2014 -- H 7991 SUBSTITUTE A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS

     Introduced By: Representatives Kennedy, Serpa, Marshall, San Bento, and Lally

     Date Introduced: March 27, 2014

     Referred To: House Corporations

     (Governor)

It is enacted by the General Assembly as follows:

     SECTION 1. Title 39 of the general laws entitled, "PUBLIC UTILITIES AND

CARRIERS is hereby amended by adding thereto following chapter:

CHAPTER 31

AFFORDABLE CLEAN ENERGY SECURITY ACT

     39-31-1. Legislative Findings. -- The general assembly finds and declares:

     (1) The state and New England face significant short and long-term energy system

challenges that may undermine the reliable operation of the bulk electric system and spur

unsustainable levels of price volatility, and that these challenges may have a substantial impact on

energy affordability for ratepayers and undermine the economic competitiveness of our state by

serving as a detriment to capital investment and job growth; and

     (2) Planned retirements of fossil-fuel, nuclear, and other electric generators, along with

lack of new interstate natural gas pipeline infrastructure and capacity into the region, may

exacerbate these conditions; and

     (3) Rhode Island benefits from a holistic energy strategy that pursues both local

investment in clean energy resources, such as energy efficiency and renewable distributed

generation, and regional investment in energy infrastructure projects that strengthen system

reliability and diversify our supply portfolio. The combination of these strategies advance our

economic development interests and environmental quality; and

     (4) Rhode Island is committed to the increased use of no and low carbon energy

resources that diversify our energy supply portfolio, provide affordable energy to consumers, and

strengthen our shared quality of life and environment, and new energy infrastructure investments

may help facilitate the development and interconnection of such resources; and

     (5) Rhode Island is part of an integrated, regional energy system and addressing these

challenges, while meeting state policy goals, requires a coordinated, multi-state approach built

upon collaboration and utilizing appropriate expertise and stakeholder processes of regional

entities including, but not limited to, the New England State's Committee on Electricity, ISO-

New England, Inc. and The New England Power Pool that takes into account affordability,

energy security, reliability, fuel diversity, and environmental sustainability.

      39-31-2. Purpose. -- The purpose of this chapter is to:

     (1) Secure the future of the Rhode Island and New England economies, and their shared

environment, by making coordinated, cost-effective, strategic investments in energy resources

and infrastructure such that the New England states improve energy system reliability and

security; enhance economic competitiveness by reducing energy costs to attract new investment

and job growth opportunities; and protect the quality of life and environment for all residents and

businesses;

     (2) Utilize coordinated competitive processes, in collaboration with other New England

states and their instrumentalities, to advance strategic investment in energy infrastructure and

energy resources, provided that the total energy security, reliability, environmental, and economic

benefits to the state of Rhode Island and its ratepayers exceed the costs of such projects, and

ensure that the benefits and costs of such energy infrastructure investments are shared

appropriately among the New England States; and

     (3) Encourage a multi-state or regional approach to energy policy that advances the

objectives of achieving a reliable, clean energy future that is consistent with meeting regional

greenhouse gas reduction goals at reasonable cost to ratepayers.

     39-31-3. Commercially reasonable defined. -- When used in this chapter "commercially

reasonable" means terms and pricing that are reasonably consistent with what an experienced

power market analyst would expect to see in transactions involving regional energy resources and

regional energy infrastructure. Commercially reasonable shall include having a credible project

operation date, as determined by the commission, but a project need not have completed the

requisite permitting process to be considered commercially reasonable. Commercially reasonable

shall require a determination by the commission that the benefits to Rhode Island exceed the cost

of the project. The commission shall determine, based on the preponderance of the evidence, that

the total energy security, reliability, environmental and economic benefits to the state of Rhode

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Island and its ratepayers exceed the costs of such projects. If there is a dispute about whether any

terms or pricing are commercially reasonable, the commission shall make the final determination

after evidentiary hearings.

