The Block Island Power Company is required to file a new rate design case with the R.I. Public Utilities Commission this summer. The PUC had initially called for a rate case to be filed six months after the island was connected to the mainland via a transmission cable but extended the due date from Nov. 1, 2017 to August 1.
At recent meetings of the BIPCo Board of Directors and the Block Island Utility District the possibility of asking for an additional deadline was discussed, due to the Utility District being party to a lawsuit filed by BIPCo minority shareholder Sara McGinnes on April 19.
It was hoped that negotiations with McGinnes would have been wrapped up by the time of the rate case filing, and that it would be the Utility District doing the filing, not BIPCo. Which entity does the filing is important because the Utility District is not-for-profit, whereas BIPCo is a private, for-profit company, and different methods of determining revenue needs are used for each. In the end, it was decided not to ask for a further extension and to forge ahead with the August first filing.
On June 13, the BIPCo Board held a rate design workshop that was open to the general public, to begin a conversation on what a new rate design might look like. Three out of five members of the Utility Board of Commissioners were in attendance, but no one from the “general public” showed up.
The discussion was joined via telephone by rate consultant Richard LaCapra and accountant David Bebyn.
The first item on the agenda was an overview of the existing rate structure, which includes four rate classes: residential service, general service, demand-metered general service, and public authority service.
Within each of these rates is a flat monthly customer service charge and a “plant and distribution charge” calculated on a per kilowatt hour of electricity used. Currently, the plant distribution charge is at least twice as high per kwh in the four summer months of June, July, August, and September, than it is during the other eight months of the year.
Within the general service and residential rates, there is also a flat monthly “system charge” administered during the summer months when, and if, that customer uses more than twice the average electricity in the summer months than they do for the other eight months averaged together.
Any customer that uses more than 20,000 kwh per year is bumped from either the residential or general service rate into the demand-metered rate. A customer also gets bumped into the demand rate if they use in excess of eight kilowatts during any fifteen minute interval.
BIPCo’s current revenues are approximately $2.7 million per year and it delivers approximately 11 million kwh of service. Exclusive of the monthly customer charge, 55 percent of revenues are presently from demand-metered customers, 27 percent from residential customers, and 15 percent from general service customers. As LaCapra said at the meeting; “It’s a pot of money that needs to be collected.”
How to re-jigger that pot is the question at hand, and there can be arguments for and against any proposals. As BIPCo President Jeffery Wright said: “There will be winners and losers.” Both the system charge and the residential demand-service charges are particularly unpopular.
The biggest change being proposed is to the winter versus summer rates. “Looking at the information to this point, four months is too long a period,” for the higher summer rates, said LaCapra. Saying that there was a “very sharp peak” in the months of July and August, he suggested adding a “shoulder season” as there are essentially, “three different and distinct” periods of usage. The shoulder season would include the months of May, June, September and October.
LaCapra suggested that the rates for November through April could go down a bit with the shoulder season rates rising about 30 percent above the winter rate, and higher rates during July and August. No specific rates for the three periods were proposed.
Another suggestion, which didn’t garner much enthusiasm, mainly because of the potential for customers to game the system, was to go to a “block charge” whereby a lower rate would apply to the amount reflecting winter usage, and anything used in excess of that would come at a higher rate. For example, the first 250 kwh hours used in a summer month would be charged at one rate, and anything in excess of that would come at a higher rate. Under this scenario, the monthly customer charge would also rise.
Utility District Commissioner Everett Shorey wasn’t in favor of increasing the customer service-charge in general, saying that it punished those who “use electricity with an eye-dropper.”
But there are problems. Block Island’s peak usage occurs during the evening hours, when visitors come home from the beach, turn on air conditioning, take showers, go out to eat, or go out to a movie. Can some of that power usage be diverted to daytime hours?
“I have tenants that I can’t control,” said Shorey.
Higher time of use rates for say, hotels and restaurants didn’t seem practical as evening is when they do most of their business. Neither did offering lower rates for those who already use more electricity during low use time, such as the bank, the school, or town hall. “How do you incentivize and not penalize?” questioned Shorey.
“What would be the benefit of time of use for the island?” asked Utility District Chair Barbara MacMullan. Satisfying the PUC’s curiosity was not a sufficient reason to incorporate them, she felt.
Increasing electric use on Block Island would be beneficial to rates as fixed costs could be spread over more kilowatt hours used. Generally speaking, it goes against convention to advocate for more electric use however Wright pointed out that: “Conservation now can be defined by such things as switching from oil heat to electric heat, or electric hot water versus propane.”
Although some of the proposals may seem complicated, Wright said at the outset of the meeting that the goal was to simplify the rate design, and to avoid “rate shock.” Too many changes at once could also negatively impact cash flows in ways that may not have been anticipated, he said.
There will be further opportunities for rate payers to chime in on the subject as BIPCo will hold additional rate workshops in the coming weeks.