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Plan for prepaid electricity rejected

State says utility proposal is unfair to low-income clients

By Erin Ailworth
Globe Staff / July 23, 2009

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The state has shot down a utility company’s plan to have some low-income residents pay in advance for the electricity they use.

The Massachusetts Department of Public Utilities dismissed the proposal from Western Massachusetts Electric Co., saying the program would have unfairly targeted low-income customers and circumvented Massachusetts laws meant to help struggling consumers keep the lights on. The plan had come under fire from community advocates and state officials, including Massachusetts Attorney General Martha Coakley.

Western Mass. Electric had proposed a pilot program under which 600 to 800 low-income households in the Springfield area would have paid for electricity in advance, while others were charged a premium for any power they used beyond what the company called the “basic’’ necessities. The plan was filed to comply with a state requirement to study so-called smart grid technologies, which help customers reduce energy use. Peter Clarke, the utility’s president and chief operating officer, earlier said the company focused on low-income customers because they were under-represented in other energy-efficiency studies.

Critics said the plan, and the prepay component in particular, could allow the company to shut off power to households in violation of state consumer protection laws. Yesterday, those same critics applauded the state’s decision to deny the proposal and order Western Mass. Electric to produce a revamped plan within three months.

“We believe the proposal would have eroded important protections for low-income customers against shutoffs,’’ Coakley wrote in a statement to the Globe.

Philip Giudice, commissioner of the state Department of Energy Resources, which also objected to the Western Mass. Electric proposal, said he thinks public utility officials made the “appropriate call’’ to dismiss the company’s plan.

“The comments that were raised by the low-income advocates were appropriate and the DPU looked at them and said, ‘You know, this doesn’t make sense,’ ’’ Giudice said. “That’s how it’s supposed to work.’’

“The proposal from Western Mass. Electric was imaginative in some ways, but I think it was potentially harmful, particularly for households with low incomes,’’ added John Howat, of the nonprofit National Consumer Law Center in Boston. “The Department of Public Utilities was pretty clear that prepayment metering in this state is not going to fly under existing regulations and statutory provisions. So, it set a good precedent.’’

Now Western Mass. Electric has 90 days to revamp its smart grid proposal so that it includes customers of all income levels and offers pricing incentives to encourage customers to use electricity in off-peak hours. Howat said the consumer law center plans to offer the utility support for the development of a new plan.

Meanwhile, Western Mass. Electric spokeswoman Sandra Ahearn said the utility has been working with low-income advocates and already is reworking its pilot proposal. “Obviously, we’re disappointed,’’ she said. “We tried something a little different . . . but we’ll just move forward.’’

However, she added, the company still believes that low-income customers deserve more attention from smart grid test programs meant to encourage cuts in usage.

“The effect or benefit that the smart grid technologies has on them still needs to be looked at, because the technology is coming,’’ Ahearn said.

Environmental advocate Seth Kaplan of the nonprofit Conservation Law Foundation said he’s glad to see the state move so quickly on Western Mass. Electric’s proposal.

“This is the kind of side issue that makes discussion of smart grid so difficult,’’ Kaplan said. “If used properly, smart grid technology has a lot of potential for reducing peak demand, which would allow us to shut down some of the oldest, dirtiest power plants. . . . It’s a tool. From an environmental point of view, we’re hopeful that if used right, it can do a lot of good.’’

Erin Ailworth can be reached at eailworth@globe.com.