     39-31-4. Regional energy planning.-- (a) Consistent with the purposes of this chapter

and utilizing regional stakeholder processes where appropriate, the office of energy resources in

consultation and coordination with the division of public utilities and carriers, the public utility

company that provides electric distribution as defined in § 39-1-2(12) as well as natural gas as

defined in § 39-1-2(20), the New England States' Committee on Electricity (NESCOE), ISO-New

England Inc. and the other New England states is authorized to:

     (1) Participate in the development and issuance of regional or multi-state competitive

solicitation(s) for the development and construction of regional electric transmission projects that

would allow for the reliable transmission of large or small scale domestic or international

hydroelectric power to New England load centers that will benefit the state of Rhode Island and

its ratepayers, and that such solicitations may be issued by The New England States' Committee

on Electricity or the electric or natural gas distribution company to further the purposes of this

chapter;

      (2) Participate in the development and issuance of regional or multi-state competitive

solicitation(s) for the development and construction of regional electric transmission projects that

would allow for the reliable transmission of eligible renewable energy resources, as defined by §

39-26-5(a), to New England load centers that will benefit the state of Rhode Island and its

ratepayers, and that such solicitations may be issued by The New England States' Committee on

Electricity or the electric or natural gas distribution company to further the purposes of this

chapter; and

     (3) Participate in the development and issuance of regional or multi-state competitive

solicitation(s) for the development and construction of regional natural gas pipeline infrastructure

and capacity that will benefit the State of Rhode Island and its ratepayers by strengthening energy

system reliability and security and, in doing so, potentially mitigate energy price volatility that

threatens the economic vitality and competitiveness of Rhode Island residents and businesses, and

that such solicitations may be issued by The New England States' Committee on Electricity or the

electric or natural gas distribution company to further the purposes of this chapter; and that such

solicitations may request proposals that are priced in increments to allow for the evaluation of

project costs and benefits associated with adding various levels of additional, natural gas pipeline

capacity into New England and that assist with the optimization of energy system reliability,

economic, and other benefits consistent with the purposes of this chapter.

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     (4) As part of any such regional or multi-state competitive solicitation processes

conducted pursuant to this chapter, the office of energy resources shall work jointly with the

division of public utilities and carriers, and with the electric distribution company as appropriate,

to identify incremental natural gas pipeline infrastructure and capacity and/or electric

transmission projects that optimize energy reliability, economic, environmental, and ratepayer

impacts for Rhode Island, consistent with the legislative findings and purpose of this chapter.

The office of energy resources and division of public utilities and carriers shall be authorized to

utilize expert consultants, as needed, to assist in any regional, multi-state, or state-level

determination related to the procurement activities identified in § 39-31-5.

     (b) Prior to any binding commitments being made by any agencies of the state, the

electric distribution company, or any other entity that would result in costs being incurred

directly, or indirectly, by Rhode Island electric and/or gas consumers through distribution or

commodity rates, the office of energy resources and division of public utilities and carriers shall

jointly file any energy infrastructure project recommendation(s) with the public utilities

commission and may make such filing jointly with the electric or natural gas distribution

company as appropriate. The public utilities commission shall consider any such

recommendation(s) as specified under § 39-31-7.

     (c) A copy of the filing made under subsection (b) of this section shall be provided to the

governor, the president of the senate, the speaker of the house, the department of environmental

management, and the commerce corporation.

     (d) The electric distribution company shall be provided with a copy of any filing made

under this section at least ten (10) business days in advance of its filing with the public utilities

commission and the electric or gas distribution utility may file separate comments when the filing

is made.

     (e) As part of any office of energy resources and division of public utilities and carriers

filing made pursuant to this chapter, the agencies shall identify the expected energy reliability,

energy security, and ratepayer impacts that are expected to result from commitments being made

in connection with the proposed project(s).

     (f) The office of energy resources and division of public utilities and carriers reserve the

right to determine that energy infrastructure projects submitted in any regional or multi-state

competitive solicitation process are not in Rhode Island's energy reliability, energy security,

and/or ratepayer interests, and shall make such findings available to the governor, the president of

the senate, and the speaker of the house. The electric or gas distribution utility may attach a

separate opinion to those findings, at its election.

