2021 -- H 5673

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LC001848

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2021

____________

A N   A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS -- OFFICE OF ENERGY

RESOURCES INTERCONNECTION STANDARDS

     Introduced By: Representatives Morales, Potter, McGaw, Tanzi, and Giraldo

     Date Introduced: February 24, 2021

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Chapter 39-26.3 of the General Laws entitled "Distributed Generation

Interconnection" is hereby repealed in its entirety.

CHAPTER 39-26.3

Distributed Generation Interconnection

     39-26.3-1. Policy objective.

     The general assembly hereby finds and declares that the expeditious completion of the

application process for renewable distributed generation is in the public interest. For this reason,

certain standards and other provisions for the processing of applications are hereby set forth to

assure that the application process assists in the development of renewable generation resources in

a timely manner.

     39-26.3-2. Definitions.

     The following terms shall have the meanings given below for purposes of this chapter:

     (1) "Applicant" means an electric distribution customer or distributed-generation developer

who submits an application to the electric distribution company for the installation of a renewable

distributed-generation interconnection to the distribution system for a renewable distributed-

generation project that, as contemplated, meets the eligibility requirements for net metering

contained within this title or the eligibility requirements for a standard contract contained within

this title.

     (2) "Feasibility study" means a high-level project assessment that includes an estimate of

the cost of interconnecting to the distribution system that would be assessed on the applicant for an

interconnection. The estimate is not based on any engineering study, but is based on past experience

and judgment of the electric distribution company, taking into account the information in the

application, the location of the interconnection, and general knowledge of the distribution and

transmission system. The estimate cannot be relied upon by the applicant for purposes of holding

the electric distribution company liable or responsible for its accuracy as long as the electric

distribution company has provided the estimate in good faith. The feasibility study estimate shall

be a range within which the electric distribution company believes the interconnection costs are

likely to be and shall include a disclaimer that explains the nature of the estimate.

     (3) "Feasibility study fee" means a fee that shall be charged to the applicant to obtain a

feasibility study as specified in § 39-26.3-4.

     (4) "Impact study" means an engineering study that includes an estimate of the cost of

interconnecting to the distribution system that would be assessed on the applicant for an

interconnection that is based on an engineering study of the details of the proposed generation

project. The estimate generally will have a probability of accuracy of plus or minus twenty-five

percent (25%). The estimate may be relied upon by the applicant for purposes of determining the

expected cost of interconnection, but the distribution company may not be held liable or responsible

if the actual costs exceed the estimate as long as the estimate was provided in good faith and the

interconnection was implemented prudently by the electric distribution company.

     (5) "Impact study fee" means a fee that shall be charged to the applicant to obtain an impact

study as specified in § 39-26.3-4.

     (6) "Renewable energy resource" means those resources set forth in § 39-26-5.

     39-26.3-3. Application process.

     (a) The application process set out in this section shall be applicable to electric distribution

companies thirty (30) days after the enactment of this chapter.

     (b) An applicant for a renewable distributed-generation interconnection must submit an

application to the electric distribution company for an impact study, including a request for an

estimate of the cost of interconnecting the renewable distributed-generation resource to the

distribution system. The applicant may request a feasibility study prior to requesting an impact

study, but the applicant is not required to do so and may submit an application for an impact study

without having obtained a feasibility study. The distribution company shall follow the schedule

below for all applications.

     (c) Upon receipt of a completed application requesting a feasibility study and receipt of the

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applicable feasibility study fee, the electric distribution company shall provide a feasibility study

to the applicant within thirty (30) days.

     (d) Upon receipt of a completed application requesting an impact study and receipt of the

applicable impact study fee, the electric distribution company shall provide an impact study within

ninety (90) days.

     (e) In anticipation of the electric distribution company needing to add resources that are

not currently in Rhode Island or covered in rates, to provide the necessary services to advance the

aggressive goals and objectives set forth in this title, the electric distribution company shall be

authorized to add up to two (2) incremental employee resources located in Rhode Island that shall

be primarily dedicated to servicing Rhode Island applicants and customers in connection with net

metering and the development of distributed-generation resources, including the requisite resources

to perform impact and feasibility studies for distributed-generation interconnections and to assure

that feasibility studies and impact studies, as well as other engineering activity necessary to

facilitate the completion of distributed-generation projects in Rhode Island, are implemented and

delivered on a timely basis. Prior to new rates going into effect following the company's next

general rate case filing, the cost of the incremental employee resources shall be recovered through

rates on an annual basis through an annual reconciliation mechanism, provided that the total amount

of fees collected from impact studies and feasibility studies shall be netted against such costs. Only

the cost of time and work actually spent on Rhode Island renewable energy project matters shall be

included in the annual reconciliation. The commission shall have the authority to review these

positions in the electric distribution company's next general rate case as a cost of service in the

same manner as it reviews all other expenses in a rate case to determine whether they should

continue. Nothing contained in this section shall preclude the electric distribution company from

adding additional resources, subject to commission approval.

     (f) Notwithstanding any other provision of this chapter, the application process and fees

set forth in this chapter apply only to interconnections to the distribution system by renewable

distributed-generation resources. To the extent that a renewable generation resource seeks an

interconnection to the transmission system and the interconnection request is governed by rules and

regulations under the exclusive jurisdiction of the Federal Energy Regulatory Commission, the

provisions of this chapter shall not apply.

     (g) The rules and fees established in this chapter shall be incorporated within the applicable

"Standards for Interconnection of Distributed Generation" approved by the commission.

     39-26.3-4. Study cost fees.

     (a) After thirty (30) days from the enactment of this chapter until the end of calendar year

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2012, the feasibility study fee shall be in accordance with the schedule set forth below:

     (1) Residential applicants for interconnections of UL 1741.1 approved renewable

distributed generation that is twenty-five kilowatts (25 KW) or less: zero dollars ($0).

     (2) Residential applicants for interconnections of UL 1741.1 approved renewable

distributed generation that is greater than twenty-five kilowatts (25 KW): fifty dollars ($50.00).

