2015 -- S 0409

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LC001511

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2015

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A N   A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS - PUBLIC UTILITIES COMMISSION

     Introduced By: Senators Sosnowski, Conley, Walaska, Jabour, and DiPalma

     Date Introduced: February 25, 2015

     Referred To: Senate Environment & Agriculture

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 39-1-27.7 and 39-1-27.7.1 of the General Laws in Chapter 39-1

entitled "Public Utilities Commission" are hereby amended to read as follows:

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

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

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

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

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

responsible.

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

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

guidelines for:

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

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

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

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

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

measurable, net system benefits;

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

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

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

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

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

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

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

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

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

commission may find necessary or appropriate.

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

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

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

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

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

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

guidelines.

      (c) To implement the provisions of this section:

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

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

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

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

thereafter through March 1, 2017. The report shall be made public and be posted electronically on

the website to the office of energy resources.

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

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

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

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

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

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

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

of energy resources and the joint committee on energy.

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

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

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

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

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

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

shall be made public and be posted electronically on the website to the office of energy resources,

and shall also be submitted to the general assembly.

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

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

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

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

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

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

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

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

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

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

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

which may provide the distribution company recommendations with regard to effective

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

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

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

response, combined heat and power, and renewables as well as the current funding allocations for

each eligible energy resource and the businesses and vendors in Rhode Island participating in the

programs. The report shall be posted electronically on the website of the office of energy

resources.

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

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

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

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

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

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

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

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

company's annual and triennial energy efficiency program plans.

      (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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

procurement portfolios.; provided, however, that such additional compensation shall not exceed

two percent (2%) of total funding provided for in subsection (c)(5) of this section.

     39-1-27.7.1. Revenue decoupling. -- (a) The general assembly finds and declares that

electricity and gas revenues shall be fully decoupled from sales pursuant to the provisions of this

chapter and further finds and declares that any decoupling proposal submitted by an electric

distribution company as defined in subdivision 39-1-2(12) or gas distribution company included

as a public utility in subdivision 39-1-2(20) that has greater than one hundred thousand (100,000)

customers, shall be for the following purposes:

      (1) Increasing efficiency in the operations and management of the electric and gas

distribution system;

      (2) Achieving the goals established in the electric distribution company's plan for system

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reliability and energy efficiency and conservation procurement as required pursuant to subsection

39-1-27.7(c);

      (3) Increasing investment in least-cost resources that will reduce long-term electricity

demand;

      (4) Reducing risks for both customers and the distribution company including, but not

limited to, societal risks, weather risks and economic risks;

      (5) Increasing investment in end-use energy efficiency;

      (6) Eliminating disincentives to support energy efficiency programs;

      (7) Facilitating and encouraging investment in utility infrastructure, safety, and

reliability; and

      (8) Considering the reduction of fixed, recurring customer charges and transition to

increased unit charges that more accurately reflect the long-term costs of energy production and

delivery.

      (b) Each electric distribution company as defined by subdivision 39-1-2(12) and gas

distribution company included as a public utility in subdivision 39-1-2(20) having greater than

one hundred thousand (100,000) customers shall file proposals at the commission to implement

the policy set forth in subsection (a) herein. The commission shall approve such proposals,

provided they contain the features and components set forth in subsection (c) herein, and that they

are consistent with the intent and objectives contained in subsection (a) herein. The existence of

any of the ratemaking mechanisms set forth in this section shall not be relied upon or cited for the

purpose of making any adjustments in the determination of the distribution company's cost of

capital. Actions taken by the commission in the exercise of its ratemaking authority for electric

and gas rate cases shall be within the norm of industry standards and recognize the need to

maintain the financial health of the distribution company as a stand-alone entity in Rhode Island

and shall consider the existence of other financial remuneration or shareholder incentives.

