In Massachusetts, the Green Communities Act forces utilities to purchase electricity from renewable sources. The Associated Press wrote that "the cost of implementing the law will exceed $4 billion over the next four years." Guess who pays? The act has a stated goal, with noble intentions and zero chance of success, of "having 25 percent of electricity coming from renewables — including wind turbines, solar panels and biomass generators by 2030." On Nov. 9, Attorney General Martha Coakley said that the law's programs already show "escalating costs that will cause an increase in electricity rates," by roughly 7 percent.
“But it don’t look like rain
And if it snows that stretch down south,
Won’t ever stand the strain.”
— Glen Campbell, Wichita Lineman
Recently, on the Sunday political program OTR, in a rare moment of epiphany and not flinching from controversy, Gov. Deval Patrick asked, “How do we support utilities in getting power back?” Considering the latest wave of criticism directed at NStar in the wake of Tropical Storm Irene (Aug. 28) and the nor’easter (Oct. 29-30), the abbreviated question should be, “How do we support utilities?”
NStar, the Cape’s largest provider of power, exposed to the oscillations of nature’s fury, serves 1.4 million customers with 190,000 on the Cape and Vineyard. Locally, for the August storm it reported 1,040 locations causing outages (224 for the nor’easter); 155,000 customers with interrupted service (44,000 in October); and 1,229 calls about downed lines (just 443 last month).
At Barnstable High School on Nov. 10 – one of eight public hearings in the commonwealth – the state Department of Public Utilities (DPU) required NStar to respond to its response to Irene. The company disclosed that 500,000 customers overall lost power, half had it back in an hour and 97 percent had it restored within three days.
Such statistics offer an illuminating insight into, informs us about, a fragmented and frangible energy policy and exposes the lack of public consensus on a sensible, workable energy solution to an unforgiving public demanding ever more from a strained industry.
Utilities are unique corporate creations governed by the public (DPU) and many, like NStar, are owned by private investors, listed on stock exchanges. Because of a byzantine regulatory structure, utilities are hamstrung by politics and questionable public policy, let alone investor preferences.
In Massachusetts, the Green Communities Act forces utilities to purchase electricity from renewable sources. The Associated Press wrote that “the cost of implementing the law will exceed $4 billion over the next four years.” Guess who pays?
The act has a stated goal, with noble intentions and zero chance of success, of “having 25 percent of electricity coming from renewables – including wind turbines, solar panels and biomass generators by 2030.” On Nov. 9, Attorney General Martha Coakley said that the law’s programs already show “escalating costs that will cause an increase in electricity rates,” by roughly 7 percent.
NStar is required to purchase 3 percent of its load by 2014 from long-term renewable contracts. Today, it reaches a 1.6 percent threshold by buying power from wind farms in Maine, New Hampshire and Massachusetts.
With unintended irony, the act may have inspired Cape Wind to demand that half its unsold power (at substantially higher rates) be purchased by NStar as a condition to its consummating a merger with Northeast Utilities. The utilities believe that DPU “lacks authority to require wind power purchase” as sought by Cape Wind, according to Commonwealth magazine.
NStar has not raised rates since 2005. Yet costs escalate.
Irene? $30 million in its footprint, which will be borne by customers over 15-20 years as the DPU determines how costs are absorbed and deferred over time. Burying lines underground? That cost, as estimated by Edison Electric Institute, is between $1 million and $20 million per mile. NStar has 2,100 miles of primary distribution lines on the Cape alone. Who is prepared to pay for that? And tree trimming? Read on.
How many understand that between two telephone poles, NStar may own the electrical wires and may share real estate with Comcast and that the two poles may be owned by Verizon? This puzzling predicament occurs from town to town and complicates efforts during outages.
The policies enumerated by the Green Communities Act, DPU and high-minded politicians create a diminution of choices and allow fewer incentives for NStar and other utilities serving the commonwealth as to where to invest limited resources towards maintaining and upgrading an already fragile system, which should be the sole priority.
Many of the prescriptions today create artificial and unnecessary costs to the consumer, if not diverted attention of the providers.
It should also demonstrate, for those giddy with the prospects of green energy alternatives and those aligned with the continued promise of fossil fuels, that there is a cost to all energy and it is escalating. It also means making hard choices.
This paper opined on Nov. 11 “Trim but don’t butcher” with regard to Orleans approving a request by NStar to trim trees (it must obtain approval from town to town and occasionally property owners) and work with tree wardens. But people like their trees. Choices … prepare for the next storm.
James P. Freeman of Orleans is a financial services professional.
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