July 4, 2013
Massachusetts

Cape Light Compact called a “rogue aggregation”

Written by James Kinsella | The Barnstable Patriot | July 4, 2013 | www.barnstablepatriot.com

A Cape Cod energy consultant has raised questions about millions of dollars of electricity charges paid by Cape and Vineyard consumers since 2002.

The consultant, Christopher Powicki, also has questioned financial transfers between Cape Light Compact, the Cape and Vineyard Electric Cooperative Inc., and Consolidated Edison Solutions.

The Compact’s administrator, Maggie Downey, has responded that the electricity charges and financial transfers faulted by Powicki were proper.

Downey, who also serves as the county’s assistant administrator, said the statements made by Powicki are baseless and inaccurate.

She characterized written testimony submitted by Powicki to the Barnstable County Assembly of Delegates as a “30-page diatribe.”

Powicki, the principal of Water Energy & Ecology Information Services in Brewster, raised the questions in testimony submitted last month to the Barnstable County Assembly of Delegates. He spoke and also submitted written testimony at the June 19 Assembly meeting.

Cape Light Compact was formed in 1997 to advance the interests of consumers in the then-newly restructured electric industry.

According to the Compact, the organization seeks to offer services including competitive electricity rates and proven energy efficiency programs.

Barnstable and Dukes counties and the 21 towns on the Cape and Vineyard are members of the Compact, which provides services to more than 200,000 consumers.

Once the Compact was approved as a municipal aggregation, Powicki said, it became the de facto electricity supplier on the Cape and Vineyard, replacing the commercial NStar utility for all classes of consumers. He stated that most Cape and Vineyard residents obtain their electricity through the Compact.
“Mill Charge” Disputed

A key part of Powicki’s testimony focused on a so-called “mill charge” included in the electricity bill paid by Cape Light Compact customers.

A mill is 1/10th of one cent. According to Powicki, the Compact, save for a nine-month period in 2006, has collected a charge of either a mill or half a mill per kilowatt/hour since 2002.

Powicki contends that the charge was “improperly imposed on ratepayers and then applied to do unauthorized things.

“This seemingly innocuous charge creates opportunity for mischief in contracts where prices are tracked to the 1/1000th of a cent and where a 1-mill/kilowatt/hour adder generates revenues that add up quickly given the (more than) 1 billion kilowatt/hours purchased through the CLC supply program each year,” he stated in his testimony.

He estimates that the charge has cost Cape and Vineyard consumers up to about $8 million over the past 11 years.

Downey replies that the charge was properly put into place and adjusted over time by the Compact.

Powicki stated that Cape Light Compact’s original 2000 aggregation plan to provide energy at a savings for consumers provided for an “administrative fund” charge only if requested by the Compact on behalf of participating municipalities and if approved by state regulators.

According to the plan, Powicki stated, any such charge was capped at three-tenths of a mill for every kilowatt/hour.

Downey, however, said the Compact had the leeway from the outset to assess consumers up to one mill for the charge on every kilowatt/hour they used.

She said the aggregation plan, which was approved by regulators, provided a template for such a charge.

Powicki states that the Compact proceeded to authorize its electricity supplier to collect one mill for every kilowatt/hour for an eight-month pilot project in 2002.

State regulators approved the mill charge, which was included in a 2002 filing with the Department of Telecommunications & Energy.

Powicki holds – but Downey disputes – that the charge was imposed without a public hearing process at the local or state level.

The consultant states that the state regulatory agency proceeded to grant extensions of the pilot project (which included the mill charge) through January 2005.

In 2004, Powicki states, the Compact submitted a petition for a full-scale electricity supply program that required the power supplier to collect a mill per kilowatt/hour from consumers for the duration of the program.

In that filing, Powicki stated, Barnstable County – which he said effectively was Downey – could release the supplier from the obligation to collect the mill charge. The county is the Compact’s fiscal agent.

The petition also allowed the Compact to use the mill-charge funds to be expended for any purpose allowable by law.