      (c) The proposals shall contain the following features and components:

      (1) A revenue decoupling reconciliation mechanism that reconciles annually the revenue

requirement allowed in the company's base distribution rate case to revenues actually received for

the applicable twelve (12) month period, provided that the mechanism for gas distribution shall

be determined on a revenue per-customer basis, in a manner typically employed for gas

distribution companies in the industry. Any revenues over-recovered or under-recovered shall be

credited to or recovered from customers, as applicable; and

      (2) An annual infrastructure, safety and reliability spending plan for each fiscal year and

an annual rate reconciliation mechanism that includes a reconcilable allowance for the anticipated

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capital investments and other spending pursuant to the annual pre-approved budget as developed

in accordance with subsection (d) herein.

      (d) Prior to the beginning of each fiscal year, gas and electric distribution companies

shall consult with the division of public utilities and carriers regarding its infrastructure, safety,

and reliability spending plan for the following fiscal year, addressing the following categories:

      (1) Capital spending on utility infrastructure;

      (2) For electric distribution companies, operation and maintenance expenses on

vegetation management;

      (3) For electric distribution companies, operation and maintenance expenses on system

inspection, including expenses from expected resulting repairs; and

      (4) Any other costs relating to maintaining safety and reliability that are mutually agreed

upon by the division and the company.

      The distribution company shall submit a plan to the division and the division shall

cooperate in good faith to reach an agreement on a proposed plan for these categories of costs for

the prospective fiscal year within sixty (60) days. To the extent that the company and the division

mutually agree on a plan, such plan shall be filed with the commission for review and approval

within ninety (90) days. If the company and the division cannot agree on a plan, the company

shall file a proposed plan with the commission and the commission shall review and, if the

investments and spending are found to be reasonably needed to maintain safe and reliable

distribution service over the short and long-term, approve the plan within ninety (90) days.

      (e) The commission shall have the following duties and powers in addition to its existing

authorities established in title 39 of the general laws:

      (1) To maintain reasonable and adequate service quality standards, after decoupling, that

are in effect at the time of the proposal and were established pursuant to § 39-3-7.

      (2) The commission may exclude the low income rate class from the revenue decoupling

reconciliation rate mechanism for either electric or gas distribution. The commission also may

exclude customers in the large commercial and industrial rate class from the gas distribution

mechanism.

      (3) The commission may adopt performance incentives for the electric distribution

company that provides a shared savings mechanism whereby the company would receive a

percentage of savings realized as a result of achieving the purposes of this section while the

remaining savings are credited to customers.

      (4) The commission shall review and approve with any necessary amendments

performance-based energy savings targets developed and submitted by the Rhode Island energy

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efficiency and resources management council. Said performance-based targets shall also be used

as a consideration in any shared savings mechanism established by the commission pursuant to

subdivision (3) herein.

      (f) The Rhode Island energy efficiency and resources management council shall propose

performance-based energy savings targets to the commission no later than September 1, 2010.

The targets shall include, but not be limited to, specific energy kilowatt hour savings overall and

peak demand savings for both summer and winter peak periods expressed in total megawatts as

well as appropriate targets recommended in the opportunities report filed with the commission

pursuant to subdivision 39-2-27.7(c)(3). The council shall revise as necessary these targets on an

annual basis prior to the reconciliation process established pursuant to subsection (c) of this

section and submit its revisions to the commission for approval.

      (g) Reporting. - Every electric distribution company as defined in subsection (a) herein

shall report to the governor, general assembly, division of public utilities and public utilities

commission on or before September 1, 2012. Said report shall include, but not be limited to, the

following elements:

      (1) A comparison of revenues from traditional rate regulation and how the revenues have

differed as part of an approved decoupling structure;

      (2) A summary of how the company is achieving the performance-based targets that may

have been adopted pursuant to subdivision (e)(4);

      (3) A summary of any shared savings the company may have received pursuant to the

performance incentives authorized in subdivision (e)(3);

      (4) A summary of how the company is achieving the service quality standards required

in subdivision (e)(1);

      (5) An overview of how decoupling is impacting revenue stabilization goals that have

resulted from decoupling; and

      (6) A summary of any customer education programs provided.

