NH Grid Modernization Working Group

Meeting #6November 29, 2016

Facilitator/Mediator: Dr. Jonathan Raab, Raab Associates, Ltd.

Consultant to NH PUC Staff: Tim Woolf, Synapse Energy Economics

DRAFT Meeting Summary

Welcome/Introductions

Jonathan went over the agenda and goals for the day

Altogether there were 29people in attendance at the Working Group meeting. See attendees in Appendix 1.

See slide decks and documents used during this meeting HERE.

Customer Engagement—Rate Design

The WG discussed the “Areas of Potential Agreement” in the Rate Design Matrix that Tim and Jonathan had drafted based on the WG member proposals and discussions at the previous (10/20) meeting. In some cases, the WG agreed to language as drafted, in others it made modifications and then agreed on the language, and in other cases the WG either agreed on different options or wanted to continue to discuss (see the language in the updated compendium—language in red is still being discussed by WG).

The WG then discussed three different proposals related to TVR for generation:

1)Opt In Approach—drafted by Eversource, Liberty, and Unitil

2)Opt Out Approach—drafted by NECEC and NHSEA

3)Opt In Technology to Enable 3rd Party Providers of TVR—Cliff Below

Each of the teams of authors went over their proposals and answered questions, followed by reactions from others in the WG. The utilities offered that in the MA analyses of both an Opt in and Opt out approach that neither was cost-effective but the Opt In approach was more cost effective. Others pointed out that National Grid’s MA analysis showed Opt out to be more cost effective than Opt in.

The WG was broadly supportive of the Opt in Technology to Enable Third Party Providers proposal if less expensive ways could be found to measure and communicate interval data than currently exists.

The WG also recognized that given the current metering capabilities, that an opt out TVR approach was not likely practical in the short run. All were supportive of opt in TVR rates in the near term. But some conditioned their support to whether the enabling technology for opt in would ultimately support, as opposed to hinder, a transition to opt out TVR for generation (a transition that many if not most WG members support). There were also issues raised about how opt in rates would work in practice with 3rd parties bidding to supply default service to an unknown (and perhaps relatively small) number of customers.

Tim/Jonathan proposed to write potential settlement language around packaging the 3 options. They may ask the authors of each of the 3 pieces mentioned above to somewhat refine their write-ups to make them more parallel.

Cost Recovery and Utility Incentives

Eric from Eversource and Janet from NECEC reviewed the cost recovery proposal that they jointly developed in consultation with their respective caucuses based on the outline agreed to by the WG for a capital tracker approach for Grid Mod investments that could potentially morph into outcome-based, forward-looking ratemaking framework over time after tracking an agreed-upon set of metrics.

The WG was very supportive of the proposal, and made some refinements to the language during the meeting. The only disagreement was whether the capital tracker should also include any stranded costs associated with grid mod related investments. See the redlined cost recovery proposal in Appendix 2 to this meeting summary (and clean version in the updated Compilation aka Draft Report).

The Utilities then reviewed their detailed outline for what would be included in each utility’s grid modernization plan. The WG was very supportive of the outline, and made a few suggested changes/clarifications. See draft outline in Appendix 3 to this meeting summary.

Compilationof Work Products to Date

After lunch the WG turned its attention to looking at the compilation of all the work products to date, resolving some outstanding issues during the review, and developing gameplans for completing/resolving others. Some of the changes and/or gameplans included:

  • Jonathan and Tim will draft the Introduction, Process, and Report Outlinechapter
  • Jonathan and Tim will draft some introductory language to the Goals and the Outcomesand Capabilities chapters, but the WG felt that the content of both chapters was fine as agreed to in prior meetings.
  • Distribution System Planning chapter
  • The WG made substantial progress on fleshing out the answers to the 11 questions posed in the chapter, and flagged several issues for further discussion at the next meeting
  • Jonathan and Tim to draft the introduction
  • Customer Engagement:Rate Design
  • Jonathan and Tim to write Intro
  • Rate design principles previously agreed to affirmed, but Unitil wants to add a principle on cost causation for WG review (Unitil will draft)
  • Rate Design Recommendations—(see above under Customer Engagement--Rate Design section of meeting summary)
  • Opt-In/Opt-Out TVR and Opt In Technology for Generation Rate Design Plans (see above under Customer Engagement--Rate Design section of meeting summary)
  • Jonathan/Tim to draft potential settlement language (with options)
  • Perhaps attach revised versions of three proposals as appendices
  • Customer Engagement: Customer and Utility Data
  • Jonathan/Tim to draft introduction
  • WG agreed on first 7 recommendations (based on work of Task Force), and still need to discuss remaining 2 non-consensus issues
  • Customer Engagement: Customer Education
  • Jonathan/Tim need to convert to recommendation language
  • Utility Cost Recovery/Incentives
  • WG needs to review/finalize stranded cost footnote