     (3) Nonresidential applicants for interconnections of UL 1741.1 approved renewable

distributed generation that is one hundred kilowatts (100 KW) or less: one hundred dollars ($100).

     (4) Nonresidential applicants for interconnections of UL 1741.1 approved renewable

distributed generation that is two hundred fifty kilowatts (250 KW) or less: three hundred dollars

($300).

     (5) Nonresidential applicants for interconnections of renewable distributed generation that

is greater than two hundred fifty kilowatts (250 KW), up to one megawatt (1 MW): one thousand

dollars ($1,000).

     (6) Nonresidential applicants for interconnections of renewable distributed generation

greater than one megawatt (1 MW): two thousand five hundred dollars ($2,500).

     Beginning January 1, 2013, and for every year thereafter, the commission shall set a new

fee schedule that is no less than what is specified herein. The purpose of the fee schedule is to

provide a disincentive to applicants contemplating a renewable distributed-generation project from

requesting order of magnitude estimates unless they are serious about pursuing such projects.

     (b) After thirty (30) days from the enactment of this chapter until the end of calendar year

2012, the impact study fee shall be in accordance with the schedule set forth below:

     (1) Residential applicants for interconnections of UL 1741.1 approved renewable

distributed generation that is twenty-five kilowatts (25 KW) or less: zero dollars ($0).

     (2) Residential applicants for interconnections of UL 1741.1 approved renewable

distributed generation that is greater than twenty-five kilowatts (25 KW): one hundred dollars

($100).

     (3) Nonresidential applicants for interconnections of UL 1741.1 approved renewable

distributed generation that is one hundred kilowatts (100 KW) or less: five hundred dollars ($500)

     (4) Nonresidential applicants for interconnections of UL 1741.1 approved renewable

distributed generation that is two hundred fifty kilowatts (250 KW) or less: one thousand five

hundred dollars ($1,500).

     (5) Nonresidential applicants for interconnections of renewable distributed generation that

is greater than two hundred fifty kilowatts (250 KW), up to one megawatt (1 MW): five thousand

dollars ($5,000).

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     (6) Nonresidential applicants for interconnections of renewable distributed generation

greater than one megawatt (1 MW): ten thousand dollars ($10,000).

     Beginning January 1, 2013, and for every year thereafter, the commission shall set a new

fee schedule that is no less than what is specified herein. The purpose of the impact study fee

schedule is to assure that an applicant is responsible for paying a reasonable amount of the cost of

the study in advance of installing the distributed generation, but that the advance cost is not so high

as to discourage an applicant from pursuing a project.

     (c) To the extent that an impact study fee established under this section does not cover the

reasonable cost of an impact study for a given nonresidential project that commences operation,

the balance of these costs shall be recovered from such applicant through billings after the project

is online. The electric distribution company may, at its sole election, offset net-metering credits or

any standard contract payments until the full fee(s) is reimbursed, if it finds it administratively

convenient to use that means of billing for the balance of the fee for a given project.

     39-26.3-4.1. Interconnection standards.

     (a) The electric distribution company may only charge an interconnecting, renewable

energy customer for any system modifications to its electric power system specifically necessary

for and directly related to the interconnection.

     (b) If the public utilities commission determines that a specific system modification

benefiting other customers has been accelerated due to an interconnection request, it may order the

interconnecting customer to fund the modification subject to repayment of the depreciated value of

the modification as of the time the modification would have been necessary as determined by the

public utilities commission. Any system modifications benefiting other customers shall be included

in rates as determined by the public utilities commission.

     (c) If an interconnecting, renewable energy customer is required to pay for system

modifications and a subsequent renewable energy or commercial customer relies on those

modifications to connect to the distribution system within ten (10) years of the earlier

interconnecting, renewable energy customer's payment, the subsequent customer will make a

prorated contribution toward the cost of the system modifications that will be credited to the earlier

interconnecting, renewable energy customer as determined by the public utilities commission.

     (d) An electric distribution company shall acknowledge to the interconnecting, renewable

energy customer receipt of an application to initiate the interconnection process within three (3)

business days of receipt. The electric distribution company shall notify the interconnecting,

renewable energy customer in writing within ten (10) business days of receipt that the application

is or is not complete and, if not, advise what is missing. Any disputes regarding whether and when

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an application to initiate the interconnection process is complete shall be resolved expeditiously at

the public utilities commission. The maximum time allowed between the date of the completed

application and delivery of an executable interconnection service agreement shall be one hundred

seventy-five (175) calendar days or two hundred (200) calendar days if a detailed study is required.

All electric distribution company system modifications must be completed by the date which is the

later of: (1) No longer than two hundred seventy (270) calendar days, or three hundred sixty (360)

calendar days if substation work is necessary, from the date of the electric distribution company's

receipt of the interconnecting, renewable energy customer's executed interconnection service

agreement; or (2) The interconnecting, renewable energy customer's agreed-upon extension of the

time between the execution of the interconnection service agreement and interconnection as set

forth in writing. All deadlines herein are subject to all payments being made in accordance with the

distributed-generation interconnection tariff on file with the public utilities commission and the

interconnection service agreement. These system modification deadlines cannot be extended due

to customer delays in providing required information, all of which must be requested and obtained

before completion of the impact study. The deadlines for completion of system modifications will

be extended only to the extent of events that are clearly not under the control of the electric

distribution company, such as extended prohibitive weather, union work stoppage or force majeure,

or third-party delays, including, without limitation, delays due to ISO-NE requirements not

attributable to electric distribution company actions, and that cannot be resolved despite

commercially reasonable efforts. The electric distribution company shall notify the customer of the

start of any claimed deadline extension as soon as practicable, its cause and when it concludes, all

in writing. Any actual damages that a court of competent jurisdiction orders the electric distribution

company to pay to an interconnecting, renewable energy customer as a direct result of the electric

distribution company's failure to comply with the requirements of this subsection shall be payable

by its shareholders and may not be recovered from customers, provided that the total amount of

damages awarded for any and all such claims shall not exceed, in the aggregate, an amount equal

to the amount of the incentive the electric distribution company would have earned as provided for

in §§ 39-26.6-12(j)(3) and 39-26.1-4 in the year in which the system modifications were required

to be completed. In no event shall the electric distribution company be liable to the interconnecting,

renewable energy customer for any indirect, incidental, special, consequential, or punitive damages

of any kind whatsoever as a result of the electric distribution company's failure to comply with this

section.

