National Grid Rhode Island’s Nov. 27 proposal to charge customers an additional $71.6 million each year evoked sharp criticism from state leaders.
The complaint – on its surface – stems from an overarching concern that reoccurring rate increases unfairly benefit the utility and unnecessarily hurt Rhode Islanders and their businesses.
“Rhode Island families and small-business owners – especially manufacturing businesses – are already challenged by high-energy costs,” Gov. Gina M. Raimondo said in a statement criticizing the proposal.
But the argument runs deeper and raises bigger questions about how a utility, such as National Grid, should be compensated for its delivery of power.
Like other utilities in deregulated energy markets, National Grid profits from the delivery of energy rather than the generation of it. The utility must propose revenue requirements to state regulators that are supposed to represent how much money the company needs to cover its costs and make a profit.
The company currently makes a 9.5 percent return on equity, according to the R.I. Division of Public Utilities and Carriers. As part of its proposal, National Grid is seeking to increase its ROE to 10.1 percent.
The current proposal is unique, however, as National Grid has not fully readjusted its rates since 2012. Company officials argue business expenses – such as property taxes, health care and labor – have since grown and the $71.6 million increase is necessary.
“The proposal … really updates the pricing to reflect our current costs,” said Bill Malee, vice president of regulatory pricing at National Grid.
The proposal, however, is more than double the $31.8 million increase National Grid received five years ago, which frustrates Macky McCleary, DPUC administrator.
“We challenged National Grid to produce a plan for its business that preserves safety, reliability and increases value for our ratepayers,” McCleary said. “What we received … appears to be a proposal that continues business as usual and presumes the willingness of Rhode Islanders to bear an ever-increasing burden of higher costs. It’s time to get off this train.”
McCleary is leading an effort to try and change how National Grid is compensated, arguing the current regulatory system is flawed.
He plans to submit a counter-proposal to National Grid to speed changes he says could help curb reoccurring rate increases.
The disagreement will undoubtedly play itself out in the coming months, as the R.I. Public Utilities Commission weighs the proposal. The commission is independent of the DPUC. Any changes would not take effect until Sept. 1.
“As Rhode Island navigates the transition from an old-way energy system to a new one, based as much on information as infrastructure, we need to consider fresh solutions, new partners and bring the best know-how in the world to our doorstep,” McCleary said.
