Done with seasonal rates, utilities now look at freezing them

Vermont Business Magazine, Aug 01, 2002 by Marcel, Joyce

A few years ago, consumers' electric bills were about as stable as seesaws: in the winter they went up, in the summer they went down, and every year seemed to bring new requests for rate increases. Those practices may start to become a thing of the past.

Two years ago Central Vermont Public Service stopped its seasonal pricing; this year, Green Mountain Power did the same. And CVPS is now hoping to institute a four-year rate freeze by keeping its costs down and its efficiency up.

"Our goal is to not just to freeze the rates until the beginning of 2006, but to not file for a rate increase before then," said spokesman Steve Costello. "Since it takes about eight months after filing to get an increase, we're talking about late in 2006."

This does not mean that all of Vermont's power companies is actively working to freeze their rates. Last month, for example, Citizens Communications Company received permission from the Public Service Board to increase its retail rates by $4.8 million, or 17.45 percent. And GMP, the state's second largest power company, is not talking yet about a rate freeze. But CVPS is determined, even though the company recognizes that it will not be easy.

"It's going to be a stretch," Costello said. "We're really trying to find savings anywhere we can, and use them to offset the increasing costs we see for health insurance, taxes, etc. And it's not a given that we can do this, by any stretch of the imagination."

There is an altruistic reason behind the rate freeze, Costello said. CVPS wants to keep Vermont competitive.

"When we talk with our customers, whether it's informally or in a more formal way, through customer surveys, we hear two things," Costello said. "People are extremely satisfied with the quality of service and its reliability. The one concern is cost. So we're trying to continue to provide the level of service customers want, and expand and improve it, but to meet the other goal of making rates as competitive as we can."

Vermont, right now, has the fifth-highest power rates in New England, Costello said.

"It helps keep jobs here, and it helps in economic development efforts," Costello said. "CVPS has got roughly a dozen companies who have special contracts, contracts designed to bring them here or keep them here when they were considering leaving."

Husky, for example, would not have come to Vermont if it was not for CVPS's efforts to provide them with competitive electricity rates, Costello said.

"As approved by the Public Service Board, they get a discount service rate for up to four years," he said. "If you're creating new jobs, this kind of a discount can be available to large industrial customers. Any cost savings we can achieve helps Vermont remain more competitive, which is critical and keeps money in the customer's pocket."

Seasonal Rates

The theory behind seasonal rates was that it costs more to produce electricity in the winter. That is no longer true, said GMP president Chris Dutton, explaining why his company has ended seasonal rate changes.

"In fact, what happened was that for GMP, our summer peak had just about caught up with the winter peak," Dutton said. "So it didn't cost us any more to service customers. Then, driving that point home, when the markets deregulated at the wholesale level in 1999, pricing in July and August turned out to be the highest."

For this s ummer, at least, the power companies are in good shape. In the past three or four years, an extra 5,000 megawatts of generating capacity has come on line in New England, mostly from Maine, and the slowdown in the economy, has slowed the growth in power demand. So power shortages-and price hikes-are not expected, no matter how high the temperatures.