2015 -- S 0409 SUBSTITUTE A

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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. Section 39-1-27.7.1 of the General Laws in Chapter 39-1 entitled "Public

Utilities Commission" is hereby amended to read as follows:

     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

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.

      (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

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

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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

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

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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. 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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