Naval Station Newport has asked state regulators to lower its electricity rates at a time when the base is trying to make itself more attractive to decision-makers in Washington.
The military complex, which includes the Naval Undersea Warfare Center, the Naval War College and the Surface Warfare Officers School, wants the Public Utilities Commission to switch the facility to a lower rate class designed for large electricity customers.
The proposal would trim $1.4 million from the naval station's annual electricity bills of about $9.7 million.
That savings would come at a cost to all other electricity customers in the state, according to Steve Frias, a PUC attorney.
Depending on when the proposal would take effect, it could raise rates slightly, or it could reduce a credit ratepayers are due from Narragansett Electric because it has been earning more money than it has been allowed to.
(Utilities such as Narragansett Electric often operate under an earnings sharing agreement, in which any profits over a certain amount are credited back to customers. Narragansett Electric has indicated that has been overearning since 2000, and its agreement with the state calls for the company to credit customers in 2005 the amount of its excess profits.)
If the $1.4 million is spread out among all ratepayers, the impact on a typical residential customer would be minimal -- an increase of about 8 cents a month, according to Narragansett Electric. The company has not spelled out what impact it would have on commercial customers, Frias said.
The naval station, which sits on 1,400 acres in Middletown and Newport, on the western shore of Aquidneck Island, plays a major role in the state's economy.
It employs about 7,600 people, of which 4,100 are civilians and 3,500 are military personnel, students and staff, according to Dave Sanders, public affairs officer for the station. It indirectly supports another 8,000 jobs among subcontractors, vendors and suppliers, according to Keith Stokes, executive director of the Newport County Chamber of Commerce.
A study conducted for the Chamber found that Rhode Island is 6 times more dependent on defense employment than Massachusetts and 3 times more dependent that Connecticut. The Rhode Island defense industry payroll totals about $900 million, with an economic impact of $1.5 billion, the Chamber's study said.
The issue is timely because the Department of Defense is scheduled to begin early next year another round of defense facility reviews as part its Base Realignment and Closure process, or BRAC. The department will examine bases around the country and decide which to keep open, which to close and which should absorb functions of other facilities.
"We have to be in the position to demonstrate that our military facilities at the very least are as efficient as other military facilities around the country," said Stokes, a supporter of the naval station's power proposal.
The station is now being charged for electricity under Narragansett Electric's rate class N-01. It is the only Rhode Island customer in that rate class, according to Michael Stoll, public works officer for the facility.
The base wants to switch to the lower G-62 rate class, which serves the largest commercial electricity customers.
The difference between the two rates is less than a penny. The N-01 rate is 9.6 cents per kilowatt-hour, while the G-62 rate is 8.97 cents per kilowatt-hour, or 6.6 percent lower. The naval station uses more than 16,000 kilowatts each month.
In testimony submitted to the PUC, Stoll said the rate reclassification would help continue the economic contributions the naval station has made to the state and region. And it is a matter of fairness, he said. The proposal would allow the station "equal treatment to that of Narragansett customers with comparable electric usage characteristics. . . ."
The base had been in a higher rate classification when it was being served by Newport Electric, the company that supplied power to Aquidneck Island before being purchased by Narragansett Electric in 2000.
After that acquisition, Narragansett Electric agreed with the state to create a new rate class for the Navy that was lower than Newport Electric's. The change saved the Navy some $780,000 annually on its electricity costs. The electric company also agreed that the Navy could move to the G-62 rate after Jan. 1, 2005.
But the new rate was still higher than the large commercial rate, and the naval station has been trying to move to the less expensive rate class. It submitted a proposal to switch a few months after the Newport Electric takeover, but it was denied by the PUC. The commission said in an August 2000 order that the Navy had its chance to object to its new rate during the settlement talks between the state and Narragansett Electric, and it chose not to.
Supporters of the reclassification say it is important to help the naval station become as efficient as possible in order to make sure it isn't hurt by the upcoming base reviews.
Stokes, of the Newport Chamber, sits on the Rhode Island House Special Commission to Study the Defense Economy, a panel of state officials who are looking at ways to help the defense industry prosper. That committee, chaired by House Majority Leader Gordon Fox, is expected to send a letter today to the PUC in support of lowering the station's electricity rates before January 2005, Stokes said.
He's also on the Base Realignment and Closure Commission, chaired by Governor Carcieri, that is looking specifically at ways the defense industry in the state could be affected by the upcoming BRAC reviews.
"At the very least, we want to sustain what we have, and with the right investments and support mechanisms we can also grow our military facilities here," Stokes said.
Electricity costs are an issue because they are high in Rhode Island, compared with other parts of the country. Stokes said the committee found that similar military facilities around the country, including those in Florida, Virginia, Washington and Hawaii, are paying less than what the Navy pays in Newport. Only San Diego had similar rates, he said.
Narragansett Electric is supporting the naval station's request. Its filing highlights the economic benefits the facility provides to the state.
It has asked the PUC to make a decision now, even if the rate change won't go into effect until 2005. That would allow the naval station to notify the Department of Defense and the BRAC committee that rate reductions would likely be implemented, Narragansett Electric said.
The Division of Public Utilities and Carriers, the state agency that represents ratepayers, would not object to moving Naval Station Newport to the lower rate after Jan. 1, 2005, said Stephen Scialabba, chief accountant for the division. If the PUC chooses to switch the rate sooner, the division said that Narragansett Electric should share some of the costs associated with the rate reduction, rather than make ratepayers shoulder the entire burden, Scialabba said.
The Public Utilities Commission has scheduled a hearing on the issue for Oct. 21, at 9:30 a.m. at its offices in Warwick.
