Published on Monday, June 25, 2012
STATE HOUSE NEWS SERVICE
On June 25, the House advanced legislation aimed at diversifying the state’s energy portfolio by doubling the amount of renewables required to be purchased by utilities, while introducing competitive bidding to the process in an attempt to address the cost of the policy.
The House also gave preliminary approval to bills that would shine a light on the number and severity of natural gas leaks in aging pipelines, and require utilities to more frequently and effectively communicate with customers during storm-related power outages.
The movement on the three bills shows the House is poised to join the Senate in advancing energy policies before formal sessions end for the year on July 31.
Rep. John Keenan, the chair of the Joint Committee on Telecommunication, Utilities and Energy, said quantifying customer savings from the energy bill was “hard to say,” but said the bill sought to address some of the underlying drivers of the state’s high energy costs, while also allowing Massachusetts to build on its renewable energy sources.
He also said the introduction of competitive bidding to the renewable marketplace was not an indictment or commentary on the controversial contracts signed for Cape Wind power, but rather a statement of how the Legislature wants to proceed in the future.
With an average electric rate in Massachusetts of 14.24 cents per kilowatt hour, the seventh highest in the country and more than 4 cents higher than the national average, state officials have discussed reducing energy prices as a way to remove an impediment to job growth.
“I think the policy is more driven toward making sure we have a diverse energy portfolio as we’re moving toward natural gas. We’re trying to procure additional renewables and, though more expensive than natural gas, we’re trying to make it as least costly as possible,” Keenan said.
The energy bill (H 4198) would require utilities to purchase an additional 4 percent of peak-load power needs from renewable sources through a competitive bidding process, more than doubling the amount of renewables required by law. Unlike the Senate’s approach, however, the House bill proposes that utilities collectively purchase renewables through new long-term contracts of 10 to 20 years, rather than as individual companies.
“We require the utilities to go out to bid and pool their contracts in the hopes that joint procurement would help reduce costs even further,” said Keenan, comparing the process to cities and towns pooling resources to purchase road salt each winter.
The House Ways and Means bill also mirrors the Senate approach to net metering, increasing the cap to allow public and private entities to sell up to 3 percent of on-site renewable energy generation back to the grid, and allows for certain solar and wind installations on government property to be tax exempt.
The three bills are scheduled to be debated Wednesday in the House after receiving initial approval during a lightly attended informal session Monday morning. All three bills were redrafted by the House Ways and Means Committee, and House lawmakers have until tomorrow at 3 p.m. to file amendments to the energy bill.
The Senate approved the emergency response bill in February and the renewable energy competition and energy industry accountability bill in early April. The gas leaks bill won the endorsement of the Telecommunications, Utilities and Energy Committee on May 30, but has yet to advance in either branch.
The energy bill, which Senate leaders described earlier this year as an attempt to tackle the drivers of high energy prices in Massachusetts, differs from the Senate’s bill in several key areas, making it a likely subject for yet another six-member conference committee in the waning days of formal sessions.
The House bill rejects the Senate’s proposal to require rate reviews every three years, instead requiring utility companies to come before the DPU every 15 years. The House bill also scraps the Senate’s proposal to smooth rate increases greater than 10 percent over two years.
“I’m not certain that requiring mandatory rate cases helps keep costs down, and in fact is an expensive proposition for utilities, large and small, to go through and is taxing on the resources of the DPU,” Keenan said in an interview. Of the 31 rates cases in the past 25 years, Keenan said all but one have resulted in rates going up.
Keenan also said spreading rate hikes over two years to avoid sticker shock for consumers could actually cost residents more money in the long-run if utilities try to recoup interest in the second year on rates prices they could not collect with the first-year increase.
“I’m not so sure it gets to the point of reducing rates because it doesn’t prevent the utilities from getting that return. It only spreads it out,” Keenan said.
The Senate bill also sought to reduce the incentives for utilities to sign long-term renewable contracts, which have been criticized by Attorney General Martha Coakley as "sweetheart deals." While the Senate proposed reducing the annual remuneration to the utility from 4 percent of the annual payments to 1 percent, the House bill gives the discretion to the DPU to return between 2.75 percent and 4 percent to utilities.
Keenan said the bill does, however, direct the DPU to spread rates more equitably for commercial, industrial and residential customers, and enables the DPU to award long-term contracts to existing power plants, such as the Salem Power Plant, if they convert from coal or oil to natural gas. Renewing those plants, Keenan said, would allow power generation to keep pace with demand, while not adding costs for new transmission lines.
The gas leak bill (H 4199) would require leaks to be reported to the Department of Public Utilities based on a three-tier classification system that prescribes the frequency of evaluations and repairs by utilities. Gas companies would also be authorized to file gas infrastructure replacement plans for aging pipes with DPU, and if approved, could begin to recover costs associated with replacement through approved rate increases.
The third bill advanced by the House (H 4196) would mandate that penalties collected by the DPU for violations of storm response plans be credited to ratepayers, and sets forth timelines and methods of communication with municipalities and customers in cases of emergency outages.
The Ways and Means bill did not including a Senate-backed annual assessment of $460,000 to help cover state storm response investigation costs, but does require utilities to provide customers without power with twice-daily estimates of when electricity would be restored.
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