WMECO announced its rate hikes poorly & Berkshire Gas's unconscionable hike

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"Report scolds WMECO for rate hikes: The state says the company announces its rate hikes poorly. A 26 to 30 percent hike is now sought"
By Ellen G. Lahr, Berkshire Eagle Staff
Thursday, May 22, 2008

The state attorney general's office has found that Western Massachusetts Electric Co.'s dramatic rate increases in January 2007, which led to average cost hikes of 55 percent for area businesses, were legal but poorly communicated to customers.

And in an epilogue to that 24-page ruling, Attorney General Martha Coakley's report noted that WMECO filed a May 19 request for a new rate boost that will bring another 26- to 30 percent increase to the electric bills of its commercial and industrial power customers.

The company's plan to now notify customers of rate increases with press releases and phone calls, she said, "should be considered a best practice'' by all power distribution companies.

Regarding last year's rate hikes, Coakley's report stated: "Although the rate increases that customers in Western Massachusetts received at the beginning of 2007 were lawful, we are concerned that WMECO did not take steps to notify its customer base that the rate hike was going into effect," said Coakley.

Customers were not given a notice or an explanation of the rate hikes until March 2007. The information given was "misleading," but was corrected, the report states.

However, the report finds that WMECO's earnings last year were appropriate under a settlement between former Attorney General Thomas Reilly and WMECO in October 2006. WMECO was allowed hike rates to recoup losses it had incurred.

Of the upcoming rate hike, Coakley noted that 83 percent of large commercial and industrial customers in WMECO's service area won't be impacted because they are big enough to buy power through competitive bids.

But Berkshire County includes many medium-sized businesses not large enough to draw competitive bids, and they will feel the pinch again. Power costs here in the Northeast are among the highest in the nation, and have undermined efforts to attract and retain business, according to area business leaders.

Compounding costs in this region, Coakley noted, is "a notoriously poor transmission infrastructure, which means the region has difficulty importing electricity from other regions."

These problems have led to the use of four costly and inefficient generators in the area, one of which is at the Altresco plant in Pittsfield.

Coakley's report raised concerns about the company's compliance with requirements for transmission line improvements that would help curtail costs.

"We intend to continue to monitor whether WMECO is undertaking the needed transmission upgrades, which is part of the solution to mitigating the rising cost of electricity in Western Massachusetts," Coakley said.

Earlier this year, the Berkshire Chamber of Commerce organized a consortium of businesses to form an energy cooperative. The group is seeking competitive bids from power providers to stabilize costs, a process still in the works.

Yesterday, Chamber President Michael Supranowicz could not be reached for comment.

State Rep. William "Smitty" Pignatelli, D-Lenox, said yesterday he believes the process by which WMECO was able to get such a huge rate hike approved in late 2006 was inadequate. He said it reflected internal company cost issues that were being passed on to customers.

Three manufacturing mills that closed in his Southern Berkshire district last year and this year were all impacted by power cost hikes. Those closings cost about 400 jobs.

He also said WMECO's most current rate hike proposal is "extremely surprising."

"The previous process was extremely flawed and unfair, and caught our large users by surprise," said Pignatelli. "Now it seems (Coakley) is more on top of things, and I hope (the state) will do a more thorough review of rate hike requests."

In general, he said, deregulation of the electric utility industry has not worked, said Pignatelli.

"There isn't new competition, rates are not leveling off and now we have a significant new increase from WMECO," he said. "We need to be more aggressive at the state level."

The attorney general serves as a utility ratepayer advocate and is authorized to intervene on behalf of consumers regarding rate issues.

While Coakley's report states that mill closings last year were caused by rate hikes, other market forces were at work as well with the shutdowns of the former Fox River Paper Co., one mill of MeadWestvaco, and now Schweitzer-Mauduit in Lee.

"It's a huge issue, and a lot of people want to blame mill closings on electric rates, but that's just part of the problem," Pignatelli said.

