Suggested Guiding Principles for Docket 4600 Discussions
1)Recognize that our electrical system is in a time of profound change with new emergingenergy services, bidirectional energy flows, and innovative overlay of information technology on energy systems.
2)The Docket 4600 process should be guided largely by the recommendations for regulators outlined in “Designing Distributed Generation Tariffs Well – Fair Compensation in a Time of Transition” by the Regulatory Assistance Project and “Smart Rate Design for a Smart Future,” RAP (July 2015).
3)The long term role of the distribution utility and of energy regulations should be imagined in ways that provides maximum value to ratepayers and society as a whole and which encourages and enables innovation.
4)Interim actions and steps should trend in the direction toward, not away from, the long-term role.
5)There are fundamental guiding principles for these discussions – fairness, for past investments, and value, for future investments.
6)All parties provide fair payment for value and services received and receive fair payment for value and benefits delivered. Resulting policy should increase opportunity for choice, thirdparty providers, competitive forces, economic efficiency, resiliency, and technological innovation.
7)To the degree possible, hard to quantify considerations like long term price volatility and “economic externalities” embedded in our incumbent energy supply systems should be acknowledged and accounted for in establishing value.
8)Even if values are not included in specific rates, these values need to be quantified and revealed in order to inform customer choices and policy decisions. Today’s externality is tomorrow’s rate element.
9)Discussions should focus on establishing fair value, and identifying the best long term ways to compensate for that value, completely regardless of existing programs. New programs or systems should be designed starting from those value propositions, not from existing programs.
10)All regulation is incentive regulation, all ratemaking is regulation. Value is not the same as price. Price is not the same as cost. Total cost and total benefit yields net value. The closer price is to net value, the more efficient the production and consumption decisions.
11)Projects or solutions built under current or previous regulatory arrangements should have those arrangements honored and grandfathered so that our state is seen as a fair and dependable place to do business.
12)Owners and providers of distributed energy resources of all kinds provide real value to the grid and to rate payers. They should be fairly compensated for the value provided, and retain the rights to monetize energy value, offset distribution and transmission costs, wholesale price suppression, value of capacity and ancillary services, avoided environmental compliance costs, as well as the social and economic value those resources provide.
13)As our monopoly distribution company, National Grid provides critical services and should be fairly compensated for providing those services reliably and well.
14)In order to encourage innovation and maximize value to ratepayers, beyond those essential services that are best suited to a monopoly provider, the distribution utility company role should be transformed into providing a platform for independent transactions provided by competitive and innovative service providers, including such services as demand response, generation, storage, metering and energy efficiency.
15)Even as the utility retains its monopoly status, it must be increasingly transformed toward non-discriminatory access for customer and third party resource options. The monopoly utility tendency toward self-build, rate base growth, and extraction of monopoly rents is real and should be proactively addressed. Mere decoupling is not enough.
16)Any service that can be efficiently provided by establishing standards and allowing for competition should be provided in a competitive manner. After an appropriate transition period, monopoly distribution companies should not be allowed to compete locally in providing those competitive services.
17)In the interim, we need transition policies for utility compensation that encourage and accelerate the transition to that more innovative and competitive energy system of the future.
18)National Grid’s services, systems and entire business model needs to change to reflect new realities. They should be compensated fairly for stranded costs though a transition charge mechanism, much as happened when energy supply markets became competitive.
19)National Grid may be able to make money in new ways, but they cannot keep making all their money in the old ways.
20)With our small size, single primary utility and cordial energy community, Rhode Island is well suited to break new ground in finding long term solutions for establishing fair compensation policies in a time of transition.
21)As the RAP report points out, regulators need to be proactive: and “failure to recognize the valueof services provided will impede maturation of emerging solutions, lead tounnecessary investment in redundant resources and thusimpose unnecessary costs on all electricity customers.”