Would
allow profit to be a consideration in rate hike requests
The Senate passed legislation introduced by Sen. V. Susan Sosnowski (D-Dist. 37, South Kingstown, New Shoreham) that would authorize the Public Utilities Commission to conduct a more comprehensive review when determining a utility’s profit by allowing the agency to consider the existence of other remuneration.
The bill (2016-S
2675), which passed the Senate 36-0, now heads to the House of
Representatives for consideration.
“As it stands now, the PUC can’t consider the profit
that National Grid makes from other sources, such as administering efficiency
and renewable energy programs, when determining the utility’s overall profit,”
said Senator Sosnowski.
In 2014, these profits totaled almost $6 million as
follows: National Grid received about $1.1 million in profit for
administering gas efficiency programs; about $4 million in profit for
administering electricity efficiency programs; and $876,602 in profit for
long-term contracting and distributed generation.
“The bill also levels the regulatory playing field so that Rhode Island is similar to Massachusetts and Connecticut by allowing the PUC to consider all circumstances that may reduce a utility’s risk,” said Senator Sosnowski. “Risk is a factor the PUC considers when determining a utility’s profit. A lower risk translates into a lower profit.”
The bill will allow the PUC to consider electricity
deregulation when examining National Grid’s cost of financing. This is the way
it’s currently done in Connecticut and Massachusetts. In this regard, the bill
levels the regulatory playing field among the three states.
Prior to deregulation, National Grid owned both the
power plants that generated electricity and the transmission lines that
distributed power to its customers.
Deregulation made two significant changes: National Grid
no longer generates the electricity that it distributes to its ratepayers, and
the company no longer shoulders the risks of financing the infrastructure
needed to generate electricity.
Because of the latter change, National Grid may look to
be less risky to investors, leading to a lower rate of return or profit which
in turn may lower electricity rates.