[BETA] Fortnightly

The Massachusetts Department of Public Utilities has authorized the Boston Gas Co. to implement a performance-based rate plan that will include a price cap for monopoly services, using the "GDP-PI" measure of inflation, minus a productivity offset of 2 percent.

It also told Boston Gas to cut rates by $2.897 million but allowed the company to go forward on an interim basis with an plan to unbundle services and require customers or marketers to take manadatory assignment of a pro rata share of the company's upstream pipeline and storage capacity contracts.

At the same time, however, state regulators turned back a unique proposal by the company to "buy-back" interruptible transportation service by replacing an existing margin-sharing formula for the interruptible revenues with a permanent $2-million reduction in base rates.

Unbundling. The unbundling plan would allow aggregation of firm load and represents an initial step by the LDC to "exit the merchant function" of the business. (The LDC's corporate parent, Eastern Enterprises, Inc., had recently formed a new energy marketing subsidiary, ALLEnergy Marketing Co.)

Interruptible Transportation. The department said that future revenues from interruptible transportation were extremely uncertain, due in large part to a recent decision by the Federal Energy Regulatory Commission to eliminate its price cap on released pipeline capacity. Given such uncertainty, the company's "buy-back" plan might make matters worse, it noted.

Price Cap. Interruptible transportation service was excluded from the price-cap plan. According to the commission, the service fit neither the monopoly nor the competitive "price basket" classifications under the plan. It envisioned the transportation function as remaining a monopoly service, but saw IT as an "opportunity-driven transaction to which it is inappropriate to apply cost-based pricing principles." It ordered the company to flow IT margins back to core customers through a newly approved per-therm adjustment clause devoted specifically to local distribution cost elements. Re Boston Gas Co., D.P.U. 96-50 (Phase I), Nov. 29, 1996 (Mass. D.P.U.).

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