     (e) On or before September 1, 2017, the public utilities commission shall initiate a docket

to establish metrics for the electric distribution company's performance in meeting the time frames

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set forth herein and in the distributed-generation interconnection standards approved by the public

utilities commission. The public utilities commission may include incentives and penalties in the

performance metrics.

     (f) The proposed interconnection of any new renewable energy resource that replaces the

same existing renewable energy resource of the same or less nameplate capacity that has been in

operation in the twelve (12) months preceding notification of the replacement shall be subject to a

sixty-day (60) review. The purpose of such sixty-day (60) review is to allow the electric distribution

company to determine whether any system modifications are required to support the

interconnection of the replacement renewable energy resource. If there is a need for system

modifications because of an interconnection policy change implemented by the electric distribution

company, then the system modification may be included in rates as determined by the public

utilities commission. If there is a need for system modifications only because of a change in the

rating or utility disturbance response that adversely affects the impact of the facility on the

distribution system, then the interconnecting, renewable energy customer shall be responsible for

the cost of the system modifications.

     39-26.3-5. Liberal construction of chapter required.

     This chapter shall be construed liberally in aid of its policy objective.

     39-26.3-6. Severability.

     If any provision of this chapter or the application thereof to any person or circumstances is

held invalid, the invalidity shall not affect other provisions or application of the chapter that can be

given effect without the invalid provision or application, and to this end the provisions of this

chapter are declared to be severable.

     SECTION 2. Sections 39-1-27, 39-1-27.7 and 39-1-27.7.1 of the General Laws in Chapter

39-1 entitled "Public Utilities Commission" are hereby amended to read as follows:

     39-1-27. Electric distribution companies required to file restructuring plans.

     (a) Each electric distribution company shall file with the commission a plan for transferring

ownership of generation facilities into a separate affiliate of the electric distribution company. The

transmission facilities owned by the electric distribution company also may be transferred to an

affiliated electric transmission company at a price that shall equal the book value of the

transmission facilities on the electric distribution company's accounts net of depreciation and

deferred taxes as the date of transfer, but such a transfer is not required. The generation plant,

equipment, and facilities owned by an electric distribution company shall be transferred to an

affiliate that is a nonregulated power producer at a price that shall equal the book value of the

generation plant, equipment, and facilities on the electric distribution company's accounts net of

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depreciation and deferred taxes as of the date of the transfer. Consistent with the schedule for

implementing retail access in § 39-1-27.3, each electric transmission company shall file tariffs with

the Federal Energy Regulatory Commission (FERC) and electric-distribution companies shall file

tariffs with the commission. The tariffs will provide the terms, conditions, and rates for

nondiscriminatory access to transmission and distribution facilities to wholesale and retail

customers and to nonregulated power producers. The tariffs shall: (1) Conform to the standards,

policies, and requirements of the Federal Energy Regulatory Commission or the commission as

appropriate with respect to nondiscriminatory access to transmission and distribution services; (2)

Fulfill such standards with respect to both transmission and distribution services for the benefit of

both wholesale and retail customers and their suppliers; and (3) Provide retail access in accordance

with the schedule set forth in § 39-1-27.3. For purposes of this section, "nondiscriminatory access"

means access to transmission and distribution services on rates, terms, and conditions found to be

reasonable by the FERC or the commission as appropriate and applied consistently to all customers

in a rate class regardless of their supplier. When establishing terms and conditions for distribution

service, the commission shall implement standards, policies, and requirements consistent with

those established by the Federal Energy Regulatory Commission for transmission service unless it

determines that alternative terms and conditions are in the public interest.

     (b) The commission shall review the plan within six (6) months of filing and if the plan is

in compliance with chapter 3 of this title, shall authorize the property transfers, securities issuances,

and affiliate transactions pursuant to this title and shall grant all necessary regulatory approvals.

All existing state and local rights, authorizations, and approvals, including but not limited to,

permits, licenses, locations, indentures, leases, orders, or similar rights associated with the

ownership and operation of plant and equipment, shall be deemed transferred with the associated

plant and equipment upon the commission's authorization of the transfer effective as of the date of

transfer. Notwithstanding any provisions of this section, if the electric distribution company's

wholesale power supplier chooses to transfer its generation assets to a nonaffiliate of the electric

distribution company for purposes of carrying out the market valuation required by § 39-1-27.4(g),

and such transfer to a nonaffiliate is specified in the electric distribution company's restructuring

plan filed with the commission pursuant to subsection (a) of this section, the transfer of the electric

distribution company's interest in the generation facilities may be made directly to the nonaffiliate.

In the case of such a transfer directly to a nonaffiliate, all of the state and local rights, authorizations,

and approvals, including those enumerated above, shall be deemed transferred with the associated

plant and equipment upon the commission's authorization of the transfer effective as of the date of

the transfer.

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     (c) The electric distribution company shall implement the corporate reorganizations and

property transfers specified in such restructuring plan; terminate its all-requirements contract with

its wholesale power supplier on the terms set forth in § 39-1-27.4; and provide retail access for all

customers in Rhode Island with a standard offer, as set forth in § 39-1-27.3, no later than three (3)

months after retail access is available to forty percent (40%) or more of the kilowatt-hour sales in

New England. The commission may extend this time if it determines that additional time is

necessary to implement the transactions on reasonable terms and in accordance with a reasonable

schedule; provided, however, that nothing in this section shall be construed to limit the effect of §

39-1-27.3 or permit the commission to unduly discriminate in providing retail access among or

within rate classes.

     (d) Following the complete implementation of the restructuring plans, electric distribution

companies shall be prohibited from selling electricity at retail and from owning, operating, or

controlling generating facilities, although such facilities may be owned by affiliates of electric

distribution companies. For purposes of this subsection, providing the standard-offer service and

last-resort power supply in accordance with subsections (d) and (f) of § 39-1-27.3 shall not be

construed as selling electricity at retail.

