As part of a sweeping grid modernization proposal, Rhode Island agencies are recommending that the state shift its utility regulation to a pay-for-performance model, build a “connected” distribution grid and take steps to improve the efficiency of the grid system.
In March, Rhode Island Gov. Gina Raimondo directed the Rhode Island Public Utilities Commission, the Rhode Island Office of Energy Resources and the Rhode Island Division of Public Utilities and Carriers to develop a "more dynamic" regulatory framework to foster a cleaner, less expensive and more reliable power system.
The effort, called Power Sector Transformation, partly aims to help Rhode Island meet Raimondo’s goal of adding 1,000 megawatts of renewables by 2020 in the nation's smallest state, which has about 100 MW of renewables.
After holding stakeholder meetings and getting comments from experts, the state agencies found that the traditional regulatory framework is a barrier to modernizing the state’s electric grid, according to the report released Nov. 9.
“A new regulatory framework will fundamentally change the trajectory of costs both by avoiding system costs and by forcing the utility to find more value from our electric distribution system, creating additional revenue streams,” the report said.
The report calls for creating a multi-year rate plan and budget with a revenue cap to spur cost savings. The state has one major utility, investor-owned National Grid.
The state agencies are also recommending developing performance incentive mechanisms for system efficiency, distributed energy resources and customer and network support.
“The utility’s earnings growth will shift away from being based on the amount of capital it invests and towards a reflection of its performance,” the report said.
The distribution system should be used to generate revenue for the utility, which would in turn lower ratepayer cost recovery, according to the agencies.
The report said the distribution grid can provide at least three revenue-producing platforms: the communications network that supports advanced meters, the advanced meters themselves and the data portal.
As part of the effort, National Grid should deploy advanced meters that can be accessed by third parties. The utility should share communication infrastructure with other companies to reduce ratepayer costs, according to the report.
Also, National Grid should work to make the grid system more efficient while state regulators and policymakers develop a plan to pay the owners of distributed resources for the locational value to the grid of their equipment, the report said.
Meanwhile, the report said electric rates should be designed to increase system efficiency. For example, National Grid should encourage electric vehicle owners to charge their cars in off-peak hours and make their batteries available to the grid to increase system benefits, according to the state agencies.
The report’s recommendations will likely be addressed through various venues. National Grid, for example, is set to file next month a rate case that could be used to modernize the utility business model, deploy advanced meters, enhance distribution system planning and pursue the electrification of the transportation and heating sectors.
Rhode Island is one of 33 states that took actions on grid modernization in the third quarter, according to a Nov. 1 report from the NC Clean Energy Technology Center. Policy hasn’t kept pace with technological advancements, but increasingly states are proposing legislative and regulatory changes to spur developments to the electric system, the group said in its quarterly report, the 50 States of Grid Modernization.
The most active states on grid modernization in the third quarter were New York, Massachusetts, California and Arizona, according to the report.