A ‘gotcha’ for those trying to save on electric bill

John Howell
Posted 3/26/15

Ken MacNaught thought he might as well save a couple of hundred dollars on his electric bill. He’s not alone.

People across the state signed up with North American Power when the …

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A ‘gotcha’ for those trying to save on electric bill

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Ken MacNaught thought he might as well save a couple of hundred dollars on his electric bill. He’s not alone.

People across the state signed up with North American Power when the Connecticut-based company sent letters to 500,000 Rhode Island residents saying they could save about 20 percent off the standard offer rate provided by National Grid.

MacNaught and those switching to the company will be saving on their electric bill, but for the moment it’s costing them more – all because of the standard offer billing adjustment being levied by National Grid. In the case of MacNaught, the adjustment amounts to $139.99.

“It’s a ‘gotcha’ as you go out the door. You’re going to leave us, so you’re going to get a charge,” he said of the charge.

Adjustment charges levied by National Grid have provoked an outpouring of complaints to the company and the Public Utilities Commission and questions to North American. It also has caught the attention of Lt. Gov. Daniel McKee, who even before taking office intervened on behalf of small businesses and residents when National Grid came before the PUC in December seeking to raise electric rates from 8.3 to 12 cents a kilowatt-hour. The PUC spread the rate increase over a full year, lowering the cost to 10.2 cents a kilowatt-hour.

In an interview Friday, McKee said the PUC has told him they plan to phase out the adjustment by December 2016. That’s not soon enough for him.

McKee said a phase-out of the adjustment would simply compound confusion and act to discourage customers from seeking the best deal on their electric rates. He plans to intervene when the matter comes before the commission in June.

“I’m going to ask them to do it immediately,” he said.

The adjustment, in the words of PUC spokesman Thomas Kogut, is to make National Grid whole on what it has paid for electricity.

“Many people perceive it as a penalty [for leaving Grid and going to with another supplier]. But it’s basically a true-up,” he said.

David Graves, spokesman for National Grid, explained that because of the high cost of electricity at this time of year, the company is paying out more than it is taking in. As the cost goes down in warmer weather, the cost of electricity falls below the standard offer, which makes up for the loss. With the adjustment, Graves said, the customer is paying for what they actually used since Jan. 1.

National Grid has 435,000 electric customers, of which 24,500 are buying power from a non-regulated provider. He said that from December through February, there was a shift of 1,127 customers (124 were residential) to a supplier other than National Grid.

According to Kogut, the January rate is calculated at 18.671 cents per kilowatt-hour. This means the adjustment for January would be the difference between the standard offer at 10.2 cents and 18.671 cents, multiplied by the usage. The monthly rates drop to 6.924 cents in May and 7.764 cents in June. They will be recalculated for July through December based on what National Grid pays for electricity. The rates are calculated in six-month intervals. The adjustment is made at the time a customer leaves the standard offer, so if the switch were made in the fall, conceivably they would get a rebate.

The system is not common and acts to discourage Rhode Islanders from getting the best deal on their electricity, said Chad Klein, director of communications for North American. Of the 63 utilities the company works with in 12 states, Klein said National Grid is the only one to use an adjustment. He said some have conversion fees of $5 and $10.

“This is virtually unprecedented. They’re discouraging energy choice,” he said.

While he didn’t provide the numbers, Klein said the response to North American’s rate offer has “been overwhelmingly positive.” The offer, which originally expired on March 15, is being extended to April 15 and the company is doing another mass mailing.

Alternate suppliers of electricity have been on the Rhode Island scene since deregulation. Since savings tend to be only a few cents per kilowatt-hour, the competition between providers has been strongest for large volume commercial and industrial users. With the dramatic spike in the standard offer, blamed on constrictions in the delivery of natural gas that is causing some generating plants to close or switch to more costly oil, the residential customer has come into play. North American’s blanket mailing is the first major bid for the residential customer in Rhode Island.

“Right now,” McKee said, “[the residential customer] needs to check with National Grid and calculate if there’s any penalty with that switch.”

In its offer, North American has been up front that the customer could be faced with an adjustment. Klein said the company “is in the process of educating the consumer” and is urging them to call the PUC and National Grid.

“This is an adjustment that only National Grid could control,” he said.

Kogut said alternatives lie in the procurement system, and if National Grid were to buy power in six-month blocks there would be no need for an adjustment. He said the PUC website alerts people to the possibility of an adjustment charge or rebate. He expects most people go to the North American website and click on “accept” without reading the fine print.

“We need to make sure the customer is protected,” Klein said.

He feels that not only should the adjustment be eliminated but that National Grid should refund those who have already paid the adjustment. Even with the adjustment, he believes the lower per kilowatt-hour charge offered by North American results in a savings.

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