ensure Energy Supply without Bankrupting Ratepayers

Posted by Robert Rio on Jul 12, 2012 9:51:00 AM

The Beacon Hill conference committee currently hammering out an energy bill has a once-in-a-generation opportunity to put Massachusetts on a path of energy independence without bankrupting ratepayers.

EnergyHow? By crafting a bill that re-balances rate design and reforms a proposed requirement that utility companies purchase more of the long-term renewable power contracts that have already cost hard-working individuals and businesses billions of dollars on projects like Cape Wind.

The committee holds in its hands the power to jump-start a Massachusetts economy that has been saddled by the failure of the commonwealth’s centerpiece energy law – the 2008 Green Communities Act - to lower the cost of electricity. A balanced energy bill will ensure reliability and improve the bottom line of key Massachusetts industries that depend upon electricity, from traditional manufacturing to hi-tech data centers to municipalities, hospitals and universities

AIM and its member employers believe that the proposed Act Relative to Competitively Priced Electricity in the Commonwealth should enhance the parts of Green Communities that work and eliminate or reform those that do not. Our position reflects a belief that renewable generation based on sound market based economic principles can, unlike the current system, reduce prices while improving the environment and energy independence.

First, the good news. An Act Relative to Competitively Priced Electricity in the Commonwealth would resolve rate inequalities under which commercial and industrial ratepayers foot an increasing percentage of total electricity costs despite using a declining share of power. The proposed legislation would allow state regulators to allocate the cost of operating the electricity distribution system in proportion to the demand represented by each rate class.

Now the challenging part. AIM opposes sections of the bill that would allow electricity distribution companies like NStar and National Grid to increase purchases of long-term contracts for power and renewable energy credits from renewable providers without a  transparent competitive bid process. Long-term contracts, negotiated in back rooms, have left consumers and employers stuck with a $3 billion bill for power from Cape Wind. Three-quarters of all contracts for long-term renewable power have been negotiated outside of competitive bidding at a cost some three times that of market-based renewable power.

The protections should include:

  • Long term contracts must be competitive bid. There should be no option for individual negotiations outside the bidding process.
  • There should be a defined cap on the amount of power that distribution companies are required to solicit.
  • 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.
  • There should be no other options for long-term contracts other than those specifically approved under this law

AIM also believes a section of the bill that requiring long-term contracts with new gas generating plans at the locations of existing coal or oil fire plants would harm consumers.

The prohibitive cost of energy is one of the key reasons that Massachusetts fell from sixth to 28th this week on CNBC’s annual ranking of the Best States for Business. The energy conference committee can help to restore the commonwealth’s ranking by taking real steps to reduce the cost of electricity in the Bay State.

Topics: Issues, Energy, Cape Wind

NSTAR Deal Offers Short-Term Savings, Long-Term Cape Wind Costs

Posted by Robert Rio on Feb 15, 2012 3:48:00 PM

NSTAR’s agreement to purchase power from Cape Wind to facilitate the utility’s merger with Northeast Utilities should create savings for ratepayers in the short term, but those savings will likely be offset in the long term by the staggering cost of the offshore wind project.

Energy costsState officials announced a settlement agreement this afternoon under which NSTAR will purchase 27.5 percent of Cape Wind power, likely the most expensive ever generated in Massachusetts.

The agreement, negotiated outside of public debate, is expected to pave the way for state approval of the proposed merger of NSTAR with Connecticut-based Northeast Utilities.

If approved by the state Department of Public Utilities, the negotiated settlement would freeze the base distribution rates for four years, benefitting customers of the merging companies – NSTAR Electric, NSTAR Gas and Western Massachusetts Electric Company (an NU subsidiary). It would also provide a one-time customer rate credit of $21 million for residential customers of the three companies – an amount that equals half of the estimated four-year savings the companies expect to net from the merger.

The settlement also requires the two utilities to restructure existing rates in the Western Massachusetts Electric service territory that currently result in commercial and industrial customers paying significantly more than the actual cost to serve them.

