McKee looks to increase electric rate competition

John Howell
Posted 2/5/15

Lt. Gov. Daniel McKee, who says the recent increase in electric rates will cost Rhode Island residents and businesses a whopping additional $105 million, told a group of realtors and energy brokers …

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McKee looks to increase electric rate competition


Lt. Gov. Daniel McKee, who says the recent increase in electric rates will cost Rhode Island residents and businesses a whopping additional $105 million, told a group of realtors and energy brokers Tuesday evening that there needs to be more competition in the energy business.

McKee also said he intends to be an intervener on behalf of the public and small business when any proposed utility rate increases come before the Public Utilities Commission (PUC). He mentioned natural gas and water in addition to electric. The PUC also regulates wastewater treatment rates of the Narragansett Bay Commission as well as motor carrier and intrastate ferry rates.

The former Cumberland mayor intervened even before taking the oath of office as lieutenant governor. McKee intervened when National Grid sought a 23 percent increase in electric rates in December. The PUC went along with the increase, but spread it over a year, rather than six months. Residential electric bills therefore increased 14.25 percent for the year.

But McKee pointed out that customers have options, and they don’t have to accept the standard offer that National Grid is required to provide. If customers don’t make contact to buy their electricity elsewhere, they automatically get the standard offer that jumped from 8 to 10.72 cents a kilowatt hour as of Jan. 1.

McKee noted that National Grid buys power months in advance to when it is used and that the company simply passes that cost along to the consumer.

“Grid isn’t making any money on that,” he said.

Yet, as McKee said he is doing personally, there are alternatives to the standard offer that are less costly.

“What can be done?” he asked of those gathered at the DeFelice Center on Post Road in Warwick. DeFelice operates real estate and energy brokerage companies from the center.

Thomas DeFelice, founder of DeFelice Energy and partner with Ross Weaver of Quest Energy, said it was McKee’s op-ed commentary in the Providence Journal underscoring the importance of small business to the state’s economy that prompted him to invite McKee to speak to the group.

McKee found a well-educated audience that knows first-hand how energy costs can impact decisions as to whether to locate in the state and what it means to businesses operating here.

“It’s a little misguided to beat up on National Grid,” said Maurice Cooney, director of sales for DeFelice Energy. “It’s the capacity of the pipeline.”

As National Grid outlined during the rate hearings, natural gas –which generates about 40 percent of the electricity in the region – is plentiful and cleaner burning than coal and oil. During the winter the demand for natural gas increases, but the pipelines delivering the product have a limited capacity. Preference is given to heating homes and businesses, meaning that gas-fired generating plants close or need to be converted to more costly oil. That pushes up the cost of electricity.

McKee agreed increased capacity would address the issue, but he said that is years away. He’s not prepared to wait.

He said fewer than 6 percent of National Grid’s residential customers decline the standard offer and contract separately for their electricity. He said in other states the numbers are much higher.

Thomas Kogut, spokesman for the PUC, said yesterday Rhode Island has four or five active suppliers, a number that is far less than other states. He said customers are eligible to drop the standard offer and contract for a supplier at any time.

He believes larger electric users, whether a large manufacturer or a small business such as a pizza shop with a staff of two or three, shop for the best rate. He said most residential users don’t bother and settle for the standard offer.

“We need to roll the competition in the mix,” McKee said. He said he is looking at getting out that information through a website.

Kogut said the PUC website provides links to alternative suppliers, but it does not offer people the opportunity to comparatively shop for their electricity. Other states have websites that offer that capability and even provide for customers to enter into contracts via the Internet.

McKee was interested to hear what Ross Weaver of Quest Energy Solutions had to say.

Weaver thought competition in Rhode Island would be keener if it was a purchase of receivables (POR) state, as are Connecticut and Massachusetts. He explained that as a POR state, National Grid would be required to split whatever partial payments it receives with the energy supplier, which apparently is not the case now. Also, he said, as a POR state, all clients would be “credit approved.”

As a second step to dealing with the issue, McKee said the legislature “needs to untie the hands of the PUC.” He said commissioners “need more flexibility” in what they can rule on.

And thirdly, McKee said the state should be right behind technological advances, “but let’s not be 100 miles ahead.”

To illustrate his point, McKee questioned whether ratepayers would have ever agreed to Deep Water Wind if they realized it is going to cost them an additional $500 million in rate increases over the next 20 years.

“Let’s not get ahead of the technology,” he said.

McKee forecasts National Grid would likely to be back for another rate increase next year based on what he is seeing in electric futures. Still, Cooney offered some advice. Noting that legislation has been introduced that would give lawmakers a say on increases of more than 5 percent, Cooney said, “The worst thing would be to legislate what the price increase would be.”

He felt that would drive out competition, the very thing McKee believes the market needs.


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  • wwkvoter

    Anyone see the pattern here? We get SCREWED, then one of these "local heroes" "steps up" to "fix it" (and yet, somehow, it never really does get fixed). Joe Trillo the big "conservative" wants to add a $500 per year STATE mooring fee!

    Saturday, February 7, 2015 Report this