State OK's 27.5% rate hike for Mass. Electric
State utility regulators yesterday approved the first in an expected wave of sharp electric and natural gas rate hikes that will hit consumers and businesses this winter, agreeing to a 27.5 percent increase for Massachusetts Electric Co. customers starting in November.
Rate increases are expected to be even higher, up to 50 percent, for large businesses that normally pay higher rates. For the average household using 500 kilowatt hours monthly of electricity, rates will jump to $81.20 from $63.68. Mass. Electric, part of British energy conglomerate National Grid PLC, serves 1.2 million customers in 168 cities and towns.
''Our review of the filing showed that the procurement of energy supplies was done appropriately, at market rates," said Timothy J. Shevlin, executive director of the Massachusetts Department of Telecommunications and Energy. By law the DTE has five days to review rate increase requests and decide whether to reject or amend them before they take effect automatically.
The DTE is also reviewing a rate increase request from KeySpan Energy Delivery New England, Bay State Gas Co., NStar Gas, and other utilities that, on average, would raise rates by an average of 26 percent starting Nov. 1. Those rate requests were made around Sept. 16. Because filing rules differ for electric and gas utilities, the DTE has up to 45 days to amend, reject, or approve them.
Already, however, some industry officials are anticipating that gas utilities might have to amend pending filings to seek even higher rate increases Nov. 1, or ask the DTE later in November for additional ''cost of gas adjustment" rate increases beyond what they are already seeking.
The Massachusetts gas utilities were generally basing their filings on prices as of late August, before hurricanes Katrina and Rita slammed into the Gulf Coast and sent natural gas prices soaring. Since Aug. 31, natural gas futures contracts have jumped more than 22 percent in trading on the New York Mercantile Exchange, Bloomberg data show.
Gulf Coast natural gas rigs, which normally supply about 19 percent of the nation's gas, are operating at less than one-quarter of their normal capacity because of massive damage inflicted by the hurricanes and slow repairs, according to Energy Department reports.
Under Massachusetts law, gas and electric utilities are allowed to pass through to consumers rising costs of the energy component of bills -- separate from what they charge for delivery and customer service -- but do not take any added profit when energy costs rise.
Alice Moore, chief of Attorney General Thomas F. Reilly's public protection bureau, said regulators should be looking at procedural rate-setting changes that could do a better job of ensuring ''stable and equitable prices" for electricity and natural gas.
But, Moore added: ''We have to face a cold reality: Energy prices are going up and will continue to go up."
Home heating oil, which nearly 40 percent of Massachusetts homeowners use and buy from more than 900 dealers across the state, is expected to cost 31 percent more than last winter.
NStar Electric, which supplies electricity to 1 million customers in Boston and 80 suburbs, is not due to seek a rate increase until Jan. 1.
Peter J. Howe can be reached at howe@globe.com. 
