Rising fuel costs prompt Narragansett Electric to request its largest power-rate hike in 7 years

Saturday, July 30, 2005, BY TIMOTHY C. BARMANN, Journal Staff Writer

Narragansett Electric yesterday filed a request to raise rates in Rhode Island by 12.4 percent, the highest single rate increase that the utility company has sought in at least 7 years.

In a filing with state regulators, the company said it needs the increase because of a projected rise in fuel costs through the end of 2006.

The company requested the hike go into effect as of Sept. 1.

If approved by the Public Utilities Commission, the rate hike would bring electricity rates to their highest level in Rhode Island since the industry was restructured by a 1998 state law, according to the company.

A typical customer who uses 500 kilowatts of electricity would pay $70.58 a month, or $7.81 a month more, compared with current rates, the company said in its filing.

Without the increase, Narragansett Electric estimated the money it collects from customers will fall short of what it pays for electricity by $28.7 million as of Dec. 31, and by $153.4 million by the end of next year.

Narragansett Electric is the dominant power provider in the state, serving 465,000 customers in 38 of Rhode Island's 39 communities. It is owned by National Grid Transco PLC of Great Britain.

Besides delivering electricity, Narragansett acts as a buying agent for most of its customers, purchasing the electricity from suppliers through long-term contracts.

Most of those contracts contain clauses that automatically increase Narragansett's cost of purchasing electricity if the market price of natural gas and fuel oil rise beyond a certain trigger point.

These additional charges, known as "fuel index payments," will total $164 million next year, the company estimated in its filing.

Narragansett Electric is allowed to recoup from customers the amount it has to pay for electricity, as long as it makes prudent buying decisions, in the opinion of the Public Utilities Commission.

The company makes no profit from buying electricity on behalf of its customers. Its profits come from distributing the electricity.

The specific rate at issue is known as the "standard offer" rate, which represents the cost of the electricity itself.

Narragansett Electric proposed raising the standard offer rate to 8.2 cents per kilowatt-hour, up from the current rate of 6.7 cents.

The rate applies to about 86 percent of the electricity delivered by Narragansett Electric. The remaining 14 percent goes to customers who who have contracts with their own suppliers.

The increase would make it even harder for many customers to pay their electric bills and is likely to increase shutoffs due to nonpayment, according to Henry Shelton, coordinator of the George Wiley Center in Pawtucket.

Any rate increase is going to affect shutoffs, Shelton said. "It's just going to make it worse."

He said many people simply can't afford to pay their utility bills, and his agency and others have been trying to design an assistance plan that would help low-income customers.

"We've tried four years in a row, to get a plan to help people cope with rising prices, which would mean paying a percent of their income, and have some kind of forgiveness element" of past due balances, Shelton said.

Legislation that would have created such a plan never made it out of committee in the General Assembly this session. Many expressed concerns about the cost, which would be passed on to other customers.

The proposed increase would also hurt manufacturers, said John Farley, executive director of the Energy Council of Rhode Island, which represents about 50 of the largest users of electricity in the state.

"What it says is that we have to get more serious about a comprehensive energy plan," Farley said.

"We've got to get serious about energy efficiency, and also about diversity of our electricity generation. We're very dependent on natural gas in New England."

What's needed, he said, is for New England states to meet and agree on how to decrease reliance on natural gas, perhaps by looking at coal, nuclear power and renewable energy sources.

Farley said he doesn't fault Narragansett Electric for the increase.

"It's easy to want to paint Narragansett in a corner as a bad guy," he said. "But they are just the bearer of bad news coming from the energy markets."

<<< BACK TO LIST