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Competition Moderates Clean-Energy Costs for Ratepayers

Posted by Bob Rio on Jan 16, 2018 8:30:00 AM

Clean energy in Massachusetts is finally subject to the laws of economics. That’s good news for both businesses and residents throughout the commonwealth who pay some of the highest electric rates in nation.

Hydro.jpgThe current competitive bidding process being conducted by Massachusetts utilities for large scale hydropower, onshore and offshore wind, and solar will not lower the price of electricity – at least not in the next few years. But ratepayers will at least be assured their money is being spent wisely.

Governor Charlie Baker signed two energy bills in 2016 that swept away the sweetheart deals and overly generous subsidies that characterized the clean-energy business prior to that time. The bills required purchases of clean energy to be competitive and transparent. The results are already evident, even before the contracts are signed.

In April 2017, as part of the first requirement for the utilities to purchase clean energy (primarily large hydropower from Canada and onshore wind) a request for proposals was sent to developers.

Suppliers responded with nearly 50 proposals, far more that the total cumulative amount allowed in the legislation. Some names you might recognize – Hydroquebec, for instance, has been sending power to Massachusetts for decades. But others may not be as familiar – Emera, Nalcor, TDI, Nextera, and Avangrid – some partnering with utilities National Grid and Eversource - all vying to serve Massachusetts consumers.

The clean energy process even attracted a bid from New England-based Deepwater Wind, which submitted a small offshore wind proposal, even though the larger competitive solicitation for offshore wind was not due until this month, separate from the initial clean energy bidding process.

While prices haven’t been disclosed yet (the analysis is based on a complex evaluation of bids and is confidential until a winning bidder is selected following by a public process at the Department of Public Utilities process), the fact that so many developers “sharpened their pencil” is a good start.

Bids under the clean-energy program are scheduled to be awarded around January 25. Bids for the separate offshore wind program will be selected on April 23..

Competition will have a particularly dramatic effect on solar energy.

Although some small solar projects were bid as part of the clean energy proposals, the vast amount of solar installations are currently subsidized through a different program that has been around for several years. It has become not only expensive – $500 million dollars per year, but also overly generous as the cost of solar installations has dropped more than 50 percent due to lower market prices.

Most states went to a competitive framework years ago – and saw significantly lower prices, but Massachusetts program is just starting. Bids for new solar projects were due in December. Those bids will establish a baseline process for solar power for the next several years. Based on the experience of other states, the prices should drop by more than half.

And that’s not all. In both the offshore wind and solar programs, future projects must be lower than the current prices, all but guaranteeing that the state has bent the price curve for these installations.

It’s an ambitious move. And in the aftermath of the Cape Wind debacle, some Massachusetts ratepayers may find it hard to believe that clean energy and offshore wind farms could be competitively priced and developed cost-effectively.

But that is what is happening. And the diversity of projects was no surprise to AIM – early supporters of bringing competition to clean energy.

The debate about whether the commonwealth will pursue clean energy is over. So is the debate about the value of competition to Massachusetts electric customers.

Topics: Electricity, Energy, Solar Subsidies

Tax Reform to Reduce Electric Rates

Posted by Bob Rio on Jan 3, 2018 6:22:15 PM

Federal tax reform may soon generate a $56 million windfall for Eversource electric ratepayers in Massachusetts.

Electriclinessmall.jpgEversource disclosed in a filing with the Department of Public Utilities today that the reduction in federal corporate tax rates from 35 percent to 21 percent will allow the company to reverse the rate increase approved for NSTAR customers in November and to reduce the amount of increase for customers of Western Massachusetts Electric Company.

NSTAR customers will now see a $35.4 million decrease in base rates instead of a $12.2 million increase. Western Massachusetts Electric customers will see their rate increase shrink from $24.8 million to $16.5 million.

Eversource indicated that it may seek additional rate reductions next January after calculating excess deferred taxes.

“Great news for Massachusetts employers struggling to manage the high cost of electricity,” said John Regan, Executive Vice President of Government Affairs for Associated Industries of Massachusetts.

“Tax reform created a tremendous opportunity to provide rate relief to customers and Eversource deserves credit for moving rapidly to realize that opportunity."

