Energy Regulators Shift Costs, Change Formula for Small Businesses in Connecticut

In an effort to help small businesses that have struggled to pay significantly higher electricity rates than other customers, state regulators on Wednesday ordered Eversource to lower fixed costs in two of its commercial rate structures. The changes, which resemble formulas that set consumers rates, will go into effect on Nov. 1.

More than 103,500 Eversource commercial customers are currently charged what’s called Rate 30, including small businesses and some schools. These customers pay a fixed rate of $44 per month for the first 2 kW of capacity they need. They pay an additional $14.52 per kW of capacity beyond that, which is based on their highest 15 minutes of electricity usage over the prior year.

Residential customers instead pay a volumetric rate, which is charge per kilowatt hour – a kilowatt is a measurement of the rate at which the user consumes energy, and kilowatt hour is how much electricity was actually used over a period of time. 

So a commercial customer with a peak need of 3 kW of energy would pay $58.52 a month, and a customer with a peak need of 100 kW would pay $1,467 a month – regardless of how much electricity either customer actually used.

State Sen. Norm Needleman, D-Essex, co-chair of the Energy and Technology Committee, said that early in the pandemic he heard from a dry cleaner who was only running their machines once a week because of the drop off in demand, but was still paying the same high fixed cost for electricity.

“I’m happy that PURA is addressing this issue of equity for small business owners,” Needleman said. “They suffered more than most during the pandemic.”

But the change has raised concerns at the Office of Consumer Counsel that the new fee structure will shift costs to other Eversource customers. Because only customers who can save money with the new fee structure will use it, Eversource is guaranteed to lose revenue with the change, and can then recover those costs from other customers, according to Consumer Counsel Richard Sobolewski.

Needleman said the argument about a cost shift goes back to how Eversource charges for demand, something he said he plans to ask PURA to study.

“The idea that you build a system for the worst case scenario under every circumstance – your business has to have this capacity for 15 minutes a year, and you’re going to pay for it the whole year. You pay more than you need to,” Needleman said.

Needleman joined other committee leaders including State Sen. Paul Formica, R-East Lyme, to urge the change.

Eversource said in a statement that it is looking forward to developing alternative rates for small business customers, and that the company is reviewing PURA’s decision to determine the exact impact to customers.

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