Questions remain about proposed sale of Narragansett Electric to Pennsylvania corporation

PROVIDENCE — A couple of months ago, PPL Corporation, the Pennsylvania company that wants to buy National Grid’s electric and gas operations in Rhode Island, released an update to an internally produced climate assessment, which outlined the steps it’s taking to reach net-zero greenhouse gas emissions across its holdings by 2050.

“The transition to a clean energy future offers us an opportunity to rethink how energy is produced, stored, delivered and used,” CEO Vincent Sorgi said when the report, titled “Energy Forward,” was released in November.

Not long afterward, at a hearing before Rhode Island regulators on the proposed $5.3-billion purchase of what’s known as the Narragansett Electric Company, PPL’s would-be president of operations in the Ocean State was asked about the climate report.

“I haven’t studied it,” David J. Bonenberger, currently a PPL vice president, said.

The answer surprised Hank Webster, an environmental advocate who put the question to Bonenberger during hearings in December before the state Division of Public Utilities and Carriers. Webster, Rhode Island director of the Acadia Center, expected the company’s top executives to not only be familiar with what appears to be a major companywide initiative but also to detail how the goals to reduce emissions would be met in Rhode Island.

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After all, Gov. Dan McKee signed into law in 2021 Rhode Island’s landmark initiative to slash carbon pollution over the next generation. Under the Act on Climate, which sets out a net-zero goal by 2050, greenhouse gas reductions are mandatory and enforceable in Rhode Island for the first time.

So there’s a lot of interest on the part of environmental groups such as the Acadia Center and the Green Energy Consumers Alliance in what PPL, an Allentown-based utility that serves customers in Pennsylvania, Kentucky and Virginia, is planning to do to green Rhode Island’s electric and gas systems.

“Climate change is a priority here in the Ocean State and we cannot let it fall off track with the transfer from National Grid to PPL,” Webster said in an email. “PPL knew climate change would be a focus of these hearings, so it was surprising key executives testified they were only vaguely familiar with their own decarbonization report.”

Could the transaction cost ratepayers?

Decarbonization isn’t the only matter that has raised questions about PPL’s bid to buy Narragansett Electric, the dominant electric supplier in Rhode Island and the state’s only distributor of natural gas.

The office of Attorney General Peter Neronha submitted filings from experts who say there’s a risk that Narragansett Electric’s 780,000 customers in Rhode Island could face rate increases to pay for the costs of transferring the utilities to PPL. They say that the financial information provided by PPL as part of the docket is inadequate and unconvincing.

And there are also concerns within the state agency that has approval authority over the transaction.

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While one employee at the Division of Public Utilities and Carriers, deputy administrator John Spirito, is acting as hearing officer in the case and a final decision will be signed off on by Linda George, administrator of the agency, members of the division’s advocacy section and their consultants say that PPL has failed to prove the benefits of the transaction. They estimate the costs that could fall on ratepayers to be in the millions of dollars.

On the eve of the hearings last month, PPL released a list of 17 commitments in response to written testimony filed by the Attorney General’s Office, the division and other intervenors. They ranged from issuing a report on meeting the goals of the Act on Climate within a year of the transaction closing to staffing up its natural gas procurement team with experienced people.

But the list has done little to assuage the concerns. On the first day of hearings, state Rep. David Morales asked the division to delay a decision on the transaction, arguing that PPL hadn’t demonstrated how Rhode Islanders would be protected from potential rate hikes.

“Clearly, this transfer of our utility system in its current form is not in the best interests of the public,” the Providence Democrat said.

With post-hearing memos due next week, the division’s advocacy section, which is tasked with representing the interests of ratepayers, is still recommending denial of the application jointly filed by PPL and National Grid, spokesman Thomas Kogut said.

The position of the Attorney General’s Office hasn’t shifted either.

“We remain significantly concerned about this matter,” spokeswoman Kristy dosReis said.

Environmentalists looking for detailed steps on reducing emissions

When Webster cross-examined Bonenberger, he specifically asked about reducing the carbon footprint of Narragansett Electric’s natural gas system, which is primarily used for heating. The Energy Forward report released by PPL has a lot to say about reducing emissions from electric generation, but not so much about gas.

Here in Rhode Island, there’s been a growing interest in shrinking the carbon footprint of the heating sector by ramping up the installation of electric heat pumps and exploring the use of alternative fuels, such as hydrogen. The focus has been on Aquidneck Island, which experienced a gas outage a few years ago and where National Grid has put forward a solution to a projected shortfall in supplies.

In his answer, Bonenberger didn’t get into specifics. He pointed more generally to the commitment to come up with a plan in response to the Act on Climate if the sale is approved. Doing anything earlier on reducing emissions associated with gas service or other areas within the Rhode Island utility system would be presumptuous, he said.

“We’re not a company that looks to put out headlines with no concrete plan to back up those headlines,” he said.