Attorney General Maura Healey filed a motion with the DPU on December 20 seeking larger rate reductions. Eversource says its agrees with the need to reduce rates, but calculates the numbers differently. Utility regulators will now determine the final figures to be implemented on February 1.

AIM urges the DPU to approve the rate reductions for Eversource and to review the rates of other utilities in the wake of the changes in federal tax law.

Topics: Massachusetts employers, Energy, Massachusetts Department of Public Utilities

New Greenhouse Regulations Will Drive Up Costs for Employers

Posted by Bob Rio on Aug 11, 2017 11:29:19 AM

The Baker Administration will today introduce new regulations that set specific limits on sources of greenhouse gases, the emissions linked to climate change. State officials indicate that the regulations could increase costs to electric ratepayers by as much as 2 percent.

Electriclinessmall.jpgThe new rules aim to reduce the state’s carbon emissions 25 percent below 1990 levels by 2020, as required by state law.

Robert Rio, Senior Vice President of Government Affairs at AIM, issued the following statement:

“The 4,000 member employers of Associated Industries of Massachusetts are extremely disappointed with the Baker administration’s new electricity sector regulations. The administration openly admits that these rules will increase Massachusetts electric rates that are already among the highest in the nation.

“The increases produced by the proposed rules, when combined with other pending cost increases, could raise the electric bills of Massachusetts employers some 10 percent in the next year alone.

“These regulations are ultimately unnecessary. The administration could have chosen to work with the legislature to change the Global Warming Solutions Act to allow for alternative ways for the electricity sector to meet these obligations.  Instead, the administration has turned a blind eye to the corrosive impacts that high electric rates are having on struggling Massachusetts companies.

“The cost increases produced will harm consumers as well through higher rents, taxes and other costs of doing business.   

“AIM supports clean energy and is a leader in working with the administration to transition the power sector to cleaner sources.  These regulations are a setback to that effort."

Topics: Massachusetts economy, Environment, Energy

New Solar Subsidy Program Gets It Right

Posted by Robert Rio on Feb 2, 2017 2:00:00 PM

The Massachusetts Department of Energy Resources (DOER), after months of public comment, released on Tuesday its proposal for a new solar-energy incentive program to replace the complex and overly expensive program now in place.

solarpanels.small.jpgWe think the state got it right. And employers and other electric customers will be the better for it.

The proposal adopts suggestions made by AIM to rely on market competition to establish the amount of incentives that developers will receive to install solar energy. The result will be a program that costs half as much as the current one and still encourages the development of solar installations throughout the commonwealth.

Total savings to employer and other electric ratepayers: $250 million per year.

The new program will eliminate Solar Renewable Energy Credits (SREC), one of two methods through which solar developers currently collect subsidies. The other, net metering credits, will remain unchanged.

While some of the details are still being worked out, the new program, called the Solar Massachusetts Renewable Target program or SMART program, will establish a solar tariff rate only after bidding is complete for an initial 200 megawatt block of solar projects. Developers will receive that bid price for 20 years.

That incentive rate will remain the same for all solar projects and will automatically decline 4 percent for every 200 MW block in the future. There will be some “adders” to the base price - for building-mounted systems, solar canopies, and cases in which solar is combined with storage technologies - that would add small amounts to the baseline price.

Projects may still receive net metering credits, but those will offset the tariff to determine the final subsidy. So if the base rate is established at 15 cents and the developer receives net metering credits of 10 cents, the utility will make up the 5-cent subsidy through the tariff.

AIM opposed the scope of the current solar program and was concerned that early proposals for the new program relied on government officials to set tariff levels for solar incentives without using the competitive market to drive down costs to the ratepayer. Such a system would fail to pass along to the ratepayer the 50 percent reduction in solar installation costs that have occurred over the last few years. 

Driving down costs is important for the future of the Massachusetts economy. Massachusetts not only has one of the highest electricity costs in the country, but one of the most generous solar and renewable incentive programs, adding up to nearly $1 billion in 2016 and $2 billion by 2020. Those subsidies add up to nearly 4 cents per kilowatt hour for individual customers even before the new solar incentive program kicks in.

