PUC shifts electricity ‘billing adjustment’ from individuals to all ratepayers following growing consumer complaints

(Updated, 1:20 p.m.)
PROVIDENCE – The R.I. Public Utilities Commission on Wednesday unanimously approved the elimination of an upfront billing adjustment cost on customers who switch to competitive electricity suppliers, setting the stage for all ratepayers to pick up the difference.

Prior to Wednesday’s vote, if a customer of National Grid PLC – Rhode Island’s largest electricity utility company – decided to procure electricity elsewhere through a competitor they could rightly do so. But consumers were made to pay an adjustment charge equaling the difference between the price they paid the third party for electricity and what National Grid was paying on the open market when it went to purchase the electricity it was delivering to the consumer on a month-to-month basis.

Thus, if a customer paid 10.5 cents per kilowatt hour for electricity that actually cost National Grid 18.5 cents per kilowatt hour, the adjustment amounted to 8 cents per kilowatt hour. This difference in cost would be spread out among customer’s bills throughout the term of the agreement with National Grid.

But this past winter, when many customers decided to leave National Grid after two winters of volatile energy costs to third-party suppliers, they received the difference as a lump sum charge, which – much to the chagrin of customers – looked more like a service-termination fee rather than money owed.

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For residential ratepayers living in homes that used 500 kilowatt hours, the adjustment billing adjustment between January and February could cost about $75, according to PUC spokesman Thomas Kogut. But for ratepayers using much more energy, the billing adjustment totaled more than $1,000 in the same period.

“The Division of Public Utilities and Carriers, along with our office and the office of the attorney general, received hundreds of complaints about the adjustment,” said Lt. Gov. Daniel J. McKee in a statement following the vote.

McKee has been advocating against the billing adjustment system since it came to light this past winter.

“This decision is a big win for small business and an important step in the right direction,” he said.

Eliminating the full individual billing adjustment does provide some respite to customers who leave for competitive services, which McKee calls “a barrier to the type of competitive electricity market that could bring small businesses and residential customers real relief in their energy bills.”

But moving forward, the adjustment costs left behind will be absorbed by all ratepayers who pay for service through the electricity grid, which is largely owned by National Grid.

Whatever amount isn’t paid by individual departing customers will be pooled, socialized and applied to the distribution costs paid by the majority of ratepayers.

“It will be folded into the cost of distribution rates rather than assigning it on the energy side,” said Kogut, thus making whole National Grid for its costs to purchase electricity.

Exactly how those costs will be divvied up between the different type of ratepayers – residential, commercial and industrial – isn’t quite clear, but the commission and National Grid moving forward are going to track costs under the new rules.
The commission also voted to shift the procurement period from its current six-month cycle beginning in January to a six-month cycle beginning in October. The change will happen following an initial nine-month procurement period beginning January 2016 and Kogut says the shift could potentially dampen costs.

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