For the full report from the attorney general, visit www.mass.gov/ago.
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To reach Ellen G. Lahr: elahr@berkshireeagle.com, (413) 496-6240.
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"Power shortage"
The Berkshire Eagle - Editorial
Friday, May 23, 2008

Although we live in an age when technology allows for instantaneous communication, it's amazing how many companies fail to get information out both clearly and on time. That is the case with Western Massachusetts Electric Company which the state attorney general's office found instituted dramatic rate increases in January 2007 that were legal but poorly communicated to its customers. WMECO appears to have gotten the message. According to Attorney General Martha Coakley's report, the utility company now plans to use phone calls and e-mails to notify customers of another 26-to-30 percent hike to the electric bills of its commercial and industrial customers.

What's still murky, however, is WMECO's decision to seek another substantial rate increase while it maintains "a notoriously poor transmission structure," according to Ms. Coakley's report. WMECO can't have it both ways. It needs to get its own house in order first. The utility company should fix its infrastructure problems before asking for an additional rate hike or it isn't being fair to the customers who will have to pay more.

It's impossible to justify a rate increase when WMECO's facilities are so lacking, "the region has difficulty importing electricity from other regions," according to the attorney general's report. These infrastructure problems have led to the use of four costly and inefficient generators, including one at Pittsfield's Altresco plant. The WMECO situation is just the latest evidence of the utter failure of energy deregulation.

State Representative William "Smitty" Pignatelli, D-Lenox, calls WMECO's current request "extremely surprising" and he should know. Power cost hikes were one reason three South County mills recently closed, which cost numerous Berkshire County residents, most of whom live in Mr. Pignatelli's district, their jobs. These businesses aren't large enough to attract bidders, leaving them with no alternatives for power. Given this reality, and without the efficient means to transport power to the Berkshires, it's hard to see how WMECO's rate increase is justified.

Ms. Coakley 's office will continue to monitor whether WMECO undertakes transmission upgrades, which she said is part of the solution to "mitigating" the rising cost of electricity in Western Massachusetts. That may be the best thing to happen out of all this.

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"Right place for hearing"
The Berkshire Eagle - Editorial
Wednesday, May 28, 2008

The U.S. Senate Committee on Small Business and Entrepreneurship came to the right place when it chose Berkshire Community College for a hearing this morning at 10 on the impact of rising energy costs on small businesses. Of all of the obstacles facing small businesses in the Berkshires, escalating energy costs, personified by the dramatic rate increases by WMECO, which is requesting another 30 percent hike for local businesses, may be the most formidable. With so many members of Congress beholden to the oil industry, it is difficult, as noted by Senator John Kerry, who was instrumental in bringing the hearing to the city, to push through measures encouraging the production and use of alternative energy sources. Today's hearing should detail the problems facing small business and explore some ways in which government can help business rather than hinder it.

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News Article:
"Power costs under review: Coakley to examine WMECO's earnings"
By Ellen G. Lahr, Berkshire Eagle Staff
Friday, November 09, 2007

Western Massachusetts Electric Co.'s reports of dramatic third-quarter earnings — apparently based on rate hikes that have hit some industries in the region hard — have triggered an inquiry by Attorney General Martha Coakley.

WMECO on Monday reported that third-quarter distribution charge earnings were $4.2 million and totaled $13.6 million in the first nine months of 2007.

For the same period last year, those earnings were $2.8 million and $8.6 million, respectively.

WMECO said its improved results were the result of a settlement reached last year with former Attorney General Thomas F. Reilly.

Now Coakley will inquire as to whether WMECO's earnings are consistent with the terms of that October 2006 rate settlement. The company has been obligated to make transmission upgrades and was allowed to recoup $1 million for delivery costs.

All electric customers pay one price for the actual electricity they use and another for the cost of delivering that electricity. In this case, the attorney general is scrutinizing the delivery charges, which are set by the utility with state oversight.

"Following WMECO's report of earnings growth in the third quarter and all of 2007, we want to make sure that these earnings are consistent with the settlement agreement and applicable state and federal law," Coakley said in a statement.

