Regulator Caps Default Service Rates, Makes Recovery Of Mitigated Costs Nonbypassable

October 22, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Massachusetts DPU has approved a rate mitigation mechanism for basic service (default service) rates at Fitchburg Gas & Electric (Unitil) that will cap an upcoming increase in basic service electric rates for the period December 1, 2021 through May 31, 2022

The under-recovery resulting from the rate mitigation will be collected through Unitil's nonbypassable Basic Service Adjustment charge (Schedule BSA, M.D.P.U. No. 376), from all distribution customers, over the period June 1, 2022 through December 31, 2022.

The rate mitigation mechanism, proposed by Unitil and the state's Attorney General, had been first reported by EnergyChoiceMatters.com

Without the rate mitigation, the new basic service rates for Fitchburg Gas & Electric mass market customers were initially proposed to be about 20 cents per kWh, as a result of Unitil's most recent procurement (see story here for originally proposed rates)

The increase in basic service rates was attributed, in part, to Unitil, in the most recent RFP, procuring 100% (rather than 50%) of its residential and small commercial load for the upcoming 6-month period to avoid risk premiums associated with the uncertain launch date of the City of Fitchburg’s proposed municipal aggregation plan.

The DPU approved the Unitil-AG compromise under which Unitil will implement a fixed basic service rate of $0.15650/kWh for residential and small general service customer groups, along with associated variable monthly rates.

Under the adopted mitigation, the medium general service fixed basic service rate will be $0.14433 per kWh, with associated variable monthly rates

The DPU approved nonbypassable recovery of the rate mitigation ($3.2 million) through the existing basic service reconciliation mechanism, which is nonbypassable

The DPU said that, "Basic service acts as a safety net for all customers regardless of whether they currently receive generation service from the basic service provided. D.P.U. 99-60-C at 13. Accordingly, all customers of electric distribution companies benefit from the availability of basic service and therefore, cost causation may be attributed to customers who actually take basic service and, to some extent, to those customers who are eligible to do so (even if they choose not to) and on whose behalf an electric distribution company secures the insurance fallback of basic service eligibility."

"Accordingly, the Department finds the Company’s proposal to recover uncollected basic service costs through the BSA reasonable and consistent with Department precedent," the DPU said

With regards to the mitigation and basic service procurements, the DPU said, "We reaffirm that our existing approach to basic service ratemaking strikes an appropriate balance between two objectives – price stability and efficient price signals (i.e., aligning basic service rates with prevailing market prices). See D.T.E. 02-40-B at 44-45."

However, the DPU cited the unique circumstances surrounding Unitil’s most recent default service procurement as supporting deviation from this standard

"First, the Company has departed from the traditional solicitation method [which includes layering of various procurement dates and delivery periods] due to the uncertainty of the start date of the City of Fitchburg’s pending municipal aggregation program. As a result, the Company’s proposed basic service rates do not benefit from the price mitigation effect of layered twelve-month solicitations," the DPU said

"Second, the Commonwealth is facing the health and economic effects of the COVID-19 pandemic," the DPU noted

D.P.U. 21-BSF-A4

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