AIM, in a series of comments, urged DOER to adopt a model based on competition. Other states where solar installations cost half as much as Massachusetts already use the competitive model.

Read First Set of AIM Comments

Read Second Set of AIM Comments

Competition reduces prices. Competition is also the hallmark of the recently passed Massachusetts energy bill, which requires utilities to solicit market proposals for hydropower and offshore wind, a notion AIM supports.

The solar proposal still needs to go through public comment and any tariff needs to be approved by the Massachusetts Department of Public Utilities. During the transition period between now and the point at which the new program is approved by the Department of Public Utilities (DPU) – expected January 2018 - the existing solar incentive program will remain in place at a lower incentive rate.  

DOER has developed a program that is well thought-out and enjoys wide support. AIM commends DOER for this step in the right direction and we look forward to working with the Baker Administration and others to get this program approved and implemented as soon as possible. 

If you are interested in following this issue and engaging with AIM on Massachusetts electricity prices, contact me at rrio@aimnet.org or 617-262-1180

Review the DOER Proposal

Topics: Energy, Solar Subsidies

Attorney General: Massachusetts Well-Positioned on Health and Energy

Posted by Christopher Geehern on Nov 17, 2016 11:35:50 AM

The approach that Massachusetts takes to key employer issues such as health care and energy will depend heavily on decisions that will be made during the next several months by the Trump Administration, Attorney General Maura Healey said this morning.


The good news, Healey told several hundred business leaders at the AIM Executive Forum, is that Massachusetts is prepared for such uncertainty because of the collaborative policy work that has been done by several governors, the legislature, the attorney general’s office and the private sector.

She pointed to the fact that Massachusetts has its own health-care reform law that will remain even if President Trump and Congress change some or all of the Affordable Care Act. She also noted that the Legislature passed a wide-ranging energy bill earlier this year to diversify the commonwealth’s energy supply.

“I would love to have the Massachusetts way to be the American way,” Healey said.

The attorney general opened her remarks with several observations on the presidential election and her decision to establish a hotline for people to report incidents of bias or harassment. She reported that more than 200 people from all sides of the political spectrum have called the hotline in the past two days.

“It sends a message that we know the difference between right and wrong,” Healey said.

She acknowledged that the degree to which the Trump Administration changes Medicaid funding levels - and potentially shifts that funding to block grants - will have a significant effect on the Massachusetts health-care system. The attorney general’s office has issues multiple reports looking at rising health-care costs in Massachusetts and methods to improve the market.

“Regardless of federal changes, the legal framework Massachusetts put in place under Governor Romney, that served as the model for the ACA, remains. So, in key ways, I believe we are strongly positioned to keep our health care systems running smoothly. But we need everyone at the table and working together.

“While we get ready to respond to changes at the federal level, we will continue to work on our affordability agenda here at the state level. And there’s plenty to do on this front.”

Energy policy will also depend on the direction of a president who campaigned on the need to exploit coal and other traditional fuels to control the cost of electricity. Healey said the new Massachusetts energy law commits the commonwealth to diversifying its energy portfolio through a competitive market.

“I believe diversification of our energy sources is critical,” she said.

“The role for my office is to make sure that we have a competitive, transparent process that results in cost-effective contracts and minimize customer risk.”

Healey said the trend of collaboration between employers and her office continued earlier this year with passage of the nation’s first pay-equity law. AIM worked with Healey and legislative leaders on a compromise bill that ensures fair compensation for all workers while allowing employers to attract and retain skilled employees.

Topics: Health Care Reform, Energy, Maura Healey, Attorney General Maura Healey

Video Blog | Stop & Shop Turns Waste to Energy

Posted by Michele Slafkosky on Oct 3, 2016 3:15:57 PM

The Stop & Shop New England Division of Ahold USA will receive one of six inaugural AIM Sustainability Awards on October 24 for its innovative, state-of-the-art, Green Energy Facility in Freetown that uses anaerobic digestion to convert inedible food into clean energy.  The process produces up to 40 percent of the energy for Stop & Shop's 1.1 million square-foot adjacent distribution center. 

 

AIM will present Sustainability Awards at each of four regional celebrations in October. The events are open, free of charge, to AIM member employers.

