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Attorney general’s experts raise concerns about sale of Narragansett Electric

Division of Public Utilities and Carriers will hold a hearing Monday on the petition to transfer National Grid’s electric and gas business in Rhode Island to PPL Corporation.

Power transmission lines.Matthew Lloyd/Bloomberg

PROVIDENCE — Experts for the attorney general’s office are raising concerns about what the sale of the Narragansett Electric Company could mean for Rhode Island electricity and gas customers and whether the new owners are ready to help the state meet new greenhouse-gas reduction goals.

“As proposed, the transaction should not be approved,” experts Mark D. Ewen and Robert D. Knecht said in written testimony.

The objections come as the state Division of Public Utilities and Carriers prepares to meet at 10 a.m. Monday for a hearing on a petition to transfer ownership of the Narragansett Electric Company – National Grid’s electric and gas business for customers in Rhode Island – to PPL Corporation.

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Narragansett Electric is the largest electricity transmission and distribution service provider in Rhode Island, and it is a natural gas distributor in the state, serving some 780,000 customers. Based in Allentown, Pennsylvania, PPL has about 2.7 million customers.

In March, the companies announced that the Narragansett Electric Company would be sold to PPL for an equity value of $3.8 billion. But the purchase requires regulatory approval. And Attorney General Peter F. Neronha’s office has intervened as their petition comes before the Division of Public Utilities and Carriers.

“We do have significant concerns about this matter,” attorney general’s spokeswoman Kristy dosReis said Wednesday. “We will develop those concerns throughout the hearing, so we will have no formal opinion until after the hearing.”

She said the hearing could last for as long as a week.

On Wednesday, National Grid spokesman Ted Kresse said, “In addition to the thousands of pages of materials already submitted, we look forward to demonstrating with PPL in the weeks ahead how both companies are committed to a smooth transition, keeping customer impacts top of mind, and working collaboratively with stakeholders to address the issues raised in the intervenors’ testimony.”

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In responding to the attorney general’s concerns, National Grid noted that the newly enacted Act on Climate does not not place any requirements on public utilities that they must comply with right now, so it’s unclear how future rules will affect the utility. But Narragansett Electric said it is “eager” to work with state officials on an updated plan help Rhode Island meet its clean energy goals.

“National Grid USA and Narragansett are committed to a smart and responsible transition to a clean energy future that benefits all customers,” the company said. “Narragansett has contracted for large-scale renewable resources for its Rhode Island customers, including, among other technologies, the first-in-the-nation offshore wind farm off the coast of Block Island and, more recently, a 400 MW offshore wind facility located in federal waters.”

PPL spokesman Mark A. Miller said, “We believe that PPL is uniquely positioned to serve the electricity and natural gas needs of Rhode Islanders and we will do so in a safe and reliable manner. We look forward to demonstrating that commitment and addressing the questions raised by other parties within the litigation activity next week. Pending approval, we look forward to collaborating with state officials and other stakeholders to achieve the ambitious goals of the Act on Climate.”

In testimony, Ewen and Knecht said the attorney general’s office asked them to analyze the proposed transaction, including its financial aspects and potential environmental consequences. They concluded that PPL has failed to provide “even the most rudimentary post-transaction financial statement” for either Narragansett Electric or PPL Rhode Island.

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“PPL has generally indicated that it will continue to operate (Narragansett Electric) in the same manner as (National Grid) without explaining fully how it will be able to do so,” they wrote, “and ratepayers are absorbing significant risk that operating costs will be materially higher under PPL ownership.”

The experts recommended that the commission condition any approval on a commitment from PPL to not propose a change to base rates for at least 36 months from the closing date.

“Such a commitment will provide some modest protection to ratepayers associated with unknown cost impacts, while allowing PPL and the regulator to develop a much clearer idea of the going forward operating costs,” they wrote.

Also, the experts noted that in March, Rhode Island’s General Assembly passed the Act on Climate, which makes the state’s goals for reducing greenhouse gas emissions mandatory and enforceable.

“Recent changes in Rhode Island policy will require a more aggressive approach for reducing carbon emissions associated with electric supply, for overall gas usage, and for distribution services,” they wrote. “At this time, PPL has offered little in the way of proposals to expand upon (National Grid’s) current policies and activities to begin to address this new policy environment.”

The Act on Climate has implications for Narragansett Electric whether it’s owned by National Grid or PPL, and it’s not enough for PPL to simply say it will follow National Grid’s existing environmental policies, Ewen and Knecht said.

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They noted that the Act on Climate sets up an executive climate change coordinating council that will come up with a plan to slash Rhode Island greenhouse gas emissions to 45 percent below 1990 levels by 2030, 80 percent below 1990 levels by 2030, and to achieve “net zero” emissions by 2050.

“What makes this legislation particularly important is that (it) specifies that the emission reduction targets specified for the plan are mandatory,” they wrote, noting reductions can be enforced through court proceedings brought by the attorney general and other Rhode Island residents and groups.

“This legislation thus sets one of the most aggressive goals for greenhouse gas reductions in the nation,” Ewen and Knecht wrote. “But more importantly, perhaps, it appears (to our non-legal eyes) to provide for an enforcement mechanism that could subject industry participants to judicial decree if the targets are not met.”

The experts said the Division of Public Utilities and Carriers should require PPL to limit how much it spends on the natural gas distribution system to those projects that are already underway or necessary for public safety.

“The division should require PPL to prepare an evaluation of the long-term viability of the natural gas distribution system in the context of Rhode Island’s 2021 Act on Climate, within 12 months of the closing date for the sale,” they wrote.

In separate written testimony, Kai Salem, policy coordinator for the Green Energy Consumers Alliance, said that based on the information provided so far, she’s not confident the proposed sale will maintain or improve Rhode Island’s ability to meet its obligations under the Act on Climate.

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“For that reason, I believe that the transaction should not be approved unless PPL is able to better demonstrate that the acquisition will not impair progress towards meeting the Act on Climate goals,” she wrote.

The Act on Climate targets are aggressive “because they have to be,” Salem wrote. “The planet is already experiencing the impacts of climate change. We are experiencing increasing and worse heatwaves, storms, droughts, and fires. And these impacts will get worse before they get better.”

Rhode Island has experienced more warming than any other of the lower 48 states, resulting in sea level rise, extreme weather events, and ocean acidification, Salem said.

“Allowing a once-in-a-generation utility transaction to be reviewed without considering this recently enacted legislation would be not only a disservice to the people of Rhode Island but would also be undermining the intent and will of our General Assembly,” she wrote.

In its petition, PPL said it is “committed to the clean energy future and recognizes that utilities play a major role in delivering a clean economy. PPL has adopted a clean energy strategy aimed at decarbonizing its owned generation and non-generation operations.

That strategy includes investing in clean and renewable energy, reducing energy use, fleet vehicle electrification, and advancing research and development of clean energy technology necessary “to achieve net-zero,” PPL said.

PPL said it has experience with “smart grid technology” in Pennsylvania, and it plans to bring that experience to Narragansett Electric “as it works to modernize electric grid infrastructure in Rhode Island.”


Edward Fitzpatrick can be reached at edward.fitzpatrick@globe.com. Follow him on Twitter @FitzProv.