The Department of Public Utilities (DPU) in Boston today issued an Order that will begin the process of "decoupling" rates from sales volume for all of Massachusetts’ electric and natural gas distribution utilities.
The order was initiated by the comprehensive energy reform law recently signed by Governor Deval Patrick and is meant to encourage utilities to help their customers reduce their energy consumption and take advantage of on-site renewable energy.
Currently, utilities collect more revenue by selling more electricity
or gas, and lose revenue when their customers use less. This approach creates an institutional barrier to reducing electricity and
natural gas costs for residents and businesses.
"In passing the Green Communities Act, Governor Patrick and the Legislature set a bold new vision for the future evolution of our state’s energy systems," said DPU Chairman Paul Hibbard. "Decoupling utility rates from sales removes the single most important barrier to realizing the vision set forth in the Act."
Decoupled rates will allow utility companies to carry out the mandates
of the new energy law and still collect adequate revenue to maintain
the quality and reliability of electricity and natural gas
distribution.
Going forward, gas and electric utilities will file rate plans that separate, or decouple, their sales of electricity or gas from the revenues they need to collect in order to maintain their electricity and natural gas distribution systems.
Fully decoupled rate structures will be phased in over several years. Initially, utilities can continue to utilize their existing DPU-approved rate plans and file for lost base revenues associated with specific energy-efficiency efforts, as detailed in their first three-year efficiency plan required under the Green Communities Act.
Rates will be subject to review and reconciliation on an annual basis. If a company’s revenues are higher than expected, the excess is returned to consumers as a credit; if revenues are lower, due to demand-reduction programs and other factors, the company will be allowed to recover the difference through a rate adjustment.
Utilities are expected to file decoupled rate plans with the Department as existing rate plans expire–for most companies, by 2012–though companies can file sooner on a voluntary basis.
While a crucial complement to the Green Communities Act, decoupling is a relatively simple adjustment to the way rates are designed, and customers will see little change in their bills, the DPU said. Decoupling has been successfully implemented in over 30 states across the country.
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