As far as PPL’s overall support for cutting emissions, CEO Sorgi said there’s no question where the company stands.

“We are absolutely committed to helping the state get to their decarbonization goals,” he testified. “I can tell you that right now.”

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But Webster says PPL should have filed detailed plans on reducing emissions in Rhode Island months ago.

“Comparatively, National Grid has developed several potential decarbonization pathways, even building a geothermal heating network project in Massachusetts that could serve as a model for changes they implement to Rhode Island,” he wrote. “There’s a demonstrable gap in experience and the Division needs to make PPL work very quickly to close it.”

Kai Salem, policy coordinator with the Green Energy Consumers Alliance, was also left wanting more.

“We would want to see measurable, enforceable commitments that we could count on before deciding whether this is in the public interest,” Salem said in an interview.

When asked about the exchanges regarding the Act on Climate during the hearings, a PPL spokesman said the company is refraining at this time from commenting on the proceedings outside of oral testimony and written filings.

Concerns over clean energy programs

There are also questions about economies of scale and whether Rhode Island would suffer if it’s removed from the National Grid network that also operates electric and gas utilities in Massachusetts and New York, and in which services are shared throughout the three states.

For example, before the deal with PPL was struck, National Grid had filed documents with regulators outlining plans to modernize the electric grid with the aid of smart meters to track consumption and report data to better manage the delivery of power. The move would have been made in conjunction with New York and Massachusetts. The expectation was that Rhode Island would have seen savings by doing it at the same time as the larger states.

When asked about this at the hearings, Sorgi said his company already has experience in implementing smart grid technology in Kentucky and Pennsylvania.

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“When we look at the estimates for what [National] Grid was planning on deploying there, we can match or exceed the cost estimates for that because we’ve done it and we have the expertise,” he said.

But PPL has not made a formal commitment on what the costs could be. The company says it would provide estimates within a year of the transaction closing.

And while it’s true that PPL is considered an industry leader when it comes to the use of smart meters, its programs have not always gone smoothly.

It first rolled out new meters in Pennsylvania two decades ago, but some of the devices failed to provide all the information required by regulators and the company had to replace them, securing permission to do so in 2015. The company’s smart meter proposal in Kentucky was initially rejected by regulators in 2018, who weren’t convinced of the benefits, before a new plan was approved last year.

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Energy efficiency is another area of uncertainty surrounding PPL’s experience. The states where National Grid operates rank high in terms of their policy efforts in conserving energy: Massachusetts is second in the nation, Rhode Island fourth and New York fifth on the most recent scorecard from the American Council for an Energy Efficient Economy. But the states where PPL is active are lower: Pennsylvania is 19th, Virginia 25th and Kentucky 33rd.

PPL says the differences are a function of what regulators in individual states want.

“It’s just different priorities in different jurisdictions,” Bonenberger testified. “We have a track record of meeting all the requirements in any jurisdiction we operate in.”

A decision with big implications for Rhode Islanders

As the hearings wrapped up, Spirito, the division hearing officer, wondered aloud if the standards set by opponents to the sale could be met only by National Grid with its decades of experience in Rhode Island. Some appear to want the company to be forced to continue operating in the state, he said.

He asked the parties involved to address the issue in their post-hearing briefs, which are due Tuesday. Spirito has set a date of Feb. 25 for a decision on the sale.

Under state law, for the application to win approval, PPL must prove that “the facilities for furnishing service to the public will not thereby be diminished” and that the transaction is “consistent with the public interest.” It’s a standard that leaves room for debate.

“The evidence in this record makes it abundantly clear that PPL’s ownership is consistent with the public interest and will not harm the general public,” Jerry Petros, a lawyer for the company, said in the hearings.

Petros pointed specifically to the state’s climate goals, saying that PPL is uniquely positioned to help meet them, through its experience with advanced meters and grid-management tools.

“This is truly a unique opportunity for Rhode Island,” he said.

While the Federal Energy Regulatory Commission has given its approval to the deal, opponents in Rhode Island, including staff with the division, say the risks of the transaction outweigh the potential benefits. That’s not only when it comes to cutting emissions, but also in regard to basic nuts and bolts of utility service, like securing reliable, reasonably priced gas supplies in New England, a market where demand is perpetually high and one in which PPL has no experience.

No matter what happens with the sale, the impacts will be far-reaching. No previous utility case of this magnitude has come up for approval in Rhode Island within our lifetimes, according to Christy Hetherington, chief legal counsel for the division who helped argue the case for the advocacy section.

“The Advocacy Section cannot emphasize enough how this transaction stands to impact all facets of these systems — the reliability of gas and electric delivery to our homes and the costs of these services, costs that will directly impact the rates that the average citizens will have to pay to keep the lights on or to keep warm in the winter,” she said in the hearings.

Read the full article at The Providence Journal here.