"In addition, a number of large commercial and industrial users have reported large increases in their delivery bills in January of 2007, and we want to determine whether these rate increases are appropriate," she stated.

Efforts to reach a WMECO spokesman yesterday were not successful.

Berkshire legislators have watched as local industrial power users faced crippling rate hikes this year. Yesterday, two members of the delegation hailed Coakley's actions as confirmation that something is off the mark at the region's biggest power supplier.

State Sen. Benjamin B. Downing, D-Pittsfield, said that, "considering the spike in rates we've seen — especially for commercial and industrial users, specifically at Southern Berkshire's paper mills, but elsewhere in the county as well — this shows first and foremost that the AG is responsive to needs of Western Massachusetts and that something is wrong at (WMECO)."

"The Berkshire delegation has been looking at this over the last 10 months, saying there is something amiss here," he added.

State Rep. William "Smitty" Pignatelli, D-Lenox, concurred, hailing Coakley's inquiry as "great news."

Pignatelli's district has seen the shutdown — or pending shutdown — of three paper mills this year. Energy costs were assessed part of the blame, contributing to rising overhead that helped make the businesses untenable.

"It seems strange that a lame-duck attorney general (Reilly) could sign this rate agreement a couple of days before leaving office, without fair knowledge of the impact on large users," he said.

Large commercial users this year have reported increases in electrical distribution charges of up to 70 percent. Some, such as Hancock's Jiminy Peak Mountain Resort and Dalton's Crane & Co., are seeking alternative sources of energy.

The attorney general serves as overseer of the utility industry and is authorized to intervene in administrative and/or judicial proceedings on behalf of consumers in connection with any matter involving the rates, charges, prices or tariffs of any electric company doing business in the state.

Her office said that the state's Energy and Telecommunications Division sent WMECO a series of oversight questions today regarding its profits and rates. WMECO must respond to these questions within 21 days.

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"Consumers footing the bill?: Federal investigators probe high electric costs"
By Scott Stafford, The Berkshire Eagle Online, August 25, 2008

The Federal Energy Regulatory Commission is investigating allegations that the wholesale cost of electricity generated in western New York has been artificially inflated by a practice called circuitous routing.

Authorities in six northeastern states and several agencies that regulate energy production and distribution recently called for an investigation into the practice, only to find out that FERC has been probing the matter since May.

The alleged practice, known to some as the "Lake Erie Loop Scam," is scheduling power to flow over circuitous routes around Lake Erie a day ahead of its actual transmission. The so-far-unnamed market participants save money by avoiding certain tariffs and fees by scheduling to send the electricity north to Canada and back south again.

They may further profit because electricity will take the path of least resistance and will not actually flow through the path scheduled, causing congestion along other transmission lines and further inflating the cost.

According to an estimate released by the Massachusetts Municipal Wholesale Electric Co., the practice may have resulted in overcharges to consumers amounting to more than $450 million since January.

"This is a New York (State) issue that has some very serious financial consequences for Massachusetts," said David Tuohey, spokesman for Massachusetts Municipal Wholesale Electric Co. "Our bills just for transmission for the month of July went from $1 million to $3 million. That's a big impact for us. But the aggregate cost resulting from this activity is in the hundreds of millions of dollars."

The New York Independent System Operator, which regulates the production and transmission of electricity in New York, had asked the federal agency for expedited rulings on their request to impose new rules and fees to curtail the practice that results in needlessly inflated wholesale prices for electricity.

According to the Federal Energy Regulatory Commission, NYISO's request had been granted.

The rapid rise in the cost of electricity in Berkshire County has been cited in the closing of several paper mills and the withdrawal of a plan to bring a water bottling operation to the former KB Toys distribution warehouse. It has also been identified as a barrier to bringing other new business into the region.

None of the officials contacted could definitively say that Western Massachusetts electricity customers had been impacted.

