Raleigh, NC. Today, the Senate Commerce Committee will hear House Bill 1086, a natural gas rate bill known as the “CUT,” sponsored by Representatives Saunders and Brubaker. The “CUT” (short for customer usage tracking and rate adjustment mechanism), would open the door for natural gas providers to recover a fixed profit. The profit would be guaranteed and decoupled from sales.
Piedmont Natural Gas implemented the CUT in a pilot program in 2005. Since then, Piedmont Natural Gas has collected or accrued over 51 million dollars more from residents than it would have recovered without the CUT. The CUT has never been used to lower residents’ rates.
Consumer advocates strongly oppose the bill, arguing that it has and will raise residents’ rates and discourage conservation. “With a name like ‘CUT’ you would think the bill would save residents money, but it won’t. It guarantees natural gas providers a profit, and it guarantees customers that their rates will go up if they use less natural gas.” says Shana Becker, advocate at the North Carolina Public Interest Research Group (NCPIRG). NCPIRG is a statewide, nonprofit, nonpartisan group that researches and advocates on behalf of consumer rights, public health and good government.
If passed, the “CUT” legislation would mark a significant departure from traditional rate-making principles. Historically, utilities’ earnings depend upon a variety of factors including sales, weather, and new technology. Measures that decouple profits from sales, like “CUT,” make utilities indifferent to customers and changing economic conditions.
The National Association of State Utility Consumer Advocates also opposes decoupling mechanisms like the “CUT.” In a resolution issued two weeks ago, NASUCA resolved to “oppose decoupling mechanisms that would guarantee utilities the recovery of a predetermined level of revenue without regard to the number of energy units sold and the cause of lost revenue between rate cases.”
“The CUT needs to be cut. If customers conserve, their rates will go up. If they consume extra, then their rates will go down.” Says Becker. “This policy makes no sense.”