AIM has opposed power agreements with Cape Wind because the project's cost will burden employers who already pay among the highest electricity costs in the nation. The average electricity price in the U.S. for industrial customers in July 2011 was 7.39 cents per kilowatt hour (kWh) versus 13.87 cents for Massachusetts manufacturers.

National Grid has already committed to purchasing half of the power from Cape Wind. The Cape Wind/National Grid agreement was the first to be approved under a provision of the Green Communities Act that allows utilities to sign long-term contracts for renewable power directly with generators.

The Massachusetts Supreme Judicial Court in December rejected an appeal by AIM of the commonwealth’s approval of the National Grid deal.

Under terms of the proposed settlement, if Cape Wind does not commence “physical construction” (i.e., installation of equipment or materials into the seabed) before December 31, 2015, NSTAR can opt to terminate its power purchase contract with the wind farm. If that occurs, NSTAR agrees to solicit contracts no later than June 30, 2016 to purchase an equivalent amount of power (equal to 2 percent of the company’s total load) from new renewable energy resources qualified under the Massachusetts Renewable Energy Portfolio Standard for Class I renewables.

AIM is disappointed that a merger that would have been good for the ratepayer was basically used as an excuse to force the companies to purchase the highest-priced renewable power in Massachusetts history.

Recent competitively bid contracts have shown that renewable power can be purchased for one-third the price of Cape Wind AIM will review the agreements in detail to assess their full impact on employers.

Topics: NSTAR, Energy, Cape Wind

State Supreme Court Upholds Cape Wind/National Grid Power Agreement

Posted by Robert Rio on Dec 28, 2011 10:44:00 AM

The Massachusetts Supreme Judicial Court (SJC) today upheld the commonwealth’s approval of a power-sales agreement between National Grid and Cape Wind that will require thousands of employers to pay the highest power price ever negotiated in Massachusetts.

Cape WindThe ruling rejects arguments by Associated Industries of Massachusetts that the power sales agreement violates state law by forcing employers in Grid’s service territory to pay for Cape Wind power even if they do not use it. The SJC also ruled that the Massachusetts Department of Public Utilities had the authority to approve the 15-year deal, even though National Grid did not seek competitive bids.

The SJC, in an opinion written by Justice Margot Botsford, ruled that while the Massachusetts Green Communities Act does not explicitly address the authority of state regulators to approve cost-recovery methods for renewable power, “it is well established that the (Massachusetts Department of Public Utilities) has the statutory authority to rule on the appropriateness of proposed cost-recovery formulas.”

“(T)he department's decision in this proceeding is not precluded by the fact that the proposed cost recovery method is novel, particularly in light of the new emphasis on development of renewable energy in the (Green Communities Act)… The department permissibly determined that the environmental benefits of (the power purchase agreement) … will accrue to all National Grid customers, and it is therefore appropriate to require all customers to share in the costs of acquiring these benefits, in accordance with departmental precedent,” the court said.

Richard C. Lord, President and Chief Executive Officer of AIM, said the association respects the ruling of the court but is disappointed with the outcome.

“We continue to maintain that state regulators fell short of their responsibilities to consumers by approving this agreement at a time when other utilities were finding plentiful renewable electricity at less than half the cost of Cape Wind."

Massachusetts employers already pay among the highest electricity rates in the nation. 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 Cape Wind/National Grid agreement was the first to be approved under a provision of the Green Communities Act that allows utilities to sign long-term contracts for renewable power directly with generators. Other Massachusetts utilities such as NSTAR have since negotiated renewable power contract for much less than the 25 cents per kWh average cost of the National Grid/Cape Wind agreement.

The cost difference stems primarily from the fact that National Grid chose to negotiate with Cape Wind individually, outside a competitive bidding process, while NSTAR and the other utilities chose to bid their renewable power requirements competitively for generation anywhere in New England.

