Mass. Electric to hike rates up to 69%

Utility cites costs, fees for increase to about 300,000 customers

By Peter J. Howe, Globe Staff, 4/3/2001 mt

Nearly 300,000 residential and business customers of Massachusetts Electric will be hit with rate increases of 23 to nearly 70 percent starting May 1.

State regulators yesterday approved even higher rate increases than the average 16 percent that Mass. Electric initially sought, after rejecting the utility's plan to seek a 12-month rate increase.

The biggest increases will hit large business users.

A typical homeowner on ''default service,'' using 500 kilowatt hours of electricity monthly, will see the bill rise to $75.60 from $61.38 after May 1, according to a Mass. Electric calculation.

Mass. Electric blames the increase on market factors such as higher gas and oil costs, but mostly on the potential effects of a proposed increase in a federally mandated fee utilities pay to generators when they must rely on spot-market power supplies to cover shortfalls in contracted power. Several generators said Mass. Electric is drastically overstating the impact of the so-called installed capacity charge.

The state Department of Telecommunications and Energy said going to a 12-month rate, instead of the usual 6 months, would send a distorted ''market price signal'' by pushing some summer costs into next winter and spring.

The new rates apply to so-called default service customers, people and businesses who opened accounts with Mass. Electric after March 1998. Their rates will rise as follows:

For 247,000 residential customers, from 6.37 cents per kilowatt-hour to 9.213 cents, starting May 1. With customer service and transmission fees added, the overall increase is about 23 percent.

For commercial accounts, generally small and medium-size businesses, from 6.493 cents to 9.556, a 47 percent jump.

For industrial users, from 5.36 cents to 9.054 cents, a 69 percent increase.

As a small cushion for the rate shock, the DTE ordered Mass. Electric to begin offering its ''equal payment plan'' to commercial and industrial customers. It currently is available only to residential accounts.

Under this plan, comparable to gas companies' balanced bills, people would pay higher rates in the spring and fall to offset higher winter and summer charges.

While the current round affects only default service customers, Mass. Electric senior vice president Bob McLaren said the company expects it will have to seek an increase for its ''standard offer'' customers after July 1, because it is paying close to 6.4 cents per kWh to buy power it now can sell for only 5.4 cents.

''We will probably be seeking an adjustment'' this summer affecting over 900,000 home and business customers, McLaren said.

Peter J. Howe can be reached by

e-mail at howe@globe.com.

http://www.boston.com/dailyglobe2/093/business/Mass_Electric_to_hike_rates_up_to_69_P.shtml

-- Martin Thompson (mthom1927@aol.com), April 03, 2001