"We've been trying to calculate the effect to our customers," said Steve Brady, spokesman for National Grid, from his office in Buffalo, N.Y. "We don't believe this had or will have any financial impact on our New England customers. And while we were impacted by the flow congestions, we were not a cause of the flow congestions."

An official from Western Massachusetts Electric Co. who is knowledgeable on the subject was on vacation and could not be reached.

But Massachusetts Municipal Wholesale Electric Co. officials said 40 municipally-owned utilities in Massachusetts receive hydro-generated power from the Niagara Hydroelectric Project in western New York. None of them are in Berkshire County. Other states that were seeking an investigation are Connecticut, Rhode Island, Vermont, New Jersey, Pennsylvania and Ohio.

"We're already burdened by too many costs associated with both the production and the delivery of electricity," said Michael Supranowicz, president of the Berkshire Chamber of Commerce. "If someone is doing something that's undermining our ability to get electricity delivered to us in a manner that provides the best value to the end user, they need to be investigated — we need to make sure no one is doing anything underhanded here."

The Massachusetts Municipal Wholesale Electric Co. was one of the entities calling for an investigation "to determine whether the alleged abuse of power market rules warrant a refund to our municipal utility consumers," said Ronald C. DeCurzio, the company's CEO. "The fact that New York's power grid operator did not catch and curtail this activity sooner underscores the need for greater oversight and accountability in restructured power markets, where the cost to consumers is often an afterthought."

"These traders can find what they're calling in this case seams in the rules, I prefer to call them loopholes, where there are opportunities to make some money and they certainly don't hesitate to do that," Tuohey said. "If there was indeed manipulation of the market rules with the knowledge that it would increase prices and these entities would profit from that, it's an abuse of the market rules and warrants some refunding."

The New York ISO became aware of the matter when officials noticed "the congestion was inconsistent with patterns in the past," said Ken Klapp, spokesman for NYISO. "So that was the first flag. But it took months to investigate because you're looking at thousands of bits of information."

"The Federal Energy Regulatory Commission today accepted interim New York Independent System Operator tariff revisions that will help to stem the use of circuitous transmission paths," said Barbara Connors, Federal Energy Regulatory Commission spokesperson, in a statement. "FERC also announced that in May, FERC's Office of Enforcement initiated a non-pubic investigation into power flows in NYISO."

Rep. Daniel E. Bosley, D-North Adams, chairman of the Joint Committee on Economic Development and Emerging Technologies, said the Federal Energy Regulatory Commission was wise to look into the situation.

"Part of the problem is we already have congestion pricing that I'm not really sure is warranted," he said. "And then you have some of these people, it appears, are using unscheduled flow to drive the price up even more and maximize money going to them. You would hope people wouldn't do that."

"The commission does have enforcement authority and civil penalty authority," Connors added. "We haven't quite gotten to that point yet because we're still looking into it."
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To reach Scott Stafford: sstafford@berkshireeagle.com, or (413) 664-4995.
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READERS' COMMENTS:

By "Vote The Bums Out", 8/25/2008 -

You would hope people wouldn't do that ? What did you think would happen when they were deregulated???? Remember who voted for deregultion?? You did and I will remember that when I vote. The electric companies and the cable TV companies are sticking it to the people and the Dan Bosleys of the world are doing nothing about it.

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By "Berkshire Resident", 8/25/2008 -

The rise in the cost of electric power has caused an important paper company in Lee to down-size or shut-down, thus causing many people to lose their jobs.
There are many empty store fronts there now and it is very sad to walk around and wonder how many more businesses will be forced to close?
Will this be a town whose citizens will be only seniors on fixed incomes? Not that I am against seniors--I am one myself. I moved to Lee to be near my family; unfortunately, they had to move to find employment!
"Lonely in Lee"

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"Berkshire Gas's unconscionable hike"
The Berkshire Eagle - Letters
Tuesday, November 25, 2008

I contacted Berkshire Gas to inquire about the sudden jump in my gas bill. I know it gets colder from September to October, and gets colder still from October to November, so we're all aware our gas bill will rise. But looking closer I noticed that Berkshire Gas is prorating and upping the first few days of November, going from $0.8680/Therm to $1.2110/Therm. If my math's correct that's about a 40 percent increase!

