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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: Senator William A.Walaska

     Date Introduced: February 27, 2014

     Referred To: Senate Environment & Agriculture

     (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 the following chapter:

CHAPTER 31

AFFORDABLE CLEAN ENERGY SECURITY ACT

     39-31-1. Legislative Findings. -- (a) 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 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;

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

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

exacerbate these conditions;

     (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, and the combination of these strategies advance our

economic development interests and environmental quality;

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

resources which diversify our energy supply portfolio, provide affordable energy to consumers,

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

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

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

challenges, while meeting state energy and economic goals, requires a coordinated, multi-state

approach 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 Rhode Island and it’s 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 the term

"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 include that the total energy security, reliability, environmental

and economic benefits to Rhode 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

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the office of energy resources, in consultation and coordination with the public utility company

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

§ 39-1-2(20), the New England States′ Committee on Electricity (NESCOE), ISO-NE and the

other New England states are authorized to:

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

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

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

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

it’s ratepayers, and that such solicitations may be issued by NESCOE 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 Rhode Island and its ratepayers, and that

such solicitations may be issued by NESCOE 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 Rhode Island and its ratepayers by strengthening energy system

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

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

that such solicitations may be issued by NESCOE or the electric or natural gas distribution

company to further the purposes of this chapter.

     (4) Provide for a thirty (30) day public comment period on infrastructure projects selected

pursuant to this chapter. During this public comment period, the following state agencies shall

provide advisory opinions on the topics specified:

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

opinion on the expected statewide environmental impacts resulting from the proposed project(s).

     (ii) Commerce RI shall provide an advisory opinion on the expected statewide economic

impacts resulting from the proposed project(s).

     (iii) OER shall provide an advisory opinion on the expected energy security, reliability,

environmental, and economic impacts resulting from the proposed project(s).

     (iv) The division of public utilities shall provide an advisory opinion on the expected

ratepayer impacts resulting from the proposed project(s).

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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 section 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 39-26 of the general laws;

     (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 which 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 provided 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) and public utilities that distribute natural gas as provided by § 39-1-

2(20) are authorized to voluntarily file proposals with the 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 Public Utilities 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:

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

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, which may include public solicitations and individual negotiations;

     (ii) The solicitation process shall permit a reasonable amount of 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) 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; and (C) The

contract is consistent with the purposes of this chapter.

     (2) Subject to review and approval of the 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.

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

Regulatory Commission (FERC) approved tariffs for the costs of electric transmission and

pipeline infrastructure projects pursued under this chapter.

     (b) The commission shall hold public hearings to review any contract filing that may be

made pursuant to this chapter and issue a written order approving or rejecting the contract within

one hundred eighty (180) days of 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

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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 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 FERC 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;

     (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 which

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 this section 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 which 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 PUC shall accept public comment on any power purchase agreement filed by the

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

the date of filing.

     (1) During this public comment period, the following state agencies shall provide

advisory opinions to the PUC on the topics specified:

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

opinion on the expected statewide environmental impacts resulting from the proposed power

purchase agreement(s).

     (ii) Commerce RI shall provide an advisory opinion on the expected statewide economic

impacts resulting from the proposed power purchase agreement(s).

     (iii) OER shall provide an advisory opinion on the expected energy security, reliability,

environmental, and economic impacts resulting from the proposed power purchase agreement(s).

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

purchase agreement filed by the distribution utility pursuant to this chapter, and notify them of

any related hearings and/or proceedings.

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

(a) The office of energy resources and other appropriate state agencies shall work with the New

England states′ committee on electricity (NESCOE), ISO-NE, NEPOOL, NICE, the GIS

administrator, and other stakeholders to implement changes to the New England power pool

generation information system (NEPOOL GIS), and any other mechanisms necessary to track and

verify the energy generation and attributes of electricity imported into New England as a result of

projects implemented under the provisions of this chapter.

     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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