COMMONWEALTH OF MASSACHUSETTSDEPARTMENT OF PUBLIC UTILITIES

RE: Massachusetts Electric Company andNantucket Electric Company D.P.U. 15-155each d/b/a National Grid –Increase in Base Distribution Rates

Initial Brief of the Low-Income Weatherization and Fuel Assistance Program Network

Charles Harak, Esq.National Consumer Law Center7 Winthrop Sq. 4th floorBoston, MA 02110617 542-8010charak@nclc.org

Jerrold Oppenheim, Esq.57 Middle St.Gloucester, MA 01930978 283-0897JerroldOpp@DemocracyAndRegulation.com

Jenifer Bosco, Esq.National Consumer Law Center7 Winthrop Sq. 4th floorBoston, MA 02110617 542-8010jbosco@nclc.org

DATE: June 17, 2016

TABLE OF CONTENTS

I. Introduction and Summary of Argument 1

II. The Company Should Be Required to Investigate Why Its AMP Enrollment is Low, and Report Back to the Department 3

III. The Department Should Continue Allowing Reconciling Cost Recovery of the Costs of the Company’s AMP 6

A. Department Orders Regarding AMP and RAAF 6

B. Record Evidence Supports Continuation of the Fully-Reconciling Mechanism for the AMP 9

IV. The Department Should Reject the Company’s Customer Charge Proposals, Which Would Disproportionately Burden Low-income Households 11

A. Burden on Low-income Customers 14

B. Energy Efficiency and Renewable Energy Disincentive 15

C. The Commission Should Approve Rate Designs Consistent with State Energy Efficiency and Renewable Energy Policies 16

V. In accordance with G.L. Ch. 164, § 141, the Department Should Make “A Fully Compensating Adjustment . . . to the Low-income Rate Discount” Reflecting the Impact of On-Site Generation on Low-income Bills 17

A. The “Scale of On-site Generation” 19

B. Affordability 21

C. Fully Compensating Adjustment 22

D. The Company’s Alternative Proposal Does Not Comply With Section 141 24

VI. Conclusion 25

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TABLE OF AUTHORITIES

I. MASSACHUSETTS GENERAL LAWSG.L. c. 25, § 19(c) 2G.L. c. 25A, §§ 3, 11F, 15 19,n.65G.L. c. 164, § 141 and “Section 141” 3, 17, 18, 19,

22,n.78; 23-25G.L. c. 164, § 1F(4) 17,n.59G.L. c. 164, § 1G 19, n.65

II. MASSACHUSETTS CASESKain v. Department of Environmental Protection,

474 Mass. 278 (2016) 17,n.57Meikle v. Nurse, 474 Mass. 207 (2016) 23,n.79Malloch v. Town of Hanover, 472 Mass. 783 (2015) 23,n.79

III. MASSACHUSETTS SESSION LAWSAn Act Relative to Heating Energy Assistance and Tax Relief,

Acts of 2005, Ch. 140 5; 6,n.14Green Communities Act, Acts of 2008, Ch. 169 2; 15,n.50; 17Global Warming Solutions Act, Acts of 2008, Ch. 298 15, 17An Act Relative to Solar Energy, Acts of 2016, Ch. 75 17; 20,n.69

IV. CODE OF MASSACHUSETTS REGULATIONS 225 CMR § 14.05 19,n.65

V. DEPARTMENT ORDERSOrder, DTE 05-86 (Feb. 8, 2006) 4,n.9; 7; 8,n.22

Order Opening Investigation, DPU 08-4 (Feb. 12, 2008) 5Order, DPU 08-4, p. 4 (Sept. 15, 2008) passim

Massachusetts Electric Company, DPU 09-39 (Nov. 30, 2009) 12,n.34; 14,n.41; 16,n.52

Order Opening Investigation, DPU 11-120 (Nov. 29, 2011) 17,n.58

Fitchburg Gas & Electric Company, DPU 13-90 (May 13, 2014) 8,n.25

Fitchburg Gas & Electric Company, DPU 15-80/DPU 15-81(Apr. 29, 2016) 9,n.27

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I. Introduction and Summary of Argument

This is the Initial Brief of the Low-Income Weatherization and Fuel Assistance Program

Network (“the Network”) regarding the request of Massachusetts Electric Company and

Nantucket Electric Company (“Company”)1 to increase its base rates. In this brief, the Network

requests that the Department: (a) require the Company to review and report on its Arrearage

Management Program (“AMP”) activities as they affect AMP enrollment; (b) maintain periodic

reconciliation of the net costs of the Company's AMP; (c) deny the Company’s proposed

customer charge increases; and (d) order a fully compensating adjustment to the low-income

discount rate to account for incentives and subsidies for on-site generation.

On November 6, 2015, the Company petitioned the Department of Public Utilities

(“Department”) for an increase in base rates. In support of the request, the Company filed the

testimony of its Massachusetts President, Marcy Reed, along with testimony of numerous other

witnesses, comprising nine volumes in all. As noted in Ms. Reed’s initial testimony, the

Company then calculated a revenue deficiency of $142.9 million.2

On November 12, 2015, the Department suspended the rates proposed by the Company

until October 1, 2016.

The Network petitioned to intervene on November 17, 2016 and was granted full

intervenor status. As its petition notes, the Network’s member agencies deliver the low-income

weatherization and fuel assistance programs in all cities and towns throughout the

Commonwealth.3 The Network, through its member agencies, also implements utility-funded

low-income energy efficiency programs. As provided in G.L. c. 25, § 19(c) (most recently

revised by the Green Communities Act, Acts of 2008, Ch. 169, § 11):1 When referring to either Massachusetts Electric or Nantucket Electric specifically in this brief, rather than both collectively, we will use the company’s actual name. 2 Exh. NG-MLR-1, p. 5.3 Petition to Intervene, ¶¶ 4-5 (Nov. 17, 2016).

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The low-income residential demand side management and education programs shall be implemented through the low-income weatherization and fuel assistance program network and shall be coordinated with all electric and gas distribution companies in the commonwealth with the objective of standardizing implementation.

Members of the Network counsel low-income customers about rates and payment options, and

arrange rate payment assistance (including LIHEAP/fuel assistance, arrearage management, and

other forms of assistance) for the Company’s customers. Many of the Company’s customers,

especially those on the R-2 rate, have an especially difficult time paying their bills.4 Low-

income consumers have difficulty affording their energy bills due to generally increasing energy

prices and the still-recovering economy, which has caused their incomes to remain flat or even

fall.

The efficiency, weatherization, education, assistance, and counseling services the

Network and its members offer are affected by the charges imposed on low-income customers

by the Company’s rates. Low-income customers are more likely to require assistance as rates

and bills rise. Further, the services the Network offers are less likely to result in affordable

utility bills for its clients as rates and bills increase. As rates and bills rise, the Network will be

increasingly called upon to both secure other means of assistance with utility bills and to assist

clients who have had utility service terminated for non-payment.5

In this brief, the Network makes the following specific arguments:

1. Compared to the other Massachusetts utilities, the Company has a low rate of adding income-

eligible customers onto its Arrearage Management Program (AMP). The Company should

therefore be required to review all of its activities that may affect AMP enrollment and report

back to the Department within six months of any final order on steps taken to improve AMP

enrollment. The Company agreed during cross-examination that it should do so.

