Figuring out a fair way to set prices in a highly volatile wholesale electricity market will be among the tasks facing Narragansett Electric Co., state regulators and large industrial users during the last half of Y2K. Because despite the official merger in May of the state’s three major electric utilities into Narragansett Electric Co. and the purchase of the company’s parent by a British utility giant National Grid Group PLC, there’s a definite feeling that cost savings expected from industry deregulation are not materializing as planned.
The Energy Council of Rhode Island (TEC-RI) is currently appealing to the R.I. Supreme Court against the Public Utilities Commission’s recent raising of Last Resort Service rates but the issue may not go to court for another year.
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The commission raised Last Resort rates for non-residential customers from 3.8 cents per kilowatt-hour to 4.5 cents for June and set July and August rates at market – with a credit equal to one half of the difference between Standard Offer and market rate, not to exceed 3 cents. The PUC last month also set Last Resort rates for September and beyond to 4.5 cents per kilowatt hour (kWh) or market, whichever is greater.
PUC Chairman Elia Germani, who in June was officially sworn in to an eight-month vacancy, said they were trying to fulfill the original intent of the 1996 Utility Restructuring Act and “motivate” users to go to market.
A livid but restrained TEC-RI responded that the ruling failed to consider their inability to get rate contracts this summer and that the new September rate artificially sets the bidding floor above market.
Officials from the 15 TEC-RI companies on Last Resort said the ruling will cost them at least $1.7 million this summer. TEC-RI Executive Director Roger L. Buck said the rate hike continues the perception that Rhode Island is not responsive to business concerns.
Last month the PUC also raised Standard Offer rates for both non-residential and residential customers from 3.8 cents per kWh to 4.1 cents in order to start recovering deferred costs between established rates and market prices. The PUC also decided to review Last Resort Service in relation to overall deregulation objectives set by the 1996 Utility Restructuring Act “and see if it can’t be improved,” said PUC Special Counsel Lindsay Johnson.
On the natural gas front, a Texas corporation’s bid to acquire Valley Resources of Cumberland (which owns Valley Gas Co. and Bristol & Warren Gas Co.) and Providence Energy Corp. (which owns North Attleboro Gas Co. and Providence Gas Co.) continues to move through regulatory channels.
Respective stockholders have approved the sales of Valley Resources for $160 million and Providence Energy Corp. for approximately $400 million to Southern Union Co. Shareholders for Fall River Gas Co. which Southern Union wants to buy for roughly $71 million, will meet in August to vote on the deal.
After fairly intense negotiations among officials of gas companies, the advocacy section of the Department of Public Utilities and Carriers, state Attorney General Sheldon Whitehouse and TEC-RI, a settlement agreement was filed June 1 jointly requesting DPUC approval for the Rhode Island portions of the merger. (The Massachusetts Department of Telecommunications and Energy is expected to rule in late August on Southern Union’s intended acquisitions of Fall River Gas and North Attleboro Gas.)
In the agreement, company officials said they would not seek direct or indirect recovery of any acquisition premium, which for Valley Resources is estimated at $87 million and for Providence Energy estimated at $160 million, in rates either through an amortization or rate base adjustment.
The companies also agreed there would be no payments of “golden parachutes” or merger related bonus payments to their stockholders and to maintaining a “strong local presence” and Rhode Island-based corporate headquarters.
The application is now being reviewed by DPUC Administrator Thomas Ahern and hearing officer John Spirito but a final ruling had not occurred last week by press time.
The new Tiverton 265 megawatts electric generating plant, for which construction began in late 1998, is expected to begin pumping electricity into the New England power grid sometime this summer, while proposals to build similar plants in Johnston and North Smithfield are progressing through required governmental studies and hearings.
