GBREB Fighting to Keep Your Energy Costs Down
The Greater Boston Real Estate Board has been actively engaged in an issue that affects all of our members, commercial and residential, large and small. The issue is known as revenue decoupling and it's a utility billing rate scheme currently under consideration by the Massachusetts Department of Public Utilities (DPU). Though this new scheme has huge implications for electricity consumers - it's gone almost entirely unnoticed by the press until now. I thought you should know where we stand.
If mandated by the Commonwealth, revenue decoupling would, in effect, allow utility companies to make money on energy that - thanks to conservation measures and investments in higher efficiency energy systems by customers -- they would no longer have to deliver. The scheme goes to the heart of what some feel is a conundrum: How can utility companies and their shareholders recognize sufficient profits as customers work hard to conserve energy and use less power?
Revenue decoupling is being advanced as the solution but unfortunately, this seemingly simple answer - while it may work for utility companies -- is profoundly unfair to consumers. In effect, the less power we use, the more we pay for the delivery of the actual amount of electricity we use. The result is that this scheme reduces the amount that the consumer would expect to save as a result of reducing his or her energy consumption - this to make utility companies whole.
The Greater Boston Real Estate Board believes this is wrong and we have voiced our objection in testimony before the DPU. And we are not alone. A host of consumer groups share our view - groups who are concerned about the negative impact this would have on residential and commercial utility bills, driving up the cost of doing business and living in Massachusetts.
As an example, assume that there is a company that purchases $120,000 of electricity yearly ($10,000 monthly) at 16 cents a unit. Roughly speaking, about 70-75 percent of this cost is energy (electricity) and about 25-30 percent is the cost of delivery. If that company reduced its consumption through energy efficiency and conservation by 20 percent, it would expect its costs to decrease by $24,000 annually. Under decoupling, however, that expectation would be dashed. Decoupling would protect the utility company delivering the energy against a reduction in revenue stemming from the reductions in energy use. The same situation would apply to residential consumers. They'd be paying more (per unit) to have less units of electricity delivered.
In Maine, revenue decoupling was an experiment of the 90's - and by the time Maine's taxpayers finally figured it out, it was repealed. Customers experienced substantial cost increases, as the State was suffering through a recession.
Current concern about revenue decoupling isn't isolated to Massachusetts. As recently as last June, the National Association of State Utility Consumer Advocates adopted a resolution to support energy conservation and efficiency, but to oppose decoupling mechanisms that would guarantee utility companies recovery of predetermined revenue without regard to the number of units sold or the cause for lost revenues (by the utility companies). Similarly, the Massachusetts Attorney General has aggressively weighed in on revenue decoupling, positively supporting every effort to use energy/electricity wisely, but questioning the need for this approach, and offering proposals if the DPU were to adopt such a scheme.
The Greater Boston Real Estate Board is -- and will continue to be -- very active on this issue. Please use the following link to access a story on this issue that appeared this week in the Boston Globe.
Greg Vasil, CEO
Greater Boston Real Estate Board