The consultant said the Compact informed state regulators that there was no change in the Compact’s funding mechanism from the initial 2000 plan approved by regulators.

Given that assurance, Powicki stated, and with the requirement that the plan could be implemented only if the Compact offered a lower price than the standard service commercial offer, the regulators approved the plan.

The consultant states that the Compact negotiated an agreement with its supplier, Consolidated Edison Solutions, that beat the price offered by NStar, the local commercial supplier, by 1/1000th of a cent per kilowatt/hour.

Under the Compact’s original 2000 aggregation plan, Powicki states, the organization was allowed to collect ratepayer money only “in very limited amounts, with full public disclosure, and only to support the administration of its power supply on behalf of consumers, only if funding from Barnstable County were not available, and only after a dedicated public process concluding in an affirmative vote by representatives of individual communities.”

At present, Powicki states, the Compact “can impose mill charges in any amount, at the whim of Ms. Downey, with no public hearing, input, or scrutiny; and ratepayer funds may be used for any purpose whatsoever, regardless of whether or not Barnstable County funding exists or consumers derive direct benefit.”
“A Rogue Aggregation”

Further, he states that the Compact’s authority to operate under the 2004 regulatory decision expired at the end of 2005, “formally launching CLC as a rogue aggregation.”

But Downey states regulators in their 2004 decision imposed no requirement on the Compact to submit future electric supply agreements for review and approval.

In addition, she states, after the end of standard-offer electric service in Massachusetts, there was no longer a statutory price benchmark to govern the provision of power supply under a municipal aggregation program.

“As a courtesy, since the original approval order in 2004, the Compact has filed with [state regulators] copies of all of its electric supply agreements, all of which were substantially similar in form to the agreement approved” by the regulators in the 2004 decision, Downey states.

“The DPU never determined that a formal proceeding was necessary to review the agreements, despite having these agreements on file,” she states.

Downey said the Compact sent its 2010 electric supply agreement to state regulators as a courtesy.

As for the mill charges, Downey said that they are part of the Compact’s annual budget, which is available for public review. She said not one member of the public addressed the Compact governing board in open meetings this year on the budget.

Powicki also has questioned aspects of the relationship between the Compact and Consolidated Edison Solutions.

In January 2006, Powicki stated, Ms. Downey signed a new power supply contract with Consolidated Edison worth in excess of $150 million without seeking prior approval of state regulators.

The contract required Consolidated Edison to collect a half-mill charge per kilowatt/hour from Compact consumers to be deposited in a Compact reserve fund.

In February 2006, Powicki stated, Downey outlined a plan to the Compact’s governing board to apply for a $500,000 grant from Consolidated Edison to help Compact energy efficiency programs.

Consolidated Edison eventually transferred $520,000 to the Compact, according to Powicki.

The consultant states that no mill charge revenue was deposited in its designated reserve fund from January through September 2006, although $520,000 from Consolidated Edison was deposited for “wind energy” and “efficiency.”

In October 2006, he states, mill-charge money began to be deposited in the reserve fund.
Compact-Con Ed Quid Pro Quo?

Powicki states the $520,000 later was transferred from the Compact to Cape and Vineyard Electric Cooperative Inc. He stated that the grant largely was used to conduct complex Consolidated Edison-Compact-CVEC contracts for solar projects.

Downey said there was no connection, let alone a quid pro quo, between the signing of the contract agreement with Consolidated Edison and the Compact’s receipt of the grant.

CVEC was formed in 2007 following a strategic planning process commissioned by the Compact. The intent was to stabilize future electric rates through municipally owned renewable energy generation.

State law allows cooperatives such as CVEC to develop and own electric generation projects and enter into long-term power purchase agreements.

In his written testimony to the Assembly, Powicki called for the state to conduct a forensic audit of the Compact and CVEC, and to suspend the Compact’s electric supply program and its collection of the mill charge.

Downey said Powicki’s assertions call into question not only the operations of the Compact, but that of the Barnstable County finance department and the decisions made by past Barnstable County assemblies of delegates, who signed off on Compact budgets.