On Jan. 31, 2017 the Block Island Power Company filed a docket with the Rhode Island Public Utilities Commission asking for Declaratory Judgment on the matter of having National Grid socialize the interconnection costs and a spare transformer across all Rhode Island ratepayers, as opposed to having only Block Island ratepayers shoulder those costs. After four months of filings by the various parties, BIPCo’s petition was finally heard on Tuesday, May 30, at the PUC’s offices in Warwick.
At the hearing, representatives from BIPCo, National Grid, and the Division of Public Utilities and Carriers made their oral arguments in front of PUC Commissioners Margaret Curran, Marion Gold, and Herbert DeSimone, who interspersed the testimonies with questions as they went along. Curran said, at the outset, that they “may decide after… or not.”
BIPCo’s attorney Michael McElroy took issue with the overall $1.8 million interconnection cost, of which approximately $1 million was for the building of the substation, and for the lack of notice to BIPCo by National Grid of the cost overruns, which were presented to BIPCo just two days before a hearing before the PUC on a standard offer rate in April. The first estimate of the cost had been $330,000 and then rose to $550,000. “Some things you can let go,” said McElroy. “But we had to file this petition.”
McElroy based his arguments for socialization of the costs on the state legislation enabling the Block Island Wind Farm, called the “Town of New Shoreham Project Law (R.I.G.L. Section 39-26.1-7, which calls for “an undersea transmission cable that interconnects Block Island to the mainland… To effectuate these goals, and notwithstanding any other provisions of the general or public laws to the contrary, the Town of New Shoreham project, its associated power purchase agreement, transmission arrangements, and related costs are authorized pursuant to the process and standards contained in this section.”
McElroy argued that “related costs” include the interconnection costs and the price for a standby transformer. He said those costs filled “three buckets,” including the $263,700 cost that BIPCo incurred in connecting its transmission lines to National Grid’s, National Grid’s interconnection cost of $1,836,000, and $450,000 for a standby transformer. These totaled $2,549,700.
McElroy also said that he didn’t understand National Grid’s objection since the company would be reimbursed for the costs whether they were socialized or not.
National Grid, through its attorney Jennifer Hutchinson, argued that the interconnection costs were not “related” because they benefitted only Block Island Power customers and not the rest of Rhode Island’s ratepayers.
At the eleventh hour, on May 26, National Grid submitted to the PUC a ruling from the R.I. Supreme Court allowing its out-of-state counsel Terry L. Schennesen to also represent them. Schennesen specializes in Federal Energy Regulatory Commission matters in Washington D.C. She argued that the matter fell under FERC’s jurisdiction, and that “FERC’s jurisdiction overrides” the enabling legislation. She referred to FERC’s Rule 1000: “Transmission Planning and Cost Allocation.”
Normally, interconnection costs into a regional transmission system are borne by the party attempting to connect. A reply memorandum on the matter, dated March 20 and written by Jon Hagopian, senior legal counsel for the Division of Public Utilities and Carriers, took the stance that BIPCo’s connection to the cable was voluntary, and therefore the costs should not be socialized. At the hearing he said: “I couldn’t disagree more” that the interconnection costs were related costs. “Devoid in this statute” is a reference to interconnection costs. “It’s clear and unambiguous.”
Clearly worried about the precedent that could be made, he told the Commissioners: “BIPCo is an interconnection customer. If you allow this you’re going to open a box and a slippery slope,” Hagopian said.
Commissioner Herbert DeSimone seized on the notion that BIPCo was voluntarily connecting and could easily go about its business of producing energy by utilizing generators that burn about one million gallons of diesel fuel per year. He questioned Hutchinson on whether she thought it would be okay for BIPCo to continue burning diesel, leading her to concede that “it would not be optimal.”
DeSimone said: “The overarching purpose of this statute” was to mitigate the “adverse impacts of diesel fuel.” As far as the interconnection of Block Island to the mainland’s distribution system, he said: “This is part of the whole purpose of the act.”
Schennesen argued that the matter was different when looked at by the “FERC perspective,” and that there was a sole purpose for the interconnection facility, describing the situation as a “service drop,” which again went to the notion that BIPCo was the sole beneficiary of the interconnection.
DeSimone asked: “Is this a little different here” with specific legislation, as opposed to a “general purpose piece of legislation?” If BIPCo did not connect to the cable, he said, “The purpose of the statute would be frustrated.” He went on to ask Schennesen: “What would be the reaction of Rhode Islanders and the State” if BIPCo were to go on burning diesel?
“I think it would be very negative,” answered Schennesen.
Hutchinson conceded that DeSimone “had a point,” but still went back to the argument that it was a “sole use facility” for Block Island and therefore the costs should not be socialized.
“Isn’t everyone benefitting from not burning diesel?” asked DeSimone, who said the environmental benefits were “over arching.”
A bit later, Curran addressed the socialization of the costs of the standby transformer. “If the substation does indeed benefit others…then why does BIPCo have to pay for the backup transformer?”
Although National Grid acknowledged they have an inventory of backup transformers on hand, Schennesen said that the Block Island transformer “was unique” to Block Island.
“I understand,” said Curran. “It’s the ‘weird’ system.” She asked if energy from the wind farm would still go to the cable (and thus to the mainland) if the transformer went down.
She was told that a breakdown of the transformer would not affect the power from the wind farm going to the mainland, but later on, in his rebuttal, McElroy addressed the matter, saying that: “There can be a fire, an explosion,” adding “we know fires.” He said if the transformer, which is housed in the substation building, failed in “a catastrophic way” there could be a disruption of power going to the mainland.
He also expressed that potential conflicts between FERC policies and the legislation allowing for “related costs” were being overplayed and that FERC had been involved in the entire process.
Hutchinson, again referring to the substation as a “sole use facility,” said socializing the costs “would treat BIPCo differently than any other wholesale customer.”
McElroy countered that they didn’t need to worry about that setting a precedent, as it was pursuant to “a very specific legislative act.”
After a few more questions, Curran said: “Okay, I believe we’re done.”
“We’re done for today, but not really done,” said DeSimone, who had earlier called for “going to transcript” of the proceeding before rendering a decision. No date has yet been set for when that will happen.
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