Utility Innovation: 2023 Highlights and 2024 Look-Ahead

2023 was a noteworthy year for transformative utility policies in the Northeast. Acadia Center was actively involved across the region, participating in regulatory proceedings, submitting testimony on legislation, and building support among policymakers and other partners on key reforms.

Here are a few highlights from the year:

• The Future of the Gas Utility Becomes Clearer. The Massachusetts Department of Public Utilities (DPU) issued a groundbreaking order in its Future of Gas (DPU 20-80-B) proceeding. The Order sets a clear path forward for building electrification, more coordinated planning across gas and electric utilities, and more comprehensive consideration of solutions that avoid the need for fossil gas pipeline infrastructure. The Order also set the stage for a recently opened proceeding on energy burden and affordability (DPU 24-15). We expect this decision to serve as a model for other states as they consider the future of the gas utility.
• Performance-Based Regulation Moves Ahead in Connecticut. Connecticut’s Public Utilities Regulatory Authority (PURA) made significant strides in designing a Performance-Based Regulation framework for the state’s electric utilities. While a final decision won’t occur until later in 2024, PURA has led a robust stakeholder process as it considers a wide range of potential regulatory tools to better align utility performance with climate, clean energy, and equity priorities.
• Maine and Connecticut Advance Restrictions on the Use of Ratepayer Funding for Utility Lobbying. Maine (LD 325) and Connecticut (SB 7) joined Colorado in placing restrictions on the use of ratepayer funds to support utility lobbying efforts and trade association dues, both of which can mask activities that work in direct opposition to ratepayer and consumer interests.
• Integrated Distribution System Planning (IDSP) Picks Up Steam. Connecticut, Maine, and New York all made progress in moving forward with Integrated Distribution System Planning processes. The proliferation of distributed energy resources, the increasingly dynamic nature of the grid and energy production, and the implementation of essential laws and policies related to emissions, equity, and resiliency all mean that utilities can no longer plan for future grid investments in a siloed and uncoordinated manner. States have made some progress on integrated planning efforts that cut across silos and require utilities to consider grid needs and solutions in a much more holistic way.
• States Push Non-Wires Alternatives Forward. Non-wires alternatives (NWA) refer to technologies and services— such as energy efficiency, demand response, energy storage, solar PV, and microgrids—that can delay or defer traditional transmission and distribution infrastructure investment. NWA can consist of individual technologies or a portfolio of resources that meet a grid need in a more cost-effective way than traditional “wires and poles” solutions. Non-wires alternatives have the potential to provide significant benefits to ratepayers and grid operators because they help to avoid the need to pay for significant infrastructure investments that may become unnecessary in the future. Connecticut’s Non-Wires Solutions program is a notable example of a state working to make NWA business-as-usual investments for utilities.
• States Begin Testing Alternative Gas Utility Business Models. Massachusetts and New York are among several states in the country that are moving forward with pilots for thermal energy network projects, testing potential new future revenue streams for gas utilities as states accelerate progress on electrification.
• Maine Hits Heat Pump Target Two Years Early. In 2019, Governor Janet Mills set a 100,000 by 2025 heat pump target, and the state met that goal two years early in July 2023. Governor Mills has since established a new target of another 175,000 heat pumps in Maine by 2027. Maine also recently joined Rhode Island, New York, Massachusetts, and several other states in committing to meet 65% of future residential HVAC needs using heat pumps by 2030.

As we look ahead to 2024, Acadia Center is gearing up for several key opportunities and challenges across the Northeast:

• Smart rate design to support electrification and affordability will become increasingly important as the cost of necessary grid investments accelerates. Setting utility rates and allocating costs and revenues across utility customers are central, but complicated, components of utility regulation. As states electrify and DERs multiply, smart rate design is essential to ensure that customers face the right price signals and that costs and benefits are equitably distributed. Regulators and utilities will need to prioritize solutions to address energy burden and affordability as they consider how utility rates can best be utilized to support the clean energy transition.
• As more states explore Integrated Distribution System Planning, advocates are working to ensure effective IDSP plans and transparent stakeholder processes. Maine and Connecticut are just two states undertaking integrated grid planning efforts. Advocates will work throughout 2024 to ensure that utility planning efforts are comprehensive and accurately capture DER benefits while allowing for robust stakeholder review and input. We will also push for legislation in other states such as Rhode Island to implement an IDSP process.
• Translating the success of the Massachusetts DPU 20-80-B Order elsewhere. Acadia Center and other advocates will work to ensure a similarly successful outcome as DPU 20-80-B in other Future of Gas Proceedings (such as Rhode Island’s). We will push for other states to open their own proceedings to assess the future of the gas utility and for existing proceedings to support coordinated electric-gas planning efforts.
• Advocates are working to ensure the successful implementation of Performance-Based Regulation in Connecticut and pushing for legislation requiring PBR in Maine. 2024 will see the conclusion of Connecticut’s comprehensive PBR proceeding, and we and others are working to ensure a successful outcome. We are also working on legislation to implement PBR in other jurisdictions, such as Maine.
• States will continue to explore thermal energy utility models and expand pilot projects. As states consider the role of the gas utility in the clean energy transition, increasing attention will be paid to new business models that create opportunities to move from utilities that primarily sell gas to businesses that provide a range of thermal energy services. By reorienting the scope of traditional gas utilities, states can help to accelerate building electrification while continuing to utilize the expertise and skills that gas utilities bring to the effort.