When I asked why the rate is going up ,the attendant told me "it was a natural gas supplier forcing up the rate" and there was nothing Berkshire Gas could do about it. Then I asked, "What is the justification for the increase?" and she said, "It's tied to the stock market." Which I then said, "so the rate should be going down then, right?" She said, "well, it's also tied to the price of oil," which I responded, "oil is at a two-year low of about $60 a barrel." Then she said "well it's tied to a bunch of other factors too." Seeing where the conversation was heading I just stated for the record that this price increase in this economic time is just unconscionable.

With many folks I've talked to adding pellet stoves, wood stoves, electric space heaters, and so on to battle energy costs this winter I would think demand for natural gas would be less than last year. Perhaps some other customers can give Berkshire Gas a call and find out what those other "factors" are causing the giant jump in natural gas. I'd really love to know.

JOHN MCALISTER
Williamstown, Massachusetts

John McAlister is director of information technology at the Massachusetts Museum of Contemporary Art in North Adams.

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Pittsfield, Massachusetts
"Solar power boost for city: WMECO names 3 possible sites"
By Dick Lindsay, Berkshire Eagle Staff, Monday, March 02, 2009

PITTSFIELD — Western Massachusetts Electric Co. wants to include Pittsfield in the utility's first- ever effort to produce solar-powered electricity that will reduce its dependency on providing customers with fossil fuel energy.

And city officials are thrilled about having another "green" project.

WMECO has identified the city's closed landfill, the Willliam Stanley Business Park and utility-owned property on Silver Lake Road, as three of eight potential host sites of solar facilities. The other five are in Springfield, Ludlow and Amherst.

These initial eight locations will provide six megawatts of solar capacity by 2010 at a cost of about $42 million dollars. By 2012, WMECO will expand the solar power production to 15 megawatts, which would be tied into the company's power grid and provide enough electricity to power 15,000 homes, according to utility officials.

"This is kind of groundbreaking for us," said Peter J. Clarke, president of Northeast Utilities, the parent company of WMECO. The Springfield-based utility serves about 200,000 homes and businesses in 59 communities, including Pittsfield and 15 Berkshire towns.

"I give credit to WMECO for looking at Pittsfield," said John Krol, chairman of Pittsfield's Green Commission. "I'm impressed by their $42 million investment and I want to see some of that in our city."

Commissioner of Public Works and Utilities Bruce I. Collingwood said the city could make some money off the project, as WMECO would lease space at the landfill.

"There's a definite financial benefit to the city," said Collingwood.

"Besides, I'd rather be collecting sun rays than mowing grass," he added, referring to the constant summer maintenance of the expansive site.

Clarke said WMECO is the first utility in Massachusetts to submit a solar energy program for approval from state utilities regulators under the state's Green Communities Act. The legislation passed last year calls on electric distribution companies to produce 250 megawatts of solar power by 2017 and reduce the state's reliance on traditional sources of electricity.

"We always felt the need to be part of the solution," Clarke said during a recent telephone interview. "With our dependence on natural gas (to produce electricity) in the Northeast, we need a more balanced mix."

While the Green Communities Act allows WMECO to produce up to 50 megawatts of solar capacity, Clarke said the company wants to evaluate which of the initial sites are most productive and build out its solar capacity from there.

"We are taking the 'walk before you run' approach," Clarke noted.

The utility-sponsored solar project is the latest to brighten up Pittsfield.

The city is already in line to receive $13.4 million in federal stimulus funds for a solar photovoltaic system to be installed on the roof of the wastewater treatment plant off Holmes Road and on the grounds of the facility. The state supported project, coupled with other energy-saving efforts, will greatly reduce the plant's electric bill, according to Collingwood.