4 See Testimony of Network witness John Howat, Exh. LI-JH-1. 5 Petition to Intervene (Nov. 17, 2016).

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2. The Company should be allowed to continue recovering its AMP-related costs on a

reconciling basis. This is consistent with recent Department orders regarding how AMP costs

may be recovered. Allowing reconciling cost recovery best carries out the legislature’s intent in

requiring regulated companies to offer AMPs. The Company agrees that AMP costs should be

recovered on a reconciling basis.

3. The Department should reject the Company’s proposed customer charge increases. These

increases would disproportionately burden low-income households. In addition, for any ordered

level of revenue requirement, increasing customer charges result in decreasing volumetric (kWh)

charges, which reduces customer incentives to invest in energy efficiency and renewable energy,

and to control energy usage.

4. In accordance with the provisions of G.L. c. 164, § 141, “a fully compensating adjustment”

should “be made to the low-income rate discount” to reflect the impact of “on-site generation . . .

on affordability for low-income customers.”

Each of these arguments is fully laid out below.

II. The Company Should Be Required to Investigate Why Its AMP Enrollment is Low, and Report Back to the Department

Unrebutted Network evidence shows, and the Company agrees, that the Company enrolls

the smallest percentage of its customers in the AMP, compared to the other Massachusetts

regulated electric companies. The Company is agreeable to the Department ordering an

investigation of the causes of this gap.

The Network offered the testimony of Marina Levy6 to present facts compiled from

reports filed with the Department, demonstrating that Massachusetts Electric Company has the

6 Exh. LI-ML-1.

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lowest rate of enrollment on the AMP among the four major regulated electric companies.7 For

example, in November 2015, 2.93% of Massachusetts Electric’s low-income discount rate

customers were enrolled on the company’s AMP, whereas 17.85% of Eversource Electric’s low-

income discount rate customers were so enrolled.8 While Eversource has the highest enrollment

rate and the comparison therefore portrays the largest gap between Massachusetts Electric and

the other companies, other gaps are also significant. Western Massachusetts Electric Company

has consistently enrolled between 6% and 10% of its low-income discount rate customers on its

AMP, and Fitchburg Electric has enrolled between 3% and 8% during the period covered by Ms.

Levy’s analysis.9 While the enrollment gaps thus vary, Massachusetts Electric consistently has

the lowest AMP enrollment rate.10

No party questioned the accuracy of Ms. Levy’s data analysis; her testimony was

admitted into the record without any party cross-examining her. Moreover, in response to an

information request from the Network, the Company stated that “it recognizes its percentage of

customers enrolled in its Arrearage Management Plan is lower than that of the other

utilities . . .” 11

As Ms. Levy’s testimony shows, there are almost 175,000 residential Massachusetts

Electric customers on the low-income discount rate. Moreover, Massachusetts Electric compares

7 The four companies included in Ms. Levy’s analysis were Massachusetts Electric Company, Western Massachusetts Electric Company, Fitchburg Electric, and Eversource (East). For Ms. Levy’s comparative analysis purposes, Nantucket Electric was not included, given its very small size.8 Here, “Eversource Electric” data refers to the former NSTAR Electric territory in the eastern part of the state. Data for the Western Massachusetts Electric Company is reported separately.9 Exh. LI-ML-1, p. 6. Note that all of the companies use enrollment on the low-income discount rate as the main criterion for a customer demonstrating income eligibility for the AMP. See DTE 05-86, p. 4 (Feb. 28, 2006)(“Every company links income eligibility for the AMP with income eligibility for the discount rate. . . .”); Exh. IR LI 2-2 (answered March 4, 2016)(providing Company’s definition of “low-income customer” in context of monthly reports to Department).10 During the course of hearings, the Company provided updated AMP enrollment data. Between November 2015 and March 2016, AMP enrollment declined steadily from the 2.93% cited in Ms. Levy’s testimony to 2.37%. Rec. Req. LI-3.11 Exh. IR LI 2-2 (answered March 4, 2016).

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favorably to the other major regulated electric companies in terms of the percentage of

residential accounts on the low-income discount rate.12 This shows that there is a large number

of Massachusetts Electric households who are low-income and could likely benefit from being

on the AMP. It also implies that something is amiss in how Massachusetts Electric conducts

outreach and enrollment regarding the AMP.

The General Court places a high priority on regulated companies offering AMPs. In

Chapter 140, section 17 of the Acts of 2005, the legislature mandated that the “department shall

require each such company to file by December 30, 2005 an arrearage management program . . .”

The Department has underscored the value of increasing AMP enrollment. In its Order Opening

Investigation, DPU 08-4 (Feb. 12, 2008), the Department reviewed the then-extant AMP

enrollment rates – which ranged from less than one percent to five percent for all companies,

with the exception of Berkshire Gas which achieved a 15% enrollment rate – and concluded:

It is our goal and expectation that higher enrollment and more successful participation in AMPs will increase low-income consumers’ ability to pay their bills, and could reduce utility arrearages and the number of service terminations.13

Ms. Reed, the Company’s Massachusetts President, is aware that Massachusetts Electric

has the lowest AMP enrollment rate of the regulated electric companies. Tr. 85-86 (Vol. 1, May

2, 2016). The Company is completely agreeable to “determin[ing] why Mass. Electric is

enrolling a lower percentage on the arrearage management programs.” Tr. 86. Ms. Reed is

willing to have the Company engage in an effort to identify “what might be causing that lower

enrollment compared to other companies” and has no objection to the Department issuing an

“order regarding the investigation of that potential difference in outreach or whatever is causing

the difference [in enrollment rates].” Tr. 86.12 Exh. LI-ML-1, p. 5. As of November 2015, Massachusetts Electric had 173,962 accounts enrolled on the low-income rate, or 14.75% of all of its residential accounts. By comparison, Eversource Electric reported enrolling 8.91% of its customers on the discount rate as of November 2015.13 Order Opening Investigation, DPU 08-4, p. 6 (Feb. 12, 2008).

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Given the record that the Network has built through Ms. Levy’s testimony regarding the

disparate AMP enrollment rates, and the Company’s awareness of the problem, the Network asks

that the Department include in its final Order in this docket:

(1) a requirement that the Company investigate the causes of its low AMP enrollment,

including in that investigation representatives of the Network and any other interested

parties (such as the Office of the Attorney General); and

(2) a requirement that the Company file a report with the Department no later than six

months after a final Order issues detailing the results of its investigation and ameliorative

measures that have already been taken or that will be taken.

