BIPCo files for rate increase

Fri, 11/10/2017 - 9:45am
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When the Block Island Power Company shut down its diesel generators and connected to the mainland power grid on May 1, new rates went into effect. Replacing the old “fuel cost adjustment” line on power bills, which fluctuated from month to month based on the current cost of fuel, was a new, stable, standard offer rate and transmission charge that totaled 12.44 cents per kilowatt hour. 

The amounts of those new charges were based partly in known costs and partly on estimates. While the cost of energy was known, i.e. fixed under contract at a per kilowatt hour rate, “soft costs” for legal and regulatory fees, and fixed costs, such as the charge for the new National Grid substation and interconnection costs (Direct Assignment Facilities, or DAF) had to be spread over an anticipated number of kilowatt hours of electricity sold. 

At the time of the initial filing, the cost of the substation and interconnection were based on estimates, but just before the hearing last spring, National Grid provided a cost that was grossly over the amount they had originally estimated — $1.8 million versus $550,000. The increase was quickly worked into the new transmission rate although no detail was provided by National Grid to substantiate its overages.

BIPCo President Jeffery Wright told The Times that he has since received a “very high level breakdown of costs but it really doesn’t tell me much other than what was categorized as materials, labor, etc.  Nothing stood out - all of the costs were significantly higher than I would have expected.”

It should be noted that BIPCo has sought for the DAF charges to be “socialized” among all R.I. ratepayers. The Public Utilities Commission denied this request, but BIPCo may file an appeal with the Rhode Island Supreme Court. If the company prevails, any recovered costs will be credited back to Block Island ratepayers. Wright said that at the PUC’s hearing, “Commissioner Gold was quoted as ‘ordering the PUC staff to conduct a full investigation into the costs,’” but that the final order for the investigation has not yet been made.

These differences in estimated versus actual costs are subject to periodic reconciliations with the R.I. Public Utilities Commission and rates are adjusted — either up or down, as necessary. BIPCo was allowed to forgo the first of these reconciliations, which would have happened after three months, and has now filed its six-month reconciliation, with proposed rates to go into effect on December 1, and continue through the end of April. 

The new proposed rates call for a total increase of 2.44 cents per kilowatt hour — 0.94 cents for the standard offer rate, and 1.5 cents for the transmission charge. For a residential customer using 500 kwh per month, this will translate to an increase of $12.21 per month. 

The other line charges on BIPCo’s bills — customer charges, plant charges, and demand charges will remain the same until a full rate case is filed in the summer of 2018.

The good news is that most of the 7.79 cent per kwh transmission charge will go away after May, 2023, as the cost of the substation and interconnection is being amortized over a six-year period. Wright told The Block Island Times that after May 2023, the transmission charge will be reduced by five cents per kwh. The assets themselves are expected to last 40 to 50 years.

Also included in the transmission rate is Block Island’s share of the transmission cable running from the mainland to Block Island. While the substation and interconnect charges are the responsibility solely of Block Island ratepayers, the cable cost has been socialized across all of National Grid’s Rhode Island customers. Block Island’s share of the $125,575,127 cable is 0.27 percent. 

There are many components that go into the rate reconciliation and David Bebyn, CPA has provided a dizzying amount of data in his prepared “testimony” for the filing — all of which can be found at ripuc.org, under Commission Docket 4690. 

One of the more interesting differences presented by Bebyn was regarding the cable surcharge. While the cable became operational in November 2016, sending power from the Block Island Wind Farm to the mainland, BIPCo did not hook up to it until May, as the interconnection at the power company was not completed by National Grid until mid April, 2017. Despite that, National Grid has decided to “back charge” BIPCo for the six months at a cost of $1,900 per month. According to Wright, the contract does call for payments to begin when “the cable is placed in service,” but National Grid neglected to bill BIPCo for the first six months of the cable surcharge until May. 

Nov. 16 is the PUC’s deadline for filing motions to intervene, and comments from interveners and the Division of Public Utilities and Carriers are due the following day. An evidentiary hearing on the matter will be held on Thursday, Nov. 30 at 9:30 a.m. at the PUC’s offices in Warwick.