BOSTON — New analysis from Acadia Center demonstrates that outdated financial incentives are driving expenditures on expensive and unnecessary utility infrastructure and inhibiting clean energy in the Northeast. Analysis of recent electric transmission and gas pipeline expansions demonstrates that utilities earn higher returns on these traditional expenditures than on local clean energy alternatives. The need to reform outdated incentives and change utility planning has come to stark relief in a rate case proposal from one of the region’s largest utilities. In it, Eversource proposes unprecedented returns on expenditures and electricity rates that inhibit clean energy while causing consumers to pay more than they should.
“Energy efficiency, community and rooftop solar, and smart energy management are revolutionizing the energy sector by offering clean, lower cost energy alternatives, but outdated incentive structures that provide high utility financial returns for old ways of doing business are standing in the way”, said Daniel Sosland, President of Acadia Center. “It’s time for the Commonwealth to seize the moment, save money for ratepayers and build a clean, lower carbon energy system.”
Acadia Center’s analysis Incentives for Change: Why Utilities Continue to Build and How Regulators Can Motivate Them to Modernize, shows through two examples of commonly financed energy projects — a transmission project in Maine and gas pipeline expansion in Connecticut — how utilities stand to earn far more from expensive, traditional infrastructure than from low cost clean energy alternatives.
“Under the current rules, it is impossible for consumers to have confidence that the millions of dollars we are all paying for energy infrastructure are the best choices for our environment and wallets,” said Abigail Anthony, Director of Acadia Center’s Grid Modernization Initiative. “The rules need to change to stimulate competition between traditional power plants, pipelines, and transmission and local solutions like solar, storage, and smart appliances.”
Utility financial incentives and grid planning rules are a part of Eversource’s rate case in Massachusetts. While advancing some important steps, too much of what Eversource proposes would undermine consumer control and clean energy incentives. On the positive side, Eversource proposes to “decouple” its revenue from electricity sales, which supports the Commonwealth’s efforts to ramp up energy efficiency. The company also proposes some potentially beneficial grid modernization investments, procurement of energy storage, and measures to help deploy more electric vehicle charging stations.
However, Eversource proposes other changes that exacerbate a regulatory structure that skews in favor of traditional projects over clean energy, including:
- Highest-in-the-region returns on equity of 10.5%, which would increase rewards for overbuild infrastructure rather than utilizing clean energy alternatives
- Automatic annual revenue increases of at least 3.5% (roughly $35 million) per year, rather than incentives to improve performance and achieve consumer and clean energy goals
- Higher fixed monthly charges and demand charges that reduce customer incentives to save or produce energy and disproportionately impact low income customers.
Additional information on proposals in Eversource’s rate case are available in Acadia Center’s summary analysis.
Abigail Anthony, Director, Grid Modernization Initiative
Krysia Wazny, Communications Director
617.742.0054 x107, email@example.com