(Updated, 2:40 p.m.)
PROVIDENCE – Gov. Donald L. Carcieri signed legislation last week that allows National Grid to restructure its electric and natural gas rates.
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The governor signed the bill without fanfare on Thursday evening after it was passed by the House, spokeswoman Amy Kempe said Monday.
The law permits National Grid to break the link between the amount of electricity and natural gas it sells and its profitability.
Supporters of the legislation say National Grid presently has little incentive to support energy efficiency because the more electricity and gas it sells, the more money it makes.
Under the new decoupling law, National Grid is guaranteed a certain return on equity based on its operating costs – which include everything from adding new power lines and transformers to clearing trees – while charging customers only for the cost of the electricity or natural gas they use.
Going forward, however, distribution charges – what National Grid will make its profit on – will vary according to how much customers use. Thus, with the total profit, and thus total distribution charges, set per year, customers who use less electricity are likely to pay a smaller percentage of those distribution costs, while those who use the same amount or more electricity will find themselves paying more per bill. The theory goes that such a setup will create a race to reduce energy consumption and relieve pressure on energy distribution systems.
David Graves, a spokesman for National Grid Plc, said the company was pleased with the passage of the legislation.
“We do feel it’s important to help us promote energy efficiency while at the same time maintaining the energy distribution system,” he said.
Abigail Anthony, a policy analyst with the nonprofit Environment Northeast, offered praise for the new law.
“With decoupled rates, utilities like National Grid can focus on saving customers money through efficiency without negatively affecting the company’s financial health,” she said in a statement. “[Environment Northeast] applauds the leadership of the General Assembly for recognizing decoupling as an essential tool for bringing cost-saving efficiency to Rhode Island’s citizens.”
Some business executives complain that they have squeezed all the efficiency possible from their manufacturing lines and the legislation will shift costs from residential customers to businesses.
The R.I. Public Utilities Commission previously rejected similar decoupling plans advanced by National Grid for gas in 2008 and electricity in 2009. The new law, while essentially overriding the PUC, does give the panel authority over some of the details of the new rate structure.
Graves said National Grid expected to file a proposal with the PUC in the coming weeks to put decoupling into practice. He said it would likely be months, however, before the PUC reviews the proposal and makes a ruling, meaning any rate changes could be a ways away.
Toray Plastics (America) Vice President for Engineer and Maintenance Shigeru Osada said the new law guaranteed his company would pay substantially more for electricity. He criticized lawmakers for overturning the PUC, which Osada said conducted an in-depth analysis of the plan before deciding to reject it.
“For them to suddenly ignore the PUC decision – I have no idea,” Osada said. “Is there any justice in the state of Rhode Island?”
Additional information is available at ripuc.org.