III. The Department Should Continue Allowing Reconciling Cost Recovery of the Costs of the Company’s AMP

A. Department Orders Regarding AMP and RAAF

As noted above, the General Court mandated that regulated utility companies offer AMPs

in 2005.14 The law “requires each gas and electric distribution company to establish an AMP to

offer low-income consumers with an arrearage an affordable payment plan with credits toward

their accumulated arrearages for compliance with the program.”15 AMPs thus give low-income

customers “an opportunity to have all or a portion of an arrearage forgiven,” in exchange for

keeping up with the current monthly charges.16

The Department has noted the importance of AMPs to low-income customers. It

underscored the value of “expansion of the AMPs” against “the backdrop of increasing energy

costs,” finding, in a 2008 decision:

It is more important than ever that the Commonwealth and its utility companies aggressively pursue opportunities to assist customers in managing energy costs and

14 Acts of 2005, Ch. 140, § 17(a). 15 DPU 08-4, p. 4 (Sept. 15, 2008).16 Id.

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provide flexibility for those who are struggling to meet payment obligations.17

The Department began implementation of AMPs in Standards for Arrearage Management

Programs, DTE 05-86 (Feb. 8, 2006). In 2008, the Department expanded AMPs with the goal

“to develop standard AMP payment plan features to increase program scope and benefit.”18

From the outset, the Department has made it clear that it wishes for AMPs to reach the broadest

feasible scope of eligible low-income customers. AMPs should also be designed to “increase[e]

the ability of low-income consumers with an arrearage to pay their bills.”19

Because the Department has supported AMP designs that are broad in scope and benefit,

it has thus been cognizant of the need to develop mechanisms that reasonably allow companies

to recover their AMP-related costs:

The Legislature has mandated that each gas and electric distribution company offer an AMP to eligible low-income ratepayers. In administering an AMP, a company may incur additional expenses directly related to its program (i.e., arrearage forgiveness costs). Similar to the recent Department-directed low-income discount computer matching program, companies may incur a decrease in revenues from the required implementation of new or expanded AMP. Low-Income Discount Participation Rate, D.T.E. 01-106-B (2004); D.T.E. 01-106-A (2004). It is appropriate to establish a mechanism for companies to recover incremental expenses directly related to an AMP because the decrease in revenues results from a legislative mandate. Id. at 9; D.T.E. 01-106-A, at 18-19.20

In its first decision addressing the issue of cost recovery, the Department concluded “that

it is appropriate to expand the RAAF21 to include incremental costs related to the AMP . . .22 The

Department confirmed this decision three years later: “the Department directs companies to

continue to recover costs associated with their low-income programs through their RAAF.” 23

17 DPU 08-4, pp. 5 -6 (Sept. 15, 2008).18 DPU 08-4, p. 2 (Sept. 15, 2008) (emphasis supplied).19 DPU 08-4, p. 6 (Sept. 15, 2008).20 DTE 05-86, pp. 10 – 11 (Feb. 28, 2006).21 Residential Assistance Adjustment Factor.22 DTE 05-86, p. 12 (Feb. 28, 2006). See also DPU 08-4, p. 23, n. 12 (Sept. 15, 2008)(“appropriate cost recovery mechanism for AMP expenses . . . was the Residential Assistance Adjustment Factor”).23 D.P.U. 08-4, p. 40.

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AMPs are one of the key tools the Department has “to address the challenging conditions

faced by low-income consumers.”24 With a limited and short-lived exception discussed below,

the Department has chosen to sharpen that tool by allowing fully reconciling recovery of AMP-

related costs. Without reconciliation, companies would potentially experience revenue shortfalls

if they expanded AMP enrollment – even though the Department has consistently supported

expanded enrollment – or increased the benefits afforded to each AMP enrollment.

Given that AMPs are legislatively mandated, the Department properly supports prudent

program expansion, rather than the goal of cost minimization that applies to many operational

expenses. Increased enrollment is seen as desirable. Reconciliation is provided in order to avoid

the regulatory lag that would otherwise discourage utilities from fully embracing the

Department’s policy goals.

There has been one notable exception to the Department allowing fully reconciling

recovery of AMP-related costs through the RAAF, a subsequently-reversed decision regarding

recovery of AMP costs by Fitchburg Gas & Electric.25

Fitchburg’s inability to recover AMP costs on a reconciling basis, as a result of the

decision in DPU 13-90, placed at risk its plan to double its per-customer AMP program

benefits.26 The Department reinstated full AMP reconciliation via the RAAF in the subsequent

Fitchburg rate case:

[T]he Department is now concerned that Unitil’s current cost recovery method, which limits cost recovery to a fixed amount, may distort incentives to implement program changes in line with the Department’s objectives to encourage increasing customer participation in the AMP (citations omitted).

24 DPU 08-4, p. 1 (Sept. 15, 2008).25 Fitchburg Gas & Electric Light Company, DPU 13-90, p. 26026 See Fitchburg Gas and Electric Light Company, DPU 14-AMP-04, Att. 1, Exh. CB-1, pp. 2-4 (Feb. 28, 2014) (witness Carole Beaulieu explains rationale for doubling maximum AMP annual write-off from $1,200 to $2,400 per customer).

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In addition, the Department recently approved continuation of a reconciling mechanism for NSTAR Gas’s AMP. D.P.U. 14-150, at 382-384. The Department also approved two settlement agreements recently that permitted continuation of the RAAF for Liberty Utilities (New England Natural Gas Company) Corp. (“Liberty Utilities”) and Bay State Gas Company. Liberty Utilities (New England Natural Gas Company) Corp., D.P.U. 15-75, at 8 (February 10, 2016); Bay State Gas Company, D.P.U. 15-50, at 10 (2015). [footnote omitted]. Reinstating the RAAF would allow the Company to standardize program changes and improvements in line with other electric and gas companies (Exh. LI 1-4 (electric)). Conversely, continuing the Company’s current electric division AMP cost recovery treatment may adversely affect Unitil’s ability to operate an AMP that aligns with Department objectives while maintaining competitiveness with industry peers (Tr. 2, at 87-88).

For these reasons, the Department finds that Unitil’s RAAF should be reinstated for the purpose of recovering AMP expenses on a fully reconciling basis.27

There is thus every reason to allow National Grid to continue using its fully-reconciling

AMP recovery mechanism, given these now well-established, consistent precedents.

B. Record Evidence Supports Continuation of the Fully-Reconciling Mechanism for the AMP

The record is clear that the conditions underlying the Department's foregoing precedents

remain, justifying a Department order in this case maintaining its policy of allowing a fully-

reconciling mechanism for National Grid’s recovery of AMP costs. For example, the Company

notes:

If AMP costs are recovered through base distribution rates without the ability to reconcile to actual costs, the Company could, based on the nature of enhancements or extensions to the AMP, be constrained in making those changes, as this incremental cost would not be eligible for recovery. Under the current recovery mechanism, the Company is allowed recovery of incremental costs of operating the AMP, subject to Department review and approval. Having the ability to recover such costs provides the Company greater flexibility in working with stakeholders in evaluating and agreeing on potential enhancements to the AMP.

Exh. IR LI 1-3 (b).