     (e) Following the termination of the electric distribution company's contracts with its

wholesale power supplier, the wholesale power supplier shall become a nonregulated power

producer, and shall be free, subject to the requirements of the standard offer set forth in § 39-1-

27.3(e) and retail electric licensing commission plan requirements pursuant to § 39-1-27.1, to sell

electricity generated from each of its facilities on either the wholesale or retail markets at market

prices, either directly or through an affiliate, which shall also become a nonregulated power

producer. The former wholesale power supplier and its affiliates shall be free to apply to become

exempt wholesale generators pursuant to § 32 of the Public Utility Holding Company Act of 1935,

15 U.S.C. § 79z-5a [repealed], and other federal law, rules, and regulations, and each and every

generating facility of the former wholesale power supplier shall become an eligible facility pursuant

to that statute. Accordingly, the legislature hereby finds and declares that the division has sufficient

regulatory authority, resources, access to books and records to exercise its duties; and that the full

participation of former wholesale power suppliers and affiliated nonregulated power producers in

the market and the designation of each of the former wholesale power supplier's facilities as eligible

facilities will benefit consumers; is consistent with state law; will not provide any unfair

competitive advantage by virtue of their status as a former wholesale power supplier or as affiliates

of electric distribution companies; and is in the public interest.

     (f) Although reducing air emissions from power plants is a goal of electricity industry

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restructuring, power plants in Rhode Island already have low emissions relative to their

counterparts in other states. For this reason, it is unnecessary for the restructuring plans required

by this section to address in-state air emission reductions. However, to the extent a wholesale power

supplier receiving contract termination fees pursuant to § 39-1-27.4(b)(4) owns and operates as of

December 31, 1995, fossil-fired generation in another state that does not meet air emission

standards applicable as of that date to new electric-generating facilities in that state, the wholesale

power suppliers shall cooperate with the appropriate environmental officials in the state or states

where the generating facilities are located to develop a plan for reducing the emissions of nitrogen

oxides, sulfur dioxide, and particulate matter from the plants on an overall basis through

retirements, replacements, controls, or offsets, or any combination of the above, toward the air

emissions standards applicable to new electric-generating facilities in effect in the state or states

where the plants are located as of January 1, 1996. The plans shall be implemented in connection

with electric-industry restructuring in the state or states where the generating facilities are located.

     (g) An electric distribution company, whether public, quasi-municipal, or investor owned,

that as of January 1, 1996, did not purchase power at wholesale from a wholesale power supplier

under an all-requirements contract, shall include proposals for recovering transition costs consistent

with the elements that would be comparable in nature to the elements included in termination fees

pursuant to § 39-1-27.4(b) through (g) and for providing a standard offer consistent with

requirements of § 39-1-27.3(d) in its plan filed with the commission pursuant to this section. The

filing by an electric distribution company that is a quasi-municipal corporation shall also address

any unique circumstances affecting the electric distribution company, including special contract

requirements or charter restrictions and the conditions that the quasi-municipal corporation must

satisfy in order to participate in retail competition. In reviewing the filing and determining the

appropriate level of transition cost recovery, the commission shall apply standards consistent with

those contained in § 39-1-27.4(b) through (g) and with this subsection. The commission shall be

authorized to take any action or to grant any approval necessary to maintain hydroelectric power

purchases from the Niagara and St. Lawrence power projects by quasi-municipal corporations.

Notwithstanding any other provision of this section, quasi-municipal electric distribution

companies that purchase hydroelectric power from the Niagara and St. Lawrence power projects

shall be authorized to continue to resell that power to residential customers within their service

territories. After notice and public hearing, the commission may exempt electric distribution

companies subject to this subsection from: (1) The requirement to transfer ownership of generation

and transmission facilities to affiliated companies pursuant to subsection (a) of this section; and (2)

The prohibition against selling electricity at retail pursuant to subsection (d) of this section with

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respect to sales within the service territory of the electric distribution company, if it determines that

the exemptions are in the public interest.

     (h) With the exception of the requirements of the standard offer set forth in § 39-1-27.3(e)

and (f) and retail electric licensing commission plan requirements pursuant to § 39-1-27.1, nothing

in this section shall be construed or interpreted to constrain the application of antitrust laws to

nonregulated power producers, whether affiliated or not with an electric distribution company.

     (i) To improve and ensure the implementation of unobstructed retail access to the electric

distribution system, as addressed in §§ 39-1-27.3 and 46-12.2-4.1(b), the Rhode Island

infrastructure bank shall file tariffs with the commission. The tariffs will provide the terms,

conditions, and rates for nondiscriminatory access to distribution facilities to wholesale and retail

customers and to nonregulated power producers. The tariffs shall:

     (1) Conform to the standards, policies, and requirements of the Federal Energy Regulatory

Commission or the commission, as appropriate with respect to nondiscriminatory access to

distribution services;

     (2) Fulfill such standards with respect to distribution services for the benefit of both

wholesale and retail customers and their suppliers;

     (3) Provide and facilitate retail access needed to meet the plan and objectives of § 46-12.2-

4.1(b);

     (4) Be proposed to the commission for approval no later than October 1, 2021; and

     (5) Be approved by the commission no later than December 1, 2021. For purposes of this

section, "nondiscriminatory access" means access distribution services on rates, terms, and

conditions found to be reasonable by the commission as appropriate and applied consistently to all

customers in a rate class, regardless of their supplier. When establishing terms and conditions for

distribution service, the commission shall implement standards, policies, and requirements,

consistent with those established by the commission, unless it determines that alternative terms and

conditions are in the public interest.

     (j) The commission shall ensure that the electric distribution companies give the Rhode

Island infrastructure bank full and unobstructed access to any and all information about the electric

distribution system that it must have to fulfill its duties under § 46-12.2-4.1(b).

     (k) The Rhode Island infrastructure bank shall propose to the commission its budget for

the planning and administration of the interconnection of renewable energy to the electric

distribution system no later than October 1, 2021. The commission shall reappropriate any budget

dedicated to the electric distribution companies for the planning and administration of

interconnection of renewable energy to the distribution system to the Rhode Island infrastructure

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bank, to fulfill its duties under § 46-12.2-4.1(b) no later than December 1, 2021.

