Suppose the electric company offered you a rate cut. Would you answer…

• “Yes, I’ll take it”, or
• “No thank you, I’d prefer that my rates be stable instead of low”.

Bill Harsch, candidate for Rhode Island Attorney General, wants you to know that this question is not a hypothetical one, because the State of Rhode Island has determined that people prefer “stable” rates to low rates and no one is advocating otherwise.
In mid-2005, National Grid was making a Standard Offer of 6.2¢ per-kilowatt-hour (kWh) of electricity to its customers. Because of rising fuel costs, National Grid determined that a rate increase was necessary, made the appropriate filings, and received permission from the Public Utilities Commission to raise rates to 10.0¢ per-kWh beginning January 1, 2006.
National Grid and the PUC, however, overestimated how much fuel costs would rise. By the end of March 2006, it was obvious that millions of dollars more were being collected from customers each month than was needed to pay for electricity. To reconcile the overcharges, National Grid asked the Rhode Island Public Utilities Commission on March 31 of this year for permission to lower its rates.
On your behalf, the Public Utilities Commission initially answered don’t bother — keep your rates high if you want.
Here are the details. On March 31, National Grid sent a letter to the Public Utilities Commission stating that the utility expected to collect $31,900,000 more from ratepayers by the end of 2006 than was needed to cover costs and that the Standard Offer to electricity customers should be reduced from 10.0¢ to 9.4¢ per-kWh to reconcile the overcharges. But before the PUC took any action, National Grid revised its estimate. In an April 21 letter, National Grid said, due to changes in fuel costs, they had revised their year-end overcharge projection to $14,600,000 and that a reconciliation would only require dropping the Standard Offer to 9.7¢ per kWh.
Four days later, the Public Utilities Commission — without holding any public hearings dedicated to the subject — issued a recommendation in response to National Grid’s filing. The PUC’s recommendation was that no reduction in electricity rates occur, despite the projected overcharges. The PUC based its decision on a doctrine of price stability…

If price stability is the objective, then a prudent course of action may be to defer any action on the standard offer price at this time and continue to monitor the fuel markets and their effect on the underlying cost to serve the standard offer customer base. Another month or so of market information would be helpful in assessing what type of rate effects might occur in 2007 from a price reduction in 2006.

However, on May 31, National Grid revised upward its estimate of how badly it was overcharging its customers. Now, National Grid projected that, if rates were held constant, $48,400,000 more would be collected from ratepayers by the end of 2006 than would spent on electricity. But despite the fact that the projected over-charges to Rhode Island customers were 50% higher than in their March estimate, National Grid now parroted the PUC line, withdrawing its rate lowering request and declaring that the price changes were too difficult to follow, so rates should just be kept high, regardless of actual costs…

The Company believes that, given the difficulty of predicting the reconciliation balance with a reasonable degree of accuracy by more than two or three months, the best course of action at this time is to maintain a stable Standard Offer Service rate at the current level. We will continue to monitor fuel prices and their affect on both the projected and actual Standard Offer reconciliation balance.

Eventually, in June, in light of the electricity overcharges now averaging $100 per-ratepaying household (and because, I suspect, of the attention being brought to the problem by Bill Harsch) the PUC recommended a modest lowering rates to 9.6¢ per kWh starting on July 1.
Mr. Harsch does not believe this to be sufficient…