One of the key drivers of any company’s AMP costs is the number of customers it enrolls

27 Fitchburg Gas and Electric Light Company, DPU 15-80/DPU 15-81, pp. 244-245 (Apr. 29, 2016)

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on the AMPs. As Exh. IR LI 1-1 (attachment) shows, the number of National Grid’s AMP

customers has been highly variable, almost doubling between December 2010 (3,159 AMP

customers) and December 2011 (6,049), and trending upward significantly between December

2013 (3,283) and June 2015 (5,464). The total amount forgiven by the Company has also varied

from a low of $1.3 million in December 2010 to a high of $4.2 million in December 2012. The

number of customers on the low-income discount rate – the pool from which AMP customers is

drawn – has also been steadily increasing, from 118,173 in December 2010 to 166,805 in June

2015.28 Unlike almost all other operational costs, the Department does not have a policy of

keeping AMP costs as low as possible. The Company should be allowed to continue recovering

these highly variable costs on a reconciling basis.

The variability and uncertainty in the costs of running the AMP was fully demonstrated

during the Network’s cross-examination of the Pricing Panel witnesses:

A. [McCABE] The company -- we've indicated that it would be our preference to continue to collect the arrearage management program costs through the residential assistance adjustment factor, mainly for the reasons that those costs are beyond the company's control and there is some volatility in the costs, and collecting those costs through base rates might limit the company's ability to work with the appropriate folks to promote the low-income arrearage management program.29

After verifying the numbers quoted above from Exh. IR LI 1-1 (attachment), Mr. McCabe

also underscored one of the key benefits for low-income customers of being on the AMP – as

long as the customer is active on the AMP, the utility service cannot be terminated,

regardless of the size of the arrearage:

Q: Do you see that the total number of terminations of AMP customers for nonpayment is zero in every year? A. [McCABE] I do see that, yes.

28 All figures in this paragraph are drawn from Exh. IR LI 1-1 (attachment) and confirmed by Company witnesses. Tr. 972–976 (Vol. 7, May 12, 2016).29 Tr. 972-973 (Vol. 7, May 12, 2016).

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………………………Q. And do you see that for low-income customers not on AMP roughly some single-digit thousands of those customers are terminated annually? Is that correct?* * *A. [McCABE] Those numbers are all in the low thousands, yes, that's correct.30

The Network’s fundamental point is that building AMP cost recovery into base rates,

rather than via the RAAF or other reconciling mechanism, undermines the legislature’s and

Department’s goals for the AMP:

Q. … Could you turn to your response to Information Request LI-1-3. Is it fair to summarize that answer as stating that if AMP costs are built into base rates as an operating cost rather than through the RAAF, it might create a financial disincentive for the company to increase AMP enrollment?A. [McCABE] Yes.31

For all the reasons argued above, the Department should maintain its policy of allowing

periodic reconciliation of the costs of the Company's arrearage management program.

IV. The Department Should Reject the Company’s Customer Charge Proposals, Which Would Disproportionately Burden Low-income Households

The Company has proposed to increase the current level of monthly customer charges

included in the residential rates R-1 and R-2, in two steps. As discussed more fully below, the

Network urges the Department to reject the increases as they would be applied to low-income

customers on the R-2 rate,32 although the rationale for rejecting these proposed increases would

apply equally to the R-1 customer charge proposal.33

30 Tr. 976 (Vol. 7, May 12, 2016).31 Tr. 977 (Vol. 7, May 12, 2016).32 See Exh. IR DPU-LI 1-2 (Network witness Mr. Howat limits his recommendation to reject company’s Phase 1 and Phase 2 proposals “to R-2 customers.”) 33 As the Department is likely aware, many customers who income-qualify for the R-2 rate do not actually apply, and therefore are on the R-1 rate.

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Currently, customers on the R-1 and R-2 rate pay a monthly customer charge of $4.00.34

They additionally face inclining distribution charges of $0.04259 per kWh for usage up to 600

kWh per month and $0.04921 per kWh for usage over 600 kWh per month.35 In addition to

inclining distribution charges, residential customers pay a transmission charge, transition charge

(currently a negative amount or credit), energy efficiency charge and renewables charge.

The Company now proposes the following increases for R-1 and R-2 customers in Phase

1, which if approved would commence on October 1, 2016:

Increasing the monthly customer charge to $5.50, an increase of 37.5% from the current

$4 charge;

Replacing the inclining distribution charges of $0.04259 and $0.4921 with a flat

distribution charge of $0.05478 per kWh, a 28.9% increase for customers who use up to

600 kWh per month, and an 11.3% increase for larger volumes of usage above 600 kWh

per month.36

The Company proposes much sharper customer charge increases in Phase 2, which would

take effect six months after Phase 1 implementation:

Four tiers of monthly customer charges ranging from $6 to $20, depending on usage,

resulting in increases of up to 400% over current monthly customer charges;37

34 In Massachusetts Electric Company, DPU 09-39, p. 432 (Nov. 30, 2009), the Department rejected the Company’s proposal to increase the customer charge to $7.25, and instead set it at $4, noting: “Lowering the customer charge to $4.00 mitigates the percentage increase to the bill for low-use, low-income customers, which satisfies our continuity goal.” Id. For R-2 customers, a discount of 25% applies to the bill (Exh. NG-PP-18, p. 2 of 24), effectively reducing the $4 customer charge to $3, although, in practice, the discount is applied to the entire bill total, not to each portion separately.35 Exh. NG-PP-18, p. 2 of 24. 36 Exh. NG-PP-18, p. 2 of 24; Exh. NG-PP-21, pp. 1 & 2 of 3. 37 Exh. NG-PP-21, pp. 1 & 2 of 3.

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Reductions in the current distribution charges, resulting in a 1.8% reduction for the first

600 kWh of usage per month, and 15% reduction for larger volumes of additional usage

above 600 kWh per month.38

The Network opposes these customer charge increases as they run counter to the state’s

many policies and programs designed to promote energy efficiency and investments in

renewable energy. Moreover, shifting revenue to customer or fixed charges and away from

volumetric (kWh) distribution charges most burdens low-volume customers, who are

disproportionately low-income. The Network specifically urges the Department not to adopt the

Company’s proposals as they would apply to low-income customers on the R-2.39

As detailed in the testimony of John Howat on behalf of the Network, the Company’s

low-income customers on the R-2 rate already struggle to pay their utility bills along with other

basic living expenses, resulting in higher rates of arrearages and service disconnections for these

customers compared to customers on the R-1 rate.40 Considering both the Phase 1 and Phase 2

proposals, the Company is clearly headed in a direction of collecting a higher percentage of its

revenue requirement from fixed charges, and actually lowering the per kWh distribution charge,

as noted above (15% reduction in Phase 2 distribution charge for consumption above 600 kWh).

The Company’s proposed increases in monthly customer charges will burden low-income

consumers and create a disincentive to the adoption of energy efficiency measures and

distributed generation.

