New England’s energy system is at an important juncture, but we are not facing a crisis. After last year’s winter, many argued for radical action to head off looming shortages and increasing prices. However, when we look at how well the energy system weathered the record-cold of 2015, the crisis narrative breaks down. Furthermore, when considering the potential financial motivations behind some of the proposed “solutions,” a more complicated picture emerges. This three-part analysis series endeavors to clarify this picture by describing the problem and risks that New England faces, the steps that states are taking to address the problem, and the path to a balanced solution that benefits consumers, the climate, and New England as a whole.
Hartford, CT – Rebutting inaccurate information publicly provided by Eversource Energy in response to efforts to place a ceiling on fixed minimum customer charges, new analysis released today by Acadia Center shows that significantly more than half of residential customers’ monthly bills would decrease if the General Assembly enacts a $10 fixed charge cap, as proposed in pending Senate Bill 570.
Using information provided by Eversource in its 2014 rate case before the Public Utility Regulatory Authority (PURA), Acadia Center found that:
All residential customers that use less electricity than the average in a given month would pay less if the fixed charge decreases from $19.25, the existing amount, to $10, the maximum allowed under S.B. 570’s proposed cap;
61% of monthly bills in Eversource’s primary residential rate class fall below the average of 730 kilowatt hours per month; and,
Increasing the residential fixed charge to $25.50 per month—the amount sought by Eversource in its rate case—would increase monthly bills for all customers that use less electricity than the average.
“Policymakers deserve to have sound facts and transparent analysis put before them on the critical issue of high fixed charges,” said Daniel L. Sosland, Acadia Center President. “An overwhelming majority of Eversource’s approximately 1 million residential customers will pay higher bills and have their incentive to use energy efficiently thwarted under Eversource’s high fixed charge rate approach. Claims by Eversource that consumers do not stand to benefit from lower fixed monthly charges conflict with reality.”
In an email sent to state legislators on May 12, 2015, an Eversource lobbyist claimed that, “more than half of our customers would see an increase in their overall bill if the fixed charge is lowered,” and that, “a $10 fixed charge is actually more regressive than a $19.25 fixed charge.” Eversource did not disclose the data or analysis supporting these billing impact claims, instead only releasing selective information on four residential customers with monthly energy consumption ranging from slightly above average to extremely high.
The residential billing information that Eversource submitted in its 2014 rate case does not support these claims. Acadia Center analyzed billing frequency data submitted as an exhibit by an Eversource rate design expert and determined that a majority of residential monthly bills in the Rate 001 class—the primary residential customer class—fall below the average level of consumption.
The results are similar for the other two Eversource residential rate classes: 58% of monthly bills in Rate 005, a closed electric heating class, fall below the 1103 kWh average and 64% of monthly bills in Rate 007, a very small time-of-use class, fall below the 1060 kWh average.
Acadia Center then analyzed three fixed charge scenarios to reveal the monthly billing impact on Eversource’s residential customers. The three scenarios were: (1) leaving the fixed charge at its current amount of $19.25 per month; (2) reducing it to $10 per month, which would be the maximum allowed under S.B. 570; and (3) increasing it to $25.50 per month, the amount sought by Eversource in its 2014 rate case. The results prove that high fixed charges are more regressive than low fixed charges, as the billing impact on low-use customers increases as the fixed charge increases.
“The math is undeniable,” said William E. Dornbos, Acadia Center CT Director and Senior Attorney. “More residential bills will go down if the General Assembly acts to cap these excessive and ever-increasing fixed charges. We need to end our overreliance on this regressive way to price electricity, and so we urge the General Assembly to pass Senate Bill 570 this session.”
In a handout distributed to legislators earlier this month, Eversource also claimed that low-income hardship customers had average electricity usage between 750 and 1100 kilowatt hours per month, implying that any decrease in the fixed charge would burden them disproportionately.
“In reviewing the transcripts from Eversource’s rate case, we noticed that their testimony on this point is in direct conflict with the handout’s claim,” said Jamie Howland, Acadia Center’s Director of Climate and Energy Analysis. “An Eversource rate design witness testified that average hardship customers actually used less than the overall average for each residential class.”
Acadia Center also researched publicly-available data on the relationship between income level and electricity use and found that there is a strong correlation between the two factors, as shown in the following chart.
