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Rate hike power play: Electric companies seek price increases by Tom Walsh Saturday, September 2, 2000

Rising fuel costs could soon take another bite out of consumers' wallets as two major Bay State power companies yesterday asked for rate hikes that would slap another $40 to $70 a year onto the electric bills of 2.5 million customers.

A spokesman for Boston's biggest power supplier, Nstar, said the company sought hikes of up to 17.9 percent to offset the ``soaring price of gas and oil.''

Nstar wants the new rates to kick in by Nov. 1, said spokesman Mike Monahan. Nstar is the parent company of Boston Edison, Commonwealth Electric and Cambridge Electric.

If regulators grant the requested hikes, Commonwealth Electric and Cambridge Electric customers would see their rates rise by 17.9 percent, from 3.8 cents a kilowatt hour to 4.48 cents a kilowatt hour, Monahan said. Boston Edison customers would face a 12.9 percent increase to 5.09 cents a kilowatt hour, he said.

Monahan said the increases, which would affect 1.3 million customers, are needed to cover Nstar's costs to buy power. He said those costs are rising due to steadily climbing fuel prices.

That may come as cold comfort to those who have to cover higher electric bills, however.

Paying even a few dollars a month extra for electricity will put a burden on low-income residents already pinched by higher gasoline and housing prices, said Estella Owens, an organizer at ACORN, a Boston community group. ``Six or seven dollars a month means a whole lot to people who don't have it and are out working two jobs just trying to make ends meet,'' Owens said.

The rate hike requests came as no surprise to state regulators.

``I was expecting this,'' said Tim Shevlin, executive director of the state Department of Telecommunication and Energy. ``We knew there were plans to increase (rates) to offset the increased cost of fuels,'' he said.

The requests were filed just before the close of business yesterday, Shevlin said, and he could not go into details on the requests.

``We will review them and determine if the fuel-related increases are consistent with the electricity restructing act,'' he said. Under the 1997 law, he said, utilities can request a rate increase if their costs are driven up by gas and oil prices.

The Massachusetts Electric Co., which serves 1.2 million Bay State customers, asked for an increase of just over 12 percent, which it estimated would cost the average residential customer about $70 a year. The company wants the rate increase to take effect Oct. 1.

In a statement, Mass. Electric said it has already taken on $50 million in power costs due to escalating gas and oil prices. ``If we did not request this increase now, we would have no choice but to defer these costs and pass them on with interest at a later date, resulting in a request for an even higher rate,'' said company president Lawrence J. Reilly.

A boost in electricity costs would come at the same time consumers are being warned to expect higher prices for home heating oil this winter.

Last winter saw record high heating oil prices in the region, and energy regulators recently said they are increasingly worried by unusually low oil and natural gas inventories.

Several natural gas suppliers have already requested rate hikes for 2001.

And no one is predicting a drop in energy prices any time soon.

``The utility companies are looking at the cost of oil and gas today and in the future,'' said James Weiss, chief of equities research at State Street Research and Management in Boston. ``They see nothing to suggest relief any time soon.''

Weiss said the utilities face a growing demand for electricity, while at the same time the gas and oil supply remains tight. ``They're getting surprised on both ends.''

-- Martin Thompson (, September 02, 2000

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