Krol said Pittsfield put itself in a position to land these solar projects because city government took the initiative to have more energy efficient municipal buildings.

"When you make a commitment to be green, these opportunities come your way," Krol said.

"These projects are not only good for the environment, but the bottom line as well," he added, "and businesses need to see that."

However, Clarke said with the high up-front cost of solar energy, the challenge is to "keep it affordable and still meet the state's target for renewable energy."

He noted fewer than 5 percent of nation's solar installations are connected to New England's power grid and the region needs to catch up with the rest of the country.

"The bigger objective is more about a social movement than just the dollars saved," Clarke said.
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To reach Dick Lindsay: rlindsay@berkshireeagle.com, or (413) 496-6233.
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"Solar energy parcels targeted: Western Massachusetts Electric is considering eight sites, including three in Pittsfield, to construct a facility."
By Tony Dobrowolski, The Berkshire Eagle, Thursday, August 13, 2009

PITTSFIELD -- The Western Massachusetts Electric Co. will consider eight sites in Western Massachusetts -- including three in Pittsfield -- on which to build large-scale solar energy facilities in its service territory.

The Pittsfield sites include the William Stanley Business Park of the Berkshires; a WMECO-owned parcel off Silver Lake Boulevard, which is adjacent to the Stanley Business Park; and a former city landfill located between East Street and the Downing Industrial Park on Hubbard Avenue. The rest are located outside of the Berkshires.

The Department of Public Utilities on Wednesday approved the utility company's proposal to own and operate solar power installations, part of the state's 2008 Green Communities Act to promote renewable energy.

Historic approval

On Wednesday, WMECO became the first utility in the state to receive the OK to own and operate solar energy facilities within its service territory, which includes the four counties of Western Massachusetts. The DPU said it also is considering solar programs submitted by National Grid and Unitil. The utilities can build solar energy installations generating up to 50 megawatts.

WMECO expects the project's development phase to cost $42 million and generate six megawatts, enough energy to power 6,000 homes.

The solar facilities will be large ground-mounted panels that will probably stand four feet off the ground, said WMECO spokeswoman Sandra Ahearn.

"They will have banks of solar panels that angle toward the sun," she added.

Specific site locations in mind

WMECO targeted six types of sites as locations for solar installations: landfills, brownfields, large commercial facilities, government buildings, utility properties, and high-visibility public properties.

The William Stanley Business Park, located on 52 acres of the General Electric Co.'s former transformer facility, is a brownfield, a former industrial site that is the process of being reclaimed. The Pittsfield Economic Development Authority is charged with developing the Stanley Business Park, which currently has no tenants. PEDA's interim Executive Director William M. Hines Sr. could not be reached for comment late Wednesday afternoon.

The next step is for WMECO to solicit a request for proposals, or RFPs, from the owners of the sites. Under the DPU's decision, WMECO is required to seek RFPs for the first three megawatts of its solar facilities by September. The utility hopes to pick the sites and builders during the last three months of 2009.

"What the decision has done is asked us to focus on larger sites so we can get better economies of scale in terms of total costs," Ahearn said.

Construction is expected in early 2010, she said, and three of the facilities should be up and running by the end of next year. The rest should be fully operational by 2012, according to the DPU.

Just as utilities bill customers for the cost of fossil-fuel generated electricity, the cost of utility-owned solar power will be recouped through ratepayer revenues. The WMECO order includes a settlement between the company and the state Attorney General's office ensuring the costs of the utility's solar program will include stricter cost controls and be spread over more years than WMECO originally proposed.

"It moves the commonwealth closer to [Gov. Deval L. Patrick's] goal of 250 megawatts of solar power by 2017, while protecting ratepayers by spreading out the cost of financing WMECO's solar energy program," DPU Chairman Paul Hibbard said in a statement.
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Material from the Associated Press was used in this report.
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To reach Tony Dobrowolski: tdobrowolski@berkshireeagle.com, or (413) 496-6224.
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