Summary of National Grid’s Distribution Rate Reform Proposal in Rhode Island

Legislation passed in 2014 required the Public Utility Commission to open a docket by July 1, 2015 to consider rate design and distribution cost allocation in light of the increasing amount of distributed generation, like solar photovoltaics (PV),that will be connected to the grid. Only reforms to distribution rates are being considered and National Grid was required to file a revenue-neutral proposal, meaning they could not propose a rate design that requires new investment in, for example, advanced metering.

National Grid submitted a proposal that includes: 1) a tiered customer charge for residential and small commercial and industrial (C&I) customers; 2) an access fee for standalone distributed generation; and, 3) a merger of the two larger industrial rate classes. Acadia Center let the US Navy and Walmart take on the rate class merger issue and focused our testimony on the first two issues.

Tiered Customer Charges

Residential and small C&I customers in Rhode Island currently pay a customer charge on their electricity bills to cover meter reading, billing, etc. Regardless of the amount of power you use in a given month that cost is always on the bill.

National Grid has proposed moving from a uniform customer charge to tiered customer charges based on monthly usage (kWh). For residential customers the customer charge would range from $5.25/month (Tier 1) to $18.00/month (Tier 4) compared to the current charge of $5.00/month. For small commercial and industrial customers the fixed customer charge would range from $10.50/month (Tier 1) to $26.00/month (Tier 4) compared to the current $10.00/month.

In practice this means that if you use more electricity in a given month (think heat wave in July) then you may be placed in a higher tier with a higher fixed customer charge. If you move up a tier then you get locked in at that higher level for the next 12 months. This obviously has implications for all customers but it is particularly worrying for customers that use electricity for heating – typically renters and low-income customers. The proposal could also penalize customers that install electric heat pumps or own electric vehicles.

Also, since this is a revenue-neutral proposal, increasing the amount of revenue collected through fixed charges leads to a corresponding decrease in the variable distribution rate, which has negative implications for energy efficiency and net metering credits by making energy savings and credits less valuable.

Access Fee

National Grid has proposed a monthly access fee for all “stand-alone distributed generation,” defined as generation connected to the distribution system that does not have on-site load. In other words, virtual or community net metering projects.

The access fee is $5.00 per kW-month for projects connected to the distribution system at primary voltage and $7.25 per kW-month for projects connected at the secondary voltage level. These fees are adjusted by a technology-specific “capacity availability factor” of 40% for solar, 30% for wind, 10% for hydro, and 40% for anaerobic digestion.

Ultimately, the access fee proposal discourages stand-alone distributed generation by imposing additional hurdles on municipalities and farms. It also fails to take into account the benefits of distributed resources.

National Grid has made a similar tiered customer charge and access fee proposal in Massachusetts. In both these states we should be encouraging more innovative analysis and reforms that have the potential to advance a clean energy future.

Leslie Malone is a Senior Analyst, Climate & Energy and Canada Project Director working from Acadia Center’s Providence office. She works on distributed and large-scale renewable energy and transmission policy as well as energy efficiency and carbon pricing issues in the U.S. and Canada.