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PUC OKs increased electricity, gas rates

12:04 PM EDT on Friday, July 11, 2008

By Paul Edward Parker
Journal Staff Writer

Starting Tuesday, National Grid customers in Rhode Island will pay 21.7 percent more for electricity and 8 percent more for natural gas, the Public Utilities Commission voted yesterday.

The commission also voted to have an independent auditor review National Grid’s financial statements to confirm the calculations that were used to support the rate hikes.

The electric rate increase, which was approved unanimously, is what National Grid had asked for. The new rate will be good until Jan. 1.

The gas rate increase, passed on a 2-to-1 vote, is less than the 10 percent the company had sought. That new rate expires Nov. 1.

For a typical home heated by natural gas, average monthly gas bills will grow by $9.60 to $129.43. Electric bills will go up $16.67 to $93.44. That would make the total bill for the year for both utilities climb about $330.

The commissioners said they were painfully aware of what their vote means in these difficult economic times.

“It seems to me there is no solution that would not be painful,” said commission Chairman Elia Germani.

“It’s unfortunate,” said Commissioner Robert B. Holbrook. “It’s unpleasant. It’s distasteful.”

“No doubt in my mind that shutoffs are going to happen. There’s going to be more of them,” said Commissioner Mary E. Bray. “How we get around that, I’m baffled.”

Bray said the state needs to develop a plan to help low-income residents who can’t afford their energy bills. “We need to do something quickly.”

But, the commissioners said, they had no choice. State law requires them to approve rate hikes when utilities have to pay more for the electricity and natural gas that they distribute to customers.

The commission could look at only three questions:

•Did National Grid act prudently when it purchased gas and electricity?

•Are the calculations presented by the company accurate?

•When should the increase take effect?

The first question was essentially answered long before National Grid even sought a rate hike. State and federal regulators had approved the purchasing plans under which National Grid buys gas and electricity.

As to the question about accurate calculations, the commission, which has a limited staff, relies largely on consultants hired by the state Division of Public Utilities and Carriers to check the math. That’s why, in this case, the commission voted to hire an independent auditor, with National Grid picking up the cost.

“I think that’s the least we can do when approving a rate increase of this magnitude,” said Germani.

That left only the question of when to institute the rate increase.

Again, the commissioners said they had little choice.

“The last thing we want to do is do nothing,” said Holbrook. “It’s a question of pay me now or pay me later.”

State law allows the utility to charge customers after the fact for any shortfall between what it pays for electricity and gas and what it collects from customers. That means putting off a rate increase would not decrease how much consummers eventually have to pay; it would only mean that they would get hit with a huge bill down the road to cover the shortfall.

That is what led Holbrook to vote against the 8 percent increase in gas rates.

National Grid, which normally gets new gas rates every Nov. 1, had sought for yesterday’s approval to be good for 16 months. That was with the understanding that the company could come in during that period seeking an interim rate change. Part of the rate for the 16-month plan would pay off an existing shortfall of about $10 million.

The Division of Public Utilities and Carriers recommended a four-month plan that does not address the shortfall. That would be looked at in the fall, during National Grid’s more comprehensive annual rate review.

Holbrook did not want to leave the $10 million hanging until November.

But Bray wanted to see what happens with the volatile energy markets. “Hopefully, things will have calmed down and adapted more.”

Germani did not like signing off for 16 months, leaving it to the gas company to decide when to return to regulators. “We should keep the company’s feet to the fire.”

Germani said he expects rates will increase again when the company comes back.

“The United States has become an energy hog,” he said, adding that the country has 4 percent of the world’s population but uses 25 percent of its energy. “The time has come to pay the piper.”

pparker@projo.com

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