A. Burden on Low-income Customers

38 Exh. NG-PP-18, p. 2 of 24 and Exh. NG-PP-21, p. 2 of 3.39 While the Network’s primary focus is on low-income customers and, therefore, on the R-2 rate, many low-income customers fail to apply for R-2 and, by default, end up on the R-1 rate. 40 See John Howat testimony, Exh. LI-JH-1, pp. 4 – 12 for a thorough discussion of the problems low-income households face in trying to pay their energy bills.

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As the Department has noted when reviewing and approving changes to R-2 rates, “any

bill increase for low-income customers should not be taken lightly.”41 In particular, the

Department held that “lowering the customer charge to $4.00 mitigates the percentage increase

to the bill for low-use, low-income customers, which satisfies our continuity goal.”42 In order to

protect low-income consumers, including those on either the R-1 or R-2 rates, from unaffordable

rates and increased terminations, a review of rate design proposals should take into account the

differences between low-income households and higher-income customers. Low-income

ratepayers in Massachusetts tend to use less energy than higher income customers. The record

shows that low-income customers on the R-2 rate have median monthly usage of approximately

460 kWh43 while median usage for R-1 customers is slightly above 500 kWh per month.44 Thus,

R-2 households already have lower consumption. Yet increasing the customer charge while

decreasing the distribution charge, as the Company proposes, only signals that keeping usage

down is less valuable. It will also make it harder, going forward, for these customers to reduce

their total bills further, since marginal reductions in use will yield smaller bill savings,

particularly under the Phase 2 proposal.

The bill impacts of the Company’s proposals on customers using low to moderate

amounts of electricity are not trivial. A low-income household using 250 kWh monthly would

see a 17.7% increase under Phase 1 and an 18.8% increase under Phase 2. An R-2 customer

using an average of 460 kWh (median usage for that rate) per month would face an increase of

15.9% in Phase 1 and 25.3% in Phase 2.45 While percentage bill impacts decrease slightly for

41 Massachusetts Electric Company, DPU 09-39, p. 431 (Nov. 30, 2009).42 Id. p. 432.43 John Howat testimony, Exh. LI-JH-1, p. 14; Exh. IR LI-2-10-2 (“Cumulative Percent of Total Bills”).44 Exh. IR LI-2-10-1 (“Cumulative Percent of Total Bills”).45 John Howat testimony, Exh. LI-JH-1, p. 14 (“R-2 Bill Impacts”).

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those using an average of 760 kWh and 100 kWh per month,46 for a small segment of high-

volume R-2 customers, the Phase 2 impacts reach 60%.47

The proposed tiered customer charge structure also presents serious barriers for low-

income customers who try to avoid the higher end of those charges by keeping monthly usage

low. As the tier design has been proposed by the Company, a consumer would need to maintain

low usage for 12 consecutive months in order to move to a lower tier with lower customer

charges. Thus, just one month of usage in excess of the limit for that tier would move the

customer back into a higher tier with its higher customer charges.48 Further, this tiered approach

may not even achieve the goals set forth by the company, since tiers tend to be an inadequate

proxy for demand.49 Customers can be bumped into a higher tier based on a proxy (kWh

consumption over a 12-month period) that does not accurately correlate with the peak demands

that may drive costs up.

B. Energy Efficiency and Renewable Energy Disincentive

In addition to the economic burden that the Company’s proposal places on low-income

and low-use ratepayers, the proposal would create a rate structure that runs counter to state and

national energy efficiency and renewable energy goals.50 While the Company states that it

agrees with these goals,51 this shared concern is not fully reflected in the proposal. The

Department has previously stated that rate design should align with goals to promote energy

efficiency, and suggested that an inclining block rate structure, in which usage (not customer)

46 John Howat testimony, Exh. LI-JH-1, p. 14.47 Scott Rubin testimony, Exh. AG-SJR-1, p. 28 (“more than 1,000 low-income customers see their annual bills increase by more than 60% due to the Company's proposed Phase 2 rate design”). 48 Tr. 630 (Vol. 5, May 9, 2016)(customer charge is “locked in” for a year).49 Rubin testimony, Exh. AG-SJR-1, pp. 16-17 (“customers can have the same contribution to class NCP demand, but wildly different annual energy consumption”).50 E.g., Green Communities Act, Acts of 2008, Ch. 169; Global Warming Solutions Act, Acts of 2008, Ch. 298.51 Tr. 88 (Vol. 1, May 2, 2016) (cross examination of Marcy Reed).

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charges increase with volume, could achieve this.52 However, the tiered customer charges

proposed by the Company would not meet this goal.

Increasing fixed customer charges reduces the incentive to implement energy efficiency

measures, since increased fixed charges and consequently reduced volumetric charges reduce the

value of each kWh saved.53 The tiers create a further barrier to energy efficiency, as any changes

to improve efficiency may not lower customer bills until a period as long as twelve months has

passed.54

Further, the proposed rate structure may be confusing to customers. When combined with

reduced volumetric charges, the customer charges (which vary annually with usage, in Phase 2)

impede customers’ ability to understand their bills and control usage since the impact of changes

in usage depend on knowledge about which tier the customer falls into, knowledge customers

will not have in real time.55

While the Company explained that it intended for the tiered charges to mimic demand

charges, the Company has offered no analysis of the likely impact of these tiered charges on the

adoption of energy efficiency measures or renewable energy technology.56

C. The Commission Should Approve Rate Designs Consistent with State Energy Efficiency and Renewable Energy Policies

Massachusetts unquestionably has strong policies designed to promote, not

hinder, energy efficiency and renewable energy investments, including in the Green

Communities Act, Acts of 2008, Ch. 169; the Global Warming Solutions Act, Acts of 2008, Ch.

52 Massachusetts Electric Company, DPU 09-39, pp. 423 – 424 (Nov. 30, 2009).53 John Howat Testimony, Exh. LI-JH-1, pp. 14 - 15.54 Tr. 632 - 633 (Vol. 5, May 9, 2016) (cross examination of Peter Zschokke).55 John Howat testimony, Exh. LI-JH-1, p. 15; Tr. 1308 (Vol. 12, May 19, 2016) (cross examination of Dr. Abigail Anthony).56 Tr. 633 - 634 (Vol. 5, May 9, 2016).

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298;57 and An Act Relative to Solar Energy, Acts of 2016, Ch. 75 (raising net metering caps).

The Department itself has noted that the state’s “energy efficiency policies date back to

regulatory policies the Department established in the 1980s.”58 Our General Court has also gone

to great lengths to minimize the risk that low-income utility consumers will lose their utility

service, by mandating that utilities offer AMPs and low-income discount rates. 59 Given these

policies promoting energy efficiency and renewable energy and protecting low-income

customers, the Department should reject the Company proposals of raising customer charges and

lowering energy charges, as these proposals will undermine the ability of the state to achieve its

energy goals.

