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Back in May, several Massachusetts state agencies came together to form an Interagency Rates Working Group (IRWG) to advance near- and long-term electric rate designs that align with the Commonwealth’s decarbonization goals by prioritizing the reduction of energy burden while incentivizing transportation and building electrification. That statement of purpose is a mouthful but it succeeds at crystalizing the general consensus on Massachusetts energy policy goals among state officials and many advocates, including Green Energy Consumers Alliance — which is, how can we pay for energy in a way that keeps energy affordable for everyone and encourages getting off of fossil fuels?
After several months of technical analysis and civic engagement, the IRWG has published a report on Near-Term Rate Strategy and recommendations. The IWRG’s recommendations are focused on providing rate designs that enable Massachusetts’ households to make cost-effective electrification choices that support and advance the Commonwealth’s climate and clean energy goals.
The stated objective of the Near-Term Rate Strategy Report was to identify useful rate designs that could be implemented prior to the widespread deployment of advanced metering infrastructure (AMI) meters that will enable additional, more advanced electric rates. The following chart indicates when we can expect AMI meters to be deployed to customers of Unitil, National Grid, and Eversource. As you can see, the Report focuses on what can be done between now and 2029.
The IRWG continues to work on a Long-Term Ratemaking Study and Long-Term Ratemaking Recommendations for release in 2025.
Why We Need Rate Reform
The Near-Term Recommendations document asserts that current electricity rates “present a barrier to Massachusetts’ policy goal to achieve widespread deployment of electrification technologies to reduce emissions. Without an alternative rate offering that addresses this barrier, households may be unwilling to adopt heat pump technology at a pace and scale necessary to achieve the Commonwealth’s electrification targets. In fact, negative customer experience related to increased energy burden of operating a heat pump under current electric rates may further jeopardize the trajectory of the Commonwealth’s clean energy policies and climate goals by deterring further investments from being made.”
Green Energy Consumers completely agrees with the IRWG on this point. The IRWG's recommendations are well-focused on reducing the Spark Gap, which is the ratio between the cost of electricity and the cost of fossil fuels (whether methane, heating oil, propane, or gasoline). We would add that the Spark Gap applies to electric vehicles, heat pump water heaters, induction stoves, and electric clothes dryers as well as heat pumps, all of which are needed to meet our emissions targets.
IRWG’s Key Recommendations With Our Thoughts
All electric distribution companies (EDCs) offer an optional, seasonal heat pump rate, with lower winter volumetric rates that reduces the cost of operating a heat pump.
| Green Energy Consumers strongly supports this recommendation. The term volumetric refers to the charge per kilowatt hour (kWh) that we pay. The more kilowatt hours we use, the more we pay. When someone installs a heat pump, their overall electricity usage will rise. At current rates, a heat pump owner will pay more per month than it will cost the utility to serve them. Calculated properly, a lower rate for heat pumps would not shift costs onto households without heat pumps. |
The Commonwealth further considers an additional non-bypassable fixed charge, exercised in a targeted manner to include specific policy or public benefits programs, a monthly charge that cannot be avoided by any customers. This would be applied to all customers as a way to pay for certain programs that support the state’s energy, affordability, and decarbonization goals in a way that does not increase volumetric charges.
| Green Energy Consumers strongly supports this recommendation. An additional fixed charge could also enable a further reduction in the volumetric rate. With this approach, all customers would contribute fairly to the cost of these programs. Some examples of policy or public benefits programs include the electricity surcharges we pay now per kWh for Mass Save, EV charging station construction, and to finance the low-income discount rate. The societal benefits that we receive from those policies are not related to how much power we use, so a fixed charge makes more sense. A fixed charge like this would be revenue neutral, meaning it would be offset by lower per kWh rates. As a way to reduce the energy burden of low-income customers, it would be easy to reduce or eliminate the monthly charge for those who income-qualify. |
Discount rates, which provide a percent discount on the total electric bill, are an essential component supporting energy affordability, and the Working Group supports ongoing efforts to modify discount rate programs to more meaningfully address high energy burdens faced by many households in Massachusetts.
| Green Energy Consumers agrees. Our current rate structure is not optimum with respect to either decarbonization or social equity. Changes are necessary. |
IRWG also expressed support for several complementary policies to provide incentives for electrification and load management such as demand response, EV-managed charging programs, peak demand reduction, and upfront incentives for decarbonization technologies.
| Green Energy Consumers agrees with this section as well. Decisions that people make about which technologies to adopt, and the optimum use of the technologies, are influenced by several factors including rates, other incentives, and programs. Policymakers need to pull these policies together for a just transition to clean energy. |
As much as Green Energy Consumers appreciates and supports the IRWG Near-Term Recommendations, we encourage the MDPU to consider additional ways to reduce the Spark Gap, some of which we enumerated in early December.
Next Steps
Most of the recommendations by IRWG require decisions of the Massachusetts Department of Public Utilities (DPU), which is not itself a member of the IRWG. It will now be interesting to see how the DPU reacts. Based upon some recent actions by the DPU, we anticipate that the recommendations will be met with favor.
There are various ways that the recommendations could be investigated by the DPU. The Healey administration, the Attorney General’s office, or utilities could petition the DPU. The Department itself could also initiate a docket of its own.
To the extent that funding allows, Green Energy Consumers may intervene in whatever dockets stem from this IRWG process. To enable a proper level of civic engagement, we encourage the DPU to consolidate the recommendations into one statewide docket. If and when these recommendations are taken up by the DPU, we will do our best to encourage participation by our allied climate organizations and interested citizens.
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