Here is the update on the Attorney General’s response, essentially recommending that the program be extended only until April 2017 (4 months) at $700,000 with a cost cap to minimize confusion over multiple rates changes. ($700,000 still seems like a lot of money to me)
PAGE 1; On September 27, 2016, the Department issued a Notice of Filing and Public Hearing and Procedural Conference. On October 20, 2016, the Department held a public hearing and procedural conference. A final procedural schedule has not yet been established for this proceeding. Since the Company’s filing of its Petition, the Attorney General’s Office (“AGO”), has issued one set of discovery questions. Additionally, the Department has received 17 sets of comments from interested parties, all of which oppose the extension of the Pilot due to concerns regarding cost overruns during the initial Pilot term and the health effects of the Pilot.
PAGE 2 According to the Company, if the Pilot and Smart Pricing rates end on December 31, 2016, customers will have to be switched back to standard Basic Service rates, and if the Smart Pricing rates are thereafter extended, customers will be placed back on Smart Pricing. Motion, p. 1. The Company states that multiple rate switches within a short timeframe are likely to cause customer dissatisfaction and confusion. Motion, pp. 1-2. The Department should deny the Motion, as proposed, because the Company has already far exceeded its Pilot budget as approved in D.P.U. 11-129.
The AGO does not object to extending the Company’s Smart Pricing rates on an interim basis to help minimize customer confusion. 2 However, given that there has been no opportunity to fully review the Company’s proposed Pilot extension, certain safeguards must be put in place to contain Company spending. Specifically, the Department should establish a set end date for the interim extension and a set a cost cap on the additional program costs incurred during the interim extension period. Moreover, to the extent the Department decides to allow interim approval, it should do so only for the Company’s Basic Service Tariff, M.D.P.U. No. 1296.
PAGE 4 In the Company’s latest Pilot cost recovery docket, D.P.U. 16-28, the Company recognized this budget and stated that its current forecast, including operation and maintenance (“O&M”), capital and cost of removal is $60,393,000. Massachusetts Electric Company and Nantucket Electric Company, each d/b/a National Grid, D.P.U. 16-28, Exh. AG-1-13. This amount is $14,593,000, or 31.9% above the Department-approved budget amount. Department approval of an interim extension of the Pilot as proposed, with no cost control measures incorporated, may result in additional cost overruns to be borne by the Company’s ratepayers. The Company has not provided any information, either in its Motion for interim approval or in its Pilot extension proposal generally, regarding its ability to control costs. In light of the fact that the Company has already far exceeded the original Pilot budget, the Company should only be allowed to continue the Pilot on an interim basis if the Department imposes some cost control measures.
PAGE 5 In order to limit the costs associated with an interim extension of the Pilot, while still allowing sufficient time for a full adjudicatory proceeding in this matter, the AGO proposes that a set end date be established for the Company’s interim extension. The Company is requesting approval of a revised Tariff for Basic Service, M.D.P.U. No. 1296 (replacing M.D.P.U. No. 1250), in this docket in order to continue its Smart Pricing as set forth in Section 8 of its current Tariff for Basic Service.4 Given that the Company’s next Basic Service rates will go into effect on May 1, 2017, April 30, 2017 is a logical end date.5 A four-month extension is more than sufficient ameliorate customer confusion concerns while the issues in D.P.U. 16-149 are fully reviewed and the Department issues its final order.
PAGE 6 In order to further control additional cost overruns associated with the Pilot, the AGO strongly urges the Department to place a cost cap on the costs that may be incurred during any interim extension period. The Company’s estimated budget for its two-year Pilot extension, representing the estimated O&M post Pilot expenses, is $2,035,000 per year. Exh. WFJ-2. As stated above, the AGO does not oppose a limited, four-month interim extension of the Pilot, which would represent roughly one third of a year. Given this timeframe for an interim extension, a reasonable cost cap could be calculated by taking the Company’s proposed $2,035,000 annual budget for the Pilot and multiplying that by one third. This would result in an approximate rounded four-month budget of $700,000. As noted above, the Company has already greatly exceeded its Department-approved budget for the original Pilot. In order to prevent further overruns of the Company’s original Pilot budget, the AGO proposes a cost cap on costs incurred during any approved interim Pilot extension of $700,000.