Register | Worcester

Register | Springfield

Register | Foxboro

Register | Lawrence

Topics: Energy, Sustainability, AIM Sustainability Roundtable

Lawmakers OK Energy, Economic Bills; Non-Competes Remain Unchanged

Posted by John Regan on Aug 1, 2016 8:40:56 AM

A frenzied conclusion to the 2015-2016 Beacon Hill legislative session produced far-reaching measures on energy and economic-development, but no agreement on restricting the use of non-compete agreements.

statehousedome.jpgA consensus pay-equity bill supported by the business community passed a week earlier and is due to be signed by Governor Charlie Baker today.

Richard C. Lord, President and CEO of AIM, said employers should take encouragement from the fact that the final bills that passed around midnight Sunday largely reflected the moderate approach to business issues taken by the House of Representatives.

“The House and the Baker Administration again showed an understanding of the factors that contribute to business growth and job creation,” Lord said. “We give particular credit to House Speaker Robert DeLeo, who forged meaningful compromises on pay-equity, non-compete agreements and other key issues.”

He also noted that lawmakers and Governor Baker worked responsibly to balance a difficult budget with no tax increases.

The energy bill commits Massachusetts utilities to purchasing up to 30 percent of the state’s electricity from offshore wind generation and hydropower imported from Canada or upstate New York. The final version rejects a troublesome proposal to double the state's minimum requirements for renewable energy and also maintains funding mechanisms for development of natural gas pipelines.

“The bill will raise electricity rates as the commonwealth transitions to non-carbon fuel sources. That said, lawmakers approached the issue in a careful and thoughtful manner that recognizes the need to include a variety of generation sources for electricity,” said Robert Rio, Senior Vice President of Government Affairs at Associated Industries of Massachusetts.

Average electric rates in Massachusetts are the third highest in the nation for industrial ratepayers, and more than twice as high as companies pay in the competitor state of North Carolina. Those costs place employers at a significant disadvantage when competing with businesses located in other areas of the country.

The breakdown of negotiations on non-compete agreements brought a stunning, if temporary, end to a contentious effort by venture capitalists to do away with current law governing non-competes. AIM has waged a protracted battle to defend the vast majority of Massachusetts employers who wish to preserve the use of non-competes, but the association nevertheless negotiated a reasonable compromise measure that passed the House of Representatives.

The House bill would have limited the duration of non-competes to one year and required employers who did not compensate workers at the time they signed a non-compete to pay 50 percent of the worker’s salary during the non-compete period. A separate Senate bill would have limited the term of non-competes to three months and required employers to pay 100 percent of a worker’s salary regardless of existing financial compensation.

The deadlock means that opponents of non-competes will have to return to square one and refile their proposals when the 2017-2018 legislative session begins in January.

“The outcome of negotiations on the use of non-competes is disappointing to the business community, which worked in good faith with the House on a reasonable compromise. AIM continues to believe that non-compete agreements with common-sense limitation protect intellectual property and stimulate investment and innovation in Massachusetts,” said Brad MacDougall, Vice President of Government Affairs at AIM.

The economic development bill includes $500 million in authorized borrowing for the MassWorks infrastructure program, $45 million in capital dollars for brownfields environmental projects and $45 million for equipment for career and technical education, among other measures. The bill also features a new tax deduction intended encourage families to save for college tuition costs.

The pay-equity bill is intended to promote salary transparency, limit upfront questions to job candidates about salary history, and encourage companies to conduct reviews to detect pay disparities. It explicitly recognizes legitimate market forces such as performance and the competitive landscape for certain skills that cause pay differences among employees. 

 Register for AIM Brown Bag Webinar:   Legislative Wrap-Up

 

Topics: Massachusetts Legislature, Economic Development, Non-Compete Agreements, Energy

Take Action to Limit Electricity Rate Hikes

Posted by Bob Rio on Jul 22, 2016 11:57:57 AM

Employers concerned about the rising cost of electricity in Massachusetts take note – it’s time to contact members of a legislative conference committee hammering out an energy bill that could make your current electric bill look like child’s play.

