Chapter 017

2010 -- H 8082 SUBSTITUTE A

Enacted 05/27/10

 

A N A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS -- REVENUE DECOUPLING

          

     Introduced By: Representative D Caprio

     Date Introduced: May 05, 2010

     

It is enacted by the General Assembly as follows:

 

     SECTION 1. Chapter 39-1 of the General Laws entitled "Public Utilities Commission" is

hereby amended by adding thereto the following 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

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

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 section 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

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

Utilities Commission" is 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 section 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.

      (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

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.

      (5) The commission shall issue an order with regard to the plan from the electrical

distribution company not greater than sixty (60) days after it is filed with the commission. 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) 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.

      (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.

     

SECTION 3. This act shall take effect upon passage.

     

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LC02525/SUB A

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