Planning for Meeting #7 (12/20) & 8 (2/3)

  1. Jonathan/Timwill update the compilation (aka Draft Report) by including (a) agreements reached during the meeting, (b) the new pieces (e.g., cost-recovery and incentives section), and (c) the Introduction, Process and Report Outline and short introductions in each section.
  2. Jonathan/Tim will draft potential settlement overview language relate to Opt In/Opt Out options, and contact original drafters to refine their proposals for potential inclusion in the report.
  3. Unitil will draft rate design principle around cost causation.
  4. The WG will carefully review the Draft Report and come ready to discuss at our next meeting.
  5. Jonathanwill draft meeting summary #6 and draft agenda #7.

Appendix 1: Meeting Attendees

Organization / Representative / 4.29.16 / 5.26.16 / 6.24.16 / 9.21.16 / 10.20.16 / 11.29.16
Acadia Center / Ellen Hawes / X / X / X / X / X
Axsess / Douglas Langdon / X / X
City of Lebanon, NH / Clifton Below / X / X / X / X / X / X
CLF-NH / Melissa Birchard / X / X / X / X / X / X
Tom Irwin (alt)
Energy Freedom Coalition / Todd J. Griset / X / X / X / X / X / X
Peter Brown (alt)
Eversource Energy / Eric Chung / X / X / X / X / X
Camilo Serna** / X / X / X
Mathew Fossum (alt) / X / X / X / X / X
Liberty Utilities / Heather Tebbetts / X / X / X / X / X / X
Chris Brouillard (alt) / X / X / X / X / X / X
Steve Mullen (alt) / X
Mike Sheehan / X / X / X
NECEC and NHSEA / Kate Epsen / X / X / X / X
Janet Besser (alt) / X / X / X
Brianna Brand (alt) / X / X / X / X / X / X
NEEP / Natalie Treat / X / X / X / X
Brian Buckley (alt) / X
NH DES / Chris Skoglund / X / X / X / X
Joseph Fontaine(alt) / X / X
Rebecca Ohler / X / X
NH Legal Assistance / Dennis Labbe, Esq. / X / X / X / X / X AM only
Stephen Tower, Esq. / X / X / X / X
NH OEP / Rick Minard / X / X / X / X / X / X
Kerry Holmes (alt) / X / X / X
DeandraPerruccio (alt) / X
Meredith Hatfield* / X
Organization / Representative / 4.29.16 / 5.26.16 / 6.24.16 / 9.21.16 / 10.20.16 / 11.29.16
NH PUC Staff (ex officio) / Tom Frantz / X / X / X / X / X
Les Stachow (alt) / X / X / X / X / X / X
Jim Cunningham (alt) / X
Suzanne Amidon (alt)
NH OCA / Donald Kreis / X / X / X / X / X / X
James Brennan (alt) / X / X / X / x / X
NH Representative / Marge Shepardson / X
Bob Backus / X
Retired Engineer / Patricia Martin / X / X / X / X / X / X
RESA / Marc Hanks
(Direct Energy) / X / X / X / X
Dan Allegretti (Exelon) (alt)
Revolution Energy / Clay Mitchell, Esq. PhD / X / X
Henry Herndon (alt) / X / X / X / X / X
The Jordan Institute / Laura Richardson / X / X / X / X
Unitil / Justin Eisfeller / X / X / X / X / X / X
Kevin Sprague (alt) / X / X / X / X / X / X
Gary Epler (alt) / X / X / X / X / X
Marc Brown / NE Ratepayers Assn. / X
Shelagh Connelly / NH Municipal Assn. / X
Karen Cramton / NH PUC / X / X / X
Ed Davis / Eversource / X
Doug Debski / Unitil / X / X / X
Brian Dickie / Eversource / X
Chris Goulding / Eversource / X / X / X / X
Lois Jones / Eversource / X / X / X
Lee Lajoie / Eversource / X / X / X
Stephanie Lamb / Business & Industry Assoc. / X
David Littell / RAP / X / X / X / X
Tom Meissner / Unitil / X
Organization / Representative / 4.29.16 / 5.26.16 / 6.24.16 / 9.21.16 / 10.20.16 / 11.29.16
Liz Nixon / NH PUC / X / X / X
Amanda Noonan / NH PUC / X / X
David O'Brien / Navigant / X
Bruce Overton / Eversource / X
Lisa Shapiro / GCG Law / X
John Shaw / Self / X / X / x / X
Michael Sununu / Sununu Enterprises / X
Patrick Taylor / Unitil / X / X
Karen Asbury / Unitil / X / X / X / X
*(Former lead, no longer at Eversource) **(Former lead, no longer at OEP)

