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

RI[RKR1] Docket 4600 Working Group

Meeting #6December 16th, 2016

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

Consultant: Paul Centolella, Centolella & Associates

DRAFT High-Level Meeting Summary

Altogether there were 28people in attendance at the sixth Working Group meeting. See attendees in Appendix I.

See slide decks and documents used during this meeting HERE

Cost Effectiveness Framework for Rhode Island

PaulCentolella reviewed changes to the Benefit Cost Framework matrix based on input from Tim Woolf and Tim Roughan on the risk related rows in the matrix. Tim Woolf also had some suggested language change related to low income/energy burden rows that the WG agreed he should discuss with the Wiley Center. Dr. Raab asked whether there were any additional changes to the matrix, and there were none. All the changes made to the matrix before, during, and after this WG meeting are now included in the matrix posted on the website.

The WG then discussed what to include in the chapter write-up including recommendations to the Commission on how the matrix could be used, and suggested next steps. The WG reviewed the memo drafted by Tim Woolf as consultant to the Division on possible next steps that the WG had broadly supported at the prior meeting. Todd Bianco of the Commission staff then reviewed the staff’s recent memo to the Commission that delineated additional potential applications and next steps that the Commission could take regarding the cost-benefit matrix. Abigail Anthony and Tim Roughan then discussed the SIRI WG’s initial discussions about applying the matrix to specific investment/resource options.

Based on the discussion, Dr. Raab proposed a potential outline of the matrix chapter in the Report to the Commission. The WG agreed to the following outline, assignment of lead responsibility, and related next steps.

1)“The Matrix” itself–Jonathan/Paul

2)High-level description of what’s in the matrix (buckets, rows, columns) and how relates to Commission’s questions—Jonathan/Paul

3)How Matrix should be applied to different resources, programs, and distribution investments--Tim

De facto RI Cost Effectiveness test(s)
Testing with and without participant costs and benefits
Using both quantitative and qualitative methods

4)Next Steps Regarding Matrix

Specific Potential Applications--Tim
Tim’s Memo-- (EE test refinement and application, applying to other resources/investments, and portfolio approach over time)
Todd/Cindy memo-- outlining additional potential applications (rate cases, major new distribution investments, screening new resources and current technologies and programs, AMI) [Note: Jonathanwill organize/facilitate call of interested WG Members to discuss the staff’s memo and make recommendations to full WG on which of them to incorporate in the WG’s own recomendations
Other recommendations--All
Developing/refining Matrix Over Time –Jonathan/Paul
Method for each Category (row) in the matrix including data needs, valuation approach, and both streamlined methods and strategy for methods with more detail and precision over time
Approach—who will develop values (and role of stakeholders)
Reconsideration of rows over time (add/subtract/refine)

5)Other

Concluding guidance for use of tool--All

Cost Recovery and Ratemaking

The WG began by looking at the Rate Design Guiding Principles recommended by representatives of 1) Acadia et al; 2) National Grid; 3) George Wiley Center; 4) the Division; and 5) New Energy RI based on a call facilitated by Dr. Raab on December 12th. The WG went through each of the principles recommended by the WG, discussed the wording and alternatives, and agreed on the following nine rate design principles:

1)Promote economic efficiency over the short and long term

2)Empower consumers to manage their costs

3)Enable a fair opportunity for utility cost recovery of prudently incurred costs and revenue stability

4)Be transparent and understandable to all customers

5)Any changes in rate structures should be implemented with due consideration to the principle of gradualism in order to allow ample time for customers (including DER customers) to understand new rates and to lessen immediate bill impacts

6)All parties should provide fair compensation for value and services received and should receive fair compensation for value and benefits delivered

7)Provide opportunities to reduce energy burden, and address low income and vulnerable customers needs

8)Ensure safe, reliable, affordable, and environmentally responsible electricity service today and in the future

9)Be consistent with policy goals (e.g. environmental, energy diversity, competition, innovation, power/data security, least cost procurement, etc.)

A few other potential principles, the WG didn’t reach agreement on but wanted to further discus and consider including:

A)Ensure equity across all customers;

B)Design rates reflective of cost causation (without an “undue” level of cross-subsidization and considering energy burden)

C)A customer should be able to connect to the grid for no more than the cost of connecting to the grid

The WG agreed to review and come ready to discuss the three principles still under discussion, and to review the entire list to see if any major high-level principle regarding rate design was still missing (and if so to propose one or more additional principles).

The WG also agreed to recommend to the Commission that theWG also supports the exploration of appropriate utility incentives and performance based ratemaking in Rhode Island (to be discussed at the appropriate time)—noting that this does not belong in the list of rate design principles but that it should be incorporated into the final report to the Commission.

The WG then discussed the HW responses that covered several rate design related areas including time varying rates; locational pricing; recovery of fixed costs; low-income/customer protections; and DG compensation. Below is a high-level summary of approximately where each conversation ended up and how the WG agreed to proceed.

