There were a few surprises at the Electric Utilities Task Group (EUTG) meeting on Thursday, Oct. 8, and not all of them were pleasant.
The main item on the agenda was a discussion of rate case issues with Cynthia Wilson-Frias, Deputy Chief of Legal Services at the Rhode Island Public Utilities Commission (PUC), but at least one piece of information provided at the meeting was interpreted in wildly different ways by those in attendance.
In what appeared to be an unexpected presentation, John Bell, the Public Utility Rate Analyst for the PUC, said that since diesel prices have fallen so much in the past couple of years, there would not be a further reduction in electric costs when the Block Island Wind Farm goes online next fall. This information was seized on by some in the audience who used Bell’s presentation as proof that the wind farm would not lower electric rates for Block Island customers. Others felt that the way Bell presented his figures made for an “apples versus oranges” comparison.
The PUC’s presentation touched on many topics, however, and of particular interest, were how ratepayers could become involved; the fate of the five diesel generators currently used to produce power; and what the rates might look like post-restructuring.
When the transmission cable to the mainland becomes operational, and BIPCo becomes a power distributor only, as opposed to being both a power generator and distributor, the company must file a restructuring plan within six months of going online. BIPCo is also expected to file a rate case (on or about July 1, 2016), which the PUC has nine months to decide. Among the interests of all stakeholders is keeping the cost of the restructuring/rate case down, and so the EUTG, on behalf of the town, and BIPCo, have been charged with working together to come up with a plan so that certain things can be agreed upon before the case even gets to the PUC.
After handing out a lengthy printout titled “Electric Restructuring on Block Island,” Wilson-Frias said: “Don’t worry, I’m not going to read the whole thing.”
Explaining the PUC’s role in the process, she said: “The Division’s job is to balance the interests of all ratepayers.” She said that there so far has been some good progress made at meetings at the PUC with Everett Shorey and Town Manager Nancy Dodge representing the EUTG and town, and Al Casazza and Cliff McGinnes representing BIPCo. The next step was “setting milestones,” Wilson-Frias said. “It’s time for the town and BIPCo to be planning some concrete ideas.”
Wilson-Frias was asked by a member of the audience if there is a consumer advocate. “The best opportunity for consumers is through the town,” she answered. “Once filed, a rate case looks like a court case. The more that can be done up front, the less the cost that then gets folded into the rate.”
Resident John Warfel said from the audience: “I don’t see any venue for ratepayers’ input. It makes me nervous.”
Wilson-Frias said she would encourage people to “use this group,” meaning the EUTG.
“I want to add that this topic is on our agenda every month,” said EUTG Chair Barbara MacMullan, adding that “Ultimately, it will be the Town Council” representing the town in the rate case.
EUTG Member Bill Penn told the audience that the Town Council has asked the EUTG to hold two public forums on the subject.
Shorey said they were trying to get some people from the Pascoag Utility District and from other islands to come out, a “thankless” job that Penn had taken on. Also, the intent is to hold the forums when people are still on the island – not in February.
Then it was time for the first unpleasant surprise.
Running the generators
Since there may be a gap between when the cable goes operational and the approval of the rate design and restructuring plans, Wilson-Frias said: “There will be a time when the island is connected, but [still] running on generator due to the six-month window.”
This seemed to be something no one had thought about before. Shorey asked: “Can we use the cable on the current rate structure?”
Wilson-Frias didn’t think so, as the language in the current tariff refers to the “fuel charge.”
“Since the PUC approves the monthly fuel charge, then can’t the fuel charge be used for the rate [for the power coming through the cable]?” asked MacMullan.
John Bell, the Rate Analyst, thought that there may actually be some provision for adjusting the fuel rate language to allow for the purchase of power through the cable.
“That might be workable,” said Wilson-Frias. “This is a prime example of something that can be worked out.”
“This is the first time I’ve heard that the generators will be running for six months after the cable,” said MacMullan.
“We’re finding federal rules or state laws we don’t know about,” said Shorey. “One of the critical issues…under state law, a distribution company cannot be a generation company.”
Wilson-Frias said that Pascoag had asked for a waiver of that requirement in 1998, because of existing contracts the power company had. “BIPCo will file for a waiver at the beginning of the year. The PUC will determine if it’s in the public’s interest.”