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     39-31-5. Regional energy procurement.-- (a) Consistent with the purposes of this

chapter the public utility company that provides electric distribution as defined in § 39-1-2(12), as

well as natural gas as defined in § 39-1-2(20), in consultation with the office of energy resources

and the division of public utilities and carriers is authorized to voluntarily participate in multi-

state or regional efforts to:

      (1) Procure domestic or international large or small scale hydroelectric power and

eligible renewable energy resources, including wind, as defined by § 39-26-5(a), on behalf of

electric ratepayers; provided, however, that large scale hydroelectric power shall not be eligible

under the renewable energy standard established by chapter 26 of title 39;

     (2) Procure incremental, natural gas pipeline infrastructure and capacity into New

England to help strengthen energy system reliability and facilitate the economic interests of the

state and its ratepayers;

      (3) Support the development and filing of necessary tariffs and other appropriate cost

recovery mechanisms, as proposed by the office of energy resources or the division of public

utilities and carriers, that allocate the costs of new, electric transmission and natural gas pipeline

infrastructure and capacity projects selected pursuant to the provisions of this chapter to

ratepayers, such that costs are shared among participating states in an equitable manner; and

     (4) To the extent that the public utility company that provides electric distribution as

defined in § 39-1-2(12), as well as natural gas as defined in § 39-1-2(20), pursues the objectives

identified above, the public utility company shall utilize all appropriate competitive processes,

and maintain compliance with applicable federal and state siting laws.

     (b) Any procurement authorized under this section shall be commercially reasonable.

     39-31-6. Utility filings with the public utilities commission.-- (a) Pursuant to the

procurement activities in § 39-31-5, the public utility company that provides electric distribution

as defined in § 39-1-2(12), as well the public utilities that distribute natural gas as provided by §

39-1-2(20), are authorized to voluntarily file proposals with the public utilities commission for

approval to implement these policies and achieve the purposes of this chapter. The company’s

proposals may include but are not limited to the, following authorizations:

     (1) Subject to review and approval of the commission, to enter into long-term contracts

through appropriate competitive processes for large-or small-scale hydroelectric power and/or

renewable energy resources that are eligible under the renewable energy standard established by

chapter 26 of title 39; provided, however, that large scale hydroelectric power shall not be eligible

under the renewable energy standard established by chapter 26 of title 39, and provided that:

     (i) The electric distribution company may, subject to review and approval of the

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commission, select a reasonable, open, and competitive method of soliciting proposals from

renewable energy developers, including domestic or international large-or small-scale

hydroelectric power, that may include public solicitations and individual negotiations.

     (ii) The solicitation process shall permit a reasonable amount of negotiating discretion for

the parties to engage in arms-length negotiations over final contract terms.

     (iii) Each long-term contract entered into pursuant to this section shall contain a condition

that it shall not be effective without commission review and approval.

     (iv) The electric distribution company shall file such contract(s), along with a

justification for its decision, within a reasonable time after it has executed the contract following

a solicitation or negotiation.

     (v) Subject to review and approval of the public utilities commission, to enter into long-

term contracts for natural gas pipeline infrastructure and capacity that are commercially

reasonable and advance the purposes of this chapter at levels beyond those commitments

necessary to serve local gas distribution customers, and may do so either directly, or in

coordination with, other New England states and instrumentalities; utilities; generators; or other

appropriate contracting parties.

     (vi) The commission shall accept public comment on any contracts filed by the

distribution utility, as authorized under this section, for a period no less than thirty (30) days.

     (A) During this public comment period, the contracts shall be reviewed by the following

state agencies, which shall provide advisory opinions to the public utilities commission on the

topics specified, and the public utilities commission shall give due consideration to the advisory

opinions filed:

     (I) The department of environmental management (DEM) shall provide an advisory

opinion on the expected greenhouse gas emissions and statewide environmental impacts resulting

from the proposed contract (s).

     (II) The commerce corporation shall provide an advisory opinion on the expected

statewide economic impacts resulting from the proposed contract(s).

     (III) The office of energy resources shall provide an advisory opinion on the expected

energy security, reliability, environmental, and economic impacts resulting from the contract(s).

     (B) The commission shall notify the aforementioned agencies upon the filing of any

contract filed by the distribution utility pursuant to this chapter, and notify them of any related

hearings and/or proceedings.

     (C) Advisory opinions issued by agencies designated under (vi)(A) of this paragraph shall

not be considered as final decisions of the agencies making the opinions, and shall not be subject

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to judicial review under § 42-35-15, or any other provision of the general laws.

