Energy in the News - Are Utility Rate Reductions Really A Positive?

Posted by Ed Burke on Aug 8, 2013 1:09:00 PM

This week a Federal Judge ruled that New England utility companies guaranteed profit rates are too high at their current rate of 11.1% and advised they be dropped to 9.7%. According to boston.com, this is projected to save electricity customers in Massachusetts approximately 50 million dollars a year (out of 115 million for New England as a whole).  

You can read the Boston.com article here: Federal Judge Rules that Utility Profits Too High

However, utilities argue that these levels of return are necessary to make transmission improvements to avoid issues like those we experienced in New England in 2011. It was only about 2 years ago that Massachusetts and the New England region suffered huge, extended power outages from a couple brutal storms.  Additionally after Hurricane Sandy and events like it, we all seem to agree that there’s improvements needed in electric transmission and supply – and in fairness, utilities have projected huge spending on these projects in the coming years.  

An important point to remember also is the monumental, round the clock work utilities put in in emergencies like Sandy, tirelessly working to restore power to impacted areas. Our work in Emergency Fueling & Response has let us see that first hand and let me assure you, these people are unbelievably great in times of crisis. In theory these transmission upgrades should mean that in times of crisis, the outages will be a lot more manageable which should be a positive for just about everyone. 

The Edison Energy Group, according to Boston.com has stated that investor-owned utilities will spend over 26 Billion on transmission improvement projects in2014 & 2015, and Massachusetts alone is expected to see 67 million dollars in improvements by 2017. That’s a pretty impressive level of investment and utilities argue those dollars come from their ability to project profit levels based on the guaranteed rates in question.

On the flip side however, Massachusetts has some of the highest electrical rates in the country, along with Connecticut and other New England States. According to the US Energy Information Administration. You can see the chart of rates here: EIA.gov 

Additionally, one of the regions’ major utility parent companies reported earnings 33% higher than in 2012. The year before that saw some controversy over bonuses paid out to utility executives, which seems to have been what spurned the case for lowered rates started two years ago by Massachusetts Attorney General Martha Coakley’s office.

Massachusetts consumers won’t see too much of an impact on their personal home bills, but businesses could benefit greatly from lowered costs. However, is there a potentially disastrous cost in the future without the transmission updates utilities say can only occur at the higher percentages?

What do you think?

Is this a good ruling or one that may seem “penny wise and pound foolish” in the event of another major storm impacting the area?

Topics: EIA, Hurricane Sandy, Utility Rates, Emergency Fuel, Massachusetts

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