Energy bill takes on storm response and grid reform challenges
Energy legislation wasn’t on the radar for any special legislative sessions called to deal with critical issues lost to the COVID-cancelled session from this winter. Even the annual July electric rate adjustment –- which this year contained big increases that sparked public outrage — would not have warranted legislation.
That was until Tropical Storm Isaias strafed Connecticut on Aug. 4, leaving close to 1 million customers without power and enduring the slow recovery that followed.
As legislators meet this week, a bill aimed at holding Eversource, especially, and the state’s other electric utility United Illuminating to account for future storm responses is taking center stage. The legislation also contains provisions touted by Gov. Ned Lamont as: “Establishing a performance-based regulation to hold the state’s electricity, gas, and water companies accountable for the critical services they provide to customers.”
Well, sort of.
What’s in the latest version of the bill is eliciting few objections. It’s what it doesn’t contain that may cause problems.
What didn’t make it into the bill – now down to a mere 20 pages from its 40-page original – is a way to help stabilize the state’s solar industry as COVID continues its economic slash and burn. Also MIA is expansion of a wildly popular program to help municipalities benefit from clean and renewable energy even if they can’t site it in their own town.
An amendment to add each will be offered by Rep. Jonathan Steinberg, D-Westport, in what he termed “short-term stop-gaps.”
What’s in the bill?
The impetus for the bill was the utility’s response to Isaias, coming inconveniently not long after the July rate increase. The legislation started off as a laundry list of punitive measures. After a long and testy hearing held as a series of tornadoes, microbursts and thunderstorms cut power to thousands of customers yet again, part of that list survived with most of the rest stripped down to its simplest form.
The key elements directed at storm response would require utilities to pay customers $25 for each day power is out beyond 96 consecutive hours, $250 for lost food and medicine if power is out for that period of time, and would begin a process aimed at providing more reliable staffing levels for storm response.
Other provisions would increase utility fine caps from 2.5% of their annual distributed revenue to 4%; allow for an interim rate decrease; and would allow the Public Utility Regulatory Authority to deny cost recovery for executive compensation – something that became a flashpoint as people waited nearly a week to have their power restored.
“Clearly the storm was an underestimation on their part and there have been no consequences for that,” said Sen. Norm Needleman, D-Essex, co-chair of the Energy and Technology Committee. “We want the penalties to be clear and certain. We don’t want to create a point for failure.”
Needleman said he is adamant the bill be bipartisan – especially in an election year.
“It was truly a bipartisan effort and I think that has to stand for something,” said Sen. Paul Formica, R-East Lyme and ranking member on the Energy Committee. He also said he felt most of the issues would have been better served in a longer regular session.
“That being said – we needed to start the ball rolling and put something together to get the attention of Eversource especially. That’s what this tried to do,” he said.
Eversource had only this to say through spokesman Mitch Gross: “We continue to talk with legislators about the proposals and how they will affect our customers, reliability and affordability.”
United Illuminating, through spokesman Ed Crowder, provided the company’s seven-page testimony written in response to the original draft of the bill. Broadly speaking, the company said it supported performance-based ratemaking “related to storm response and restoration.” It said, however, “that in order to enact appropriate performance-based rates that balance the interests of the Company and its customers, such rates must have clear and measurable metrics.”
Environmental advocates were largely on board with the bill’s modest approach. But Amy McLean, Connecticut director of Acadia Center, an energy and climate change consultant, said she was concerned with potential unintended consequences of the punitive provisions.
To prevent outages and the penalties that go with them, energy companies are “going to do what they have to do to harden the grid,” she said. “They may do all of the traditional ways of hardening the grid instead of maybe doing better ways.”
She said that could further entrench old systems of wires and poles that under the current regulatory structure the companies could get paid for and which would cost ratepayers.
The legislation, however, does address some long-term reforms that could change that paradigm, and it has a few smaller items that could make some enormous differences at PURA.
The big stuff and the teeny stuff
The top item in the bill –- widely considered the blockbuster provision — says this: “Not later than June 1, 2021, the Public Utilities Regulatory Authority shall initiate a proceeding to investigate, develop and adopt a framework for implementing performance-based regulation of each electric distribution company.”
PURA already has that on its docket – literally.
Going back to December 2017, PURA began a process toward grid modernization that would lead to performance-based operations. It was started by then-PURA chair Katie Dykes, now commissioner of the Department of Energy and Environmental Protection.
Broadly, performance-based grid operation means setting various metrics the company would need to meet to get paid. It represents a more modern approach to power delivery. Presently utilities in Connecticut operate under a cost-of-business model that pays them for things like replacing poles and delivering power with a set rate of return that insures a profit.
The current PURA Chair, Marissa Gillett, who took over in April 2019, kicked the process into high gear around the beginning of 2020, before COVID and Isaias hit. She set up a series of 11 of what are known as dockets – essentially proposals. They are in a logical order, the last of which actually sets an electric rate structure based on the utilities meeting a number of metrics determined through the 10 dockets before it.
Gillett has felt she has plenty of authority to do all this without legislative action. Early on in the bill’s development process she was concerned the legislative mandate would be too prescriptive – tying her hands to prevent her from doing what she felt was best, forcing to her to do things she felt were misguided, or both.
