On November 8, 2017, Rhode Island energy agencies submitted to Governor Raimondo a report which outlined recommendations for transforming the state’s electrical grid and utility business models. The report, “Rhode Island Power Sector Transformation,” is the latest development in a proceeding initiated by Governor Raimondo in April in which she challenged the state’s energy agencies to consider three broad questions related to the future of the state’s electric grid:

• What functions should the future electric utility perform, and how should it be compensated for those services?
• How can adoption of electric vehicles and electric heating help to optimize our system?
• How can the electric utility improve grid planning to enable customers and third parties to participate in the clean energy revolution, while prioritizing investments for a reliable and least-cost system?

Over the course of the proceeding, state agencies have conducted a series of public meetings and solicited comments from stakeholders. Initial proposals were released in August, comments on the proposals were submitted on September 1, and the principles and recommendations released in October incorporate the feedback received to date. The four work streams include:

• Utility Business Models
• Grid Connectivity and Meter Functionality
• Distribution System Planning
• Beneficial Electrification

Key Details on Power Sector Transformation Initiative Recommendations

• Utility Business Model (UBM)
  • The report lists a number of ways in which the current utility business model may not align with expectations for a clean, cost-effective, and resilient electricity system, including:
    • System efficiency
    • Innovation
    • Bi-directional energy flow
    • Connectivity and software solutions
    • Energy supply and security
  • Recommendations
    • Create a multi-year rate plan and budget with rate cap to incent cost savings
    • Shift to a pay-for-performance model by developing performance incentive mechanisms for system efficiency, distributed energy resources, and customer and network support
    • Develop new value streams from the distribution grid to generate third-party revenue and reduce the burden on ratepayers
    • Update service quality metrics to address today’s priorities, including power outage prevention, cyber resiliency, and customer engagement
    • Assess the existing split treatment of capital and operating expenses
  • Grid Connectivity and Meter Functionality
    • The report provides the justification for investment in Advanced Meter Functionality and outlines the state’s grid connectivity and functionality goals:
      • Greater connectivity
      • Two-way information flow
      • Enhanced cybersecurity
    • Recommendations
      • Deploy advanced meters
      • Plan for third-party access and innovation
      • Share the cost burden through partnerships
      • Focus on capabilities to avoid technological obsolescence
      • Proactively manage cyber resilience
    • Distribution System Planning (DSP)
      • The report lays out the following principles for DSP reforms:
        • DSP reforms should establish clear and specific intermediate milestones to achieving the long-term vision
        • The utility should identify the required resources necessary to achieve material improvements to DSP capabilities
        • For all DSP reforms, there must be an ongoing process for meaningful review, input, and update of DSP products, including, but not limited to: forecasting, data access, data portal, and heat and hosting capacity maps
        • As DSP reforms drive increased customer and third-party access to data, the utility and regulators must address all key data privacy and security protections
        • Implementation of DSP reforms should achieve consistency across all programs and policies. For example, operationalization of heat maps and locational incentives should be implemented uniformly across all EE, DG, NWA, and capital planning and procurement processes
      • Recommendations
        • Synchronize filings related to DSP
        • Improve forecasting
        • Establish customer and third-party data access plans
        • Compensate locational value
      • Beneficial Electrification
        • Though the report does list recommendations regarding beneficial electrification in the executive summary, in the report itself no recommendations are presented. It’s noted that due to the wide range of views expressed by stakeholders, the Public Utilities Commission and Office of Energy Resources plan to engage stakeholders and clarify their views in response to any electric vehicle program proposal that may be forthcoming from National Grid (presumably as part of their December 2017 rate case filing)
        • Recommendations
          • Design rates to increase system efficiency
          • Establish outcome-based metrics
          • Beneficial heating proposals should be consistent with principles outlined in the Commission White Paper on beneficial electrification

Implications

Rhode Island joins a number of other states in embarking on some degree of reform in order to encourage the integration of DER and evolve the utility business model. A majority of the recommendations laid out by the Rhode Island Public Utilities Commission echoes New York’s Reforming the Energy Vision (REV), either directly or indirectly. This is seen clearly in some of the more ambitious recommendations such as utility performance incentive mechanisms for system efficiency, DER, and network support services and compensation for locational value of DER.

However, Rhode Island is not starting from scratch. For example, as the report points out, National Grid has made recent progress expanding the scope of non-wires alternatives (NWAs) as well as considering “partial NWAs.” Also, the report shows that various performance-based incentives already in place related to energy efficiency, distributed generation, and renewables total 44 basis points in opportunity, as compared to a potential 100 basis points for New York’s utilities under the new NY REV Earning Adjustment Mechanism construct. It will be interesting to see if the Power Sector Transformation effort will take a targeted approach focusing on specific proposals through prioritization or some kind of sequencing, or if it will set forth regulation to implement some of the above recommendations simultaneously, similar to NY REV.

Regardless, as in New York, the real challenge will be in the implementation of this ambitious vision, especially given the three- to five-year timeframe the report lays out to begin to realize these recommendations. To that end, the report is relatively light on specifics around the regulatory path to implementation beyond existing regulatory dockets regarding planning and energy efficiency as well as National Grids upcoming distribution rate case filing, anticipated in December 2017. How the report’s recommendations manifest themselves in National Grid’s rate case filing and subsequent settlement will be an early indicator of the true scope, pace, and degree of change expected from Rhode Island’s Power Sector Transformation in the years to come.

More Information

• Utility Dive: Rhode Island Grid Mod Plan to Focus on Renewables Integration, Cost Control
• SNL: I. Grid Modernization and Developments in Other States
• Rhode Island PUC: Power Sector Transformation Initiative (home page)

This report is part of ScottMadden’s Wires Minute series. To view all featured Wires Minutes, please click here.