V. In accordance with G.L. c. 164, § 141, the Department Should Make “A Fully Compensating Adjustment . . . to the Low-income Rate Discount” Reflecting the Impact of On-Site Generation on Low-income Bills

In the Green Communities Act,60 the General Court added Section 141 to Chapter 164 of

the General Laws (“Section 141”), providing as follows:

In all decisions or actions regarding rate designs, the department shall consider the impacts of such actions, including the impact of new financial incentives on the successful development of energy efficiency and on-site generation. Where the scale of on-site generation would have an impact on affordability for low-income customers, a fully compensating adjustment shall be made to the low-income rate discount.61

The legislative intent is clear: in cases involving rate design, the Department is tasked

with considering “the impact of financial incentives” for energy efficiency and on-site

generation” and “shall” make a “fully compensating adjustment . . . to the low-income rate

discount” whenever the “scale of on-site generation would have an impact on affordability for

low-income customers.” In simpler terms, and as argued more fully below, the Department must

57 See Kain v. Department of Environmental Protection, 474 Mass. 278 (May 17, 2016)(under Global Warming Solutions Act, state must promulgate regulations for meeting carbon reduction goals of that act). 58 Order Opening Investigation, DPU 11-120, pp. 1 – 2 (Nov. 29, 2011).59 G.L. c. 164, § 1F(4).60 Acts of 2008, Ch. 169.61 Added by Acts of 2008, Ch. 169, § 78.

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increase the percentage value of the low-income rate discount when the growth of on-site

generation makes it harder for low-income households to afford their electric bills.

On November 17, 2015, the Network “filed with the Department of Public Utilities a

request for an adjudicatory decision to adjust the value of the low-income discount rates affected

by the cost of on-site generation,” relying on Section 141 and other provisions of law.62 The

Department chose not to exercise its discretion to open a proceeding, noting that the “petition

presented by the Network/MEDA is unaccompanied by testimony, supporting materials, and

affidavits authenticating the positions raised therein.”63 However, the Department suggested an

alternative route for having those positions fully considered:

Rather, to pursue the matters identified in its filing, the Network/MEDA may desire to file a direct case in a current or future electric company base rate case proceeding . . . .In that way, the Network/MEDA will be best able to present facts and data on the record in support of its position.64

In the present docket, the Network has filed such a direct case, including sworn testimony

and supporting materials: the direct testimony of John Howat (including relevant data) as well as

additional information elicited through information requests and cross-examination to support its

request for a “fully compensating adjustment” to the low-income rate discount, based on the

impact that certain costs relating to on-site generation are having on the affordability of low-

income bills.

There are three strands to the Network’s argument, aligning with the wording of Section

141. First, the “scale of on-site generation” is now substantial, with installed capacity from 62 December 17, 2015 Letter of Kevin Penders (“December 17 Letter”), Department General Counsel, to Jerrold Oppenheim, Esq., as counsel for the Network, p. 1. The Network asks that the Department take administrative notice of this letter, for the very limited purpose of establishing the procedural context of its present Section 141 argument and not for determining any factual matters. In this present docket, the Network relies solely on the testimony of John Howat (Exh. LI-JH-1), responses to information requests and other material formally admitted into the record of this case, and not on either its November 17, 2015 request nor on the December 17 Letter from General Counsel, for purposes of making its legal argument regarding a fully compensating adjustment pursuant to Section 141. 63 December 17 Letter, p. 2.64 December 17 Letter, p. 2.

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distributed generation (DG) on the Company’s system exceeding 15% of its peak load. Second,

the cost impacts of that generation are impacting the “affordability [of rates] for low-income

customers,” raising total bills (inclusive of distribution charges and Basic Supply or competitive

supply) by 6%. Third, there is an adequate record to determine the size of the “fully

compensating adjustment” to the low-income rate discount called for by the law. The Company

does not directly contest the principle of a fully compensating adjustment.

A. The “Scale of On-site Generation”

In order to begin to quantify the scale of on-site generation, the Department will need to

determine what exactly is included by the words “on-site generation.” The legislature has not

itself defined the term. The most logical parsing of the term is that it refers to generation on the

site of a utility customer’s premises or property, since Section 141 speaks of “financial

incentives on the successful development of . . . on-site generation.” Those incentives are

provided for generation facilities on the site of a customer, whether located behind the meter – as

most rooftop solar is located – or whether in a stand-alone facility with parasitic customer load,

primarily built to export its generated electricity. “On-site generation” would thus simply be

distinguished from “off-site generation,” that is, the generation that the utility procures to

provide Basic Service and which is not located on the site of a customer.65

The scale of this on-site generation is substantial and thus affects affordability of bills for

low-income households, whether viewed in terms of individual customer bill impact, aggregate 65 The phrase “on-site generation” or near-identical wording is used in several different sections of Chapters 25A and 164 of the General Laws, but nowhere defined. This reinforces the Network’s argument that “on-site generation” is used in a common-sense manner that encompasses only solar and other renewable energy production on the site of an end-use customer. See, e.g., G.L. c. 164, § 1G (referring to customers’ plans to install on-site generation equipment and customers reducing their energy purchases through operation of “an on site generation … facility”). Furthermore, G.L. c. 25A, § 11F(g) specifically mandates that the phrase “on-site renewable energy generating sources” include “behind the meter generation and other similar categories of generation.” See also G.L. c. 25A, § 3 (listing the types of energy measures that are undertaken by customers on the customer’s premises); G.L. c. 25A, § 15( discussing government procurement of solar panels only for “onsite use of the energy generated by these panels.”). See also 225 CMR § 14.05, where DOER includes non-rooftop projects with a parasitic load as “on-site”.

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revenue impact, or megawatts of installed capacity.66 In terms of the dollar impact on low-

income discount rate customers, the record demonstrates that the total bill (not just the Basic

Supply portion of the bill) for a low-income customer using 500 kWh is approximately 9%

higher as a result of net metering, solar carve-out, and RPS/non-solar carve-out costs, and almost

6% higher due just to net metering and solar carve-out costs.67

Just focusing on net metering, the aggregate net metering “export costs” across all

customer classes are projected to be $112.8 million in 2016, and $88 million after “total

revenue” from this generation is netted against costs.68 The net metering costs, again after

generation revenues are netted, are projected to climb to $100 million by 2018.69 As Exh. IR LI

1-5-2 - Supplemental shows, the solar carve-out costs are having an even larger impact on bills,

more than eight times greater than the impact of net metering costs.

Finally, in terms of installed capacity, the Company expects to have 700 MW of

distributed generation on its system by the end of 2016, which is slightly more than 15% of its

2015 peak load.70 By any measure, the scale of on-site generation is substantial, and the net

metering and solar carve-out costs arising from this on-site generation are impacting the

affordability of low-income electric bills.