But Gillett said she’s OK with the result.
“I’m a proponent of legislation that allows PURA to exercise its discretion -– gives us an end target but doesn’t say how to get there,” she said. “This won’t derail what we’re already working on.
“The bill is more like an attempt to redirect the culture of utility regulation in the state.”
Dykes, whose energy policies at DEEP are tied to what PURA does, is also pleased. “This legislation clearly establishes a performance-based regulatory approach that the General Assembly expects and the administration is behind,” she said. “This greatly enhances and clarifies PURA’s ability to implement that approach.”
She said she was also pleased to see meeting the state’s climate goals listed among the metrics PURA should consider as part of goals the utilities would have to meet. It would ensure the utilities have to find ways to interconnect residential solar systems and other clean energy into the grid. “I’m very excited about what that opens up,” she said.
Dykes was also pleased with a provision to expand the microgrid program and broaden the parameters for what may include. The bill also requires a report on issues pertaining to Connecticut’s participation in the grid operated by ISO-New England, something Dykes has been concerned with for a number of years.
She and Gillett both pointed to some under-the-radar provisions in the bill that while not sexy for the public at large may have some of the biggest impacts for PURA. They include increasing the time period for reviewing and approving rate cases. The existing time period of 180 days is one of the shortest in the country.
It allows a portion of fines PURA may levy against a utility to be awarded to the customer who was harmed. And it denies the utilities recovery for rate case costs, which can go into the millions.
What still worries Gillett, though, is that she will be pushed to come up with performance-based rates before the groundwork for them is set.
“I would be lying if I said I wasn’t concerned about the pressure to come up with a way to complete this,” she said. “The cart before the horse.”
In the meantime, there’s a conflict brewing as the legislature tackles the bill.
Solar and a potential battle
There is sentiment among environmental advocates, some legislators and others, that a couple of what they consider time-sensitive issues should have been in the legislation.
One involves the state’s residential solar incentive program, RSIP. Its incentives will run out in another month or two. It’s the end of a ramp-down planned years ago as a way to get solar operating on its own. But COVID has changed some of that thinking.
The solar industry and others want the program extended out of concern that homeowners economically strapped by COVID would be unable to purchase systems without some continued incentive. That money is strictly from longstanding ratepayer fees leveraged by the Connecticut Green Bank, which runs the program.
The other issue is for municipalities. A program known as “virtual net metering” has already helped a couple of dozen of them access clean energy by buying into renewable energy sited elsewhere. There is a financial outlay at the start – but because of the credits a town receives on its electric bill, it saves money in the long run.
Participation in virtual net metering is limited, though its popularity already forced the cap to be raised once. The queue of communities looking to get in the program is now longer than the list of those that have already benefitted.
Chair Needleman said the issues were too divisive to ensure the bill be acceptable to both sides of the aisle. He also offered a reason that is a classic utility answer for not doing such programs – cost shifting.
Utilities have long argued that renewable energy – mainly rooftop solar – means people without it will wind up paying more for grid maintenance than those with solar because of how utility fees are structured. The argument is that wealthier people have solar and so lower income folks will get stuck with higher bills.
The argument has been debunked over and over for areas where penetration of solar is less than around 10%. Connecticut’s is barely 2%.
“Whenever we make headway on these policy issues, someone pulls this BS cost shift argument on legislators and they get hung up on it again,” said Mike Trahan, executive director of Solar Connecticut.
Pointing to economic concerns and the need for jobs, Trahan and others are pushing for action on either or both programs to at least buy some time until the programs can be re-visited in a full legislative session.
“Our economy leaves something to be desired. When you’re in a slump – you build stuff,” Trahan said. Virtual net metering alone, he argued, could create 1,000 construction and electrical jobs.
“The focus of this should be on exigencies related to COVID-19 – things that we couldn’t have even anticipated back in March,” said Charles Rothenberger, climate and energy attorney at Save the Sound. He is generally on board with the legislation, but feels these provisions are needed. “This affects real people and real businesses and is time sensitive.”
Steinberg is also on board with the broader bill, even though he thinks it’s modest. “This is a heavy lift to do in a special session,” he said, though he hopes it will reinforce the serious regulatory reform PURA has underway and open the door to more.
His amendments will double the virtual net metering program and increase the cap on residential solar from 350 megawatts of power, which it’s just about reached, to 450 megawatts, which he figures will buy about a year more. He too points to the potential for jobs and economic growth from both.
Dykes agrees both are important, but she said: “These are consequential changes. They need to be taken up in a regular session.”
For residential solar, the Green Bank already has a backup plan in place. Its board has approved an additional 32 megawatts, which bank President Bryan Garcia believes it has the authority to do. He thinks that small amount will last until the 2021 legislative session.
Garcia often points out that the Bank’s mandate was not just to provide a solar program – it was to “foster the sustained orderly development of a local solar industry.” He worries that is in jeopardy.
“The local solar industry has been destabilized by COVID-19 and an uncertain economy, and therefore the Board of Directors of the Green Bank voted unanimously to keep some form of the existing residential solar incentive until it’s determined if a policy extension will be taken up in the 2021 legislative session,” he said in an email statement. “It would be easier if legislators approved an extension to the RSIP today.”
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