Specifically, a waiver would allow BIPCo to retain the ability to generate power using its existing generators. Wilson-Frias explained that if the waiver wasn’t granted, they had options such as selling them to another company, or setting up either a non-affiliated company or an affiliated company, although if the latter option was chosen, there could be no common employees.
Then came the next unpleasant surprise: the impact of storms on the mainland. Wilson-Frias said that she understood that usually when the power goes out on Block Island, BIPCo has it restored usually within 24 hours. On the mainland, the power can be out for up to a week. “On the mainland when there’s a big storm, utilities repair first where they get the biggest bang for the buck.”
In terms of population demographics across the state, Wilson-Frias said: “The Wakefield substation may not be a high priority. You’re not going to be one of their (National Grid’s) transmission customers.”
(When contacted this week, National Grid spokesperson David Graves said, “As far as the Wakefield substation is concerned, it’s an integral part of our distribution system and if there is an outage we will address that as quickly as possible. What Cindy was getting at is that we tie our restoration process in order to get the largest number of customers online first. There may be larger number of customers that may be restored before we get to the Wakefield substation, but it is a priority.”
Graves said that National Grid was contractually obligated to service Block Island customers. “So if we breach that through malfeasance or whatever you want to call it, we would be open to breach of contract suit and that’s not something we’re going to do,” said Graves.)
As to the waiver BIPCo has requested, if it is not approved there could be additional costs charged to ratepayers, Wilson-Frias said. “If BIPCo is required to divest, they don’t just give it away,” said Wilson-Frias. There may be “stranded costs” (such as depreciation and debt service on the generators) that will be passed on through a “transition rate” on the monthly bills.
At any rate, “BIPCo has the burden of proof [to retain generation]. The Commission could deny, grant or grant with conditions,” said Wilson-Frias, as long as there is no conflict with federal law.
Wilson-Frias then went through some of the different charges that will appear on the new bills, some familiar, and some not. “There will be a new Energy Efficiency Charge,” she said. That charge will cover the cost of energy efficiency programs that will be offered by BIPCo.
The current fuel charge will be replaced with the cost that BIPCo will incur in purchasing energy from the mainland. This can be a complicated process, and BIPCo is expected to use Energy New England to help them navigate. BIPCo could, Wilson-Frias suggested, enter more than one contract – one for summer and one for winter, for example.
“Our position is going to take the lowest risk possible,” said Casazza. “There’s a capacity charge – that’s something new to me. You’re not only buying power, but buying capacity.” He said he expects the additional cost to be $225,000 per year for “our load.”
From the audience, Rosemarie Ives, who has a house on Block Island, said that she has been following “this issue” for four to five years and that she had, in that time, heard many “statements.” She wanted to know if they were “true.” Specifically, she wanted to know about the diesel generators. “Is it only for emergency back-up or is it based on the January 15 letter” (from BIPCo to the PUC) asking about additional generation. “I’ve gone round and round with The Block Island Times’ reporters.”
Wilson-Frias said, “The Commission does not have anything before it.”
Ives said that she had heard that once the cable and wind farm were operational, “diesel won’t be burned on Block Island,” and she wanted a “definitive answer.”
“There is none,” said Wilson-Frias.
Penn said: “But Rosemarie, this is the chance to make these statements come to fruition through a rate case.”
“Let me just say something,” said Casazza, standing and turning to address Ives, who was behind him. “Statements were probably made in good faith, but with incomplete information,” he said. “Just caution everybody – this is not a simple thing.”
Shorey emphasized that the EUTG is an advisory commission and that, ultimately, the Town Council would make the decisions. “How many things can we put in the first camp – that we agree on?”
“There may be things that can’t be agreed on through discussion,” cautioned MacMullan.
“We take a pie and cut it into pieces,” said Wilson-Frias, of fleshing out a rate design. “The hardest part will be projecting the first year.”
One of the issues that some feel will be contentious is a new net-metering policy. Wilson-Frias said that BIPCo has said the new policy will be aligned with the laws on the mainland, which BIPCo is currently exempt from.
Then came another surprise.
Savings or no savings?
Wilson-Frias introduced her colleague John Bell. Bell had been asked to put together an estimate of “Costs after restructuring.” Wilson-Frias cautioned that: “This is back of the envelope – not to be relied on.”
