As electric utilities move ever closer to all-out competition, senior executives are streamlining their organizations, reducing spending, and developing strategic plans to ensure their company's...
Mass. OK's Stranded-cost Charge for Self-generators
The Massachusetts Department of Public Utilities (DPU) has ruled that Cambridge Electric Co. may recover stranded costs from customers that switch to self-generation. The DPU made the ruling while reviewing a "Customer Transition Charge" (CTC) filed as part of the utility's tariff for services in connection with the operation of a cogeneration qualifying facility (QF) by one of its large customers, the Massachusetts Institute of Technology (MIT). Cambridge said the charge was not an exit fee, but a charge based on the customer's specified maximum standby contract demand (em "essentially a wires charge."
The DPU concluded that a CTC charge of 75 percent of net stranded cost represented the proper balance of interests between the "load at risk class," the utility, and other ratepayers. The new rate of $5.62 per kilovolt-ampere (kVa) would apply to any customer that discontinues all or a portion of all-requirements firm sales service and 1) has an average billing demand of 2,000 kVa or greater for the most recent calendar year, 2) obtains electric service from another source, and 3) remains within Cambridge's service area.
The DPU traced the foundation for its decision to a recent generic order on industry restructuring (See Re Electric Industry Restructuring, 163 PUR4th 96 (Mass.D.P.U. 1995)), in which it ruled that utilities be allowed a "reasonable opportunity to recover cost for existing commitments that might be stranded in the transition to competition." The DPU rejected calls to delay implementation of the charge pending further study, finding that the stranded costs stemmed not from the move toward competition, but from the QF option open to customers and promoted across the nation since the Public Utility Regulatory Policies Act of 1978 (PURPA). It also emphasized its concern about the significant impact of the loss of MIT on the utility, "given the relative size of MIT's load on Cambridge's system."The board also noted that Cambridge's obligation to serve all customers, including MIT, was long-standing and that it had made investments to that end that had been reviewed and sanctioned by state regulators.
The DPU also rejected MIT's allegations that it lacked jurisdiction to approve the rate because the fee was not based on the sale or consumption of electricity. The DPU cited energy conservation charges, which reimburse utilities for the costs of demand-side management activities, as an example of rates approved by the courts that are not tied expressly to kilowatt-hour consumption. The DPU also dismissed allegations that the rate violated PURPA because allocating stranded costs to QF customers was discriminatory and would circumvent the statute's policy of promoting alternative energy sources. The DPU said the charge would apply equally to all class customers, QF or not, and would not necessarily block or unduly burden development of QFs. The DPU also rejected charges by MIT that the CTC was an improper tying arrangement in violation of antitrust laws. Re Cambridge Electric Light Co., D.P.U. 94-101/95-36, 164 PUR4th (em , Sept. 28, 1995 (Mass.D.P.U.).
Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please