AG Coakley Alleges Electric Transmission Companies Overcharging Massachusetts Ratepayers by Millions
Files Complaint With FERC To Reduce Transmission Rates By $113Million Per Year
BOSTON – Stating that Massachusetts consumers’ energy costs should be cut by nearly $113 million based on the excessive rates charged by electric transmission companies, Attorney General Martha Coakley today filed a complaint with the Federal Energy Regulatory Commission (FERC) seeking to lower the rates that transmission companies charge New England ratepayers.
Joining the complaint were the Massachusetts Department of Public Utilities (DPU), Massachusetts Municipal Wholesale Electric Company, the Connecticut Public Utilities Regulatory Authority, the Connecticut Office of Consumer Counsel, Connecticut Attorney General George Jepsen, and several other New England state regulators, ratepayer advocates, and industrial customer groups.
“The current electric transmission rates are excessive and transmission companies are making unreasonable profits at the expense of ratepayers,” AG Coakley said. “Electric transmission companies in New England have enjoyed the benefits of higher returns that were set when economic conditions were much better. It is now time for the federal government to set rates at an appropriate level in order to give ratepayers relief from the current rates.”
"High electricity costs can be a significant impediment to job creation and economic recovery," said Robert A. Rio, Senior Vice President and Counsel for the Associated Industries of Massachusetts, Inc. “Current economic conditions warrant this type of review to make sure there is an appropriate balance between the financial needs of the utilities and the cost pressures facing the ratepayer.”
“A guaranteed 11 percent return is significantly out of whack with the rest of the marketplace, and we are pleased to join with Attorney General Coakley in seeking to reduce charges to the nonprofit businesses, institutions and government entities we serve,” said Cynthia Arcate, President and CEO of PowerOptions, the state’s premiere energy consortium serving 500 nonprofits throughout the Commonwealth, which signed on to the filing. “Even Warren Buffet is only getting 6 percent for his $5 billion investment in Bank of America. This is a common sense request and FERC should act quickly to approve it.”
Transmission companies are allowed to recover the costs to construct transmission lines plus a profit. The current allowed profit or return on equity for constructing transmission was set by FERC in 2006 at 11.14 percent. Because economic conditions have worsened and since interest rates have declined, AG Coakley requests that FERC lower the return on equity to 9.2 percent.
Regional transmission lines cost New England ratepayers $1.347 billion annually. If the Complaint is successful, New England ratepayers’ bills will be lowered by $113 million in 2012. Because transmission costs are expected to double over the next few years, that savings would grow to $206 million per year by 2015. Massachusetts ratepayers pay for nearly half of the region’s transmission costs.
“When today's lower cost of capital is plugged into the regulatory formula for determining the return on equity for transmission owners, the need for change is clear,” said Ronald C. DeCurzio, CEO of the Massachusetts Municipal Wholesale Electric Company. “The transmission owners’ current rate of return on equity is excessive, which results in consumers being overcharged for transmission service by more than $100 million per year, an amount that escalates rapidly as the investment in transmission increases.”
The named respondents in the complaint are Bangor Hydro-Electric Company, Central Maine Power Company, New England Power Company d/b/a National Grid, New Hampshire Transmission LLC d/b/a NextEra, NSTAR Electric and Gas Corporation, Northeast Utilities Service Company, The United Illuminating Company, Unitil Energy Systems, Inc. and Fitchburg Gas and Electric Light Company, Vermont Transco, LLC, and ISO New England Inc. Most of the named transmission companies are transmission affiliates of local electric distribution companies. ISO New England operates the region’s transmission system and administers wholesale markets.
The Attorney General’s Office of Ratepayer Advocacy is by statute the utility ratepayer advocate for Massachusetts and is authorized to intervene in or institute administrative and judicial proceedings on behalf of consumers in connection with any matter involving the rates, charges, prices or tariffs of any gas or electric company doing business in the Commonwealth.