Power companies and regulators’ biases obstruct more affordable, secure and cleaner energy for Rhode Island

Denied participation during the sale of National Grid’s Rhode Island utility, New Energy Rhode Island advocates say more must be demanded of its successor, Rhode Island Energy

National Grid has left Rhode Island, its pockets full of $5.3 billion. Attorney General Peter F. Neronha settled for $200 million in concessions after the Rhode Island Division of Public Utilities and Carriers approved a deal that “failed to adequately protect and advance the interest of Rhode Islanders.” Now we rely on Pennsylvania Power & Light’s newly named “Rhode Island Energy” to be much better.

A group of energy professionals organized as New Energy Rhode Island tried to join the proceeding advocating that these utilities overlook opportunities to reduce rates, favoring their interests in infrastructure investment. The hearing officer refused NERI’s participation. He would not consider the public interest in ratepayer cost and anticompetitive impact, only whether the takeover would result in any loss in the quality of service. He ruled that NERI’s members, including a former director of our office of energy resources, could not represent the public interest or advocate for the general welfare as it related to this proposed sale.

NERI had warned Governor Daniel McKee and the attorney general of the risk of weak regulatory review of the sale. National Grid had long been allowed to underserve our state’s strategy for lower-cost, more secure, clean local energy resources in favor of its own profit from natural gas and infrastructure, leaving us paying unaffordable rates for an old, insecure and dirty energy system. Rhode Island’s Power Sector Transformation report concludes that “the primary financial means through which the utility can grow its business and enhance earnings for shareholders is to invest in capital projects. This bias, created by the regulatory framework rather than by the utility itself, discourages the utility from seeking more efficient solutions that do not depend on large capital investments.” NERI appealed for change.

Meanwhile, National Grid’s British CEO spoke of Narragansett Electric’s rate base climb from £1576 million in 2018 to £2119 million in 2020, half spent on the gas distribution system. In pitching the sale, it claimed to have achieved “premium valuation” for Narragansett Electric at $2.6 billion in rate base, including $1.8 billion of investment in the distribution system and $788 million in the transmission system. How do such huge investments serve Rhode Islanders’ need for affordable electricity? National Grid reported a “two-times rate base multiple” in its sale to Pennsylvania Power & Light. What does that premium say about what we can expect of Rhode Island Energy’s intentions for infrastructure investment and rates? PPL reported to its shareholders that Rhode Island’s rules allow for recovery of natural gas and electric distribution system investment outside of its rate cases and that the Federal Energy Regulatory Commission approves formula rates for transmission investments. How does this regulatory system ensure efficient and effective spending to achieve rate reduction?

National Grid also advised its investors that its new affiliate, National Grid Ventures, signed a joint venture agreement with RWE Renewables to build offshore wind in the Northeast. It plans to spend £2-£3 billion over the next 5 years in offshore interconnection cables, offshore wind and big solar projects. They claim, “[w]e have fantastic expertise in offshore cables, and we have fantastic expertise in understanding onshore transmission and distribution in the North East,” and promise to “make sure we have the right regulatory or other frameworks to ensure appropriate funding for those and recovery of those investments as well.” In 1996, Rhode Island restructured its electric markets to ensure competition in electric supply while the utility retains monopoly control of the system used to move electricity. How could this monopoly business be expected to provide equal access to our electrical system while it held and gathered such huge stakes in competing energy production? Just what is that “right regulatory framework” the utilities seek to ensure?

The attorney general was allowed to advocate on this sale. He clawed back some benefit for Rhode Island. The Division of Public Utilities and Carriers obstructed access to other advocates for the public interest, applying the wrong standard to approve the sale. National Grid walked away with way too much profit gained from obstructing Rhode Island’s strategy to deliver more affordable, more secure and cleaner energy alternatives. We must demand far better from Rhode Island Energy.

Seth Handy is a lawyer practicing in Providence who represented New Energy Rhode Island on the proposed sale of Narragansett Electric.