     (vii) The commission may approve the contract(s) if it determines that:

     (A) The contract is commercially reasonable;

     (B) The requirements for the solicitation have been met;

     (C) The contract is consistent with the region's greenhouse gas reduction targets; and

     (D) The contract is consistent with the purposes of this chapter.

     (viii) Participate in a multi-state or regional sharing of costs through The Federal Energy

Regulation Commission approved tariffs for the costs of electric transmission and natural gas

pipeline infrastructure projects pursued under this chapter.

     (b) The commission shall hold evidentiary hearings and public hearings to review any

contract filing that may be made pursuant to this section and issue a written order approving or

rejecting the contract within one hundred twenty (120) days of the filing; in rejecting a contract

the commission may advise the parties of the reason for the contract being rejected and provide

an option for the parties to attempt to address the reasons for rejection in a revised contract within

a specified period not to exceed ninety (90) days.

     39-31-7. Duties of the commission.-- (a) The commission may approve any proposals

made by the electric and gas distribution company that are commercially reasonable and advance

the purposes of this chapter. The commission’s authority shall include, without limitation, the

authority to:

     (1) Approve long-term contracts entered into pursuant to the goals and provisions of this

chapter for large-or small-scale hydroelectric power and renewable energy resources that are

eligible under the renewable energy standard established by chapter 26 of title 39; provided,

however, that large scale hydroelectric power shall not be eligible under the renewable energy

standard established by chapter 26 of title 39;

     (2) Approve long-term contracts for natural gas pipeline infrastructure and capacity

consistent with the purposes of this chapter;

     (3) Approve rate-recovery mechanisms proposed by the electric and gas distribution

companies relating to costs incurred under this chapter by the electric and gas distribution

company that facilitate the multi-state or regional sharing of costs necessary to implement electric

transmission and natural gas pipeline infrastructure projects pursued under this chapter, including

any costs incurred through The Federal Energy Regulation Commission approved tariffs related

to such multi-state or regional energy infrastructure procurements;

     (4) Address any proposed changes to standard offer procurements, standard offer pricing

and retail choice rules;

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     (5) Provide for the recovery of reasonable costs from all distribution customers incurred

by the electric and gas distribution company in furtherance of the purposes of this chapter that

may include, but are not limited to, costs incurred under any contracts approved by the

commission under this section and costs associated with the management of incremental capacity

resulting from interstate gas pipeline expansion projects pursued pursuant to this chapter and

costs associated with investments in local gas distribution network assets necessary to implement

such interstate gas pipeline expansion projects;

     (6) Approve cost allocation proposals filed by the gas distribution company and/or the

electric distribution company that appropriately allocate natural gas infrastructure and capacity

costs incurred under § 39-31-6 between electric and gas distribution customers of the electric and

gas distribution company in a manner proportional to the energy benefits accrued by Rhode

Island’s gas and electric customers from making such investments. In making its determination,

the commission shall consider projected reductions in regional, wholesale electric prices as a

benefit that accrues to electric ratepayers. The allocation of costs shall include all distribution

customers, regardless from whom they are purchasing their commodity service; and

     (7) Approve any other proposed regulatory or ratemaking changes that reasonably

advance the goals set forth herein.

     (b) The grant of authorizations under this chapter shall not be construed as creating a

mandate or obligation on the part of the electric and gas distribution company to enter into any

contracts or file any proposals pursuant to this chapter.

     (c) The public utilities commission shall docket any proposals made by the office of

energy resources and division of public utilities and carriers pursuant to § 39-31-4. Docket

materials shall be posted and maintained on the commission’s website. The commission shall

conduct proceedings, as provided below, solely for the purpose of determining whether the

proposed infrastructure projects, if implemented, are in the public interest and no commitments

shall be valid or authorized without such finding being made by the commission. The validity

and approval of any commitments made by the electric or gas distribution company in furtherance

of the purposes of this chapter shall be separate and subject to § 39-31-5. The docket opened

pursuant to this paragraph shall proceed as follows:

     (1) The following state agencies shall provide advisory opinions to the commission on

the topics specified below within sixty (60) days from the docketing date:

     (i) The department of environmental management (DEM) shall provide an advisory

opinion on the expected greenhouse gas emissions and statewide environmental impacts resulting

from the proposed project(s).

