Few could find fault with the prospect of hundreds of millions of dollars in winter energy bill credits for Rhode Islanders.
R.I. Attorney General Peter Neronha can, and is, arguing that Rhode Island Energy is lowballing customers in the discounts required under the terms of its 2022 acquisition of the state’s gas and electric business.
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“Immediate relief for skyrocketing and unstable energy costs is desperately needed,” Neronha said in a statement on Oct. 24. “However, the discount rate that Rhode Island Energy used to calculate how much they owe ratepayers shortchanges Rhode Islanders by tens of millions. Rhode Island Energy needs to keep up their end of the bargain and provide the full value they owe to ratepayers, many of whom are struggling to make ends meet.”
The scathing rebuke comes as the R.I. Public Utilities Commission kicks off its review of Rhode Island Energy’s proposed rollout of customer bill credits. Written testimony was due on Oct. 23, with a set of in-person hearings scheduled for next month.
Rhode Island Energy President Greg Cornett first unveiled the company’s plan to ease the pain of skyrocketing energy bills through bill credits at a July press conference. Cornett touted the $155 million in discounts on gas and electric bills, to be distributed across a three-month period at the start of 2026 and 2027, as a show of support for struggling customers. If approved, the proposal would slash customers’ electric bills by $20 to $30 per month, with a $40 to $50 cut to monthly gas bills, during the coldest and most expensive time of year.
But it’s not just good will behind the discounts. They were mandated under the terms of the 2022 sale of state gas and electric operations from National Grid to Rhode Island Energy’s parent company, PPL Corp.
State utility regulators required the company to shield customers from shouldering the cost of tax and accounting changes associated with sale. Additional conditions and ratepayer protections were imposed by the Attorney General’s office under a separate settlement with PPL.
PPL initially estimated the dollar figure for its “hold harmless commitment” – sparing Rhode Island customers from tax expenses – at $240 million over 37 years. Adjusted to today’s numbers, the company arrived at a $149 million present-day value.
The dispute centers on the discount formula the company used to determine the worth of the electric lines and gas and electric distribution services today: weighted average cost of capital. The financial metric is commonly used by businesses to project rates of return based on company investments and debt.
Neronha’s office argued that customers – not the company – should be centered in the calculations.
“The use of the Company’s WACC as a discount rate to determine the value of money owed to ratepayers over time overlooks the obvious fact that Rhode Island Energy’s customers are differently positioned than the Company in terms of their ability to invest the money coming into their pockets today, instead of in the future,” Nicholas Vaz, special assistant attorney general, wrote in an Oct. 23 filing to state utility regulators.
Written testimony from Chiara Trabucchi, an economic and financial expert hired by Neronha’s office, explains why the weighted average capital cost is an inappropriate formula.
“By the Company’s own admission, the WACC is a private discount rate that represents the rate at which it evaluates its own internal investment decisions,” Trabucchi wrote in her Oct. 23 testimony. “Use of the WACC to discount a public benefit to present value presupposes that the Company and the customer act with the same economic motivation, share the same investment goals, and enjoy comparable access to capital markets. This simply is not the case. The Company and the customer are not equal market participants.”
Put another way: PPL is considering risks to its own operations and to its shareholders in its formula, but Rhode Island customers don’t stand to suffer or benefit from those same investment decisions.
Trabucchi, who works as a principal for a business consulting firm in Cambridge, Massachusetts, instead suggested using the customer-deposit rate or the 10-year fixed U.S. Treasury yield as alternatives.
The two risk-free discount rates generate $37 million and $39 million more, respectively, than the formula used by PPL Corp.
“If Rhode Island Energy wants to front load some of the hundreds of millions of dollars secured for Rhode Island ratepayers at the time of the sale, that’s fine by me, but they better be coughing up every last penny that they owe,” Neronha said.
Cornett accused Neronha of “playing politics” in response.
“This was an entirely voluntary effort that Rhode Island Energy and our parent company undertook to bring relief to customers during the upcoming colder winter months in 2026 and 2027,” Cornett said in a statement on Monday. “We are deeply disappointed with the Attorney General’s actions and rhetoric.”
Cornett also noted that the company’s proposal was backed by Gov. Daniel J. McKee, and approved by the R.I. Division of Public Utilities and Carriers, the administrative arm of the state utility agency, in September. However the Public Utilities Commission, the politically appointed, three-member panel, has not weighed in.
In an initial, written notice, the commission acknowledged the formula fight unfolding between the company and Neronha’s office. Its review and investigation will focus on the method for calculating the bill credits, as well as how the discount is distributed between residential, commercial and industrial customers of different sizes.
A final decision on the proposal has not been scheduled as of Tuesday. If approved, the discounts as proposed by Rhode Island Energy would be given in January through March of 2026, and again over the same three months in 2027.
The proposed discounts are unrelated to bill credits authorized by state regulators on Monday.
