Dive Brief:

• The Massachusetts Department of Public Utilities (DPU) has approved demand charges for net metering customers of Eversource utilities operating in the state, along with eliminating optional time-of-use rates for residential customers. 
• The decision is the second part of the ratesetting process for subsidiaries NSTAR Electric Co. and Western Massachusetts Electric Co. Last year, regulators approved higher rates for each of the utilities, though in a win for consumers the increases were much less than had been requested.
• Consumer and clean energy advocates say the DPU's decision last week will take control away from customers, in part due to a lack of advanced metering equipment installed in Massachusetts.

Dive Insight:

Demand charges are very controversial among renewables and clean energy advocates, and Massachusetts' decision has set the stage for intense debate over rate design. 

“Massachusetts needs to step up its game and embrace smarter electricity rates and more customer control," Daniel Sosland, president of Acadia Center, said in a statement. He said eliminating optional residential time-of-use rates and approving demand charges shows the state "is moving backwards instead of forward.”

Eversource, however, argued it faces "displaced distribution revenues" of more than $8 million annually that should be collected from net-metered customers. The DPU agreed, saying "the companies have demonstrated a cost shift from net metering to non-net metering customers by identifying costs directly imposed by net metering facilities on the distribution system." 

"The costs of net metering ... are borne by all electric customers, whether or not they receive net metering credits," regulators concluded in their order. "Consequently, there is a transfer of costs rooted in the net metering system."

The Acadia Center was critical of both the decision to eliminate optional time-of-use rates as well as the imposition of demand charges.

"Given the lack of sophisticated metering in Massachusetts, there is no way for consumers to know what time this peak occurred and what actions could be taken to manage these charges," the group said. "As a result, consumers will be paying the highest possible rate for this charge without being provided the information needed to understand the cause of these costs."

Acadia added that because an individual's peak usage doesn't necessarily align with the system's overall peak, "consumers are not being provided incentives to reduce energy usage in a way that could benefit the whole electricity system."

Demand charges typically bill consumers for the period of their highest usage — typically monthly. Normally found in the C&I sector, utilities have started proposed demand charges for residential customers, particularly solar. But most of those proposals were rejected, until now. 

In November of last year, regulators decided the initial phase of the case, but that result did not please Eversource. The DPU's approved a $12.3 million increase for NSTAR, about 78% lower than the utility requested. For WMECo, regulators approved a $24.1 million increase, about 30% lower than requested.

Following that decision, an Eversource spokeswoman said the utility was "disappointed with the deep cuts the DPU made to our rate request because we feel we provided sufficient and detailed documentation to support the total increase we requested."

The order also included $45 million in investments in electric vehicle infrastructure, and authorized up to a $15 million investment to construct a 5 MW energy storage facility on Martha’s Vineyard, and up to $40 million to construct a 12 MW energy storage facility on Cape Cod.