Electriclinessmall.jpg The message: Pass a bill that follows the detailed recommendations of a four-page letter sent by AIM earlier this week.

The Legislature and Governor Charlie Baker have made it a priority to secure passage of an energy/electricity bill prior to the end of the session on July 31. 

AIM supports the commonwealth’s efforts to transition its economy to non-carbon fuel sources and attract new businesses to Massachusetts.  At the same time, the complex House and Senate energy bills now in conference will have far-reaching and irreversible impacts upon employers and citizens alike during the next two decades. 

One fact is clear: The final bill will raise electric rates.  Under virtually any scenario the above-market costs passed to ratepayers in the form of rate hikes could be larger than any utility rate hike in history. Massachusetts could end up buying up to 40 percent of its electricity from high-priced renewable energy sources.

The disparity between electric rates in Massachusetts and those in competing states is hindering the ability of employers to attract and retain jobs. The list of internationally known companies that have moved out of Massachusetts just in the last year is long and includes Polartec in Lawrence; SABIC in Pittsfield; Kraft Foods in Woburn; General Mills in Methuen; General Foods in Woburn; and Notini and Sons in Lowell.

Traditional companies located in Gateway cities are at particular risk. These companies are not beneficiaries of the new economy, but still provide good paying jobs, tax revenue and spin-off spending to their communities. 

Other Massachusetts employer groups also sent a letter to the conference committee this week urging lawmakers to factor in costs to ratepayers.

Contact the Energy Conference Committee

 

Topics: Electricity, Energy

Senate Advances Energy Bill

Posted by Bob Rio on Jun 27, 2016 9:47:25 AM

The Senate passedan  energy bill last week that would require utility companies to buy almost half of the electricity used in Massachusetts from renewable generation sources. AIM remains encouraged by some elements and concerned about others.

WindTurbinesSmall.jpgThe Senate measure (S. 2372, An Act Relative to Energy Diversity) would commit the commonwealth to purchasing 2,000 megawatts of electricity generated by offshore wind and about 1,400 MW from other sources, such as large hydropower and onshore wind. Other sections add requirements for energy labelling on buildings and mandatory energy audits. 

AIM’s response to the Senate proposal is the same as its reaction to an earlier bill passed by the House -  employers support the concept of buying electricity from clean-energy resources, provided the following guidelines are followed:

  • Any contract must be cost-effective for Massachusetts ratepayers (i.e. the benefits of any contract to the ratepayer must be greater than its costs);
  • The procurement process must be competitive and decision-makers must have an ability to refuse any bids that do not meet standards (i.e. no carve-outs for favored technologies);
  • Any above-market or below-markets costs of the contract must be allocated fairly among  all customers;
  • The clean energy procured must qualify to be used for compliance with the state’s Global Warming Solutions Act (GWSA), which requires a 25 percent reduction in statewide greenhouse gas emissions by 2020 and an 80 percent reduction by 2050.

The significant amounts of clean-energy solicitations contained in the Senate bill are a matter of concern for employers who already pay some of the highest electricity bills in the country. While the bill provides “off-ramps” allowing utilities to decline contracts deemed unreasonable or not cost-effective, the initiative could be economically damaging if wind and hydro power are priced higher than the electricity we current buy from other sources.

Positive elements of the legislation include:

  • The procurement process would require the price of each solicitation for offshore wind to result in lower prices than the solicitation before it, a good requirement.   
  • The bill would define cost-effective contracts simply as cost less benefits. Inexplicably missing from the requirement is that the benefits must accrue to Massachusetts ratepayers. The Senate version still leaves open the possibility that Massachusetts ratepayers could subsidize out-of-state ratepayers by paying for benefits that accrue to other states. AIM will work with the Senate to clarify this section.
  • The bill contains a detailed tracking mechanism to ensure that clean-energy generation is used for compliance with the state greenhouse-gas requirements.
  • There is no remuneration surcharge to utilities included, potentially saving customers millions of dollars.
  • The creation of a task force to develop a new energy efficiency program starting in 2018.