Appendix 2: New Hampshire Grid Modernization

Description of Proposed Cost Recovery Framework

Summary of the Proposal

A high-level process summary is as follows (description to follow):

  • Utilities develop GMPs that describe incremental capital expenditures and O&M associated with Grid Mod investments
  • Utilities file GMPs and corresponding testimony/exhibits for rate changes
  • Commission reviews with opportunity for stakeholder intervention and discovery
  • Commission pre-approves investments
  • Expenditures are reconciled annually
  • Rates are reset annually
  • GMPs are refreshed every three years

Grid Modernization Plans

Each utility would would be allowed to submit a GMP to the New Hampshire Public Utilities Commission on a timeline established by the Commission. A utility’s GMP would be designed to meet the established NH grid modernization objectives in a manner suitable for the unique characteristics of each system and rate plan. An individual utility approach would account for the unique service territory characteristics and various technologies currently deployed by each utility currently. A component of each GMP would be a business case justifying the expected costs and benefits of each utility’s proposed portfolio of grid modernization investments.

A working proposal for an appropriate GMP outline, including general business case guidelines, is provided as an attachment to this document.

Cost recovery

Utilities would be permitted to request targeted recovery of grid modernization investments through cost recovery tracking mechanisms outside of base rates, with such mechanisms to be established by the Commission. For such mechanisms, the Utilities’ requested revenue requirement associated with the grid modernization investments wouldmay include forecasted investments with return on and of the investments, grid modernization-specific O&M, property taxes, stranded costs, and other related costs[1]. The return on the investment would be based upon the utilities most recently-approved cost of capital, as established in each of their last rate cases.

Proceeding with proposed initiatives under the Utilities’ proposed GMPs would require pre-authorization by the Commission. Proposed grid modernization investments that are pre-authorized are presumed to be prudent, in terms of the decision to proceed with them. However, for reconciliation purposes, the utility still has to demonstrate that the actual costs incurred are reasonable.

GMP proceedings are expected to follow the normal course of Commission dockets that include requests for intervention, testimony, discovery, and hearings.

Upon approval, revenue requirements related to target investments in the GMP would be eligible for recovery across distribution customers based on cost causation.

Reconciliation

Following the first year of the rate change, and annually thereafter, utilities would be required to reconcile rates within an adjudicated Commission docket, conducted in a manner similar to other reconciling rate dockets (e.g. utilities’ Reliability Enhancement Programs). The Utilities would be required to provide sufficient documentation of pre-construction estimated costs, actual project costs, and explanation of any variance between the two, as would typically be provided during the context of a rate proceeding to justify the approval of the cost recovery for the capital additions. Whether or not a project is approved for recovery will not be revisited in a reconciliation docket.

Future GMPs and rate-setting proceedings

GMPs should be refreshed every three years from the last approval. Regardless of whether a GMP is refreshed in a given year, utilities may submit an annual rate filing reflecting changes to expected revenue requirements corresponding to pre-approved grid modernization projects, subject to reconciliation. In years that do not require a GMP refresh, utilities should submit a brief report updating the Commission on the progress of the GMP. After the initial GMP filings, the Commission, utilities and other stakeholders may want toshould consider how to coordinate, or even integrate, GMPs with least cost integrated resource plans filed pursuant to RSA 378:38.

