2012 -- S 2792 SUBSTITUTE A

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LC02253/SUB A/2

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS - LEAST-COST PROCUREMENT

     Introduced By: Senators Walaska, Lombardo, Sosnowski, Bates, and McCaffrey

     Date Introduced: March 21, 2012

     Referred To: Senate Environment & Agriculture

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 39-1-27.7 of the General Laws in Chapter 39-1 entitled "Public

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Utilities Commission" is hereby amended to read as follows:

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     39-1-27.7. System reliability and least-cost procurement. -- Least-cost procurement

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shall comprise system reliability and energy efficiency and conservation procurement as provided

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for in this section and supply procurement as provided for in section 39-1-27.8, as complementary

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but distinct activities that have as common purpose meeting electrical and natural gas energy

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needs in Rhode Island, in a manner that is optimally cost-effective, reliable, prudent and

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environmentally responsible.

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      (a) The commission shall establish not later than June 1, 2008, standards for system

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reliability and energy efficiency and conservation procurement, which shall include standards and

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guidelines for:

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      (1) System reliability procurement, including but not limited to:

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      (i) Procurement of energy supply from diverse sources, including, but not limited to,

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renewable energy resources as defined in chapter 26 of this title;

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      (ii) Distributed generation, including, but not limited to, renewable energy resources and

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thermally leading combined heat and power systems, which is reliable and is cost-effective, with

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measurable, net system benefits;

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      (iii) Demand response, including, but not limited to, distributed generation, back-up

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generation and on-demand usage reduction, which shall be designed to facilitate electric customer

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participation in regional demand response programs, including those administered by the

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independent service operator of New England ("ISO-NE") and/or are designed to provide local

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system reliability benefits through load control or using on-site generating capability;

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      (iv) To effectuate the purposes of this division, the commission may establish standards

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and/or rates (A) for qualifying distributed generation, demand response, and renewable energy

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resources; (B) for net-metering; (C) for back-up power and/or standby rates that reasonably

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facilitate the development of distributed generation; and (D) for such other matters as the

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commission may find necessary or appropriate.

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      (2) Least-cost procurement, which shall include procurement of energy efficiency and

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energy conservation measures that are prudent and reliable and when such measures are lower

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cost than acquisition of additional supply, including supply for periods of high demand.

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      (b) The standards and guidelines provided for by subsection (a) shall be subject to

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periodic review and as appropriate amendment by the commission, which review will be

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conducted not less frequently than every three (3) years after the adoption of the standards and

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guidelines.

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      (c) To implement the provisions of this section:

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      (1) The commissioner of the office of energy resources and the energy efficiency and

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resources management council, either or jointly or separately, shall provide the commission

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findings and recommendations with regard to system reliability and energy efficiency and

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conservation procurement on or before March 1, 2008, and triennially on or before March 1,

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thereafter through March 1, 2017.

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      (2) The commission shall issue standards not later than June 1, 2008, with regard to

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plans for system reliability and energy efficiency and conservation procurement, which standards

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may be amended or revised by the commission as necessary and/or appropriate.

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      (3) The energy efficiency and resources management council shall prepare by July 15,

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2008, a reliability and efficiency procurement opportunity report which shall identify

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opportunities to procure efficiency, distributed generation, demand response and renewables,

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which report shall be submitted to the electrical distribution company, the commission, the office

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of energy resources and the joint committee on energy.

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      (4) Each electrical and natural gas distribution company shall submit to the commission

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on or before September 1, 2008, and triennially on or before September 1, thereafter through

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September 1, 2017, a plan for system reliability and energy efficiency and conservation

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procurement. In developing the plan, the distribution company may seek the advice of the

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commissioner and the council. The plan shall include measurable goals and target percentages for

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each energy resource, pursuant to standards established by the commission, including efficiency,

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distributed generation, demand response, combined heat and power, and renewables.

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      (5) The commission shall issue an order approving all energy efficiency measures that

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are cost effective and lower cost than acquisition of additional supply, with regard to the plan

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from the electrical and natural gas distribution company, and reviewed and approved by the

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energy efficiency and resources management council, and any related annual plans, and shall

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approve a fully reconciling funding mechanism to fund investments in all efficiency measures

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that are cost effective and lower cost than acquisition of additional supply, not greater than sixty

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(60) days after it is filed with the commission.

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      (6)(i) Each electrical and natural gas distribution company shall provide a status report,

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which shall be public, on the implementation of least cost procurement on or before December

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15, 2008, and on or before February 1, 2009, to the commission, the division, the commissioner

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of the office of energy resources and the energy efficiency and resources management council

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which may provide the distribution company recommendations with regard to effective

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implementation of least cost procurement. The report shall include the targets for each energy

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resource included in the order approving the plan and the achieved percentage for energy

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resource, including the achieved percentages for efficiency, distributed generation, demand

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response, combined heat and power, and renewables.

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     (ii) Beginning on November 1, 2012 or before, each electric distribution company shall

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support the installation and investment in clean and efficient combined heat and power

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installations at commercial, institutional, municipal, and industrial facilities. This support shall be

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documented annually in the electric distribution company’s energy efficiency program plans. In

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order to effectuate this provision, the energy efficiency and resource management council shall

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seek input from the public, the gas and electric distribution company, the economic development

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corporation, and commercial and industrial users, and make recommendations regarding services

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to support the development of combined heat and power installations in the electric distribution

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company’s annual and triennial energy efficiency program plans.

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     (iii) The energy efficiency annual plan shall include, but not be limited to, a plan for

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identifying and recruiting qualified combined heat and power projects, incentive levels, contract

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terms and guidelines, and achievable megawatt targets for investments in combined heat and

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power systems. In the development of the plan, the energy efficiency and resource management

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council and the electric distribution company shall factor into the combined heat and power plan

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and program, the following criteria: (A) Economic development benefits in Rhode Island,

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including direct and indirect job creation and retention from investments in combined heat and

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power systems; (B) Energy and cost savings for customers; (C) Energy supply costs; (D)

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Greenhouse gas emissions standards and air quality benefits; and (E) System reliability benefits.

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     (iv) The energy efficiency and resource management council shall conduct at least one

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public review meeting annually, to discuss and review the combined heat and power program,

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with at least seven (7) business day’s notice, prior to the electric and gas distribution utility

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submitting the plan to the commission. The commission shall evaluate the submitted combined

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heat and power program as part of the annual energy efficiency plan. The commission shall issue

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an order approving the energy efficiency plan and programs within sixty (60) days of the filing.

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      (d) If the commission shall determine that the implementation of system reliability and

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energy efficiency and conservation procurement has caused or is likely to cause under or over-

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recovery of overhead and fixed costs of the company implementing said procurement, the

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commission may establish a mandatory rate adjustment clause for the company so affected in

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order to provide for full recovery of reasonable and prudent overhead and fixed costs.

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      (e) The commission shall conduct a contested case proceeding to establish a performance

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based incentive plan which allows for additional compensation for each electric distribution

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company and each company providing gas to end-users and/or retail customers based on the level

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of its success in mitigating the cost and variability of electric and gas services through

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procurement portfolios.

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     SECTION 2. This act shall take effect upon passage.

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LC02253/SUB A/2

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS - LEAST-COST PROCUREMENT

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     This act would require all electrical distribution companies to support the installation and

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investment in clear and efficient combined heat and power installations at commercial,

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institutional, municipal and industrial facilities.

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     This act would take effect upon passage.

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LC02253/SUB A/2

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