     39-1-27.7. System reliability and least-cost procurement.

     (a) Least-cost procurement shall comprise system reliability and energy efficiency and

conservation procurement, as provided for in this section, and supply procurement, as provided for

in § 39-1-27.8, as complementary but distinct activities that have as common purpose meeting

electrical and natural gas energy needs in Rhode Island, in a manner that is optimally cost-effective,

reliable, prudent, and environmentally responsible.

     (b) The commission shall establish not later than June 1, 2008, standards for system

reliability and energy efficiency and conservation procurement that shall include standards and

guidelines for:

     (1) System reliability procurement, including but not limited to:

     (i) Procurement of energy supply from diverse sources, including, but not limited to,

renewable energy resources as defined in chapter 26 of this title;

     (ii) Distributed generation, including, but not limited to, renewable energy resources and

thermally leading combined heat and power systems, that is reliable and is cost-effective, with

measurable, net system benefits;

     (iii) Demand response, including, but not limited to, distributed generation, back-up

generation, and on-demand usage reduction, that shall be designed to facilitate electric customer

participation in regional demand response programs, including those administered by the

independent service operator of New England ("ISO-NE"), and/or are designed to provide local

system reliability benefits through load control or using on-site generating capability;

     (iv) To effectuate the purposes of this division, the commission may establish standards

and/or rates (A) For qualifying distributed generation, demand response, and renewable energy

resources; (B) For net metering; (C) For back-up power and/or standby rates that reasonably

facilitate the development of distributed generation; and (D) For such other matters as the

commission may find necessary or appropriate.

     (2) Least-cost procurement, which shall include procurement of energy efficiency and

energy conservation measures that are prudent and reliable and when such measures are lower cost

than acquisition of additional supply, including supply for periods of high demand.

     (c) The standards and guidelines provided for by subsection (b) shall be subject to periodic

review and as appropriate amendment by the commission, which review will be conducted not less

frequently than every three (3) years after the adoption of the standards and guidelines.

     (d) To implement the provisions of this section:

     (1) The commissioner of the office of energy resources and the energy efficiency and

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resources management council, either jointly or separately, shall provide the commission findings

and recommendations with regard to system reliability and energy efficiency and conservation

procurement on or before March 1, 2008, and triennially on or before March 1, thereafter through

March 1, 2024. The report shall be made public and be posted electronically on the website of the

office of energy resources.

     (2) The commission shall issue standards not later than June 1, 2008, with regard to plans

for system reliability and energy efficiency and conservation procurement, which standards may

be amended or revised by the commission as necessary and/or appropriate.

     (3) The energy efficiency and resources management council shall prepare by July 15,

2008, a reliability and efficiency procurement opportunity report that shall identify opportunities

to procure efficiency, distributed generation, demand response, and renewables and that shall be

submitted to the electrical distribution company, the commission, the office of energy resources,

and the joint committee on energy.

     (4) Each electrical and natural gas distribution company shall submit to the commission on

or before September 1, 2008, and triennially on or before September 1 thereafter through September

1, 2024, a plan for system reliability and energy efficiency and conservation procurement. In

developing the plan, the distribution company may seek the advice of the commissioner and the

council and must seek the advice of the Rhode Island infrastructure bank, according to its duties

under this section and § 46-12.2-4.1(b). The plan shall include measurable goals and target

percentages for each energy resource, pursuant to standards established by the commission,

including efficiency, distributed generation, demand response, combined heat and power, and

renewables. The plan shall be made public and be posted electronically on the website of the office

of energy resources, and shall also be submitted to the general assembly.

     (5) The commission shall issue an order approving all energy-efficiency measures and

distribution system modification measures that enable and enhance access to the distribution system

for renewable energy facilities that are cost-effective and lower cost than acquisition of additional

supply or investment in additional distribution or transmission infrastructure, with regard to the

plan from the electrical and natural gas distribution company, and reviewed and approved by the

energy efficiency and resources management council, and any related annual plans, and shall

approve a fully reconciling funding mechanism to fund investments in all efficiency measures and

distribution system modification measures that are cost-effective and lower cost than acquisition

of additional supply or investment in additional distribution or transmission infrastructure, not

greater than sixty (60) days after it is filed with the commission.

     (6)(i) Each electrical and natural gas distribution company shall provide a status report,

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which shall be public, on the implementation of least-cost procurement on or before December 15,

2008, and on or before February 1, 2009, to the commission, the division, the commissioner of the

office of energy resources, and the energy efficiency and resources management council which

may provide the distribution company recommendations with regard to effective implementation

of least-cost procurement. The report shall include the targets for each energy resource included in

the order approving the plan and the achieved percentage for energy resource, including the

achieved percentages for efficiency, distributed generation, demand response, combined heat and

power, and renewables, as well as the current funding allocations for each eligible energy resource

and the businesses and vendors in Rhode Island participating in the programs. The report shall be

posted electronically on the website of the office of energy resources.

     (ii) Beginning on November 1, 2012, or before, each electric distribution company shall

support the installation and investment in clean and efficient combined heat and power installations

at commercial, institutional, municipal, and industrial facilities. This support shall be documented

annually in the electric distribution company's energy-efficiency program plans. In order to

effectuate this provision, the energy efficiency and resource management council shall seek input

from the public, the gas and electric distribution company, the commerce corporation, and

commercial and industrial users, and make recommendations regarding services to support the

development of combined heat and power installations in the electric distribution company's annual

and triennial energy-efficiency program plans.

     (iii) The energy-efficiency annual plan shall include, but not be limited to, a plan for

identifying and recruiting qualified combined heat and power projects, incentive levels, contract

terms and guidelines, and achievable megawatt targets for investments in combined heat and power

systems. In the development of the plan, the energy efficiency and resource management council

and the electric distribution company shall factor into the combined heat and power plan and

program, the following criteria: (A) Economic development benefits in Rhode Island, including

direct and indirect job creation and retention from investments in combined heat and power

systems; (B) Energy and cost savings for customers; (C) Energy supply costs; (D) Greenhouse gas

emissions standards and air quality benefits; and (E) System reliability benefits.

