LYNDSEY WASIO OF LENOX wrote a letter recently to the state Department of Public Utilities, which had asked for input on the energy burden homeowners are facing.
“Having moved to western Massachusetts rather recently from a region just as prone to cold and snow as this one, I feel uniquely qualified to tell you that your electric prices are completely out of control,” she wrote.
Like many others who wrote in, she detailed her monthly utility bills and expressed astonishment that the cost of delivering electricity to her home is often more than the electricity itself. She didn’t mince words when describing her energy burden.
“We are having serious discussions about whether we can afford to live in a town we intentionally chose to move to, not because our taxes are too high, but because of electricity costs,” she said. “I am deeply concerned by the fact that the state is, effectively, letting electric suppliers and distributors price people out of entire regions, all while actively encouraging a massive shift towards renewable electric energy sources.”
Wasio’s letter, and many others like it in the DPU docket, reflect growing anxiety about rising utility bills for electricity and natural gas. The anxiety is greatest among low-income utility customers, but moderate and middle-income customers are increasingly feeling the pinch as well. The situation is expected to worsen as the state’s decarbonization efforts pick up speed — cars and homes are electrified and utilities scale up their distribution and transmission networks to deliver more power to customers. All that will cost money, lots of money.
The Healey administration and key legislators are eager to provide some relief. The DPU is considering a significant equity upgrade to the discounts utilities currently offer low-income customers for electricity and natural gas. And the Healey administration is working with key legislators on Beacon Hill to extend the discount offered to low-income customers to moderate income customers.
But there are broader structural problems with utility rates that also need to be addressed, including one related to solar power development. Massachusetts electricity bills are based primarily on usage, meaning nearly all charges are assessed based on how many kilowatt hours are used. A homeowner who installs solar panels on the roof ends up purchasing fewer kilowatt hours from the grid, so his bill for electricity goes down. But purchasing less electricity from the grid also means lower charges for distribution, transmission, and other fixed charges to maintain and operate the grid that don’t decline with less individual power consumption. The result is the cost burden is shifted on to remaining, non-solar customers.
California is grappling with this problem now. It passed a law in 2022 that called for splitting electric bills into two parts – one part for electricity and one for fixed costs, including transmission and distribution. Customers would pay for the electricity based on how many kilowatt hours they use, and pay a flat rate charge to cover the fixed costs. The size of the flat rate charge would adjust based on household income, with those in lower income brackets paying less and those in higher income brackets paying more.
When utilities began floating their proposed income-based, fixed-rate charges, pushback was immediate from well-off communities that were looking at fees starting at $50 to $73 a month and expected to rise in the future to $85 to $128 a month. Some of the lawmakers who supported income-based, fixed-rate charges in 2022 are now pushing legislation to repeal the earlier law, even as the state prepares to move ahead with graduated income utility rates this summer.
Massachusetts isn’t moving in the same direction as California, at least not yet. The Healey administration, however, is aware of problems with utility bills that are looming on the horizon and reviewing various options.
The Clean Energy Center has commissioned a study to look at near-term and long-term utility rate restructuring. The request for proposals said the state “has identified existing electricity rates as a barrier to achieving the Commonwealth’s clean energy goals.” It calls for the creation of “rate design features targeted to reducing the energy burden for ratepayers, particularly for low- and moderate-income ratepayers and vulnerable populations.”
Meanwhile, the Department of Public Utilities is exploring an equity upgrade to the way Massachusetts utilities charge lower-income customers for electricity and natural gas. According to research cited by the DPU, the average energy burden (heating and electricity costs divided by income) for all households in Massachusetts is 3 percent, but the average energy burden jumps to 10 percent for low-income households and as high as 31 percent in some areas. A “high energy burden” is considered anything above 6 percent.
Currently, an income-eligible customer is entitled to a flat-rate discount on their bill – 25 percent for natural gas customers and anywhere from 32 to 42 percent for electricity ratepayers. The DPU is worried the one-size-fits-all discounts are inadequate for very low-income customers and unfair to people just over the income threshold, which is set at 200 percent of the federal poverty level or 60 percent of the state’s median income, whichever is higher. The median income level, which works out to $59,359 for a family of two and $87,294 for a family of four, is typically higher.
The Department of Public Utilities has asked for input on whether there is a better way to do offer the dscount, and is seeking feedback on two specific possibilities. One approach, called a percentage of income payment plan, would have the utility bills of income-eligible customers set at a yet-to-be-determined affordable percentage of their household income. The other would offer tiered discounts, providing greater reductions to those with the lowest income and gradually lesser reductions for those at higher levels of income.
Separately, National Grid is seeking DPU approval in a pending rate case to move forward with a tiered discount structure on its electricity bills, with five tiers ranging from 55 percent at the lowest end of the income scale to 32 percent at the top.
Karsten Barde, director of US policy and regulatory strategy at National Grid, said the utility explored setting a discount at an affordable level of a customer’s income and concluded it would be complicated to implement and give the customer no incentive to conserve energy. “We really think the tiered approach is simpler,” he said.
Not everyone is a fan of the utility discounts. In a letter to the DPU, Marc Pacheco of Topsfield worried about a hollowing out of the middle class as discounts are provided to low-income customers and de facto discounts are provided to high-income customers who can take advantage of subsidies for installing solar and reducing the electricity purchases fron the grid.
“Those in the middle who do not qualify for the low-income discount, nor can afford solar panels, will be part of an ever-shrinking subsidizer class,” Pacheco wrote. “Of course the investor-owned utilities have no problem expanding the low-income discount. They don’t pay for it, the ratepayers do.”
Providing the existing low-income discount costs National Grid an estimated $114 million, which the utility recoups through a surcharge on residential customer bills of $5 a month. Moving to the utility’s proposed tiered approach would add an additional $33 million to the cost, requiring a boost in the monthly surcharge of $2.47.
Despite concerns about this cost shifting, momentum appears to be building to extend the utility discounts to moderate income households. Julie Curti, director of clean energy at the Metropolitan Area Planning Commission, urged the DPU to require utilities to offer discounts to moderate income customers, which she defined as households making between 60 and 80 percent of the state’s average median income.
The Healey administration and key legislative leaders are on board with an expansion. Rep. Jeffrey Roy of Franklin, the House chair of the Legislature’s Telecommunications, Utilities, and Energy Committee, said language authorizing the expansion of the discounts to moderate income customers was included in legislation reported out of the committee. The language, which is supported by the Healey administration, would leave the job of defining moderate income to regulators.
Roy said he hears constantly from consumers about the high cost of their utility bills. “We’re trying to address their bills and help people out as best we can,” he said.
Sen. Michael Barrett of Lexington, the Senate chair of the Legislature’s Telecommunications, Utilities, and Energy Committee, applauds the effort to introduce greater equity into utility bills, but he sees a larger challenge looming.
“We need to redesign rates to do three things at once,” he said. “Incentivize one group to produce more power by putting up residential solar, while also enabling a second group to afford the additional power their heat pumps and EVs will need, while also making sure that a third group can just get by and pay their monthly bills. We need it all.”
So far, no one is proposing the type of radical change in utility bills that California is considering. Barde, the National Grid official who is pushing a tiered discount approach to help low-income customers, said an evolutionary change with utility bills seems appropriate in Massachusetts, not the “total shift” being pursued in California.
“We said that was maybe a bridge too far,” he said.