Oil-Heat Group, Attorney General Blast KeySpan

BY ROBERT P. MADER Of CONTRACTORs staff WELLESLEY HILLS, MASS. The Massachusetts Oilheat Council is hoping state regulators see things its way in the groups long battle against KeySpan Energys oil-to-gas conversion program. KeySpan gives away free gas-heating equipment to customers who convert to gas. Installation is performed either by independent contractors or by the utilitys unregulated service

BY ROBERT P. MADER

Of CONTRACTOR’s staff

WELLESLEY HILLS, MASS. —The Massachusetts Oilheat Council is hoping state regulators see things its way in the group’s long battle against KeySpan Energy’s oil-to-gas conversion program.

KeySpan gives away free gas-heating equipment to customers who convert to gas. Installation is performed either by independent contractors or by the utility’s unregulated service subsidiary.

KeySpan has asked the state’s Department of Telecommunications and Energy for a $61 million rate increase for its Boston Gas subsidiary. Apparently, $11.5 million of that ratepayer money would be used for oil-heating conversions. The outraged MOC asked for and was granted intervenor status in the rate case.

The Massachusetts attorney general, who blasted both KeySpan and the DTE, has joined the MOC. Attorney General Tom Reilly surprised all those involved in the proceeding by calling the utility “manipulative,” chiding state utility commissioners for being pro utility and siding with MOC by stating that KeySpan’s oil-to-gas heat conversion program has no real benefit to gas users.

A KeySpan spokesperson said it had submitted documents to DTE showing the program is beneficial to ratepayers.

Reilly’s comments coincided with an Aug. 28 deadline for the filing of final legal briefs by his office and MOC as DTE nears a decision on whether to grant KeySpan’s Boston Gas unit a base rate increase of nearly $61 million beginning Nov. 1. KeySpan had until Sept. 10 to respond to the briefs. Parties in utility cases such as this are usually mum on their specific legal positions until the utility has had an opportunity to respond to the briefs, or until the utility commission rules on the entire case.

“I can’t even speculate on the outcome,” MOC President Michael Ferrante told CONTRACTOR.

Because DTE regulators act as judges in the legal proceeding, they gave no indication if the MOC and attorney general were persuasive, Ferrante said.

Reilly, the state’s lead consumer attorney, clearly decided to ratchet up the pressure on KeySpan and the DTE, however, and show that he sympathizes with MOC’s position on utility oil-to-gas conversion programs, which have long been a thorn in the side of oil-heat marketers.

Ferrante noted that KeySpan, in its public statements, has said that it wants to convert 20,000 customers to gas heat. The utility is giving away equipment from American Standard and Burnham.

After hearing about the rate increase request, MOC asked for and was granted intervenor status in the case. MOC presented a series of arguments to the regulators.

KeySpan is using its monopoly position and its highly aggressive free home-heating equipment program to convert 20,000 oil heat customers a year to gas heat, said MOC, which added that this situation is a detriment to the long-term health of the heating oil industry in Massachusetts as well as small plumbing, heating and cooling contractors.

KeySpan’s equipment giveaways and related marketing efforts are of no benefit to existing gas customers, who are subsidizing the free equipment program and all related activities, MOC said.

Customers are not fully aware of the cost of converting fuels and KeySpan does little to explain these costs, which include installation and the higher cost of natural gas vs. heating oil as it relates to a payback analysis for homeowners, MOC said.

Given the current status of natural gas supplies and pricing in the United States — even Federal Reserve Chairman Alan Greenspan has commented on tight U.S. gas supplies — KeySpan should not be allowed to use its free equipment program to add new gas customers to an already strained system, MOC said.

MOC’s arguments caught the attention of Reilly, who has worked with MOC’s attorney on this case, Emilio Petroccione, of Roland, Fogel, Koblenz & Petroccione.

“Without question, MOC’s involvement in this case and Emilio’s relentless pursuit of our key objectives has greatly impacted how the state attorney general has pursued KeySpan,” Ferrante said.

Reilly’s strong comments on Aug. 29 attacked KeySpan’s proposed rate hikes and company activities, and they were a stinging criticism of a regulatory body that has long been viewed as sympathetic to utilities.

Citing soaring prices for natural gas, Reilly said that KeySpan’s rate increases would raise monthly winter gas bills for an average Boston Gas home to $218.51 starting Nov. 1 from $155.73 from last November.

Reilly said the hike is unacceptable because the company used a host of “manipulative” moves to justify the rate increase including adding maintenance and repair costs that had been delayed from previous years and shifting about $10 million in costs from other subsidiaries, which are subject to a rate freeze. KeySpan also owns Essex Gas, Colonial Gas Lowell and Cape Cod Gas.

And in siding with MOC, Reilly said the company’s $11.5 million free furnace and boiler program for new customers, which is part of the proposed $61 million in rate increases, is unacceptable because it yields no clear benefit for other Boston Gas ratepayers.