Performance targets

Performance targets metrics will be addressed in the context of the Commission proceeding and would be specific to the nature of the investment. Performance incentive mechanisms are expected to be considered by the Commission within the context of a specific utility base rate proceeding. Targets Performance incentive mechanisms are expected to be considered by the Commission within the context of a specific utility base rate proceeding. Metrics would be established at the outset and data will be collected to inform establishment of performance-based and/or outcomes-based metrics, which could be implemented after tracking grid modernization targets for a long enough period of time to establish a baseline.Performance incentive mechanisms are expected to be considered by the Commission within the context of a specific utility base rate proceeding.

Appendix 3: NH Grid Modernization

Proposed Outline for Grid Modernization Plan

Developed by Utilities--Revised November 29, 2016

1)List of Acronyms used in the plan

2)Executive Summary

a)Recovery window aligned with the plan

b)10 Year plan updated at similar interval to LCIRP (3 years)

c)Envision GMP will take over LCIRP over time – Combine LCIRP/GMP

d)Cost Causation Principles

3)Introduction

a)Purpose of the Filing

b)Regulatory Requirements

i)GMP and Cost Recovery Requirements

ii)The Business Case Analysis

c)Grid Modernization Objectives

d)Compliance with the Filing Requirements

4)Grid Modernization Plan

a)Approach

b)Overview of the Plan

i)10 Year Plan with first 5 years spending “pre-approved”

c)Stakeholder Engagement

i)Customer education component prior to engaging the customers

ii)Involvement in the pre-planning and prioritization and project consideration (input to the plan, not review of the plan)

iii)Prior to plan submittal, solicit comments on the proposed plan

d)Investment Plan

e)Key Factors for Projects

i)First 5 years of plan

ii)“Pre-approved” spending portion of the plan

iii)Annual cost recovery filing

f)Rate Recovery Assumptions

g)Project Portfolio and Business Case Analysis

i)Project descriptions

ii)Projected project costs and benefits

iii)Portfolio benefit to cost ratio

iv)Based upon a combination of utility, vendor, and RFP/RFQ estimates

v)Common Business Case Assumptions:

(1)Common societal assumptions – carbon savings, etc.

(2)Customer avoided cost of reliability

(3)Rate of inflation - Moody’s Analytics

(4)Energy forecast (kWh) - Analyses conducted by the ISO-NE. More granular forecastswill be Distribution Company-specific.

(5)Demand forecast (kW) - Analyses conducted by the ISO-NE. More granular forecastswill be Distribution Company-specific.

(6)Forecast capacity prices - Third-party consultant to perform this analysis. Analysisconducted will be comparable to the analyses conducted for long-term renewable energy contracts.

(7)Forecast energy prices - Third-party consultant to perform this analysis. Analysisconducted will be comparable to the analyses conducted for long-term renewable energy contracts.

(8)Forecast Renewable Energy Certificates (“RECs”) - Third-party consultant to perform this analysis. Analysis conducted will be comparable to the analyses conducted for long-term

(9)Recovery of Stranded Costs as part of the business case

(10)Methodology for determining discount rate

(11)Time horizon for evaluating investments

(12)Sensitivity Analysis - Variables that are best suited for a sensitivity analysis are those for which a small change in an assumption can lead to a large change in the resulting output of a calculation.

vi)Implementation Roadmap

h)Additional Plan Components

i)Marketing, Education and Outreach for Customers

ii)Research Development &Deployment (RD&D)

iii)Cybersecurity, Privacy and Customer Data Access

iv)Program Build Metrics

i)Financial Summary

5)Rates and Regulatory

a)Regulatory/Ratemaking Framework

i)Proposed rate mechanism

ii)Rate impact by customer class

b)Cost Recovery

i)Study Costs

ii)Stakeholder engagement costs

iii)Marketing and Research Costs

iv)Incremental O&M and Capital Costs

6)Appendix

a)Projects Considered

b)Benefit/Cost Models

c)Revenue Requirement and Customer Bill Impact

d)Supplemental Studies

1

[1] Eversource, and XXX believe that this should also include any stranded costs that could occur as a result of the grid mod investment while the remaining WG members believe that this is not an appropriate element of capital tracker.