New electric rates discussed

Fri, 08/31/2018 - 8:00am
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On a hot and hazy evening Tuesday, power companies across New England were watching the regional grid to see how high energy use would peak. Such was the case at the Block Island Power Company, where members of the Board of Directors, along with some members of the Block Island Utility District, met to discuss a new rate structure.

Energy use is significant because peak use locally, in relation to the regional peak, determines what BIPCo’s capacity charge will be for year beginning June 1, 2020. Currently, the capacity charge — the charge to participate in the regional grid — is $0.034237 cents per kwh. It will go down slightly for the year beginning June 1, 2019 to $0.027326 per kwh, based on last year’s peak.

Before Tuesday, the regional grid’s most recent peak was on July 5, a time when the island was quite busy. On July 5, BIPCo’s peak was 4.8 megawatts. On Tuesday, BIPCo’s peak was 3.7 MW, reflecting a quieter, end-of-summer time on Block Island. However, an even higher peak was reached on Wednesday, Aug. 29, as the current heat wave continued across New England.

It’s a lucky break for Block Island ratepayers. Had the July 5 peak been used, the capacity charge would have been larger than with the peak the week of Aug. 27 through Aug. 31. 

Despite watching the New England grid peaking in real time on their smart phones, those present at the meeting got down to discussing the nitty gritty of proposed rate changes. BIPCo, or its expected successor, the B.I. Utility District are due to file a new rate case with the R.I. Public Utilities Commission on October 1.

The current rates include four main components: a monthly, flat customer charge; and three charges that are dependent on use — a plant and distribution charge, the standard offer rate, and a transmission rate. Some customers are also subject to system and demand charges.

The standard offer rate and transmission charges are dependent on energy contracts and other factors (such as that capacity charge and cable surcharge) and so will not be a part of this particular rate filing.

The customer charge, plant and transmission charge, and the system and demand charges have all been in place since 2008 and will be the subject of the filing.

The system charge affects those who use significantly more power in the peak season (June through September) than they do in the off-season. BIPCo President and Board Member Jeffery Wright said he would like to do away with it. He also would like to do away with the residential demand charge. The demand charge kicks in when a customer draws a high amount of power from the system during a very short period of time. (This can result from turning on too many lights and appliances within a 15-minute period.) Both of these charges are highly unpopular.

The biggest proposed change is to move from a two season rate to a three season rate. Currently the Plant and Distribution rate more than doubles in the months of June, July, August, and September, from what it is in the other months.

Under the proposed three-season rate, May, June, September and October would have a shoulder season rate somewhere between the lower winter rate and the higher peak (July and August) rate.

With the three season scenario, a customer using 500 kwh per month for 12 months of the year, would pay the same as they would under the two-season rate. It would just be spread out differently.

Wright said the three season model would greatly enhance cash flows for the company with the higher May revenues. It would also ease the shock that customers currently receive when they get that June bill.

The new model also envisions condensing some of the rate classes. Currently there are many, including residential, general, demand rate (large power), public authority, and public authority demand rate. One suggestion was to eliminate the public authority rates, which are slightly lower than their respective general and demand rates.

One area slated for an increase is the customer charge. Currently the monthly customer charge is $12.38 per month for residential customers, general service customers, and non-demand public authority customers. Demand customers pay a monthly service charge of $18.57. The proposal is to increase that charge to $15 and $25 per month respectively. 

Demand charges may be being eliminated for residential customers, but not for “large power” customers. These charges are dependent on peak use, and theoretically could occur at any time of year. But on Block Island, peaks normally occur in July and August, and those at the meeting decided to stick with measuring them during that time period.

One area that is causing some head scratching is how to utilize the capabilities of smart meters. Block Island is actually the only community in Rhode Island where all customers have smart meters, and the PUC is curious to see how BIPCo may capitalize on them. 

With smart meters, BIPCo could implement some type of “time of use” charging. Block Island’s peak usage time is between 4 p.m. and 9 p.m. so conserving power during those hours is desirable.

So should electric use during that time cost more than in, say, the earlier morning or late at night? The conclusion was “no” as that would jeopardize the businesses that perhaps drive the island’s economy the most – hotels and restaurants. 

Utility District Commissioner Everett Shorey also pointed out that he has “no control” over the electric use of those who rent his house for a summer vacation. “What if they want to have a party?” he said.

All of the above changes at this point are “purely for discussion,” Wright told The Times. Whatever the final proposal, it will need to be approved by the BIPCo Board of Directors, and then will be subject to the scrutiny of the PUC.