The legal challenge that AIM filed on behalf of employers and others was based upon three broad arguments:

  • National Grid’s allocation of the above-market costs of Cape Wind to ratepayers is inconsistent with the law and harms ratepayers on competitive energy supply;
  • The amount of the Power-Purchase Agreement exceeds 3 percent of total electricity demand in the National Grid territory and therefore exceeds the legal cap on the amount of renewable power utilities must purchase through long-term contracts; and
  • The National Grid/Cape Wind contract was not competitively bid.

The first issue was the most important for AIM member employers. National Grid has chosen to allocate the $1 billion in above-market costs of Cape Wind to all customers, even though the power will be funneled only to the customers who buy electricity from National Grid. That means businesses that buy power on the competitive market to help moderate their costs will be forced to pay extra money - tens of thousands of dollars in some cases – for power they do not use, essentially making them pay twice for electricity.

Topics: Issues, Energy, Cape Wind

State Energy Policy Built on Ineffective Programs that Drive Up Costs

Posted by Robert Rio on Dec 2, 2011 10:21:00 AM

Editor’s note – AIM Senior Vice President Robert Rio wrote an article in this space Monday about the fact that a rare political consensus is developing on Beacon Hill around the need to address the staggering cost of electricity in Massachusetts.

Rio’s article was later posted by Commonwealth magazine, where it drew a response from Lisa Capone, Assistant Secretary for Communications and Public Affairs at the Massachusetts Executive Office of Energy and Environmental Affairs. Rio’s subsequent article appears below.

Electricity CostsAIM appreciates substantive debate on issues as important as the high cost of energy in Massachusetts. But the recent posting in Commonwealth magazine by Assistant Secretary Lisa Capone is disappointing in its grasp of the issues.

Ms. Capone attempts to rebut arguments that AIM never made in its November 28 article Consensus Emerges on Need to Address Massachusetts Electricity Costs. Her ad hominem representation of AIM’s position on numerous issues is false. And the “facts” she cites are either incorrect or verify our initial points.

Ms. Capone spends an inordinate amount of time accusing AIM of flip-flopping in our support for energy efficiency. The only problem is that the November 28 AIM article was not about energy efficiency, but about state-mandated programs of questionable benefit diverting money out of the productive economy.

For the record, AIM has been clear and consistent in its support of energy efficiency.  We stated in our recent testimony before the Joint Committee on Telecommunications, Utilities and Energy, that we support a vibrant, cost-effective energy efficiency program.  We may debate the actual monetary benefit of energy efficiency versus its cost, but all energy should be used wisely and we are proud to be a leader in supporting cost-effective energy efficiency programs.

While efficiency measures create measurable results, the same cannot be said of other programs developed under the Massachusetts Green Communities Act, including net metering, long-term contracts for renewable energy, smart grid, additional RPS categories, utility owned solar and solar carve outs. These programs are either of questionable benefit or run so inefficiently and without any accountability or review that their added costs will wipe out any benefit from energy savings.

These are the programs that contribute unnecessarily to the $4 billion of additional costs that Attorney General Martha Coakley, the statutory ratepayer advocate, cited in testimony on Beacon Hill. The Massachusetts Division of Energy Resources (DOER) does not dispute the attorney general’s numbers.

AIM supports cost-effective, competitively bid renewable projects and other programs that demonstrate real results at the least cost to ratepayers. 

Ms. Capone’s claims about impressive job gains in the so called “clean-energy sector” - a rhetorical sleight of hand suggesting that industries that don’t fit the administration’s political agenda are somehow “unclean” - prove AIM’s point about the problem of government picking winners and losers. Could it possibly be that the anemic growth in the so called non-clean energy sector cited by Ms. Capone is partly due to the imposition of more than $1 billion worth of electricity cost increases under Green Communities in order to transfer it to favored sectors of the economy?   Clean-energy jobs are not being created - just transferred.

Massachusetts deserves an energy policy that treats all ratepayers and companies equally. A diverse economy is more sustainable than one based on government-imposed cross subsidies. 

Massachusetts has the highest electricity prices in the nation, almost double the average rate for industrial users, despite the promises that these programs reduce rates. Even a recent 40 percent decline of the cost of natural gas, a key fuel for electricity generation, failed to lower electric rates in Massachusetts. The only way to address the problem is through rigorous, cost-effective, transparent and competitively bid projects and policies that put the consumer first.