Bell focused his analysis on comparing the current fuel cost adjustment (18.03 cents per kwh for Sept. 2015) to what might be expected afterwards. Included in the analysis are items such as the standard offer rate, Block Island’s share of the cable cost, grid connection, regulatory filings, etc.
“Restructuring doesn’t save anybody any money,” said Bell, who had come up with a bottom line of 17.73 cents per kwh post-restructuring, versus the current 18.03 cent per kwh fuel charge.
Bell’s analysis was met with shock.
Some in the audience believed they had been “lied to” regarding the savings on electric bills that would come with connection to the wind farm and cable. Regarding the 40 percent savings that the EUTG had estimated back in 2013, Bell said: “That was accurate at the time.” (And it should be noted, ratepayers have already seen reductions in their bills due to the decline in the price of diesel fuel since 2013.)
However, in going through the numbers, it quickly became apparent that there was a problem with Bell’s analysis: he had included three items in his calculation that were not anticipated to be included in the portion of the bill that will replace the “fuel cost adjustment.” These were the cost of regulatory filings, Demand Side Management (the cost of energy conservation programs), and a provision for an earnings shortfall. These costs will be associated, instead, with the “energy charge” portion of the bill, which may go up as a result, unless savings can be identified in other areas that will offset those expenses.
“I don’t think we have any other utilities that haven’t raised their rates in that period of time,” said Bell. BIPCo’s current rate structure has been in place since June 2008.
The standard offer rate that Bell included in his analysis was higher than what the EUTG has been expecting when adjusted for the cable costs and grid connection, by about three cents per kwh. When questioned on this, Bell responded that the figure he used was what Narragansett Electric customers are currently billed. “On the mainland, winter gas shortages may have made the standard offer prices go up,” he said. However, later in the meeting he said that pipeline expansion in the region may cause standard offer rates in the region to go down.
“You make your decisions based on the information available at the time,” said Shorey.
In the Public Input section of the meeting, Bill McKernan stood to address the EUTG. He prefaced his remarks by thanking the EUTG for “the great work you do.” Then he brought two issues to the EUTG’s attention. First, he said that he thought it would be helpful if the EUTG had its own website, further noting that there had been no updates on the EUTG’s page on the town’s website since 2013. Second, he asked that someone look into the brightness of some of the newly installed LED streetlights on the island. Some were blinding and look “like a UFO.”
MacMullan seemed surprised that there had been no updates to the website since 2013, and said that she would check on that with clerk Bonny Ryan, who was absent from the meeting. (Millie McGinnes was standing in as clerk.)
As for the streetlights, “Some are really bright,” said MacMullan.
Block Island Power Company (BIPCo) employee Dave Milner explained that four of the streetlights were indeed brighter. They are in specific locations, and had come at the New Shoreham Police Department’s request.
After approving the minutes of the last EUTG meeting, it was time for the monthly update from Deepwater Wind liaison, Bryan Wilson. Since there has been detailed coverage of the Wind Farm construction in The Block Island Times, he said his report would be brief. There are three cranes working, and the deck structures will be attached after the pile driving is completed. He also reported that National Grid has held pre-bid meetings for the construction of the Block Island sub-station and duct banks (through which the transmission lines will go). One had been held earlier that morning.
Penn asked if the construction was still “on time” and Wilson answered that it was. “The schedule is very fluid,” Wilson said, with plenty of allowances worked in to fit with the weather. Things will be winding down soon, though. “Pile driving has to cease at the end of the month,” Wilson said.
As Wilson left the meeting to go back “out on the water,” MacMullan decided to next address agenda item five. She said that she had a request from Bill Padien, chairman of the School Committee, to write a letter of support to the Town Council regarding the location of solar panels for the school. She said that the school needed a special exception because the solar panels will now be in the parking lot, “so they will lose spaces.”
Dodge said that the school has 38 parking spaces, and needs to have more. She also added that the Town Council hasn’t yet heard anything on the matter. “Everyone’s in favor of the grant – it’s just the location,” said Dodge.
MacMullan said that while she was in support of the project, “I don’t think we need to weigh in on parking.”
Penn said: “I’d like to see a site plan. We’re being asked, willy-nilly” to support it.
But both MacMullan and Shorey thought that requiring a site plan was outside of the EUTG’s venue, and so the group decided to send a letter addressing “the economic aspects of the project only.”
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