AIM remains concerned about several elements:

  • The bill doubles the renewable portfolio standard, which could increase cost, particularly since the increase in the RPS is not tied to the new timetable for the contracts. The mismatch would create a shortage of renewable power in the short term.
  • The cost-allocation methodologies for accounting for above-market power is inconsistent with what we believe should be fair to ratepayers.   

 Lawmakers are expected to propose a significant number of amendments to the bill this week.

Topics: Electricity, Energy

Beacon Hill Energy Bill Won't Lower Electric Bills

Posted by Bob Rio on May 31, 2016 7:30:00 AM

Those expecting the long-awaited Beacon Hill omnibus energy bill to lower the state’s highest-in-the-nation electricity costs will be disappointed.

Electriclinessmall.jpgIn fact, the bill will likely increase energy costs for employers and consumers.

The Legislature’s Joint committee on Telecommunications, Energy and Utilities released H.4336 on May 23.  The measure now goes to the House Ways and Means Committee for review.

The bill contains only two provisions – a requirement for utilities to solicit contracts for hydroelectric power combined with onshore wind; and a similar requirement to purchase offshore wind.

AIM supports the concept of soliciting for clean energy resources, provided the following guidelines are included:

  • Any contract must be cost-effective for Massachusetts ratepayers (i.e. the benefits of any contract to the ratepayer must be greater than its costs);
  • The procurement process must be competitive and decision-makers must have an ability to refuse any bids that do not meet standards (i.e. no carve outs for favored technologies);
  • Any above-market or below-markets costs of the contract must be allocated fairly among  all customers; and
  • The clean energy procured must qualify to be used for compliance with the state’s Global Warming Solutions Act (GWSA), which requires a 25 percent reduction in statewide greenhouse gas emissions by 2020 and an 80 percent reduction by 2050.

The last guideline is important in light of a May 17 Massachusetts Supreme Judicial Court (SJC) ruling that the state Department of Environmental Protection (DEP) has not acted aggressively enough to enforce regulations to meet the GWSA emission-reduction targets. DEP must now develop new regulations that reduce emissions in Massachusetts, especially in the transportation and energy generation sectors.

The court decision complicates the omnibus energy bill because virtually all of the clean energy envisioned in the omnibus bill would be purchased from out of state and would thus not directly reduce emissions in Massachusetts.

AIM is seeking to add language in the energy bill to ensure that any emission credits received from procuring clean energy under the bill are properly credited in accordance with the SJC decision. If clarification language is not included, and further interpretation of the decision finds that greenhouse gas reduction from all this clean energy cannot be used as a compliance tool with the GWSA, billions of dollars will be wasted to “comply” with the law and policymakers will no doubt impose more Draconian limits and costs on ratepayers.

The House has the opportunity to improve this legislation.    

While the bill sets up a process to solicit hydro and offshore wind, there is no definition of “cost-effective” or “reasonable,” two standards that appear numerous times in the procurement language of the bill. A definition of those terms is sorely needed because current law classifies even expensive projects like Cape Wind as “cost-effective” even though the energy they produce is several times more expensive than other clean power.  

Legislators should also change what appears to a special status created for offshore wind at the expense of large hydro and onshore wind. The bill establishes a ceiling on the amount on amount of large hydro/on shore wind that can be procured at about 20 percent of the of the states total electric load, while establishing a minimum amount of procurement for offshore wind at about 10 percent of the state electricity load.

The language is puzzling. It puts a limit on what may be the cheapest sources of power (large hydro/wind), while encouraging virtually unlimited amounts of the highest-cost power (offshore wind). The inevitable result will make Massachusetts dependent upon high-cost energy sources at multiple times the cost of conventional power.  

A recent analysis performed through the AIM Foundation found that Massachusetts employers and consumers already pay more than $800 million in additional costs on their electric bills to support renewable energy. Add carbon taxes for power plants (passed on to the ratepayer) and energy efficiency surcharges and the cost balloons to $1.5 billion, not including the cost of the actual electricity.

Businesses pay nearly 55 percent of these costs. More importantly, business that have used the AIM Energy Calculator have found that these hidden costs can add up to 25 percent of a total electric bill.

AIM is working with the House Ways and Means Committee to ensure that these items are addressed.

Topics: Electricity, Massachusetts Legislature, Energy

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