After a several-month process, on Friday, August 21, the Rhode Island Public Utilities Commission (PUC) made several decisions in response to a rate increase request from Rhode Island Energy (RIE). This rate case was primarily about what RIE would charge for distributing power and gas. It did not affect the supply of gas or electricity. Overall, the decisions are good for ratepayers and will support the Ocean State’s efforts to comply with the 2021 Act on Climate.
Minutes from the August 21 meeting are linked here, but these are some highlights:
Profit Margin
RIE requested an increase in the allowed "return on equity" from 9.3% to 10%. The PUC denied the request and kept the current figure in place. In a related decision, the PUC changed the capital structure for financing major investments by the utility from the current split of 57% equity and 43% debt to 52% equity and 48% debt. Given that equity is a higher cost of capital than debt, this formula change is another savings for consumers.
Bill increases will be lower.
There will likely be modest distribution bill increases, but they could be offset by bill credits to consumers ordered by the PUC.
Subsidies to new gas customers will end.
The PUC will phase out subsidies for new gas connections over three years. These "line extension allowances" force existing gas customers to defray the cost of connecting new users to the system. The practice is a bad deal for existing customers and is at odds with Rhode Island’s climate goals as codified in the 2021 Act on Climate. Working with our allies at the Conservation Law Foundation, Green Energy Consumers submitted expert testimony in favor of ending these "line extension allowances."
A new rate for heat pump customers will be considered.
The PUC accepted a settlement between the Conservation Law Foundation (CLF) and RIE that will require the utility to study to what extent heat pump owners are being overcharged for electricity service. Heat pumps can efficiently heat and cool homes with electricity, reducing reliance on dirty and volatile fossil fuels. Green Energy Consumers Alliance also submitted testimony on this important topic.
Data centers and other large loads will receive special treatment.
RIE is directed to file an extra-large (20 MW or larger) electric load tariff by December 31, 2026, designed to prevent such customers, such as data centers, from, at a minimum, adversely affecting grid reliability and resilience, shifting costs to existing customers, or causing undue rate shock.
Things to Watch for in the Near Future
Again, the PUC’s order was very positive overall in many respects. But in the next few months and years, Green Energy Consumers Alliance will be watching for:
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How the PUC decides to approve or deny requests by RIE for specific investments in gas and electricity infrastructure. We want to see RIE support "non-wire" alternatives, such as distributed energy resources (i.e. battery storage, EV managed charging, vehicle-to-grid, demand response, etc.), instead of unnecessarily big and expensive capital-intensive solutions. On the gas side, we want to see "non-pipe" alternatives instead of expanding the gas infrastructure and increased spending on maintaining existing pipes. Over four years ago, the PUC began a "Future of Gas" investigation. A report was completed but, inexcusably and without explanation, has yet to be made public. The main purpose of the docket was to determine what policies would be needed to put the gas system into proper alignment with the Act on Climate.
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The upcoming dockets to work out the heat pump rate and data center issues described above.
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The PUC to open up another docket to establish time-varying electricity rates to replace our current method, which has consumers paying the same rate for power whenever it is used. Time-varying rates would be higher during periods of peak demand, such as 4:00 to 8:00 PM on weekdays) and lower during off-peak periods. TVR is enabled by the "smart meters" that are being installed across Rhode Island and Massachusetts.
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