B. Affordability

66 The issue of impact on affordability is discussed immediately below, under heading B.67 Exh. IR LI 1-5-2 – Supplemental (answered Feb. 16, 2016), p. 2 of 3, Section 4, “% of total bill.” The lines labeled “Solar Carve Out”, “Renewable Portfolio Standard except Solar Carve Out” and “Net Metering” sum to 8.8% of the total bill for an R-2 customer using 500 kWh per month. The sum of “Solar Carve Out” and “Net Metering” is 5.9%.68 Exh. IR DPU 5-3, p. 1, lines 18 & 21.69 Id. As Company witness Scott McCabe testified, those net metering costs have grown dramatically: “[I]n 2010 the cost of net metering credits that were paid out to customers were $321,000 during that calendar year, and in 2015 that number increased to 63.9 million. So there certainly has been an increase over the past several years with regards to the costs of DG to all of the company's customers.” Tr. 1034, lines 3 -11 (Vol. 7, May 12, 2016). Recently passed legislation is likely to result in a lowering of those additional net metering costs, although existing installations will have their net metering compensation arrangements grandfathered. Acts of 2016, Ch. 75.70 Tr. 1003, lines 15 -18 (Vol. 7, May 12, 2016) and RR LI-2.

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John Howat’s testimony on behalf of the Network provides extensive analysis of

available data regarding the inability of low-income households to afford their bills. For

example, approximately 35% of the Company’s R-2 discount rate customers were more than 60

days in arrears on their bills during 2014 and 2015, versus only 10% of customers on the regular

R-1 residential rate.71 Compounding the problem, the average arrearage amount for the R-2

customers (approximately $400 to $500, depending on the month studied) was twice as high as

for the R-1 customers (approximately $150 to $250).72 Not surprisingly, all of this results in

low-income customers on the R-2 rate being disconnected for non-payment at a much higher rate

than R-1 customers,73 except during the winter months when low-income customers are largely

protected against service termination.

The underlying problem is that low-income households do not have sufficient income to

meet the high cost of living in Massachusetts. A single person living in Worcester – one of the

lower-cost cities in Massachusetts – needed $22,464 in 2013 “just to pay for the most basic

necessities,” according to analysis done by the Crittenton Women’s Union. A family living in

Middlesex County and “consisting of two adults, a preschooler and one school-aged child”

would need $81,576 to cover necessities, “or 346 percent of the federal poverty guidelines.”74

Fully 28% of the Massachusetts population was living below 200% of those poverty guidelines

in 2014.75 Even current rates are beyond the ability of many households to pay. The additional

costs that have been added over the past several years due to policies that promote on-site

generation simply increase the burden and make bills less affordable.

71 Exh. LI-JH-1, p. 5, lines 1–7.72 Exh. LI-JH-1, p. 6.73 Exh. LI-JH-1, p. 7.74 Exh. LI-JH-1, p. 875 Id. Exh. LI-JH-1, p. 9 contains a table showing numbers and percent of Massachusetts households living at various percentages of the poverty guidelines.

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Another measure of bill affordability is “home electricity burden,” the ratio of amounts

expended on electricity to household income. While it is intuitively obvious that the electricity

burden is higher for lower-income households, the actual gap is substantial. For a two-person

household earning the state median income, the burden is only 1.8%, whereas for a two-person

household at 75% of the federal poverty guideline the burden is 7.8%.76 Since most households

heat with gas or oil, not electricity, and heating costs in New England are quite substantial, low-

income household energy burdens (as opposed to electricity burdens) far exceed 7.8% for those

at or below 75% of the poverty guidelines.

Given that low-income households have such a difficult time affording their electric bills,

the 6% impact on bills from the costs of net metering and the solar carve-out arising from on-site

generation add a significant burden, rendering those bills significantly less affordable.77

C. Fully Compensating Adjustment

Having shown that the scale of on-site generation is significant – comprising

approximately 15% of the Company’s peak load – and that the bill impacts relating to that on-

site generation “impact on affordability for low-income customers”78 – raising those bills 6% –

the Network therefore asks that the Department carry out the mandate of Section 141 by making

a “fully compensating adjustment” to the “low-income rate discount.”79

76 Exh. LI-JH-1, pp. 9 – 10. The Network notes that a significant percentage of households in Massachusetts somehow manage to survive on less than 75% of the federal poverty guidelines. Mr. Howat’s testimony shows that 13.6% of the state’s households are at or below 100% of the federal poverty guidelines. Id. 77 The Company tends to agree, but uses more cautious language: “The cost of DG has increased over the past several years for all customers and may result in an additional burden to its low-income customers’ being able to pay their bills.” Tr. 1033, lines 20 – 24 (Vol. 7, May 12, 2016). See also Tr. 1034, lines 16 -18 (“It would be a burden on all of our customers, as well as our low-income customers, certainly.”)78 See G.L. c. 164, § 141.79 Record Request DPU-41 suggests a reading of Section 141 that a compensating adjustment should perhaps be limited to any post-2010 incremental costs attributable to the solar carve-out, RPS excluding solar carve-out and net metering: the $5.25 difference between $6.53 (2015 “Net Incremental Renewable Charges”) and $1.28 (2010 “Net Incremental Renewable Charges”) shown in RR-41, p. 2 of 3, row (m), lines (9), (18) and (20). However, not a single word in Section 141 implies that the “fully compensating adjustment” shall be made in reference to any particular prior period of time (such as post-2010), nor that the reference to “scale of on-site generation” is meant to include only generation added after any particular date. Parsing the language of Section 141 to include such a limitation would run afoul of the “general and familiar rule” that words in a statute should be “construed by the

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The Network had originally recommended that the required adjustment would be to

increase the total low-income discount from 28.8% to 35%,80 to fully compensate for the cost of

the solar carve-out from the Renewable Portfolio Standard (“RPS”), the RPS excluding the solar

carve-out, and net metering.81 However, in light of the full record that has been developed, the

Network now recognizes that Section 141 does not mandate a “fully compensating adjustment”

for costs imposed on low-income customers as a result of the RPS excluding solar carve-out,

since many of these latter RPS costs may not be due to on-site generation but to system power.

As the answer and supporting calculations in Exh. IR DPU LI 1-582 show, the required “fully

ordinary and approved usage of the language.” Meikle v. Nurse, 474 Mass. 207, 209-210 (2016)(citations omitted). Moreover, “where the statutory language is clear,” courts and agencies must “give effect to the plain and ordinary meaning of the language.” Malloch v. Town of Hanover, 472 Mass. 783, 788 (2015). Since the plain language of Section 141 contains no reference to or even hint of a time limitation, such a limitation should not be read into the law.

Similarly, there is nothing to suggest that the 25% level of the discount extant during 2010 in any way was intended to offset costs related to net metering (which were zero at that time) or to the solar carve-out, which in 2010 caused costs of less than ½ cent/kWh (DPU RR-41, p. 2 of 2, l. 10). Additionally, since the Network now only seeks a “fully compensating adjustment” for solar carve-our and net metering costs, limiting that adjustment to post-2010 incremental costs would have a trivial impact, given that those costs during 2010 were $.00044.

