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Bay State's IT Customers Hit with $317/MMBtu Penalties

Bay State's IT Customers Hit with $317/MMBtu Penalties

Some dual-fuel interruptible natural gas customers of Bay State Gas Co. in Massachusetts, New Hampshire and Maine were shocked when they found out that they may have to pay $317.10/MMBtu for any gas they have used since an operational flow order and curtailment period began on Christmas Eve.

"It's outrageous. It comes out to the equivalent of fuel oil at $44.39/gallon. It's like filling up your car and then being charged $75/gallon for gasoline," said Curt Freedman of CMF Engineering in Long Meadow, MA.

"We're waiting to find out from one of our clients if they will have to pay it," he said. "They had sediment in their oil tank and it took them a week to get it serviced and in the meantime they had to use gas. They haven't gotten their bill yet, but based on this notice, they could get a bill that represents the cost of their heating fuel consumption for two whole winters."

Earlier this month, Bay State sent out a notice informing customers that the January "unauthorized use of gas rate" for interruptibles who had emergencies and needed to switch from oil back to gas during this curtailment period could go as high as $31.71/therm ($317.10/MMBtu). At the end of the month, the utility will set the penalty fee at five times the highest daily index price seen during the month of January. Right now that number is around $60/MMBtu at Algonquin Citygate, a Bay State spokesman said.

"This rate was calculated consistent with Bay State's unauthorized use charge set out in its terms and conditions," Bay State's Linda Wainwright told IT customers in the notice. "I sincerely regret I was not able to inform you of this high rate in advance, but the rate is based on the highest gas cost each month, which cannot be determined until the end of the billing cycle. Please be aware that the 'unauthorized use of gas rate' for [February] may also be extremely high. If you are currently on gas or must switch to gas at any time during this curtailment period, I would strongly urge you to fix the problem as soon as possible and get back on oil!!!

"I know this rate will be a shock for you...it was for me as well," said Wainwright. "However, by virtue of definition, interruptible customers must be off during the colder months so that Bay State may provide reliable service to its firm customers, and according to tariff/regulation, any interruptible customer who switches back to gas during interruptible curtailment periods, must be billed at the unauthorized use of gas rate."

"This could [hurt] hospitals, universities, large boiler plants, and many other customers who are dual-fuel," said Freedman, who believes that the utility has such exorbitant penalties mainly to discourage customers from using the interruptible dual-fuel service and instead utilize firm delivery service, which costs more.

"It is my opinion that Bay State Gas is doing everything in their power to discourage dual-fuel interruptible customers from subscribing to the IT gas rate. A lot of people who are on firm natural gas are considering interruptible gas. That diminishes Bay State's revenue, so they are creating all these scare tactics," he said.

"There are previous notices I could share with you in which they said they would shut people off if there were any violations. My contract doesn't show any penalty numbers like this. No one was told ahead of time that this is the price they would pay."

Freedman said he intends to take the matter to state regulators at the Massachusetts Department of Telecommunications and Energy (DTE). He also plans to send letters about the problem to his state and federal representatives.

"What clearly has to happen is that the politicians will have to intervene to straighten this out and put pressure on the DTE to establish an improved policy for managing the dual-fuel customers," Freedman added.

He said it is a flawed regional energy policy to discourage fuel switching. "If the marginal costs of natural gas are so high, we should be doing everything in our power to encourage more customers who can to switch from natural gas to alternate fuels. This measure scares people and forces them off the IT rates."

Bay State spokesman Charles Moran said the utility had to cut its IT customers this month because demand exceeded its design day several times and reached record levels twice, on Jan. 9-10 at 574,000 Dth and on Jan. 15-16 at 603,000 Dth. He noted that the utility and in fact all the other utilities and power grids in the region had to issue calls for conservation. Bay State still is under an operational flow order. High temperatures Thursday in Massachusetts were in the mid 20s with lows in the mid-teens.

"If it was 60 degrees outside and we were cutting customers, maybe there would be some cause for [alarm about charging penalties]," said Moran. He said OFO balancing charges were similarly high.

"Part of being an interruptible customer is being available to switch when we call on you," he said. "That is something the customers are aware of and we enforce. These people make business decisions based on the contracts they sign, and this in fact is a result of them not holding up their end of the bargain so to speak."

The utility is one of the largest natural gas utilities in New England, serving more than 300,000 customers.

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