     SECTION 2. Section 39-26.6-12 of the General Laws in Chapter 39-26.6 entitled "The

Renewable Energy Growth Program" is hereby amended to read as follows:

     39-26.6-12. Annual bidding and enrollments. -- (a) With the exception of the first

program year (2015), the electric-distribution company, in consultation with the board and office,

shall conduct at least three (3) tariff enrollments for each distributed-generation class each

program year. For the first program year, the board may recommend that either two (2) or three

(3) enrollments be conducted.

      (b) During each program year, the tariff enrollments shall have both an annual targeted

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amount of nameplate megawatts ("annual MW target") and a nameplate megawatt target for each

separate enrollment event ("enrollment MW target"). The enrollment MW target shall comprise

the specific portion of the annual MW target sought to be obtained in that enrollment. The

enrollment MW targets shall be recommended by the board each year, subject to commission

approval. The board shall also recommend a megawatt target for each class ("class MW target")

that comprises a specified portion of the enrollment MW target, subject to commission approval.

If the electric-distribution company, the office, and the board mutually agree, they may reallocate

megawatts during an enrollment from one class to another without commission approval if there

is an over-subscription in one class and an under-subscription in another, provided that the annual

MW Target is not being exceeded, except as provided in § 39-26.6-7.

      (c) The annual MW targets shall be established as follows; provided, however that at

least three megawatts (3 MW) of nameplate capacity shall be carved out exclusively for small-

scale solar projects in each of the first four (4) program years:

      (1) For the first program year (2015), the annual MW target shall be twenty-five (25)

nameplate megawatts;

      (2) For the second program year, the annual targets shall be forty (40) nameplate

megawatts;

      (3) For the third and fourth program years, the annual target shall be forty (40)

nameplate megawatts, subject to the conditions set forth in § 39-26.6-12(f) having been met for

the applicable prior program year as determined in the manner specified in § 39-26.6-12(g); and

      (4) For the fifth program year, the annual target shall be set to obtain the balance of

capacity needed to achieve one hundred sixty (160) nameplate megawatts within the five-year (5)

distributed-generation growth program, subject to § 39-26.6-12(e) and the conditions set forth in

§ 39-26.6-12(f) having been met for the fourth program year as determined in the manner

specified in § 39-26.6-12(g).

      (d) During the fifth year of the distributed-generation growth program, the board may

recommend to the commission an extension of time in the event that additional time is required to

achieve the full one hundred sixty (160) nameplate megawatt target of the program. The

commission shall approve the recommendation of the board; provided, however, that the

commission may make any modifications to the board's recommendation that the commission

deems appropriate, consistent with the legislative purposes of this chapter as set forth herein.

      (e) To the extent there was a shortfall of capacity procured under chapter 26.2 of title 39

from distributed generation procurements in 2014, such shortfall amount may be added to the one

hundred sixty megawatt (160MW) target for acquisition in the fifth program year under this

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chapter. In no event shall the electric distribution company be required to exceed the aggregate

amount of one hundred sixty (160) nameplate capacity plus any such shortfall amount over the

five (5) years, but may do so voluntarily, in consultation with the board and subject to

commission approval.

      (f) The conditions specified in subsections (c)(3) and (c)(4) of this section are as follows:

(1) That it is reasonable to conclude that the bid prices submitted in the procurements for the

large-scale solar and commercial-scale solar classes were reasonably competitive in the

immediately preceding program year; (2) That it is reasonable to conclude that the annual MW

target specified for the next program year is reasonably achievable; and (3) That the electric-

distribution company was able to, or with reasonably prudent efforts should have been able to,

perform the studies and system upgrades on a timely basis necessary to accommodate the number

of applications associated with the targets without materially adversely affecting other electric-

distribution construction projects needed to provide reliable and safe electric-distribution service.

To the extent the board or the commission concludes that any of these conditions have not been

met for the applicable program year, the board may recommend, and/or the commission may

adopt, a new annual MW target, based on the factors set forth in section 39-26.6-12(h).