     (iv) The energy efficiency and resource management council shall conduct at least one

public review meeting annually, to discuss and review the combined heat and power program, with

at least seven (7) business days' notice, prior to the electric and gas distribution utility submitting

the plan to the commission. The commission shall evaluate the submitted combined heat and power

program as part of the annual energy-efficiency plan. The commission shall issue an order

approving the energy-efficiency plan and programs within sixty (60) days of the filing.

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     (e) If the commission shall determine that the implementation of system reliability and

energy efficiency and conservation procurement has caused, or is likely to cause, under or over-

recovery of overhead and fixed costs of the company implementing the procurement, the

commission may establish a mandatory rate-adjustment clause for the company so affected in order

to provide for full recovery of reasonable and prudent overhead and fixed costs.

     (f) The commission shall conduct a contested case proceeding to establish a performance-

based incentive plan that allows for additional compensation for each electric distribution company

and each company providing gas to end-users and/or retail customers based on the level of its

success in mitigating the cost and variability of electric and gas services through procurement

portfolios.

     (g)(1) The office of energy resources shall conduct a study and analysis of the electric and

gas distribution company's state energy efficiency programs that will examine implemented

program and planned conservation measures and review and confirm the claimed energy savings.

In carrying out this study, the office shall utilize a representative sample of different customer

classes and measures that have and/or will be participating in the state energy efficiency programs.

At a minimum, the study performed by the office of energy resources shall include the following

in its scope of work:

     (i) Independently review and summarize the electric and gas distribution company process

for incorporating results from completed evaluation studies into ongoing energy efficiency program

reporting and implementation.

     (ii) Conduct an independent review of gas and electricity efficiency programs, which may

include billing analysis techniques. The scope and subjects of this analysis will be decided by the

working group with input and advice from an independent consultant. The analysis will be

conducted by a qualified independent consultant using industry accepted methods.

     (iii) Review the data-collection practices, including metering equipment used; sampling

frequency; sample sizes; and data validation procedures, and the methods for data analysis

employed, as deemed appropriate by the independent evaluator.

     (iv) Study results and recommendations will be presented to the public utilities commission

and the energy efficiency and resource management council.

     (2) The office of energy resources shall consult with the working group in development of

the request for proposals (RFP), and during the course of the study, including the preliminary study

results. The working group shall be comprised of one representative from each of the following

groups chosen by the office of energy resources:

     (i) Large commercial and industrial energy users;

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     (ii) Small business energy users;

     (iii) Residential energy users;

     (iv) Municipal and state energy users;

     (v) Low-income energy users;

     (vi) Electric and gas distribution company; and

     (vii) Energy efficiency and resource management council.

     (3) The office of energy resources, in consultation with the electric and gas distribution

company and representatives referenced in subsection (g)(2), shall be authorized to hire an energy

consulting company or firm to carry out the energy efficiency verification study. The costs

associated with this study, including, but not limited to, those associated with the consultant or firm

contract and reasonable administrative costs incurred by the office in the execution of subsection

(g) of this section, shall be recoverable through the system benefit charge subject to commission

approval. Funding shall be transferred from the electric and gas distribution utility to the office of

energy resources upon request by the office.

     (4) The office of energy resources shall submit this report on or before October 30, 2019,

to the governor, the president of the senate, and the speaker of the house. The office and its selected

energy consulting company or firm shall host two (2) public presentations on the preliminary and

final results of the study.

     39-1-27.7.1. Revenue decoupling.

     (a) The general assembly finds and declares that electricity and gas revenues shall be fully

decoupled from sales pursuant to the provisions of this chapter and further finds and declares that

any decoupling proposal submitted by an electric distribution company as defined in § 39-1-

2(a)(12) or gas distribution company included as a public utility in § 39-1-2(a)(20) that has greater

than one hundred thousand (100,000) customers, shall be for the following purposes:

     (1) Increasing efficiency in the operations and management of the electric and gas

distribution system;

     (2) Achieving the goals established in the electric distribution company's plan for system

reliability and energy efficiency and conservation procurement as required pursuant to § 39-1-

27.7(d);

     (3) Increasing investment in least-cost resources that will reduce long-term electricity

demand;

     (4) Reducing risks for both customers and the distribution company including, but not

limited to, societal risks, weather risks, and economic risks;

     (5) Increasing investment in end-use energy efficiency;

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     (6) Eliminating disincentives to support energy-efficiency programs;

     (7) Facilitating and encouraging investment in utility infrastructure, safety, and reliability;

and

     (8) Considering the reduction of fixed, recurring customer charges and transition to

increased unit charges that more accurately reflect the long-term costs of energy production and

delivery.

     (b) Each electric distribution company as defined by § 39-1-2(a)(12) and gas distribution

company included as a public utility in § 39-1-2(a)(20) having greater than one hundred thousand

(100,000) customers shall file proposals at the commission to implement the policy set forth in

subsection (a) of this section. The commission shall approve these proposals, provided they contain

the features and components set forth in subsection (c) of this section, and that they are consistent

with the intent and objectives contained in subsection (a) of this section. Actions taken by the

commission in the exercise of its ratemaking authority for electric and gas rate cases shall be within

the norm of industry standards and recognize the need to maintain the financial health of the

distribution company as a stand-alone entity in Rhode Island.

     (c) The proposals shall contain the following features and components:

     (1) A revenue decoupling reconciliation mechanism that reconciles annually the revenue

requirement allowed in the company's base distribution-rate case to revenues actually received for

the applicable twelve-month (12) period; provided that the mechanism for gas distribution shall be

determined on a revenue-per-customer basis, in a manner typically employed for gas distribution

companies in the industry. Any revenues over-recovered or under-recovered shall be credited to,

or recovered from, customers, as applicable; and

     (2) An annual infrastructure, safety, and reliability spending plan for each fiscal year and

an annual rate-reconciliation mechanism that includes a reconcilable allowance for the anticipated

capital investments and other spending pursuant to the annual pre-approved budget as developed

in accordance with subsection (d) of this section.

