Shining Light on a Broken Compact

An Open Letter to Residents & Businesses on the Cape & Vineyard

By Chris Powicki

   The Cape Light Compact was formed to represent the interests of all electricity consumers on the Cape and Vineyard. Under the Compact’s power supply program, however, residents and businesses have been paying the highest rates in the continental United States while subsidizing lower rates for towns and other municipal accounts. In addition, Barnstable County officials and select town appointees have been making decisions behind closed doors while flouting both the spirit and the letter of consumer disclosure standards.

   Residents and businesses deserve immediate answers to three critical questions:

  1. What is the Compact doing to prevent a repeat of last year’s power supply fiasco?
       In August 2005, Compact officials indicated that they were waiting for a lull in prices before striking a favorable deal with a competitive power supplier. Bad decision: First Katrina, then Rita, battered energy infrastructure. This roiled power markets already buffeted by increasingly global demand pressures.
       Facing no good choices, the Compact extended its existing supply agreement with ConEdison Solutions. All Cape and Vineyard consumers suffered rate hikes exceeding 80%. The aggregate impact on pocketbooks and bottom lines will likely surpass $10,000,000 by the end of the year. Profits realized by ConEdison Solutions have not been disclosed.
       By not layering contracts or otherwise diversifying its supply portfolio, the Compact failed to hedge risks, violating a fundamental tenet of market participation. With hurricane season well under way, Cape and Vineyard consumers need details on the Compact’s power supply procurement and risk management plans for 2007.
  2. Will the Compact continue keeping consumers in the dark?
       
    Under state law, NStar and competitive power suppliers are required to mail notices to consumers informing them of rates and other contract terms. Last fall, however, Compact officials chose not to require ConEdison Solutions to directly notify consumers of the new, much higher rates. Marking a change of course from previous practice, the Compact also neglected to publish notices in local newspapers comparing its prices with NStar’s. As a result of these decisions, tens of thousands of consumers didn’t find out about skyrocketing rates until after they opened their bills, and they weren’t made aware of cheaper options.
       The Compact was formed to protect consumers, not to undermine their interests while protecting its own. For 2007, Cape and Vineyard consumers need to know whether the Compact will require supplier(s) to notify them of any significant changes in rates or contract terms. For the Compact itself, requirements defined by Compact officials and institutionalized by Massachusetts Department of Telecommunications & Energy Order 00-47 represent a good starting point for future consumer disclosure.
  3. Will the Compact represent the interests of all classes of consumers equally?
       
    The Compact’s supply program is supposed to get better rates for all by leveraging the buying power of residents, as well as small, medium, and large commercial and industrial (C&I) consumers. Municipal consumers are sprinkled among the C&I rate classes, accounting for a small percentage of the Compact’s overall constituency but 100% of its Governing Board.
       At the beginning of 2006, Compact officials privy to a closed rate apportionment process granted a break (relative to rates available from NStar) to large C&I consumers, including the most substantial municipal accounts. In spring 2006, all municipal consumers were given discounts (relative to their rates at the beginning of the year) exceeding 33%. Meanwhile, all residential consumers and the overwhelming majority of C&I consumers were left fully exposed to Category 5 market forces for the first 6 months of this year – long after the storm had passed.
       As a taxpayer and parent with two children in the public school system, I generally support anything that stretches scarce public resources. However, decisions with different effects on different classes of consumers should be made in a transparent manner. For 2007, Cape and Vineyard residents and businesses need to know whether the Compact is trying to get them the best deal possible, or whether they will be asked to pay more so the towns and other municipal consumers can pay less.
       If you are concerned about these issues, I encourage you to contact officials within your town and at the county level—as well as local and regional chambers of commerce—to demand public hearings regarding the Compact’s power supply program. By pursuing answers to these and other questions, you can help shine some light on the Compact’s decision-making processes, ensure that the Compact’s actions are consistent with its rationale for existence, and gain more control over your energy future.
The author, a Cummaquid consumer and small business owner, has provided consulting services on public interest issues facing the electricity industry for more than 15 years.

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