Jul 10 - Providence Journal

One thing is all but certain: when the Public Utilities Commission meets this afternoon, it will approve National Grid's request to sharply increase the rates customers pay for electricity and natural gas.

Chairman Elia Germani said yesterday that, in cases where a utility is simply passing on increases it pays for energy, the PUC's hands are all but tied. "I wish I had better news to give," he said.

National Grid is seeking a 21.7-percent increase in the rates it charges for electricity and a 10-percent increase in what it charges for natural gas. National Grid buys both of those from other companies and then distributes them to customers. The rate hike would cover the higher costs the company is paying. Electricity prices have risen sharply in recent months as the price of oil -- used to fire many power plants -- has spiraled upward. Natural gas prices have also risen sharply.

The combined increases would raise the average utility bill for a typical home heated by gas by almost $30 a month. The increase would be higher in winter months and lower in summer months.

National Grid, Rhode Island's dominant utility company, provides electricity to 477,000 customers in 38 communities and natural gas to about 245,000 customers in 33 communities.

In a filing with the PUC, Attorney General Patrick C. Lynch opposed the rate hikes, but noted, "We recognize that ... National Grid is essentially seeking to pass through the effect of spiraling fuel costs to the ratepayers, not increase profits for its shareholders and bonuses for its officers and managers."

Germani said that, under state statute, the commission can only decide three questions in cases where a utility is passing on its increased costs:

Did the utility make "prudent" decisions in buying the energy that led to the higher costs?

Are the numbers the utility cited in requesting the increase correct?

When will the increase take effect?

The question on the buying decisions has effectively already been answered.

Almost a decade ago, concerns had been raised about the way the company bought natural gas, relying too much on the spot market, where short-term volatility could cause prices to spike. As a result, the company instituted a gas-purchasing program that averaged out costs over the long run. The PUC approved that plan.

On the electric side, National Grid's wholesale contracts to buy electricity from companies that generate it was reviewed and approved by the Federal Energy Regulatory Commission, which regulates wholesale electricity sales under the federal Energy Policy Act of 2005.

That means government regulators signed off on the buying decisions for both natural gas and electricity. "It's almost ipso facto prudent," Germani said. "At that point, we must pass on the cost."

As for checking the numbers submitted by National Grid, the commission makes do with limited resources.

"We depend on their audited financial statements," Germani said.

He said that, in addition to the three commissioners, the commission has only six employees: two lawyers, two financial analysts, a clerk and an administrative support person -- and one of the lawyers is out on leave.

As utility rate questions depend more and more on broader economic conditions, Germani would like to get state approval to add a position for someone with a master's degree in economics. "We are the only commission in New England that doesn't have an economist on staff," he said.

The three commissioners come from varied backgrounds, but none has prior experience in utilities regulation.

Germani, a lawyer, joined the commission in 2000. He had been a partner in the now-defunct firm of Tillinghast Collins & Graham and had represented Blue Cross and Blue Shield of Rhode Island and Narragansett Electric Company, now owned by National Grid. He has been a member of the state Board of Governors for Higher Education and the Board of Regents for Elementary and Secondary Education. As chairman, his state salary is $110,045 a year.

Commissioner Robert B. Holbrook, a member of the East Greenwich Planning Board, joined the commission in 2003. He had a 26-year career with Old Stone Corporation, owner of the former Old Stone Bank, where he held several executive positions. He also served as chief financial officer of the Meeting Street, an agency serving special-needs children. He has served on the state Board of Elections and the East Greenwich School Committee and Town Council. As commissioner, his state salary is $93,818.

Commissioner Mary E. Bray, president of the Pawtucket City Council, joined the commission in 2005. She had been director of the Roman Catholic Diocese of Providence's Office of Community Services and Advocacy, business manager of the Holy Spirit Catholic Community in Central Falls and credit card operations manager for Rhode Island Hospital Trust Bank. As commissioner, her state salary is $93,480.

In cases such as the National Grid increase, the commissioners also rely on independent consultants hired by the state Department of Public Utilities and Carriers, a sister agency that shares in utilities regulation.

That leaves the commission to decide the timing of an increase.

"The real question we have before us is when are they permitted to collect it?" said Germani.

He echoed sentiments expressed by Commissioner Holbrook at a hearing Tuesday that it doesn't make much sense to delay an increase at a time when energy prices continue to climb. That just means a future increase will be even bigger.

He cited the rise of electricity rates during his tenure on the commission. When he started, they were 3.5 cents a kilowatt hour. They now are 9.3 cents. And National Grid wants to raise them to 12.5 cents -- nearly quadruple what they were eight years ago.

"I don't see any end to this very soon," he said, adding that it was wrenching listening to public testimony from people who already could not afford their utilities and had to choose between "pills, bills and food," as one person put it.

"The strain that's going to be on people," he said, pausing. "It's depressing, frankly."

pparker@projo.com / (401) 277-7360

Originally published by Paul Edward Parker, Journal Staff Writer.

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