     (d) Prior to the beginning of each fiscal year, gas and electric distribution companies shall

consult with the division of public utilities and carriers and the Rhode Island infrastructure bank,

regarding their infrastructure, safety, and reliability spending plan for the following fiscal year,

addressing the following categories:

     (1) Capital spending on utility infrastructure;

     (2) For electric distribution companies, operation and maintenance expenses on vegetation

management;

     (3) For electric distribution companies, operation and maintenance expenses on system

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inspection, including expenses from expected resulting repairs; and

     (4) Any other costs relating to maintaining safety and reliability that are mutually agreed

upon by the division and the company.

     The distribution company shall submit a plan to the division and the Rhode Island

infrastructure bank and the division and the Rhode Island infrastructure bank shall cooperate in

good faith to reach an agreement on a proposed plan for these categories of costs for the prospective

fiscal year within sixty (60) days. To the extent that the company and the division mutually agree

on a plan, such plan shall be filed with the commission for review and approval within ninety (90)

days. If the company and the division cannot agree on a plan, the company shall file a proposed

plan with the commission and the commission shall review and, if the investments and spending

are found to be reasonably needed to maintain safe and reliable distribution service over the short

and long term, approve the plan within ninety (90) days.

     (e) The commission shall have the following duties and powers, in addition to its existing

authorities established in this title:

     (1) To maintain reasonable and adequate service-quality standards, after decoupling, that

are in effect at the time of the proposal and were established pursuant to § 39-3-7.

     (2) The commission may exclude the low-income rate class from the revenue decoupling

reconciliation-rate mechanism for either electric or gas distribution. The commission also may

exclude customers in the large commercial and industrial rate class from the gas-distribution

mechanism.

     (3) The commission may adopt performance incentives for the electric distribution

company that provide a shared-savings mechanism whereby the company would receive a

percentage of savings realized as a result of achieving the purposes of this section while the

remaining savings are credited to customers.

     (4) The commission shall review and approve, with any necessary amendments,

performance-based, energy-savings targets developed and submitted by the Rhode Island energy

efficiency and resources management council. The performance-based targets shall also be used as

a consideration in any shared-savings mechanism established by the commission pursuant to

subsection (e)(3) of this section.

     (f) The Rhode Island energy efficiency and resources management council shall propose

performance-based, energy-savings targets to the commission no later than September 1, 2010. The

targets shall include, but not be limited to, specific energy kilowatt-hour savings overall and peak-

demand savings for both summer and winter peak periods expressed in total megawatts as well as

appropriate targets recommended in the opportunities report filed with the commission pursuant to

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§ 39-1-27.7(d)(3). The council shall revise, as necessary, these targets on an annual basis prior to

the reconciliation process established pursuant to subsection (c) of this section and submit its

revisions to the commission for approval.

     (g) Reporting. Every electric distribution company, as defined in subsection (a) of this

section, shall report to the governor, general assembly, division of public utilities and carriers, and

public utilities commission on or before September 1, 2012. The report shall include, but not be

limited to, the following elements:

     (1) A comparison of revenues from traditional rate regulation and how the revenues have

differed as part of an approved decoupling structure;

     (2) A summary of how the company is achieving the performance-based targets that may

have been adopted pursuant to subsection (e)(4) of this section;

     (3) A summary of any shared savings the company may have received pursuant to the

performance incentives authorized in subsection (e)(3) of this section;

     (4) A summary of how the company is achieving the service-quality standards required in

subsection (e)(1) of this section;

     (5) An overview of how decoupling is impacting revenue stabilization goals that have

resulted from decoupling; and

     (6) A summary of any customer education programs provided.

     SECTION 3. Sections 39-26-6 and 39-26-8 of the General Laws in Chapter 39-26 entitled

"Renewable Energy Standard" are hereby amended to read as follows:

     39-26-6. Duties of the commission.

     (a) The commission shall:

     (1) Develop and adopt regulations on or before December 31, 2005, for implementing a

renewable energy standard, which regulations shall include, but be limited to, provisions for:

     (i) Verifying the eligibility of renewable energy generators and the production of energy

from such generators, including requirements to notify the commission in the event of a change in

a generator's eligibility status.

     (ii) Standards for contracts and procurement plans for renewable energy resources to

achieve the purposes of this chapter.

     (iii) Flexibility mechanisms for the purposes of easing compliance burdens; facilitating

bringing new renewable resources on-line; and avoiding and/or mitigating conflicts with state-level

source disclosure requirements and green marketing claims throughout the region; which flexibility

mechanisms shall allow obligated entities to: (A) Demonstrate compliance over a compliance year;

(B) Bank excess compliance for two (2) subsequent compliance years, capped at thirty percent

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(30%) of the current year's obligation; and (C) Allow renewable energy generated during 2006 to

be banked by an obligated entity as early compliance, usable towards meeting an obligated entity's

2007 requirement. Generation used for early compliance must result in the retirement of NE-GIS

certificates in a reserved certificate account designated for such purposes.

     (iv) Annual compliance filings to be made by all obligated entities within one month after

NE-GIS reports are available for the fourth (4th) quarter of each calendar year. All electric-utility-

distribution companies shall cooperate with the commission in providing data necessary to assess

the magnitude of obligation and verify the compliance of all obligated entities.

     (2) Authorize rate recovery by electric-utility-distribution companies of all prudent

incremental costs arising from the implementation of this chapter, including, without limitation:

the purchase of NE-GIS certificates; the payment of alternative compliance payments; required

payments to support the NE-GIS; assessments made pursuant to § 39-26-7(c); and the incremental

costs of complying with energy source disclosure requirements.

     (3) Certify eligible renewable energy resources by issuing statements of qualification

within ninety (90) days of application. The commission shall provide prospective reviews for

applicants seeking to determine whether a facility would be eligible.

