9.2.2000 00:12 Electric, gas rates rising fast Customers of Narragansett Electric will see a 4-percent increase immediately -- and possibly another 10 percent next month -- while Valley Resources boosts gas rates 32 percent.

By BOB WYSS Journal Staff Writer

PROVIDENCE -- The state Public Utilities Commission yesterday reversed a stand it made three days ago and approved an immediate rate increase of 4 percent for Narragansett Electric's 460,000 customers.

The decision came after Narragansett Electric filed a plan yesterday morning that would hike rates another 10 percent by Oct. 1 in addition to the increase that was ratified yesterday.

Under the approved 4-percent rate hike, monthly costs for a typical residental customer using 500 kilowatt-hours will increase from $53.67 to $55.75. If the proposed 10-percent rate plan is approved, the monthly cost would rise to about $61.50.

In a second, unanimous vote, the PUC approved a 32-percent rate increase that began yesterday for the 63,000 natural gas customers of Valley Resources.

More rate shocks are on their way.

Valley Resources warned the PUC that natural gas prices are rising so rapidly that yesterday's approved increase might not be enough. Providence Gas next Wednesday will begin discussing with the PUC how much it will have to hike its rates. And Massachusetts Electric, which represents customers in Southeastern Massachusetts, yesterday proposed a 12.3-percent increase to begin Oct. 1.

Skyrocketing oil and natural gas prices are driving the increases.

"It's medicine," said Commissioner Kate Racine of the utility rate hikes. "It's certainly not something anyone wants to take."

Narragansett Electric's prices have already risen 8.8 percent since May 1 and could be up to nearly 19 percent by Oct. 1.

Almost all of the increases are related to the price Narragansett charges for electric generation, called the standard offer. The charge had been 4.1 cents a kilowatt-hour and Narragansett had proposed raising it to 4.5 cents a kilowatt-hour.

At the close of a public hearing Tuesday, PUC Chairman Elia Germani moved to approve the increase, but neither of the two other commissioners, Racine or Brenda Gaynor, would second the motion. Both said they were upset because it was obvious that the proposed increase was inadequate to cover Narragansett's costs. They said they wanted a more comprehensive plan, which they acknowledged would be more costly for consumers.

Yesterday Narragansett complied. The utility proposed raising the standard offer price on Oct. 1 to 5.6 cents a kilowatt-hour.

It said that would be adequate to cover both mounting fuel and other costs. Without the increase, the potential deficit had been projected to be $112 million by next August.

The commission is expected to have public hearings on the request this month.

With the Narragansett plan filed, both Racine and Gaynor yesterday said they were prepared to vote on the plan to increase the rate to 4.5 cents a kilowatt-hour.

"That's what I wanted to know -- what do the people owe and when do they owe it," Racine said. "I think it tells people that the rates are going to increase."

"Yes, it will raise rates," she continued. "But people have to realize that they have had rates for a long time that were much lower. Of course you do not want to raise rates, but you have to cover your costs."

Prices have been down significantly since December 1997 when a typical residential customer of Narragansett was paying $61.93 a month.

Customers of the former Blackstone Valley Electric and Newport Electric pay slightly different rates even though they are now part of Narragansett Electric. (Only customers in a portion of Burrillville and Block Island are now not part of Narragansett.)

Here's the breakdown for a typical residential customer of the Blackstone district: $62.25 in December 1997; $57.20 before yesterday's increase; $59.28 today; and about $65 proposed Oct. 1.

For the Newport district: $63.61 in December 1997; $57.19 before yesterday's increase; $59.27 today; and about $65 proposed Oct. 1.

"Until we got this plan before us," added Gaynor, "we did not know what the full costs would be for the next 6 to 12 months. We can now tell the people of the state here is where we are going."

The proposal by Massachusetts Electric mirrored elements of the Narragansett proposal. It wants to raise the standard offer from 3.8 cents a kilowatt-hour to 5 cents a kilowatt-hour. A typical residential customer's bill would increase $5.97 a month.

Oil and natural gas are the fuels for slightly more than one-third of New England's electric generation. Prices have been on a roll. Natural gas prices this week rose to $4.865 per million British thermal units, a record in 10 years of trading on the New York Mercantile Exchange. Crude oil prices rose 21 percent in August and were trading yesterday near $32 a barrel.

Those prices also mean trouble for customers of Valley Resources, whose rate increase affects Valley Gas in Northern Rhode Island and Bristol & Warren Gas Co. in the East Bay region.

Rates vary for different customers, but a typical heating customer who now pays $798 a year would pay $925, a 15-percent increase.

The impact on industrial customers could be far greater. Racine said that during the hearings representatives of Osram Sylvania, of Central Falls, said the increase would cost the company an additional $440,000 a year.

Racine said she is especially worried about the impact the rising natural gas prices will have on the Rhode Island economy and employment. She said she is urging the gas utilities and affected customers to write to the Clinton administration and Congress urging that they take steps to alleviate the problem.

"I'm very worried and concerned," she said. Racine said she did not want to alarm people but they should consider setting money aside for higher fuel bills this winter and conserving energy whenever possible.

Gaynor said that gas companies must become more aggressive in searching out the best deals for customers. The PUC might want to consider offering incentives and penalties to obtain better deals, she said.

"We can't have them do business as usual and then come in with an apology" when prices come in high, she said.

The situation for the 160,000 customers of Providence Gas is even more grim. Three years ago the company locked into a rate plan which kept prices stable and, in comparison to where prices are now, inexpensive. But that contract with a gas supplier ends at the end of this month.

Market prices have been so volatile that Providence Gas has been reluctant to lock into any agreement. It has said it will be looking for guidance from the PUC on what type of deal to pursue

http://www.projo.com/cgi-bin/story.pl/news/04170022.htm

-- Martin Thompson (mthom1927@aol.com), September 02, 2000

Answers

It appears the New England utilities are in a tizzy - caught between rising prices and fixed contracts. This is truly a bad state - businesswise - to be in.

-- Wayward (wayward@webtv.net), September 02, 2000.

I don't think this is a problem isolated to New England. I think it's pretty much a problem spread out, evenly, throughout the country.

-- Billiver (billiver@aol.com), September 02, 2000.