 These standards benefit all members of the Massachusetts economy. They will bring jobs to all regions of the state, create stable or lower electricity costs and result in more renewable energy being built in Massachusetts.

AIM calls upon the commonwealth to take the following actions:

  • itemize and maintain a list to share with ratepayers of all added costs for every program instituted since the Green Communities Act was signed;
  • project these costs out over three years;
  • update bill impacts for Cape Wind (now almost triple the original estimate).

Such reporting would allow consumers and employers to debate the merits of each program.  Open debate would bring certainty to ratepayer planning, and credibility to the commonwealth. Absent the data, we are left with a government that appears to want to maintain the status quo and marginalize anyone who questions their agenda.

 

Topics: Issues, Energy, Business Costs

Consensus Grows on Need to Address Massachusetts Electricity Costs

Posted by Robert Rio on Nov 28, 2011 8:45:00 AM

“There are compelling reasons to support the development of offshore wind and solar projects, but requiring them to compete with onshore wind on the basis of price would undermine this development.”
Ann Berwick, Chair
Massachusetts Department of Public Utilities

Cost of ElectricityA rare political consensus is developing on Beacon Hill around the need to address the staggering cost of electricity that has long suppressed economic growth in Massachusetts.

Attorney General Martha Coakley, Senate President Therese Murray, House Speaker Robert DeLeo, AIM and scores of Massachusetts employers have all expressed remarkably similar messages in recent weeks about the need to create much-needed relief for consumer and employer electric bills.

AIM invites DPU Chair Berwick and the Patrick administration to join that consensus. The formula for relief on energy prices in Massachusetts should be a state energy policy that is technology neutral, transparent, and based on a competitive bidding process that ensures the best possible prices for end users.

The stakes could not be higher for Massachusetts employers. Electricity price increases caused by the commonwealth’s primary renewable energy policy – the 2008 Green Communities Act - 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.

Attorney General Coakley told a Beacon Hill hearing two weeks ago that the Green Communities Act will add $4 billion to the electric bills of Massachusetts employers and residents over the next four years.

Coakley said that electricity costs in Massachusetts – already some of the nation’s highest – will continue to rise over the next decade, warranting a review of some of Green Communities Act provisions that encourage investment in expensive technologies and give utility companies “overly generous” incentives to hit efficiency targets set by the law.

Coakley also recommended that long-term renewable energy contracts be competitively bid, a position long taken by AIM in its objection to the power sales agreement between National Grid and Cape Wind. The position is at odds with that taken by Berwick, the state’s top utility regulator, who said competitive bidding could discourage offshore wind and solar power development.

Meanwhile, Senate President Murray wasted no time after the conclusion of formal legislative sessions for 2011 to confirm that the Senate will address the high cost of energy next year. She named Senator Benjamin Downing of Pittsfield, co-chair of the Committee on Telecommunications, Utilities and Energy, to lead the initiative.

“Does the regulatory regime that we have set up right now meet the needs of ratepayers in the best way possible?” Downing told State House News Service. “There are a lot of issues that fall under that. It’s a broad conversation that we’re having.”

AIM applauds the Legislature for addressing energy costs and offers several basic principles to guide the review:

  • Put the consumer first. Consumers in Massachusetts should be the primary beneficiaries of energy policy, not developers, marketers, brokers, or other stakeholders seeking to benefit their bottom lines.
  • Ensure that all programs are subject to rigorous cost-effective standards and, where possible, require that they be implemented at the least cost to consumers. Massachusetts is making a massive investment in renewables and energy efficiency under Green Communities, and we should hold these programs up to strict standards for evaluating whether they are cost effective.
  • Ensure that legislative or regulatory goals are economically sustainable and open to review and adjustment. Legislative targets for the development of certain technologies and for certain environmental goals are important, but should be dynamic and subject to periodic evaluation and adjustment depending on economic conditions.

Topics: Issues, Energy

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