Boston – Continuing its efforts to remove obstacles for businesses to grow, the Massachusetts Senate today took on the high costs of electricity in the Commonwealth by unanimously passing legislation that will create more competition for energy contracts and bring down prices. The vote in favor of the legislation was 39-0.
“We’ve streamlined our economic development model, lowered corporate tax rates, given businesses tools to negotiate lower health insurance rates, and once again have frozen the unemployment insurance rate, but the high cost of electricity continues to be a burden on consumers and businesses,” Senate President Therese Murray (D- Plymouth) said. “We want to lift that burden and eliminate the drag these costs are putting on our economic recovery. That’s why this bill is so important.”
Senator Benjamin B. Downing (D- Pittsfield), the lead sponsor of the bill, said: “This legislation builds on Massachusetts' nation-leading clean energy policies and ensures those policies are advanced in the most cost effective way. It will continue the job growth we have seen in clean energy and energy efficiency, while ensuring rate payer dollars are being used effectively." Downing serves as the Senate chair of the Joint Committee on Telecommunications, Utilities and Energy.
Because of an ongoing commitment to renewable resources, the Commonwealth has the second-lowest greenhouse gas emissions of any region in the nation. It has positioned itself as a frontrunner in the clean energy economy, which currently employs 64,000 people statewide, becoming one of the top three states for innovation, investment, employment and policy in clean energy.
The state needs to maintain this position, according to Murray, without harming the many successful businesses for which electricity is a detrimental cost of doing business.
“The initiatives in this bill will improve the reliability of our grid and address some of the cost-drivers for electricity prices without compromising our commitment to developing the domestic resources we do have for renewable energy,” Murray said.
The average electric rate in Massachusetts is 14.24 cents per kilowatt hour – the seventh-highest in the United States and well above the national average of 10 cents. Part of the reason is that Massachusetts, in comparison to other parts of the country, does not have an abundance of natural resources such as coal or gas. In fact, New England states in general have very little domestic sources of fuel for electricity.
But the high costs are also driven by the industry itself – a combination of aging transmission and distribution infrastructure, and a lack of accountability from investor-owned utility companies.
“We took the first step in February, passing legislation to improve the emergency response of our investor-owned utilities in light of the widespread power outages during last year’s Tropical Storm Irene in August and the snowstorm in October,” Murray said. Downing was also the lead sponsor of the Senate’s storm response legislation, which is pending before the House of Representatives.
The bill passed in the Senate today addresses the high cost of electricity in Massachusetts in an effort to support job creation and economic recovery. It seeks to reduce the price of electricity by identifying cost-drivers, reviewing rates on a more regular basis, and demanding more competition.
During her keynote address at the Greater Boston Chamber of Commerce Legislative Breakfast on Thursday, Murray said: “The electricity cost legislation seeks to strike a balanced approach to our electricity markets. We want neither to continue importing fossil fuels from outside the region to satisfy our demand, nor to condemn our residents and businesses to a future of steadily increasing prices for electricity in pursuit of our renewable energy goals.
“Instead, this legislation continues to prioritize our nation-leading energy efficiency programs, while injecting some needed competition into our renewable energy programs and requiring more stringent reviews of rate cases by the Executive Branch.”
To establish competition in the market, the bill would end the current long-term contract program under the Green Communities Act by December 2012 and require investor-owned utilities to competitively bid proposals from renewable energy suppliers for long-term renewable energy contracts. And by increasing the overall net metering cap from 3 percent to 6 percent, the legislation doubles the existing limits on municipal and privately-owned projects that generate their own renewable energy.
The legislation requires gas and electric companies to file rate cases every three years with DPU; increases from six to 10 months the time DPU has to review rate cases; prevents DPU from approving rate case settlements more than once every six years; and requires DPU to spread over a two-year period any rate increase that would exceed 10 percent in one year, with a first-year cap of 7.25 percent.
The bill also requires the Department of Energy Resources (DOER), when it intervenes on cases before the Department of Public Utilities (DPU), to do so on behalf of all commercial and industrial ratepayers.
The legislation clarifies current law regarding solar and wind property tax classifications. A system producing up to 125 percent of its annual energy needs is exempt from property tax. All other systems are exempt as long as the owner makes a payment in lieu of taxes to the municipality equal to 5 percent of the system’s gross electricity sales in the previous year.
The legislation also does the following:
· Expands DPU’s oversight to any transaction involving a regulated company, not just Massachusetts-regulated companies;
· Establishes a voluntary energy efficiency pilot program for the five largest electric and five largest gas users in each utility’s service territory; and
· Allows hydroelectric power to count toward the Commonwealth’s renewable and alternative energy generation goals under the Green Communities Act.
The bill now goes to the House of Representatives for review and consideration.