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     (ii) The commerce corporation shall provide an advisory opinion on the expected

statewide economic impacts resulting from the proposed project(s).

     (2) The commission shall notify the aforementioned agencies upon the filing of any

proposal made under this section, and notify them of any related hearings and/or proceedings.

     (3) Advisory opinions issued by agencies designated under (c)(1) of this section shall not

be considered as final decisions of the agencies making the opinions and shall not be subject to

judicial review under § 42-35-15, or any other provision of the general laws.

     (4) Upon completion of the sixty-day (60) advisory opinion period, the commission shall

provide for a thirty day (30) public comment period on any energy infrastructure project(s)

selected pursuant to this chapter and hold evidentiary hearings. In addition to evidentiary

hearings, the commission shall also hold at least one public hearing to accept public comment on

the proposal(s) prior to an open meeting held pursuant to this section.

     (5) The commission shall hold an open meeting no later than one hundred twenty (120)

days from the date of filing by the office of energy resources and division of public utilities and

carriers filing and shall certify that the proposed project(s) are in the public interest if, in the

commission’s determination, and in consideration of filed advisory opinions and the opinion of

the electric or gas distribution utility, the proposed infrastructure project(s):

     (i) Are consistent with the findings and purposes of this chapter;

     (ii) Will benefit Rhode Island by improving local and regional energy system reliability

and security;

     (iii) Will benefit Rhode Island ratepayers by offering the potential for reduced energy

price volatility and reduction of energy-supply costs in the context of an integrated regional

energy system;

     (iv) Will not cause unacceptable harm to the environment and are consistent with the

region's greenhouse gas reduction goals; and

     (v) Will enhance the economic fabric of the state.

     (6) The commission shall issue a written determination of its findings within ten (10)

business days of its open meeting decision and provide copies of that determination, along with

copies of all advisory opinions, public comment, and any other materials deemed relevant to the

commission determination, to the governor, the president of the senate, the speaker of the house,

the commissioner of the office of energy resources, and the administrator of the division of public

utilities and carriers.

     (d) A determination issued by the commission shall constitute the sole, final, binding, and

determinative regulatory decision within the state for the purpose of authorizing the state to

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support a proposed, regional-energy infrastructure project(s) that is funded through The Federal

Energy Regulation Commission approved tariffs on a regional and/or multi-state basis pursuant

to this chapter. Appeals shall be governed by § 39-5-1.

     (e) Upon issuance of a written determination by the commission finding that the proposed

project(s) is in the public interest, the office of energy resources and division of public utilities

and carriers shall, on behalf of the state, be authorized to support any regional and/or multi-state

process necessary to implement the project(s), including, without limitation, supporting any

necessary and related Federal Energy Regulation Commission filings; provided, however, that

any commitments made by the electric or gas distribution company to implement the proposals

remain voluntary and subject to § 39-31-5.

     (f) Nothing in this section shall be construed to preclude the electric or gas distribution

company from making a filing under § 39-31-6, simultaneous with a filing under this section by

the office of energy resources and the division of public utilities, in which case the filings made

under §§ 39-31-6 and 39-31-7 of this chapter shall be consolidated.

     39-31-8. Verification of energy generation and attributes of imported electricity.--

Energy generation and the attributes of electricity imported into New England shall be tracked

and verified through the expansion of the New England Pool-Generation Information System or

the development of another appropriate tracking and verification mechanism.

     39-31-9. Siting of Regional Energy Infrastructure.-- All regional or multi-state energy

infrastructure projects authorized under this chapter shall respect and maintain compliance with

the individual project host state’s siting authority and requirements.  Any projects selected

pursuant to this chapter must maintain compliance with Rhode Island energy facility siting act

requirements, where applicable, as authorized under chapter 98 of title 42.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS

***

     This act would create the "Affordable Clean Energy Security Act" to establish a

framework for the state, in coordination with other New England states, to make strategic

investments in resources and infrastructure to achieve a clean, reliable energy future.

     This act would take effect upon passage.

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