“What this correlation means is that low-income households in Connecticut will, on the whole, benefit from any reduction in the fixed charge,” said Howland. “It’s always possible to pick outlier examples when analyzing rate design scenarios, but the best way to evaluate billing impacts is by customer class, not through selective customer anecdotes.”
“We believe that the facts demonstrate that capping the fixed charge in Connecticut at $10 will benefit a majority of customers and support public policy goals,” said Sosland. “It is important that policy decisions be made based on accurate information. Our goal with this analysis is to contribute to an open and honest debate about this issue.”
[Above referenced Eversource 2014 rate case testimony can be found here] Background on the Fixed Charge in Connecticut
A fixed charge is a monthly flat minimum charge on a customer’s electricity account, sometimes called a customer service charge. The fixed charge should be an accurate calculation of the minimum, short-term fixed cost of connecting a customer to the grid. These costs should be limited to the cost of the customer’s meter, service drop, and metering and billing.
Most major utilities in New England (outside of Connecticut) have residential fixed charges in the $5-10 range. Notably, the three Massachusetts operating units of NSTAR Electric (now part of Eversource) have residential fixed charges of $6.43, $6.87, and $3.73 per month. Western Massachusetts Electric Co., also part of Eversource, charges $6 per month. The region’s other major multi-state utility, National Grid, has residential fixed charges of $4 and $5 in Massachusetts and Rhode Island, respectively.
The residential fixed charges of Eversource Energy (formerly Northeast Utilities and its local subsidiary, Connecticut Light & Power) and United Illuminating are, respectively, the highest and the second highest in New England for any major electric utility. Eversource’s is now $19.25 per month, a twenty percent increase over the previous amount. UI’s is now $17.25 per month. Eversource’s residential fixed charge was last in the reasonable range in 2007, when it was $9.99 per month. Since 2004, both utilities have increased their residential fixed charges at a pace more than four times faster than the cumulative rate of inflation for that same time period.
Both utilities can be expected to seek additional increases in their next rate cases (possibly 2016 or 2017). In its 2014 rate case, Eversource proposed a residential fixed charge of $25.50, while asserting that its analysis showed it was actually entitled to a $34.96 charge.
Energy efficiency is saving New England consumers billions of dollars, according to a new report by Acadia Center. The group notes that efficiency measures put in place during the last 15 years have slashed peak demand and during the last winter cut overall demand by 14%.
A new study released this week by Acadia Center quantifies the grid and societal benefits of solar photovoltaic systems (solar PV) in Massachusetts. Establishing the value of distributed resources like rooftop solar is increasingly important as states explore ways to meet energy needs and deploy clean energy resources.
Acadia Center assessed the value of six hypothetical solar PV system configurations to better understand the overall value that solar PV provides to the grid. The assessment determined that the value of solar to the grid—and ratepayers connected to the grid—ranges from 22-28 cents/kWh, with additional societal values of 6.7 cents/kWh. This value derives from solar PV’s unique ability to produce clean energy and, among other benefits, avoid generation and related emissions from conventional power plants. The overall grid value of solar is the sum total of these different benefits.
Acadia Center also evaluated the impact of orientation (i.e. west- or south-facing arrays with different tilts from the horizontal) on the value of solar PV, which is why six different system configurations were examined. One key finding is that under traditional net metering, west-facing arrays—which maximize output during periods of peak demand like late afternoon—would receive approximately 20% less credit than a comparable south-facing system, despite the fact that they produce approximately the same overall value to the grid. The study finds that solar PV provides broader societal advantages (such as environmental benefits from avoided greenhouse gas emissions and other pollutants) which should be considered when assessing costs and benefits and determining additional incentives for solar producers.
The implications and policy recommendations of the report include the following key points:
Solar generation is a valuable local energy resource that provides significant benefits to all ratepayers, with a per-kWh value in excess of retail rates. Further, in the aggregate, net metering is a fair policy.
Once sufficiently high levels of solar PV are installed, a “value of solar” tariff could correct discrepancies between the individual elements– for example, avoided energy or transmission and distribution costs – of the value of solar and of retail rates. In such a tariff, solar PV generation is credited at an administratively determined rate and the individual value components can be accounted for properly (e.g. distribution portion of benefits paid by distribution companies).
Current policies can discourage the installation of west-facing systems. For customers who cannot install south-facing solar, new policies that recognize the value of west-facing solar (maximizing output during peak demand periods) could be beneficial for both ratepayers and society.
