NStar seeks cut in rates for Mass. homeowners

Eastern Massachusetts homeowners who buy electricity from utility NStar are likely to see their monthly bill drop about $4 to $7 starting July 1, under rates NStar is asking state regulators to approve.

But at the same time, businesses and institutions that buy their electricity through NStar -- instead of using a competitive supplier -- are facing a 20 percent increase in the price of power.

The reason is that under state law residential rates are set every six months, but so-called commercial and industrial rates are readjusted every three months. Because business customers have far more competitive alternatives to NStar for electric supply than homeowners do, state policymakers want businesses to be more exposed to market price signals while cushioning homeowners from price volatility.

For homeowners, the new rates reflect a net drop in wholesale electric prices since NStar rates were set in mid-October, when energy markets were still roiled by the aftermath of Hurricane Katrina and Hurricane Rita, which ravaged Gulf Coast oil and natural gas supplies and sent prices skyrocketing. Natural gas plunged during the mild winter, but have climbed again in recent weeks.

Natural gas prices heavily influence New England electric rates because about 40 percent of the region's electricity is generated by gas-fueled power plants.

Commercial and industrial customers reaped a huge dividend from the falling winter energy prices last month, when NStar's electric rate fell by nearly half, to 9.2 cents per kilowatt-hour from 18.1 cents during the January-March period. Starting July 1, however, that rate will rise to 11.08 cents, NStar spokeswoman Caroline Allen said.

Small businesses are most likely to buy their electricity through NStar, while most larger commercial and industrial accounts pay a competitive supplier for power and pay NStar only for transmission and distribution costs.

Although it operates under one brand name, for legal and regulatory reasons NStar still files three rates for its former Boston Edison Co. territory, Cambridge Electric, and Commonwealth Electric service area in southeastern Massachusetts, Cape Cod, and the islands. NStar serves 1.1 million homeowners and firms in 80 cities and towns.

Under the proposed new rates, the average ``basic service" for homeowners using 500 kilowatt hours of electricity monthly would see their total bill fall to:

$100.47 from $106.56 in the Boston Edison area.

$95.95 from $99.71 in the ComElectric area.

$98.36 from $105.24 in Cambridge.

The NStar rate changes require approval by the state Department of Telecommunications and Energy , which virtually always accepts utility rate proposals without making changes.

The changes are driven solely by the so-called energy supply portion of bills, or the cost of generating electricity, not transmission, distribution, or customer service fees. NStar shops for power among competitive suppliers like Constellation Energy and Dominion Power on behalf of basic service customers, then passes along the price to customers without markup or profit.

NStar buys different wholesale electric pacts for each of its electric utility subsidiaries. For residential customers, the Edison rate is dropping to 11.44 cents per kilowatt-hour from the current 12.66 cents. The ComElectric rate is dropping to 10.45 cents from 11.21, and the Cambridge rate to 10.67 cents from 12.05 cents, NStar said. The monthly bill figures represent the total price after delivery and other fees are added.

National Grid, which serves 169 Massachusetts cities and towns, is charging homeowners 9.693 cents per kilowatt-hour through October. It locked in that price in March, before energy prices began to climb. Also, because of inadequate high-voltage transmission lines, NStar customers dependent on premium-priced plants in metropolitan Boston, power prices are also almost always higher in Boston than they are in National Grid service areas in central and western Massachusetts that have better access to cheaper power.

Peter J. Howe can be reached at howe@globe.com.