Endless Rate Increases, RI Energy Hasn’t Lived Up to Its Rhetoric - Grasso
Endless Rate Increases, RI Energy Hasn't Lived Up to Its Rhetoric - Grasso
In May of 2022, PPL Corporation (NYSE: PPL) acquired the Narragansett Electric utility franchise from National Grid. In the introductory press release, RI Energy President Dave Bonenberger stated, "We're committed to delivering safe, reliable, and affordable energy while advancing a cleaner energy future in all of the communities we serve." Surely the future for RI ratepayers would be optimistic after more than a decade of what felt like serfdom under the British rule of National Grid. Fast forward two-plus years and a look back on the transition from National Grid to PPL reveals the reality didn't live up to the rhetoric.Rising Prices and Profit Margins... Shortly after PPL's acquisition, RI Energy filed its first rate increase for effect in October 2022, which included a whopping 66% increase to its supplier service rate known as Last Resort Service, in response to spiking energy costs driven by the Ukraine-Russia conflict. While the drastic increase received pushback and protest by ratepayers, RI Energy claimed that they were simply "passing on their cost of energy" to the consumer and the utility was given a pass by the RIPUC considering the circumstances. However, a closer look at the underlying wholesale cost of electricity since PPL's reign over RI shows the opposite...energy market price deflation and staggering profitability to the tune of 2x the retail premium National Grid was allowed to charge during its tenure running the state's monopoly.
Rather than pass the overcollection in supply costs back to ratepayers in the form of a credit RI Energy continued its above-market rate filings into 2023 and 2024. The utility recently filed another supply rate increase of 60% to take effect on October 1st. What's perhaps most remarkable about the outrageous increases is the outrageous approvals by regulators. Both the RIPUC [which is charged with regulating RI Energy's rates] and the RIDPUC [the consumer advocate division of the RI Public Utilities Commission] have rubber stamped RI Energy's rate proposals despite their divergence from market reality. RIPUC Chairman Ron Gerwatowski publicly stated in 2023 that he was "very troubled" by the repetitive increase in rates, yet the pattern continued indicating the empty rhetoric is not limited to RI Energy. Given the leadership of the PUC is appointed by Governor Dan McKee one must ask why McKee has not addressed the issue.
An Expensive RFP...To add insult to injury, in addition to the massive increases in energy supply "cost" RI Energy coincidentally loaded an additional 4% onto the backs of their ratepayers in the form of a "Last Resort Supply Service Administration Cost Factor" over the same timeframe. This fee reflects the utility's purported administrative cost associated with procuring Last Resort Service (ie. Issuing an RFP to wholesale energy marketers). At $.0038/kWh the "percentage of value" based fee is not only disconnected from the amount of labor applied to the RFP process, it's 2-3x what their wholesale energy supplier makes and disincentivizes the utility from lowering their rates. All in residential and small commercial ratepayers pay RI Energy an estimated $12,000,000 per year for the simple pleasure of having PPL charge them above market rates. And these figures exclude the value RI Energy is extracting from the state's largest commercial and industrial ratepayers who subsidize the residential and small commercial markets. RI Energy reported an Administration Cost Factor of $.0078/kWh for the state's largest consumers.
Conflicts of Interest... Although RI Energy has a franchised monopoly on the transmission and distribution of kilowatts in RI [what's referred to as the Delivery Service portion of the bill], consumers do have the legislated right to choose the provider of that electricity supply [Supply Service]. The Rhode Island Utility Restructuring Act of 1996 required RI electric utilities to sell off their generation assets, opening up the wholesale and retail electric markets to non-regulated power producers...what are more commonly referred to as energy marketers or suppliers. Yet nearly three decades later 75% of RI residential consumers and 38% of small commercial consumers still purchase their energy supply from RI Energy at above market rates. So if there's competition in RI, why would anyone continue to pay their utility above market rates? It is estimated that over the past 12 months RI Energy's supply rates averaged close to $.03/kWh above the real retail market*. Allocated across an estimated 3.3 billion kWh per year of Last Resort Service supplied consumption, that's nearly $100,000,000 worth of reasons for RI Energy to add friction to the supply switching process for both the consumer and supplier.
A Switch with a Glitch... In order for a ratepayer to successfully "switch" suppliers, they need two basic things...their account billing information and a basic knowledge of market rates, neither of which the utility makes easily accessible. For instance, how many of us know our ten-digit account number or our four-digit Shopping ID which is required for a supplier to enroll your account into their supply service? Perhaps it's easy enough to locate on your bill...the paperless bill RI Energy incentivizes you to receive digitally. So now you have to log into your online account because their new billing system doesn't include a PDF copy with your email reminder. Yes, the new online account portal which still doesn't work for thousands of ratepayers. And as for that basic knowledge of market rates, [see above] Last Resort Service isn't exactly the best indicator of fair market prices...leaving brokers and community energy programs to feast on under-informed ratepayers.
Will AI solve Energy Supply? AI has already entered the market via locally developed applications like kilowant.com which automate the search and sourcing of fair market supply service plans for the ratepayer. However, this technology is not welcomed by the state or its monopoly. In a 2023 informal complaint filed with the RIDPUC, kilowatt outlined RI Energy's antiquated and preferential data-sharing policies. Unsurprisingly the response from both the RI Energy and the State was uniform, finding no fault or justification to change the utility's frictional practice.
James Grasso is the Founder & President at SilentSherpa
* Data provided by SilentSherpa
