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Saturday, April 16, 2016

Senate passes Sosnowski bill to curb energy cost

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.