Societal benefits should be calculated when assessing the costs and benefits of solar PV and determining additional solar producer incentives.
Locational values (the added value from solar that reduces grid congestion and avoids expensive upgrades to the distribution system) have not been considered in this study, but are important to maximize the savings in distribution costs that solar can bring to ratepayers. Appropriate incentives can ensure that solar PV, energy efficiency, and other customer-side resources are targeted to defer or avoid the need for new infrastructure spending.
The Value of Solar report has been released in time to provide information for the work of the Net Metering and Solar Task Force in Massachusetts, which will conclude its work at the end of April.
For more information:
Value of Solar for MA and CT
National Grid will begin construction in Massachusetts on the first solar generation site in New England to pilot advanced technology; meanwhile, Acadia Center has released a study that quantifies the grid and societal benefits of solar photovoltaic (PV) systems in Massachusetts.
A new report by Acadia Center on a study regarding the benefits of solar photovoltaic systems (solar PV) in Massachusetts , states that the solar is “increasingly important…to meet energy needs and deploy clean energy resources.”
…Joining the Regional Greenhouse Gas Initiative could provide a solution for Virginia to meet upcoming federal emission reduction mandates. The Acadia Center said that by joining the nine states already participating in RGGI, Virginia could have a “plug-and-play” way of satisfying the requirements of the Environmental Protection Agency’s Clean Power Plan…
On the heels of its release of UtilityVision, a framework for advancing a modern clean energy grid, Acadia Center took the next step to work through various challenges to implementation. On March 23 and 24, Acadia Center hosted Envisioning Our Energy Future: Making it Work for Consumers and the Environment—a strategy retreat at The Pocantico Center of the Rockefeller Brothers Fund* in Tarrytown, New York. The objective was to move closer to resolving key questions regarding how the utility business model must change to achieve a clean energy future that is friendly to both consumer and the environment. The agenda was structured around two key questions:
1. What reforms are needed to maximize the utility transition to a clean, affordable distributed energy future?
2. Broad-based consumer support will be critical to achieving the reforms needed. What is needed to ensure that all consumers tangibly benefit from the future energy system?
The retreat brought together a small group of individuals who are leaders in thinking about the future of the electric power system. Attendees included representatives from utilities, clean energy businesses, academia and consulting, state energy officials, and consumer and sustainable energy voices from California, New England, and New York.
The discussions covered these three categories: a) the roles of planning and competitive markets to achieve a sustainable power grid; b) how to align utility financial incentives with public policy objectives; and c) ways to design revenue recovery to both empower consumers and provide utilities with the appropriate level of certainty. Some of the key questions discussed included the following:
What is the utilities’ experience with using geographically-targeted energy efficiency and demand response to avoid transmission and distribution upgrades?
What is the experience with performance incentive mechanisms, from the U.S. and United Kingdom?
Can competitive markets deliver greater innovation and respond to consumer needs more quickly and with greater nimbleness than utilities?
What are different ways utilities can earn the revenue required to support the advanced technological investments needed to create a market platform?
Can the utility’s obligation-to-serve and net metering co-exist?
Can we shift to widespread time-of-use distribution rates or demand charges while ensuring that consumers have the knowledge and tools to manage their electricity bills?
The group at The Pocantico Center of the Rockefeller Brothers Fund* came much closer to agreement than expected on key questions concerning the utility business model, the role of markets and regulation, strategic grid planning, and utility rate design and compensation for distributed generation. The next steps discussed include drafting and refining a straw proposal for grid reforms, providing lessons learned from utility pilot experiments, and possibly reconvening in the future. Acadia Center will be developing a proposal for facilitating these next steps.
*Please Note: As is the case with all materials resulting from meetings held at The Pocantico Center, the views expressed in this report are not necessarily those of the Rockefeller Brothers Fund, its trustees, or its staff.
Massachusetts has an impressive record of investing in energy efficiency and saving home-owners and businesses money on energy bills. Electricity and natural gas programs produced an estimated $3.14 billion in benefits in 2014 alone, and $11.4 in benefits since the programs began in 2010 (Press Release: MA Energy Efficiency Benefits Top National Bests for Savings ; MA Energy Efficiency Benefits Factsheet). Now, work is underway on the state plans that can ensure that this leadership continues to provide even more benefits to ratepayers.
