Electricity rates for Rhode Island consumers and businesses continue to drop.
Narragansett Electric late last month filed with the Public Utilities Commission a proposed rate reduction of roughly 12 percent. If approved by the PUC, which is expected, the rate cut will take effect Jan.1.
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The planned reduction is good news for Rhode Island businesses and consumers, who saw electricity rates jump 65 percent between June 2000 and April of this year – thanks mostly to rising natural gas prices.
But many large electricity users apparently still are frustrated by the fact that power costs are a growing percentage of their overall expenses. A number of manufacturers told the House Corporations Committee last week that there aren’t enough ways to cut electricity bills through innovative measures, such as shifting production loads to off-peak hours.
Take Metallurgical Solutions Inc., a Providence commercial heat-treating company that specializes in the hardening of high-speed cutting tools in molten salt. The operation uses furnaces that heat up to 2,200 degrees, requiring electricity instead of natural gas or heating oil.
“I’d estimate that our little company probably uses more electricity per employee than any other Rhode Island company,” said John J. O’Meara, president of the 20-employee business.
He told committee members that he would like to move some of his production load to off-peak hours – such as nights and weekends when the wholesale cost of electricity is lower – if it would cut the company’s electricity bills. But there are no financial incentives to do so, he said.
“The electric company does not see fit to encourage that,” O’Meara said.
O’Meara said his electricity costs have grown in recent years from 17 percent of the company’s cost of goods sold to 20 percent, ultimately eroding his profit margins. He said competitors in other states are able to undercut the company’s prices because they are paying much lower electricity rates.
“We’re never price competitive outside of New England,” O’Meara told committee members.
Other companies who want to “co-generate” power – and thus save on electricity costs – say they are prevented from doing so because of fees that Narragansett charges to provide backup supplies.
Co-generation allows companies to use the byproduct of electricity generation – steam – and use it to create new electricity or heat. The method is environmentally friendly because it cuts down on carbon emissions. Critics charge that the tariffs levied by Narragansett Electric to supply backup power in case the co-generation source goes down are too high.
Executives from Polytop Corp., a Slatersville-based manufacturer of plastic closure devices such as tops for ketchup and shampoo bottles, told committee members that the company has refrained from installing a co-generation plant because Narragansett’s backup tariff make it too costly.
“These backup costs are so high, they prevent us from supplying (electricity) ourselves,” said Steven Wilson, vice chairman of Polytop’s board of directors. “It’s difficult to find reason in how (Narragansett) can enrich themselves on something we’re doing on our own.”
Polytop – which operates in an industry with razor-thin profit margins – has had to lay off workers recently, partly because relatively high energy costs have eaten away at margins, company officials said. Executives told the committee that Polytop could have saved $115,000 over an eight-month period earlier this year had it been able to generate its own power via co-generation, according to an internal analysis.
But Narragansett Electric says the backup fees are necessary to cover the cost of being able to instantly supply electricity when a co-generator needs backup power.
“We have to be able to provide (a co-generator) with their load at a moment’s notice,” said Robert Seega, a spokesman for Narragansett Electric. “There are costs associated with that.”
Manufacturers also often gripe about Narragansett’s demand-side management program, which encourages consumers to reduce energy use through a number of conservation measures, such as replacing old equipment with energy saving machines. The program, created in 1996, is funded by a small fee charged to Narragansett customers each month, which amounted to about $27 million last year. The legislature last summer approved the program for another five years.
Although consumers have saved $221 million since the program’s inception in 1990, many commercial and industrial customers say it isn’t enough to provide significant cost savings.
“How many light bulbs and electric motors can be replaced?” asked Roger Buck, executive director of TEC-RI, which represents the state’s biggest energy users.
All these manufacturer grievances come against a backdrop of nearly non-existent competition, which some say leaves energy users with little choice but to stick with the incumbent utility. The House Corporations Committee has had a series of public hearings this year to explore whether the restructuring act is a failure or if it can be saved. The review was ordered by House Speaker John B. Harwood, who has expressed concerns that deregulation hasn’t sparked competition or lowered prices.
Although several retailers initially entered the Rhode Island market to compete with Narragansett when deregulation took effect in 1998, nearly all of them withdrew from the state when they couldn’t compete with the utility’s Standard Offer.
With the recent rate reduction, the Standard Offer rate will be about 12 percent lower than it was when deregulation took effect in 1998. But Seega said that primarily is the result of lower prices for oil and natural gas.
Officials at the hearing said just one non-regulated electricity supplier – TransCanada Power – is selling a significant amount of electricity to Rhode Island customers.
“Basically, you’re held hostage to the Standard Offer, unless you dare to venture off of it,” said Rep. John Douglas Barr, a Lincoln Democrat and House deputy majority leader.
