PUC approves new Rhode Island Energy capital infrastructure rehab plan

When PPL Corp. bought gas and electric operations from National Grid last year, it laid out grand plans to revamp Rhode Island’s aging pipelines and power stations.

But utility regulators aren’t giving PPL subsidiary Rhode Island Energy free rein on spending, at least not on infrastructure projects that come with extra costs for ratepayers

The Rhode Island Public Utilities Commission slashed $76.7 million from what Rhode Island Energy first proposed to spend on electric and gas infrastructure for fiscal year 2024, which starts April 1. The final, $291 million budgets (gas and electric together) represent a more-than-25% reduction over the company’s initial proposal. 

That means a smaller increase in the customer charges that help pay for these projects.

The gas and electric infrastructure, safety and reliability (ISR) spending plans were approved by the commission Wednesday. The decisions followed months of discussion over reams of documents as utility regulators sought to distinguish between immediate repairs and visionary (but less immediate) overhauls. 

“Rhode Island Energy needs to show us they have to have the hands on the wheel of this company,” said Commissioner Abigail Anthony. “They haven’t even owned this for a year. We need to get a baseline read on what the company can accomplish.”

Rhode Island Energy wants to spend around $2 billion in gas and electric capital projects over the next four to five years, which will require collecting more than half a billion in revenue from customers, according to documents submitted to the commission.

“I think it’s a good thing that the company wants to invest in Rhode Island, but on the other hand, we have a lot of things that are pressing on rates,” Commission Chairman Ronald Gerwatowski said at the outset of discussion on Wednesday.

Gerwatowski observed that Rhode Island Energy plans to dramatically increase spending over the next five years.  “This trajectory is like a hockey stick,” he said.

Compatibility with climate change goals?

Also a concern: how state decarbonization mandates will change demand on gas and electricity, rendering some spending areas obsolete in the future. Utility regulators, along with the company and community representatives, have begun considering how climate change goals interact with utility operations in separate dockets.

Commissioners agreed it doesn’t make sense to approve spending now on partially modernizing the electric grid and replacing leak-prone gas pipes when there are separate and ongoing discussions around the state’s future dependency on natural gas and a proposed $529 million overhaul of the electric grid.  

With that in mind, the commission axed nearly all of the $35.3 million in grid modernization spending that Rhode Island Energy proposed in its fiscal 2024 electric ISR budget. Also cut on the electric side: $10 million in “major projects” spending and $9.5 million for 100 new high-voltage electric switches.

Impact on ratepayers

The resulting $127.8 million spending plan (down from an original $181.3 million proposed by the company) is 21.9% higher than the approved fiscal 2023 budget. The approved budget means the company needs to collect $58.6 million from customers. 

That translates to an annual bill increase of $46.44 based on a residential customer who uses 845 therms of natural gas, according to updated calculations from Rhode Island Energy.

On the gas side, commissioners’ cuts were less far-reaching, partly because Rhode Island Energy had already agreed to reduce spending based on recommendations from the R.I. Division of Public Utilities and Carriers. Rhode Island Energy originally pitched a $186.5 million gas ISR budget but after the division raised concerns, the company agreed to take out an $8.9 million weld shop and cut back on “proactive” replacement of natural gas main lines. The agreed-upon settlement reduced the gas ISR budget to $170.7 million.

The commission then shaved off another $7.5 million from that settled-upon spending number by further reducing the amount of main line replacements. The final $163.2 million gas ISR spending plan is 7.1% less than the approved fiscal 2023 budget.

“It’s our job to minimize risk of having stranded assets,” Anthony said, explaining how pouring more money into replacing natural gas pipelines might end up being a waste as the state moves away from natural gas.

Skepticism from Attorney General’s Office

Rhode Island Attorney General Peter Neronha also expressed concerns with the proposed spending plans, urging the commission to deny an increase in gas spending and on the electric side, at least cut funding for grid modernization. 

“This Office is skeptical about how responsible it is for Rhode Island Energy to needlessly invest in gas infrastructure when clearly Rhode Island has not arrived at a plan for the future of gas, and especially when investment costs will be borne by ratepayers,” Neronha said in a statement. 

The approved electric ISR budget increases the average residential customer’s annual electricity bill by $6.30, based on the $55.4 million in revenue the company will need to collect from customers over fiscal 2024, according to updated calculations from Rhode Island Energy. 

The ISR charges, combined with recently approved summer electricity rates and other charges, translate to an average monthly bill of $156.23 starting April 1.

In an emailed response about the commission’s decisions, Rhode Island Energy said, “We maintain that our full proposals had the opportunity to better serve our customers right now, but we also understand the commission’s need for more time to review our Grid Modernization Plan, Advanced Metering Functionality filing, and further progress the Future of Gas stakeholder proceeding, before approving additional funding. We look forward to engaging with the Commission, the Division of Public Utilities and Carriers, and other stakeholders on these matters in the weeks and months ahead.”