      (g) Before the third, fourth, and fifth program years, each year the board shall review the

conditions specified in § 39-26.6-12(f) and make a recommendation to the commission for

findings as to whether they have been met for the applicable year. The recommendation shall be

filed with the commission, with copies to the office and the electric distribution company, and

any person who has made a written request to the commission to be included in such notification,

such list which may be obtained from the commission clerk, and a notice of such filing shall be

posted by the commission on its website. If no party files an objection to the recommended

findings within ten (10) business days of the posting, the commission may accept them without

hearings. If an objection is filed with a reasonable explanation for its basis, the commission shall

hold hearings and make the factual determination of whether the conditions have been met.

      (h) In the event that the conditions in § 39-26.6-12(f) have not been met for any program

year, then the board and the commission shall take into account the factors set forth below in

setting the annual MW target for the following year. In addition, for every program year the board

and the commission shall take into account these factors in setting the class MW targets, and the

enrollment MW targets for the following year: (1) That the new annual, class, and enrollment

levels reasonably assure that competition among projects for the applicable bidding

classifications remains robust and likely to yield reasonable and competitive program costs; (2)

That, assuming prudent management of the program, the electric-distribution company should be

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able to perform the studies and system upgrades on a timely basis necessary to accommodate the

number of applications associated with the targets without materially adversely affecting other

electric-distribution construction projects needed to provide reliable and safe electric-distribution

service; and (3) Any other reasonable factors that are consistent with the legislative purpose of

this chapter as set forth herein, including the program purpose to facilitate the development of

renewable distributed generation in the load zone of the electric-distribution company at

reasonable cost.

      (i) The renewable energy growth program is intended to achieve at least an aggregate

amount of one hundred sixty (160) nameplate megawatts over five (5) years, plus any shortfall

amount added in pursuant to § 39-26.6-12(e). However, after the second program year, the board

may, based on market data and other information available to it, including pricing received during

previous program years, recommend changes to the annual target for any program year above or

below the specified targets in § 39-26.6-12(c) if the board concludes that market conditions are

likely to produce favorably low or unfavorably high target pricing during the upcoming program

year, provided that the recommendation may not result in the five-year (5) one hundred sixty

megawatt (160MW) nameplate target, plus any shortfall added pursuant to § 39-26.6-12(e), being

exceeded. Any megawatt reduction in an annual target shall be added to the target in the fifth year

of the program (and any subsequent years if necessary) such that the overall program target of

one hundred sixty megawatt (160MW) nameplate capacity, plus any shortfall added pursuant to §

39-26.6-12(e), is achieved. In considering such issues, the board and the commission may take

into account the reasonableness of current pricing and its impact on all electric distribution

customers and the legislative purpose of this chapter as set forth herein, including the program

purpose to facilitate the development of renewable distributed generation in the load zone of the

electric-distribution company at reasonable cost.

      (j) The provisions of § 39-26.1-4 shall apply to the annual value of performance-based

incentives (actual payments plus the value of net metering credits, as applicable) provided by the

electric-distribution company to all the distributed-generation projects under this chapter, subject

to the following conditions:

      (1) The targets set for the applicable program year for the applicable project

classifications were met or, if not met, such failure was due to factors beyond the reasonable

control of the electric-distribution company;

      (2) The electric-distribution company has processed applications for service and

completed interconnections in a timely and prudent manner for the projects under this chapter,

taking into account factors within the electric-distribution company's reasonable control. The

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commission is authorized to establish more specific performance standards to implement the

provisions of this chapter; and

      (3) The incentive shall be up to one and three-quarters percent (1.75%) of the annual

value of performance-based incentives. The commission is authorized to establish more specific

performance standards to implement the provisions of this paragraph.

     SECTION 3. 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 - PUBLIC UTILITIES COMMISSION

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     This act would grant the public utilities commission the authority to conduct a broader

review in the determination of electric and gas utility rates of return (profit), to consider all other

utility profits and to cap certain performance based profits.

     This act would take effect upon passage.

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