In his testimony, Mr. Howat rebutted the notion that Section 141 is only intended to require an adjustment for incremental costs beyond 2008. Tr. 1692-1693 (Vo. 11, May 18, 2016)(“My plain reading of the statute involved here is such that the absolute costs of distributed generation borne by R-2 customers are the costs that are in play here, rather than the rate of change from one point in time to another.”) While Mr. Howat is not a lawyer, his plain reading of the statute is correct. The Department must follow that reading, if the legislative mandate of Section 141 is to be carried out.80 The full record in this case makes it clear that although the discount mandated for the Company’s customers by G.L. c. 164, § 1F is in fact 25%, the effective baseline discount used by both Mr. Howat in his testimony and discovery answers and by the Company in its testimony and discovery answers is 28.8%. This is so because low-income customers benefit both from the statutorily-mandated 25% discount and from a discounted Energy Efficiency Reconciliation Factor (“EERF”). Tr. 1034 – 1036 (Vol. 7, May 12, 2016); Exh. NG-PP-Rebuttal-1, p. 55, lines 10 - 12. See also Exh. IR DPU LI 1-3 (reconciliation of the 28.8% figure in Mr. Howat’s testimony and the 25% figure included in Company tariffs).81 Exh. LI-JH-1, pp. 17 -18.82 This document is Mr. Howat’s response to Department information request DPU LI 1-5.

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compensating adjustment” is 33%.83 The Company does not dispute Mr. Howat’s calculations;

they derive wholly from numbers the Company itself provided in response to Exh. IR LI 1-5.84

D. The Company’s Alternative Proposal Does Not Comply with Section 141

While the Company does not oppose making the “fully compensating adjustment” that

Section 141 mandates,85 it has put forth an alternative to the Network’s proposal. That alternative

would “maintain the low income discount at its current level of 25 percent” but “exempt Rate R-

2 customers from being charged for the DG costs which the Department concludes should be

avoided by this customer group.”86 That proposal, however, suffers from a serious flaw if the

goal is to offset the DG-related cost increases: R-2 customers on competitive supply would not

benefit from this proposal unless they somehow found competitive suppliers offering their own

low-income discounts. The Company essentially agrees with this critique of its alternative

proposal. In its rebuttal testimony, it acknowledged, in somewhat oblique language, that in order

for such an R-2 customer to benefit, the customer would have to “select a competitive supplier

offering a price that is comparable to that of Basic Service that would, by design, exclude the

applicable RPS cost recovery.”87 In less oblique terms, R-2 customers on competitive supply

83 This 33% includes the statutorily-mandated 25% discount; the additional, “fully compensating adjustment” the Network maintains is mandated by Section 141; and the EERF discount described in Exh. NG-PP-Rebuttal-1, p. 55, lines 11 -12. To the extent the Department agrees with the Network’s Section 141 recommendation but needs to break out that latter EERF portion and thus separately determine the percentage solely attributable to the first two items (25% discount + Section 141 adjustment), it is clear that the Company can carry out that calculation, as it did in its response to the Network’s initial recommendation of a 35% discount. See Exh. NG-PP-Rebuttal-1, lines 15 -18. 84 See Tr. 1035, line 22 – 1036, line 2 (Vol. 7, May 12, 2016)(“Q. So again, you and Mr. Howett [sic] agree, then,to both numbers [i.e., the 28.8% and 35%] but you would parse those numbers. He does it in aggregate, and you do it in two pieces. Is that fair to say? A. [McCABE] Yes, that is fair.”) Note that Exh. IR LI 1-5 is a Company response to an information request from the Network, not to be confused with the Network’s response to IR DPU LI 1-5.85 “I think the company would acknowledge that the costs related to net metering certainly are increasing and that it would be more of a policy decision on the part of the Department as to whether or not the rates charged to low-income customers should be changed to reflect the fact that they -- whether they should or should not pay forthose increased costs.” Tr. 1038, line 20 – 1039, line 3 (Vol. 7, May 12, 2016); Exh. NG-PP-Rebuttal-1, p. 54, line 21 – p. 55, line 2.86 Exh. NG-PP-Rebuttal-1, p. 64, lines 9 – 12.87 Exh. NG-PP-Rebuttal-1, p. 64, line 17 – p. 65, line 2.

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would have to find suppliers who discount their prices for low-income customers, to match the

additional discount the Company proposes in its alternative. Nothing in the record suggests that

there are any such competitive suppliers, and the Company certainly could not identify any such

suppliers.88 The Network’s cross-examination of the Company’s witnesses sponsoring this

proposal demonstrates that it would be contrary to the business interests of competitive suppliers

to offer such a discount, since they incur RPS-related costs and need to recover those costs

through their price offerings to customers.89

Fully 52% of the Company’s R-2 customers are on competitive supply.90 This means that

more than half of R-2 customers would have to find suppliers offering special discounts to low-

income customers for the Company’s alternative to benefit them, yet, based on the record, there

is no basis for the Department to conclude such suppliers exist. The Department must reject the

Company’s alternative as it would not meet the requirements of Section 141.91

VI. Conclusion

The Network asks that the Department issue a final order consistent with the arguments

in this brief. In particular, the Network respectfully requests the following:

1. That the Company be required to review all of its activities that may affect AMP

enrollment and report back to the Department within six months of any final order on

steps taken to improve AMP enrollment.

88 Tr. 1040 (Vol. 7, May 12, 2016). As to whether there may be suppliers offering discounts to low-income customers, the Department is well aware of complaints that some competitive suppliers actually target low-income customers with unfair sales practices. There is not even a suggestion in the record that there are competitive suppliers targeting low-income customers for special discounts. 89 Tr. 1043 (Vol. 7, May 12, 2016).90 Exh. NG-PP-Rebuttal-1, p. 66, line 5.91 The Company also raises the concern that the Network’s proposal “would require an annual re-setting of the percentage,” if the discount is to precisely compensate for costs arising from on-site generation. Exh. NG-PP-Rebuttal-1, p. 56, lines 12–13. However, the Network has not proposed that the adjustment need to be made annually. To the contrary, the Department is only required to address Section 141 “in all decisions or actions regarding rate design.” The Network therefore assumes that the Department would address Section 141 in rate cases or rate design proceedings, and not annually. The Company’s witnesses agreed this “certainly is possible.” Tr. 1037, line 14 (Vol. 7, May 12, 2016).

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2. That the Company be allowed to continue recovering its AMP-related costs on a

reconciling basis.

3. That the Department not accept the Company’s proposed changes to customer

charges.

4. That, in accordance with the provisions of G.L. c. 164, § 141, the Department direct

the Company to adopt “a fully compensating adjustment” to the “low-income rate

discount” to reflect the impact of “on-site generation . . . on affordability for low-income

customers” by raising the total low-income discount to 33%92.

Respectfully submitted,

Charles Harak, Esq.National Consumer Law Center7 Winthrop Sq. 4th floorBoston, MA 02110617 542-8010charak@nclc.org

Jerrold Oppenheim. Esq.57 Middle St.Gloucester, MA 01930978 283-0897JerroldOpp@DemocracyAndRegulation.com

Jenifer Bosco, Esq.National Consumer Law Center7 Winthrop Sq. 4th floorBoston, MA 02110617 542-8010jbosco@nclc.org

DATE: June 17, 2016

92 See note 83 for an explanation of the components that make up the 33% total.

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