April 14, 2017

OCC: Brace for electricity rate increases


Higher "capacity" prices are likely to push retail electricity rates upward starting in July, the Office of Consumer Counsel said this week.

Rate increases could continue for the next two years, before starting to subside in mid-2019, OCC said.

New England's grid operator, ISO-New England, pays power plants that promise to be available to provide power in the future.

Those capacity payments - set through competitive auctions held by ISO-NE each February - are a way to ensure the grid will be able to meet future electric demand from consumers and businesses.

Capacity prices are a component of the generation charge on ratepayer bills. But OCC said capacity currently accounts for 7 percent, or $10, of the average residential ratepayer's bill, which it estimates will climb to 15 percent come July, when new standard service rates take effect.

Those rates change twice a year, and it's not yet certain that ratepayers will see an overall rate increase this summer. Bills also include charges for transmission and distribution. The Public Utilities Regulatory Authority typically announces summer rates in early May.

Those rates, which will be in effect through the end of the year, will factor in ISO's 2014 capacity auction prices.

Next summer, OCC estimates capacity payments will rise to 20 percent, or $28, of the average electric bill, based on 2015 ISO capacity auction prices.

In 2019, OCC said capacity charges will drop back down to 2017 levels, with another drop anticipated in 2020, which will be based on the Feb. 2017 capacity auction.

This year's auction resulted in relatively low prices due to flat demand and other factors, OCC said.

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