Power costs under review:
Coakley to examine WMECO's earnings
Friday, November 09
By Ellen G. Lahr, Berkshire Eagle Staff
Western Massachusetts Electric Co.'s reports of dramatic third-quarter earnings — apparently based on rate hikes that have hit some industries in the region hard — have triggered an inquiry by Attorney General Martha Coakley.
WMECO on Monday reported that third-quarter distribution charge earnings were $4.2 million and totaled $13.6 million in the first nine months of 2007.
For the same period last year, those earnings were $2.8 million and $8.6 million, respectively.
WMECO said its improved results were the result of a settlement reached last year with former Attorney General Thomas F. Reilly.
Now Coakley will inquire as to whether WMECO's earnings are consistent with the terms of that October 2006 rate settlement. The company has been obligated to make transmission upgrades and was allowed to recoup $1 million for delivery costs.
All electric customers pay one price for the actual electricity they use and another for the cost of delivering that electricity. In this case, the attorney general is scrutinizing the delivery charges, which are set by the utility with state oversight.
"Following WMECO's report of earnings growth in the third quarter and all of 2007, we want to make sure that these earnings are consistent with the settlement agreement and applicable state and federal law," Coakley said in a statement.
"In addition, a number of large commercial and industrial users have reported large increases in their delivery bills in January of 2007, and we want to determine whether these rate increases are appropriate," she stated.
Efforts to reach a WMECO spokesman yesterday were not successful.
Berkshire legislators have watched as local industrial power users faced crippling rate hikes this year. Yesterday, two members of the delegation hailed Coakley's actions as confirmation that something is off the mark at the region's biggest power supplier.
State Sen. Benjamin B. Downing, D-Pittsfield, said that, "considering the spike in rates we've seen — especially for commercial and industrial users, specifically at Southern Berkshire's paper mills, but elsewhere in the county as well — this shows first and foremost that the AG is responsive to needs of Western Massachusetts and that something is wrong at (WMECO)."
"The Berkshire delegation has been looking at this over the last 10 months, saying there is something amiss here," he added.
State Rep. William "Smitty" Pignatelli, D-Lenox, concurred, hailing Coakley's inquiry as "great news."
Pignatelli's district has seen the shutdown — or pending shutdown — of three paper mills this year. Energy costs were assessed part of the blame, contributing to rising overhead that helped make the businesses untenable.
"It seems strange that a lame-duck attorney general (Reilly) could sign this rate agreement a couple of days before leaving office, without fair knowledge of the impact on large users," he said.
Large commercial users this year have reported increases in electrical distribution charges of up to 70 percent. Some, such as Hancock's Jiminy Peak Mountain Resort and Dalton's Crane & Co., are seeking alternative sources of energy.
The attorney general serves as overseer of the utility industry and is authorized to intervene in administrative and/or judicial proceedings on behalf of consumers in connection with any matter involving the rates, charges, prices or tariffs of any electric company doing business in the state.
Her office said that the state's Energy and Telecommunications Division sent WMECO a series of oversight questions today regarding its profits and rates. WMECO must respond to these questions within 21 days.