Pascoag Fire District Economic Assessment, Rate and Supply Assessment with Capital Investment Plan

Pascoag, Rhode Island

Tucked away in the northwest corner of the smallest U.S. state is a small town with a small utility system. One hundred years ago, when the Pascoag Fire District in Pascoag, Rhode Island, inherited a reservoir and hydroelectric dam from a closing textile mill, no one foresaw the problems the system would encounter as it approached the 21st century. Pascoag has a system peak that is less than many mid-sized industrial plants, even though it serves over 4,000 customers and has revenues of almost $4 million. The fire district also provides water and fire protection services and has its own Board of Utility Commissioners whose rates and operations arc regulated by the Rhode Island Public Utilities Commission (PUC).

As with many municipal utilities, the district faces problems with uneconomic power supplies. Pascoag receives its power from several resources, including hydropower, a mix of fuels purchased from other utilities and a costly nuclear power plant, Seabrook, which came on line in 1990 and caused electric bills in Pascoag to soar. In 1996, when the Rhode Island Legislature passed an energy restructuring act, Pascoag retained the Berger Group to examine the district's cost structure, particularly purchased power costs. Although the district is locked into long-term supply arrangements, the Berger Team renegotiated one supply contract, reducing costs by eight percent. District management also had prepared a capital investment plan for improvements to the distribution system. Based on this plan, Berger experts analyzed both Pascoag's anticipated source and application of funds and net capital needs and devised a new rate structure to ensure sufficient revenues. Berger also revised the tariff schedules to allow the district to provide lower energy rates to large commercial and industrial users to retain and attract jobs to the area. In addition, the Team developed plans for the introduction of an advanced metering system to enable Pascoag to receive up-to-the-minute information for rate charging and service requirements. Finally, Berger advisors, working with Pascoag, identified additional long-term measures to reduce energy costs and presented these to the state PUC as part of Pascoag's rate filing.