     (4) Determine, on or before January 1, 2019, and every fifth year thereafter, the adequacy

of renewable energy supplies to meet the increase in the percentage requirement of energy from

renewable energy resources to go into effect the following year. In the event that the commission

determines an inadequacy of supplies for scheduled percentage increases, the commission shall

delay all or a part of the implementation of the scheduled percentage increase, until such time that

the commission determines that the supplies are adequate to achieve the purposes of this chapter.

     (5) Establish sanctions for those obligated entities that, after investigation, have been found

to fail to reasonably comply with the commission's regulations. No sanction or penalty shall relieve

or diminish an obligated entity from liability for fulfilling any shortfall in its compliance obligation;

provided, however, that no sanction shall be imposed if compliance is achieved through alternative

compliance payments. The commission may suspend or revoke the certification of generation units,

certified in accordance with subsection (a)(3) above, that are found to provide false information or

that fail to notify the commission in the event of a change in eligibility status or otherwise comply

with its rules. Financial penalties resulting from sanctions from obligated entities shall not be

recoverable in rates.

     (6) Report, by February 15, 2006, and by February 15 each year thereafter, to the governor,

the speaker of the house, and the president of the senate on the status of the implementation of the

renewable energy standards in Rhode Island and other states, and which report shall include in

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2009, and each year thereafter, the level of use of renewable energy certificates by eligible

renewable energy resources and the portion of renewable energy standards met through alternative

compliance payments, and the amount of rate increases authorized pursuant to subsection (a)(2).

     (b) Consistent with the public policy objective of developing renewable generation as an

option in Rhode Island, and subject to the review and approval of the commission, the electric

distribution company is authorized to propose and implement pilot programs to own and operate

no more than fifteen megawatts (15 MW) of renewable-generation demonstration projects in Rhode

Island and may include the costs and benefits in rates to distribution customers. At least two (2)

demonstration projects shall include renewable generation installed at, or in the vicinity of

nonprofit, affordable-housing projects where energy savings benefits are provided to reduce

electric bills of the customers at the nonprofit, affordable-housing projects. Any renewable-

generation proposals shall be subject to the review and approval of the commission. The

commission shall annually make an adjustment to the minimum amounts required under the

renewable energy standard under this chapter in an amount equal to the kilowatt hours generated

by such units owned by the electric distribution company. The electric and gas distribution

company or the Rhode Island infrastructure bank, under its authority, pursuant to §§ 39-1-27 and

46-12.2-4.1(b) shall also be authorized to propose and implement smart-metering and smart-grid

demonstration projects in Rhode Island, subject to the review and approval of the commission, in

order to determine the effectiveness of such new technologies for reducing and managing energy

consumption, and may include the costs of such demonstration projects in distribution rates to

electric customers to the extent the project pertains to electricity usage and in distribution rates to

gas customers to the extent the project pertains to gas usage.

     39-26-8. Interaction with other policies.

     (a) Rhode Island has established a system-benefits charge (SBC), a portion of which is

dedicated to supporting renewable energy, administered in accordance with the provisions of § 39-

2-1.2(b) and (c); other states have similar policies. The office of energy resources is hereby directed

to collaborate with the division of public utilities and carriers, the trustees of the renewable energy

development fund, the distribution company, the Rhode Island infrastructure bank, and with other

interests and parties, as appropriate, in maximizing the combined impact and efficiency of the

renewable energy program established by § 39-2-1.2(b) and (c) and the renewable energy standard.

     (b) It is the intent of this chapter that generation attributes and NE-GIS certificates applied

towards Rhode Island renewable energy standard compliance may not be used towards compliance

with state renewable energy obligations relating to an obligated entity's load in other states.

     SECTION 4. Section 46-12.2-4.1 of the General Laws in Chapter 46-12.2 entitled "Rhode

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Island Infrastructure Bank" is hereby amended to read as follows:

     46-12.2-4.1. Power to participate in projects to enhance the waters of the state Power

to participate in projects to enhance the waters, air and energy infrastructure of the state.

     (a) The agency shall have the power to exercise the powers set forth in § 46-12.2-4 to

participate in the following projects and classes of projects that enhance the waters of the state:

projects for dewatering dredged material, for beneficial use and disposal of dredged material at

sites above mean high water and for confined aquatic disposal of dredged materials, provided that

the project has been approved by the coastal resources management council and the department as

provided for in chapter 6.1 of this title, and further provided that the project is supported either by

a fund established for the purposes of supporting such projects or is supported from project

revenues. The agency shall cooperate with the coastal resources management council and the

department in preparing a proposal for establishing a fund to support projects for dewatering

dredged material, for beneficial use and disposal of dredged material at sites above mean high water

and for confined aquatic disposal of dredged materials.

     (b) The agency is authorized to exercise the powers set forth in § 39-1-27 to participate in

the following projects and classes of projects that enhance the air of the state, by facilitating access

to the distribution system:

     (1) Development of a plan to most cost effectively and efficiently interconnect to the

electric distribution system all renewable energy, needed to serve all of Rhode Island’s energy and

climate goals, policies and plans;

     (2) Oversee and administer the interconnection of renewable energy resources to the

electric distribution system; and

     (3) Report to the commission and the general assembly on the implementation of its plan

for the interconnection of renewable energy, no later than December 1, 2022 and biannually

thereafter, including consideration of at least the following criteria:

     (i) Economic development benefits to Rhode Island, including direct and indirect job

creation and retention from investments in combined heat and power systems;

     (ii) Energy and cost savings for customers;

     (iii) Energy supply costs;

     (iv) Greenhouse gas emissions standards and air quality benefits; and

     (v) System reliability benefits.

     The agency shall cooperate with the commission in establishing a budget to fulfill these

duties and to ensure the proper funding of that budget, as addressed in §§ 39-1-27 and 39-1-27.7.

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     SECTION 5. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS -- OFFICE OF ENERGY

RESOURCES INTERCONNECTION STANDARDS

***

     This act would repeal the distribution generator interconnection chapter. It would also

improve the nondiscriminatory and retail access to the electric distribution system. It would transfer

from the electric distribution companies to the Infrastructure Bank, the planning and administration

of the interconnection of renewable energy to the electric distribution system.

     This act would take effect upon passage.

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