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‘First time in New Hampshire’ rate system for Liberty gas would compensate for losses due to energy efficiency



Monitor staff
Tuesday, May 01, 2018

In a move that the state Consumer Advocate calls a “decisive step forward into the 21st century,” the state wants to change the way Liberty Utilities gets paid for natural gas to make it easier to create energy efficiency programs.

The Friday ruling by the New Hampshire Public Utilities Commission – involving what is known as a “decoupling” – would allow monthly adjustments in Liberty Utilities gas rates for the first time in New Hampshire. The decision drew praise from Consumer Advocate Don Kreis, who said it improved on earlier attempts to compensate utilities for selling less of their product because of increases in energy efficiency.

“We need to design rates that encourage utilities, and encourage consumers, to do the things that are good for them to do,” Kreis said. “This is much more fair because the utilities have to actually prove what effect efficiency is having on their revenue – and the rate can be adjusted either up or down.”

Liberty Utilities is reviewing the ruling and has not said whether it will appeal. The ruling applies only to their natural gas business in New Hampshire, not their electricity business.

Kreis said that similar programs exist in a number of other states. They are designed to tackle the inherent conflict of interest when a gas or electric utility oversees energy efficiency programs, as is the case in New Hampshire.

Because utilities make their money by selling energy, they have little interest in helping customers use less of it. So utility regulators have instituted a variety of programs that pay utilities to compensate for at least some of that lost income.

New Hampshire’s version of this is called LRAM, for lost revenue adjustment mechanism.

But Kreis has argued, most recently in his regular column published by InDepthNH, that LRAM is bad for ratepayers because it “simply assumes the existence of lost revenue, based on predictions of how efficient the energy efficiency measures prove to be,” and makes payments even if there’s no drop in customer usage due to “an unusually cold winter, warm summer, or a booming economy.”

“In short, under the LRAM, the utilities get the revenue adjustment regardless of whether any revenues are actually lost,” he wrote.

The PUC ruling would remove LRAM as of November and replace it with monthly adjustments based on usage, determined separately for residential and for commercial customers, including an extra adjustment to factor in weather changes that may affect how much gas people burn.

“If decoupling is implemented successfully, customers should see enhanced opportunities for cost-effective energy efficiency measures to reduce consumption and lower their energy costs,” the PUC ruling says.

The ruling also allows some shifting of costs from winter to summer, to reduce the effect of any adjustments when it is cold and people’s natural gas bills are already increasing. It adds that decoupling may not be used to compensate Liberty if customers leave it and go to competitive energy providers.

The ruling also cuts fixed charges, which are regularly applied to every bill.

This case was triggered a year ago when Liberty filed an application for new rates. Liberty’s predecessor in New Hampshire, EnergyNorth, had proposed a similar decoupling several years ago, but it was rejected by the PUC at the time.

Friday’s ruling would give Liberty an increase of about 7.8 percent, raising the annual bill for a customer in Concord who uses 760 therms by about $85, according to staff estimates. It estimated that Liberty Utilities would make an extra $12.7 million annually in New Hampshire, plus a $2.4 million reduction in federal taxes due to tax reform, creating an overall annual return of 9.3 percent on equity.

Those figures are slightly below the level that Liberty Utilities had previously agreed to accept in a settlement with the Office of Consumer Advocate. Liberty can appeal the ruling, which would otherwise go into effect Tuesday.

“We are still reviewing it and determining our next step,” said Emily Burnett, marketing and communications analyst for Liberty.

Liberty Utilities has about 90,000 gas customers in central and southern New Hampshire, including a set of customers in Berlin. The ruling also covers about 1,200 customers in the Keene area served by a stand-alone propane/air system. Liberty bought that system in 2014 and is in the process of switching it to natural gas.

(David Brooks can be reached at 369-3313 or dbrooks@cmonitor.com or on Twitter @GraniteGeek.)