Halloween Post: PSNH and the Zombie Tariffs
While there are many horrific and ghoulish stories that we could write about in the energy sector, we recently came across a textbook version of a nightmare that plagues many a utility rate department: the zombie tariff. Zombie tariffs are rates that just won't die despite the best efforts of the utility to kill them. The graphic below illustrates many of the zombie tariffs that you'll find in the haunted utility tariff book.
Zombie tariffs are often really hard to kill. The reasons are many, but most often utility commissions are sympathetic to customers who have "exercised reliance" on the existence of these rates. Oftentimes, these customers made investments that would be stranded if the rate were to go away. Commercial and industrial users on zombie tariffs often intervene in rate cases to ensure that their zombie rate lives on.
About two weeks ago, this author was taking a look at the latest filings with the New Hampshire Public Utility Commission (NH PUC) when we came across Docket 14-203. This docket embodies the nightmare that zombie rates can pose for a utility rate department. Once upon a time in the PSNH territory, before many of us were born, PSNH offered a special discounted rate for customers with controllable hot water heaters. The deal was discounted electric service in exchange for installation of a control device that would ensure off-peak only operation of the heating element. This rate was actually a Rider to the residential rates called the Controlled Water Heating (CWH) rider. It was closed to new customers in 1981 and customers were grandfathered until they replauced or removed their hot water tanks, at which time they would be removed from the rate and defaulted to standard rates. Somehow in 2014, mindbogglingly there are functional water heaters from the 70s on this rate that still work (but I bet some customers replaced their tanks and just didn't tell PSNH). The graphic below shows a timeline of this rate and summarizes the results of the PSNH investigation into customers still on the rate.
PSNH had a real interest in vetting customers on this rate because most of the metering and control devices for these customers were made before 1980 and aren't available for purchase anymore. Furthermore, PSNH found that the load control functionality of many of these meters was no longer operable and many meters weren't working properly. PSNH's metering team found itself in a ghoulish place faced with the following three options detailed below.
The NH PUC judiciously allowed PSNH to proceed with option three as the control functionality on these water tanks isn't worth three hundred thousand bucks. Its important to note that while the metering and controls for Rider CWH will be scrapped, the tariff will live on like the undead zombie it is. While it will no longer terrorize the metering department at PSNH, it will continue to haunt the dreams of the rate department, especially when things like cost of service studies and revenue requirements need to be devised. Chances are, Rider CWH will continue for many more years.............muahahahaha.
Happy Halloween!