Under the Massachusetts Green Communities Act (GCA), the state gas and electric utilities (Program Administrators) are charged with creating plans to acquire all available energy efficiency and demand reduction resources that are cost-effective, or less expensive than supply. These plans are prepared in coordination with the state’s Energy Efficiency Advisory Council (Council) which is made up of fifteen representatives of stakeholder groups and includes residential customers, low-income customers, large commercial and industrial users, manufacturers, and non-profits, as well as state agencies. Acadia Center is the representative of the environmental community.
The Council recently issued a Resolution setting out its priorities and recommendations for the 2016-2018 state plans. It also reiterated that the emission reduction targets established by the Global Warming Solutions Act and the state’s Clean Energy and Climate Plan–which implements the Act—require a key role for energy efficiency and demand reduction programs. The Council has high expectations for the development of a third well balanced, cost-effective, robust, and innovative statewide electric and natural gas plan. The Council expects the forthcoming energy efficiency programs to accomplish the following:
Achieve all cost effective energy efficiency and demand reduction in accordance with the GCA;
Align with the greenhouse gas reduction targets of the Global Warming Solutions Act and Clean Energy and Climate Plan;
Deliver consistent and equitable service to all segments of businesses and residents statewide;
Prioritize lifetime savings and benefits;
Produce electric demand savings in order to significantly mitigate peak demand costs to the electric sector;
Achieve data transparency and enable robust planning and analysis through a comprehensive statewide database;
Effectively communicate to ratepayers information about program and initiative effectiveness, and progress;
Continue to improve the cost efficiency of program delivery.
Acadia Center—as a member of the Council—will be reviewing the draft Three-Year Plans when the Program Administrators submit them on April 30th. After June stakeholder workshops, the Council and Program Administrators will coordinate on plan revisions. Plans will be filed with the Department of Public Utilities by October 31st and be finalized and under implementation starting January 2016.
Participating in the Regional Greenhouse Gas Initiative (RGGI) would bring significant benefits to Virginia, according to analysis released today by Acadia Center. Acadia Center has been tracking RGGI since the program’s launch in 2009, and drew on this expertise to arrive at the following key findings:
RGGI provides a flexible, straightforward mechanism for reducing greenhouse gas (GHG) emissions
Participating in RGGI would enable Virginia to meet Environmental Protection Agency requirements to reduce GHG emissions from power plants.
RGGI would raise $2.8 billion by 2030 for Virginia to reinvest in complimentary consumer and climate programs
“RGGI has been successful in the states that currently participate. It is helping to reduce carbon emissions, while offering a demonstrated record of advancing economic development, and saving consumers money on energy,” said Daniel L. Sosland, Acadia Center President.
“RGGI has received significant attention and growing support as a means of reducing climate pollution and helping to protect the state from sea level rise and other damaging effects of climate change,” said Dawone Robinson of Chesapeake Climate Action Network. “This analysis helps show why RGGI is the right solution for Virginia.”
Virginia needs a plan for cutting greenhouse gas pollution from major generators to meet the federal requirements of EPA’s Clean Power Plan. A recent study by the regional grid operator PJM showed that a multi-state program—like RGGI—was the most cost-effective way for Virginia and other PJM states to meet the regulations.
“The RGGI program is well-established and has a track record of results: driving down emissions and bringing in revenue and other economic benefits. The numbers clearly show how much Virginia and other states could gain by joining,” said Stutt.
The current RGGI states have used the majority of revenue raised through the program to invest in energy efficiency and clean energy programs, which have generated $3.40-$3.70 in economic growth for every $1 invested. Revenue can also be used to meet local needs such as adaptation planning or investment in diversifying Southwest Virginia’s economy and retraining its workforce.
Emily Avery-Miller, Director External Relations, Acadia Center, 617-742-0054 x100, firstname.lastname@example.org
Jordan Stutt, Policy Analyst, Acadia Center, 617-742-0054 x105, email@example.com
Dawone Robinson, Virginia Policy Director, Chesapeake Climate Action Network, 804-767-0372, firstname.lastname@example.org
Acadia Center is a non-profit, research and advocacy organization committed to advancing the clean energy future. Acadia Center is at the forefront of efforts to build clean, low-carbon and consumer-friendly economies. Acadia Center provides accurate and reliable information, and offers a real-world and comprehensive approach to problem solving through innovation and collaboration.