Massachusetts DPU Approves Electric Sector Modernization Plans

On August 28, 2024, the Massachusetts Department of Public Utilities (DPU) issued its final Order in the Electric Sector Modernization Plans (ESMP) proceeding (DPU 24-10, 24-11, 24-12), marking a major milestone in the ongoing efforts to modernize the state’s electric grid.

The ESMPs are the utilities’ plans to proactively upgrade Massachusetts’ distribution system to improve reliability and resiliency in the face of increasingly severe climate change impacts. The ESMPs are also a roadmap for how the state’s utilities will prepare the grid for broad deployment of distributed energy resources and help facilitate the electrification of our buildings and transportation sectors.

The DPU has now approved an ESMP for each of the three investor-owned utilities in the state. This is the culmination of many years of work from many different stakeholders, not only since the passage of the Act Driving Clean Energy and Offshore Wind (2022) that required the ESMPs, but also from the previous years of work on grid modernization that has taken place in Massachusetts. Acadia Center is an executive member of the Grid Modernization Advisory Council (GMAC), which was set up alongside the ESMP process to guide the development of the plans and provide input and recommendations before the plans were submitted to the DPU. Acadia Center served as a member of the GMAC, as well as the GMAC Equity Working Group.

Over the course of the first five-year term, the utilities plan to spend billions of dollars across a range of activities to upgrade the distribution grid and enable a cleaner and more flexible system, all of which will result in billions of dollars’ worth of benefits for customers and the state. For example, the utilities plan to invest in infrastructure to support the deployment of advanced metering infrastructure (AMI), electric vehicles, virtual power plants (VPPs), and distributed energy resources (DER) such as rooftop solar and battery storage; network and communications upgrades to optimize the use of distributed energy resources; and grid hardening, automation, and other resiliency measures, among many other investments.

The ESMPs are strategic five-year plans to guide future proposals that the utilities will then submit to the DPU for approval. By issuing its Order, the DPU has approved the plans but has not guaranteed approval or cost recovery for any specific project, which will have to go through more detailed assessment in the future.

Here are some key highlights from the Order:

• The DPU directs the utilities to establish a long-term stakeholder planning process (LTSPP). The LTSPP will start as a six-month process, beginning in October 2024, and will consider a range of issues, including how best to enable distributed generation hosting capacity in specific locations and the role of flexible interconnection in avoiding the need for system upgrades.
• The Order builds on the DPU’s groundbreaking 2023 Future of Gas decision (20-80-B), which required Integrated Energy Planning (IEP) to better coordinate electric and gas system planning efforts. The DPU now provides more detail on how the IEP process will be developed and how the utilities will work with stakeholders to establish a Joint Utility Planning Working Group.
• The utilities and other stakeholders are directed to develop a statewide community engagement framework to improve stakeholder engagement in utilities’ distribution system planning processes. The utilities will then follow the framework before filing electric distribution system infrastructure projects for approval by the DPU and/or the Energy Facilities Siting Board (EFSB).
• The utilities are required to submit biannual filings to the DPU throughout the ESMP term. The reports will include updated forecasts and an assessment of how the latest forecasts lined up with actual demand; a description of any reprioritization of investments; updates on how the utilities are addressing structural and distributional equity in the implementation of the ESMPs; as well as updates on financing that the utilities are seeking (e.g. state and federal grants, tax incentives, etc.) to help fund the ESMP investments. Future ESMPs will also need to include data from advanced metering infrastructure and smart meters, which are currently being deployed across Massachusetts; rate design solutions, particularly time-varying rates as AMI is deployed; as well as updated distributional and structural equity analyses.
• The DPU makes clear that it now expects the utilities to incorporate Non-Wires Alternatives (NWA) into “their typical planning processes.” This is a major win for customers, as NWA such as energy efficiency, demand response, battery storage and other DER, can often be cleaner and cheaper than traditional infrastructure investments.
• The Order maintains the Provisional Program for DER from DPU 20-75 in terms of how upgrades to accommodate new DER projects are paid for. Rather than having the individual DER developer be responsible for the entire cost of any necessary system upgrades, which can often be financially prohibitive, customers will help fund the initial cost of the upgrades. Customers will be reimbursed over time from fees charged to future distributed generation facilities that are able to interconnect due to the prior upgrades.

In approving the ESMPs, the DPU chose not to implement a number of recommendations from Acadia Center and other stakeholders that were intended to strengthen the plans and ensure that they delivered even more benefits to customers. For example:

• Acadia Center and other stakeholders strongly recommended that the DPU reject utility proposals for “hybrid heating” systems (i.e. projects that include both electric heat pumps and gas or fossil-fuel backup systems), renewable natural gas, and hydrogen. In the Future of Gas proceeding (DPU 20-80-B), the DPU was not persuaded that pursuit of a broad hybrid heating strategy, which would itself necessitate maintenance of the natural gas system to support backup heating systems, is a viable path forward for the Commonwealth. In making that argument, the DPU specifically pointed to improvements in cold climate heat pump technology that will generally eliminate the need for backup heating systems in the future. In the ESMP Order, however, the DPU decided not to take a position on “specific decarbonization pathways,” which the 2022 Clean Energy Act prohibited as part of the ESMP approvals, and declined to explicitly reject hybrid heating, hydrogen, or renewable natural gas projects. However, the DPU noted that the LDCs will be filing Climate Compliance Plans in April 2025, in which those types of projects will be explored in more detail, so the DPU has not ruled out an official determination on the matter.
• Stakeholders pointed to inconsistencies across the utilities in terms of their forecasting methodologies, inputs, and assumptions. Although the DPU determined that the utilities’ approach to forecasting satisfied the original statutory requirements, it will require the utilities to incorporate new and updated data in future ESMPs and to work with the GMAC going forward on sensitivity analyses.
• Stakeholders recommended a clearer directive for the Joint Utility Planning Working Group and expectations around timelines and work products. While some specifics were left undecided, the Joint Working Group is nevertheless tasked with (1) developing a shared understanding of the utilities’ networks and network planning processes; (2) leveraging Integrated Energy Planning best practices; (3) conducting joint gas-electric planning studies; (4) creating a roadmap to strengthen IEP capabilities; among other activities.
• The DPU determined that the estimated bill impacts of the plans were reasonable given expected benefits that will result from the ESMPs. Stakeholders had argued that the ESMPs did not present an accurate picture of ratepayer impacts, in part because of the categorization of certain investments and the lack of clarity in terms of benefit-cost analysis.
• Stakeholders including Acadia Center identified a number of concerns with the Benefit Cost Analysis (BCA) used in the ESMPs. Although the Department did not ultimately require changes to the BCAs in the plans, it noted that more detailed BCAs will be required when the utilities request cost recovery for specific investments in future rate cases.

Despite these gaps, the ESMPs represent a major turning point in Massachusetts’ path towards a modernized and decarbonized electric grid.