DPU Cuts Proposed New Charges for Western DPU Cuts Proposed New Charges for Western Massachusetts Electric Company Customers by 40 Percent
Decision reduces WMECo's revenue request by $11.5 million; restricts company to lowest rate of return in a utility rate case in decades; and rewards WMECo customers for conserving electricity
WMECo's revenue request by $11.5 million - decreasing WMECo's requested increase of $28.4 million (6.1 percent) to an increase of $16.9 million (4.2 percent).
The action, which follows a six-month proceeding that included three public hearings in WMECo's territory in August and a month of evidentiary hearings, will result in an increase of 1.7 percent - or $1.52 - in the monthly bill for a typical residential customer using 600 kilowatt hours of electricity per month.
"The DPU's decision will result in multiple benefits for WMECo's customers," DPU Chair Ann Berwick said. "Large customers will experience new rate designs more closely tailored to their energy consumption patterns, low-income customers will see simplified and substantially discounted rates, and the company will receive sufficient revenues to maintain safe, reliable service going forward."
In addition, Chair Berwick pointed out, by approving WMECo's proposed "decoupling" mechanism, the DPU order spurs company efforts to promote large-scale energy efficiency programs mandated by the Green Communities Act and championed by the Patrick-Murray Administration. Decoupling eliminates the link between the volume of sales for distribution service and company earnings. WMECo's is the fourth decoupling proposal to receive DPU approval since the DPU issued an order in July 2008 requiring utility rate structures that promote more energy conservation. The DPU, which approved nation-leading energy efficiency plans for the state's investor-owned utilities last year, further continued its commitment to greater energy efficiency through approval of "inclining block rates," which will reward WMECo customers who conserve energy.
The DPU reduced WMECo's proposed return on equity from 10.5 percent to 9.6 percent - the lowest return on equity the DPU has ordered in a gas or electric rate case in decades - in part because decoupling significantly reduces the company's financial risk.
In addition, the DPU approved a "simplified low income discount" that allows low-income customers a 32 percent discount on their total electricity bill relative to other customers. Meanwhile, certain large commercial and industrial customers - including the University of Massachusetts Amherst - will shift to a new rate structure under the DPU's order, allowing for rates that are more equitable and lead to much lower bill increases than would have otherwise occurred.
In yesterday's order, the DPU also approved a new mechanism for WMECo to recover storm-related costs through a separate proceeding, and directed the company to provide quarterly reports on the reliability of service to UMass Amherst, which, in testimony to the DPU during this case, reported experiencing frequent service interruptions.
In addition to UMass, the following parties intervened in the WMECo rate investigation: Attorney General Martha Coakley, the Department of Energy Resources, the International Brotherhood of Electric Workers, Solutia Inc., Western Massachusetts Industrial Group, Environment Northeast, the Low Income Network, and the cities of Easthampton and Springfield.