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After three months of exorbitant electricity rates, many of Rhode Island’s largest companies will get some relief starting next week.
Narragansett Electric’s Last Resort Service – paid by about 1,000 commercial and industrial users – will drop more than 40 percent on Sept. 1. Those customers will pay 5.674 cents per kilowatt-hour from September through March.
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The state Public Utilities Commission approved the change earlier this month.
The new rate is a big drop from the 10 cents or more that companies on Last Resort have been paying in July and August. It is the lowest rate for Last Resort Service since last December.
“It’s a favorable rate,” Narragansett Electric spokesman Robert G. Seega said of the six-month power-supply contract. “The price of power has come down dramatically and we wanted to lock in a good rate for our customers.”
What’s more, a second contract at a similar rate could be approved for March through August of 2002. PUC spokesman Terry Mercer said Narragansett Electric should sign that contract soon.
“(The 5.67 cents) is certainly a lower rate, but just as importantly it should give these companies a stable rate for the next 12 months,” Mercer said.
Seega said “nobody is happy” with the 10-cent rates that Last Resort customers have been paying this summer. He said The Energy Council of Rhode Island (TEC-RI) lobbied Narragansett Electric to secure a longer-term contract in order to iron out some of the volatility in companies’ electricity costs.
“One thousand little guys out there will finally be getting a decent, stable price,” said Roger Buck, executive director of TEC-RI, which represents 85 of the state’s largest energy users. “That’s great, but it’s going to take a long time for them to recover from the last six months.”
Narragansett Electric’s Last Resort customers are those users who left the utility after deregulation in search of cheaper rates from non-regulated suppliers and have since returned to Narragansett Electric. By state law they are charged a different rate than the customers who never left the utility (about 90 percent of Narragansett Electric customers), who pay the Standard Offer rate.
The Standard Offer rate now stands at 6.3 cents and is slated to remain in place until the end of the year, although it could drop if fuel prices continue to ease, Seega said.
But even customers on the Standard Offer rate are paying much higher electricity bills than last summer, when that rate was about 4 cents. It has increased four times during the past year to offset the higher cost of fuel, which drives electricity-generation costs higher.
Providence-based American Silicon Products has tried to conserve electricity by cutting back on air conditioning and using high-efficiency lighting and motors, company president Richard Brown said. Although the manufacturer has been able to trim its consumption by more than 20 percent this summer, its monthly electricity bills still are about $3,000 higher than last summer.
“We’ve done what we can (to conserve power), but we can’t cut our usage 50 percent to offset the 50 percent rate increase,” Brown said.
East Greenwich-based Stanley Fastening Systems has taken similar steps to cut electricity costs, but its bills have jumped an average of 15 percent. George Mayes, director of operations, said the company would consider contracting with an outside supplier if it could get a better rate.
“We’re looking at all our options,” Mayes said.
But Buck cautions that companies who leave Narragansett Electric in search of lower rates from other suppliers could get burned.
“There are (non-regulated suppliers) calling companies right now saying ‘sign a contract with me and I can beat the Standard Offer,'” Buck said. “But if things don’t work out the company has to go back to Last Resort, which could be way up again next year.”
Select Energy Inc. of Connecticut was one of the first non-regulated companies to supply power to Rhode Island customers following deregulation. Spokesman Joel Weinberg said the energy-marketing firm has been contacting Rhode Island companies recently with offers to beat Narragansett Electric’s Standard Offer.
“We are looking to offer commercial and industrial customers price stability by offering them a discount on the Standard Offer,” Weinberg said. He said Select Energy is targeting companies with “high load factors,” or firms that use a lot of power day and night.
Some of the state’s largest energy users already have obtained contracts with non-regulated suppliers, driven back to the deregulated marketplace this summer by Narragansett Electric’s lofty Last Resort rates. Of the 15 TEC-RI members that had been on Last Resort, nearly all have gone back to outside suppliers for better rates.
Buck said that as of Aug. 1 companies with high load factors who are willing to sign a one-year contract with an outside supplier probably could secure a rate as low as 5 cents. Longer-term contracts might net rates below 5 cents, Buck said.
But he says only a handful of large energy users are able to negotiate rates that low.
“The problem is that the average firm doesn’t understand the process,” Buck said. “This is a tough ballgame, and unless you have a high load factor or really know what you’re doing, the average guy shouldn’t be playing.”
