A GAS COMPANY serving one of the state’s most economically distressed areas is looking to dramatically raise rates, prompting intense backlash and raising scrutiny of its spending habits.
Liberty Utilities, which services a small southeastern pocket of Massachusetts, filed its rate hike request in June and is asking the Department of Public Utilities for permission to raise gas rates by about 55 percent on average. DPU now has until May 31 to make a decision.
The company delivers gas for heating and cooking to customers in Fall River, the tenth-largest city in Massachusetts with a median household income less than half of the statewide average, along with eight surrounding towns like North Attleboro and Westport.
“No matter how you slice it, for my district, this is exorbitant,” said Rep. Carole Fiola, a Democrat who represents Fall River. “This was a shock to a lot of people. It will be very difficult for many people to afford this increase.”
It’s also a direct shot at Gov. Maura Healey’s affordability push.
Healey has based her energy agenda on a drumbeat of policy steps aimed at addressing high gas and electric costs and reducing or removing charges from utility bills to save ratepayers money. Liberty’s rate increase, if approved, would prompt dramatic sticker shock in a Gateway City and directly fly in the face of Healey’s effort.
DPU declined to comment on the rate case.
Pamela Bellings, a spokesperson for Liberty, which is owned by Canada-based Algonquin Power & Utilities Corp., defended the rate request in a statement, saying that the company has made “substantial investments” to comply with new pipeline safety regulations and enhance system reliability. Liberty serves customers in New Hampshire, Georgia, Iowa, Illinois, and Missouri, in addition to Massachusetts.
“We recognize the financial challenges many in our community are facing and have carefully assessed ways to smooth the impact to customer bills,” Bellings said. “A rate adjustment is necessary to help maintain compliance with all new regulations and continue delivering safe and reliable service to customers.”
The company is now negotiating the rate hike proposal with the state attorney general and other groups. For now, though, Liberty ratepayers are in the lurch.
Liberty’s rate hike request would raise monthly bills anywhere from $33 to $103 a month depending on the customer’s location and income level in order to recover nearly $95 million. The company last raised rates a decade ago, in 2015, it said in its DPU filing, and the majority of this request is to recover costs for pipe replacement and repair that are associated with the state’s Gas System Enhancement Plan, which have ballooned in recent years.
Liberty is also seeking to recover costs for improvements to the company’s customer information system and the relocation of its headquarters in Fall River.
If DPU approves Liberty’s plan, gas bills could rise 90 percent by 2030 — prompting “rate shock that will significantly burden ratepayers,” Timothy Newhard, a financial analyst in the state attorney general’s office, testified to the DPU in October.
The pure size of the rate hike request is putting a spotlight on Liberty’s gas system infrastructure work to fix leaky old pipes, the main driver of the company’s proposed bill increases. Newhard goes a step further, adding that Liberty is looking to profit from its “budgetary mismanagement” by recovering more than $40 million in a deferred GSEP revenue balance and recommending that DPU limit Liberty’s ability to charge ratepayers for those costs under reforms that the department adopted earlier this year.
The rate request has unsurprisingly attracted a large amount of scrutiny — and pointed criticism.
Sen. Michael Rodrigues, chair of the Senate Ways and Means Committee whose district spans the South Coast, including Fall River, said that “now is not the time” for Liberty’s rate hike.
“This move by Liberty, on the heels of a federal government that continues to shirk its responsibilities in providing food and housing subsidies, is unacceptable,” he said. “The cost of replacing their aging infrastructure should not be entirely borne by the consumer.”
Healey, meanwhile, said in a statement that this proposal “could not come at a worse time for families and businesses in southeastern Mass.”
“My administration will be pushing back in the review process and will oppose additional burdens on ratepayers,” she said.
State officials, including Department of Energy Resources Commissioner Elizabeth Mahony, appeared at an October DPU hearing to oppose Liberty’s request, alongside irate members of the public.
It’s the exact scenario Healey has increasingly tried to fend off. She blasted other more modest rate hike requests from the state’s larger utilities earlier this year, called on DPU to comprehensively review gas and electric rates to find ways to lower costs, and filed landmark energy affordability legislation that has yet to gain traction as the winter season hits. DPU approved gas rate increases for other companies of up to 30 percent last year, which prompted an outcry from consumers.
“I, too, am concerned about the size of the rate increase proposed by Liberty,” Mahony said in the hearing. “People are struggling every day to afford rising energy bills, and the 55 percent increase in rates proposed by Liberty is shocking.”
Dan Dolan, president of the New England Power Generators Association, said the rate request highlights the tradeoffs associated with the state’s decarbonization goals. Electrifying homes through heat pumps requires significant upfront capital costs but offers savings down the line. Slow uptake, however, means dealing with the burdensome transmission and supply costs of maintaining the gas distribution system.
“The fact that that is now coinciding with the sharpest political refocus on electric affordability that has happened in decades in Massachusetts and frankly, across the nation, is going to create an extraordinarily politically volatile situation,” Dolan said.
Liberty is also asking regulators to approve a 9.9 percent return on equity, which is the allowed rate of profit for the utility’s shareholders through capital investments. Though that rate of return isn’t out of the ordinary, it would still be tied for DPU’s highest approved return on equity in the past five years, according to Liberty’s own filings.
The rate hike request has also spawned debates about what kinds of costs utilities should be allowed to recover from customers in the first place. The Energy & Policy Institute, a nonprofit watchdog organization, is pushing legislation in Massachusetts to bar utilities from using ratepayer money for lobbying, investor relations, litigation and DPU cases, and lavish expenses for boards of directors.
Liberty’s rate case includes roughly $675,000 in these expenses, and removing these items would save ratepayers on average roughly $11 per year, according to the Energy & Policy Institute.
Still, that represents a small fraction of the $80 average monthly bill increase that Liberty is seeking for Fall River customers.
The state attorney general’s office said in DPU filings earlier this year regarding the utilities’ GSEP plans that the utilities have “little regard for targeted replacement and prudent cost management” under the Gas System Enhancement Program and that GSEP capital expenditures have increased by about 12 percent per year over the past decade because the companies have almost exclusively chosen to replace rather than repair leak-prone pipe.
Liberty, like most other gas utilities in the state, did not “demonstrate compliance” with its 2024 GSEP work plan approved by DPU and exceeded its cap by nearly $38 million, according to the attorney general, money that the company is now attempting to recover.
Getting DPU to approve such a large rate hike request will be a tall order, said Christopher Knittel, associate dean for climate and sustainability at the Massachusetts Institute of Technology. But the fact that Liberty is requesting the bill increases in the first place cuts both ways.
“It’s certainly possible that they’re trying to play a more complex bargaining game and that they are trying to settle on a number that is close to what they really need,” Knittel said. “The DPU will obviously try to cut costs wherever possible, but the fact that they’re asking for it in this environment might signal that these are actually really legitimate because this is not going to play well.”