Rate-Fixing

Today is the deadline NStar imposed on the Commonwealth for a $90 million deal in rate hikes for its electricity customers.

Nstar supplies electricity, which they don’t produce, to hundreds of thousands of Massachusetts customers. They also distribute electricity to even more customers by virtue of owning the transmissions lines that they all use to get electricity.

Most are familiar with the two charges on the electric bill. Here on the Cape the vast majority of us buy our electricity from the Cape Light Compact (CLC), the county sponsored aggregator of Cape and Island users, kind of a buyers club for electricity. In this function, the CLC competes with Nstar to supply us our electricity. But Nstar still distributes it.

Now comes the intrigue. Nstar wants to raise its rates. Maybe with good reason maybe not. But in order to minimize the impact on their electricity customers, they want to raise the charges on transmission and keep the prices on supply fixed for 7 years. In the sum total, Nstar is still raising rates to all their customers by some 40%, but not the 50% other companies are this year.

They need approval to do this from the Department of Telecommunication and Energy (DTE). But rather than go to the DTE for a rate hearing, they went to Attorney General (AG) Tom Reilly for a deal, a Rate Settlement, because they knew that they were treating different customers differently. Namely, the Cape and a couple other areas that get their electricity from other suppliers, would end up paying the higher transmission rates, while not benefiting from the “less-than-otherwise” price increases in supply.

This would be catastrophic for the Cape Light Compact if it comes to pass. It would put Nstar in a competitive advantage over the CLC, because we would all then move back over to NStar to get the better deal on electricity. Also, to sweeten the deal, Nstar is willing to defer these higher transmissions charges, to be paid later with interest. By the way, the deferral of transmission charges for now, would come with a usury interest rate of 11%, to be paid after 7 years.

The AG saw some political hay to be made with this deal. While making it look like he was brokering a deal for less of an increase for most of the Commonwealth, if not all Nstar customers, he made a political calculation that we on the Cape wouldn’t notice. By the way, the main benefactors of the rate deal, are industrial customers, big consumers, and poverty advocates. The guys that have real political clout.

The AG thought he had kissed the Cape on the lips by opposing the wind farm. That was easy, it didn’t cost any money, and only a few votes in a County he wouldn’t win anyway. But now we’re getting the royal treatment from the AG. Personally, I don’t liked getting kissed before I get screwed.

But what’s the AG-running-for-Governor supposed to do? The numbers are with NStar. More customers are getting a better price, even though some, like the Cape, are getting screwed. And besides, there’s another numbers game that matters too. Thomas May, the overpaid CEO, (salary $4.5Million plus options) of the very profitable NStar (earnings up over 15% this year, and stock price at recent highs), covers his bet by contributing heavily to Reilly for Governor.

Had enough? The story gets better. Not to be out tacked by changing political winds, the firm hired by Nstar to argue the case for the deal, (Robert) Keegan and (Robert) Werlin are heavy political contributors to Governor Mitt Romney and Governor-wannabe Kerry Healy. How does this matter? Romney recently appointed a political crony to chair the DTE, the agency charged with making a decision on this scheme, non other than Judith Jackson, the same DTE Commissioner who was doing the Governors’ bidding when she voted against the transmission line for the Cape Wind project.

Last night there was a last minute hearing in Yarmouth to take testimony from the Cape electricity customers. Present were all the usual suspects, State Legislators, County officials, and CLC representatives. But the only one with any courage to call out the snake was County Commission Bill Doherty. “And keep in mind,” Doherty told the DTE staff, “that next year one of the parties to this agreement is running for Governor.”

State Senator Rob O’Leary, one time County Commissioner and driving force behind the creation of the CLC, was left wondering out loud, how could the AG make such a deal without first consulting the affected parties, like the pols who are supporting him in his run for Governor. Well, to borrow the famous line from Edward G. Robinson, “Where is your Moses now?”

Is Tom Reilly feeling the heat? Maybe. He sent down an Assistant AG last night to read a statement. Nstar also sent down a manager to handle the media. They were sitting together.

But the best line of the week comes from a staffer from the CLC, who shall remain anonymous for obvious reasons, who said, “I wish I was a Democrat, so I could vote against Reilly twice next year.”