Time Varying Rates

The WG converged on the notion that the TVR as a default service for energy supply should be offered on an opt-out basis as soon as practical (e.g., the presence of advanced metering functionality and related communications and billing changes in place). [RKR2]The WG felt that for TVR to be successful extensive consumer education was needed, as was the ready availability of various control technologies to help facilitate price responsiveness. Most also felt that an opt-in approach should be used during the transition to an opt-out requirement (and also once the opt-out paradigm was in place any customer that chose to opt out, could opt back in at a later date).[RKR3]

The WG agreed that the default TVR rate for large customers should be real-time pricing, and that the goal for residential and small C&I customers should be time of use pricing with critical peak pricing (perhaps with TOU and peak time rebates as an interim step to critical peak pricing). [RKR4]

The WG also agreed that once AMI functionality was in place, interval meter data for residential and small commercial customers should be made available to 3rd party providers (with customer approval), so that 3rd parties could offer rate design alternatives more cost-effectively than they can today. [RKR5][RESA also asked the WG to consider a recommendation that 3rd parties be able to also provide an alternative bill that could break-down customer usage by end use and suggest targeted energy savings improvements). Finally, the WG agreed that any roll out of TVR should be sensitive to low-income challenges and opportunities.

Location-Base Pricing

The WG discussed using administratively based programs as an alternative to full-blown location based pricing at the distribution level. Such administratively based programs could identify the areas of the National Grid service territory with the greatest distribution constraints, and use a targeted procurement process to identify potential non-wires alternative solutions that could cost-effectively defer or down-size traditional distribution investments. Although the WG agreed that they preferred this alternative to location-based pricing for the foreseeable future—they also agreed that when granular location based information was more readily available, that Rhode Island should consider location-based pricing.[RKR6]

Recovery of Fixed Costs

On a high level, the WG agreed that Grid should recover its prudently incurred costs and that RI has a decoupling mechanism in place to true up any under (and over) collection. Moreover, some WG members posited that if the issues around under recovery of fixed costs were primarily precipitated by DG issues, than it might make more sense to address it there rather than with all customers. [RKR7]On the specific fixed cost related alternatives, the WG ended up approximately as follows:

Customer charges: The WG agreed that Grid should be able to recover costs to serve customers through the customer charge[RKR8]. However, while Grid pointed out that parts of the distribution system (besides meters) don’t vary by usage and should be recovered through the customer charge, others argued that AMI meters have other benefits and portions could be put in volumetric charges. In the end, the WG asked that Grid delineate the types of expenses that it thinks should be recovered in the customer charge.

Demand charges: Grid stated that to the extent metering is in place, demand charges should handle all demand related costs. Others were supportive of demand charges for large customers, but probably not for smaller customers.

Minimum bills: No one was advocating for minimal bills (separate from customers charges).

Most important low income/customer protections: WG agreed that current low income rates and other low income and customer protections should be maintained. Agreed to look at Wiley Center list in HW and discuss next time. It was pointed out that this should include equal access to opportunities as well (such as access to energy efficiency, demand response, and renewables).

DER/DG Compensation: Briefly discussed how to compensate DERs. The discussion included mentions of compensation that was technology neutral and focused on their long-term benefits and costs. Also touched on using competitive bidding and feed-in-tariff model. [Ran out of time and will need to return to this later.]

Briefly discussed the next steps on these rate design issues, including:

1)Todd will identify important background data from previous Grid case, and Raab to post on website.

2)TVR material from Ahmad Faruqui, Brattle—Tim supplied and Raab posts

3)Worcester (AMI/TVR) Pilot 2nd Evaluation—Grid provides, Raab posts

4)Proposal on DG compensation—Karl (NEERI) drafts

5)Grid delineate the types of expenses that it thinks should be recovered in the customer charge, WG reviews

Planning for Next Meeting

The next meeting will focus on attempting to wrap up the cost-benefit matrix, and to continue the discussions about rate design and cost recovery.

Preparation work for the next meeting includes:

Review this meeting summary and send any corrections or suggested improvements in redline by FridayDecember 23rd.
Benefit-Cost Framework
“The Matrix” itself–Jonathan/Paul
High-level description of what’s in the matrix (buckets, rows, columns) and how relates to Commission’s questions—Jonathan/Paul
How Matrix should be applied to different resources, programs, and distribution investments--Tim
De facto RI Cost Effectiveness test(s)
Testing with and without participant costs and benefits
Using both quantitative and qualitative methods
Next Steps Regarding Matrix
Specific Potential Applications--Tim
Tim’s Memo (EE test refinement and application, applying to other resources/investments, and portfolio approach over time)
Todd/Cindy memo outlining additional potential applications (rate cases, major new distribution investments, screening new resources and current technologies and programs, AMI) [Note: WG embrace all recommendations agree with]—Jonathan Organize/Facilitate call of interested WG Members to Discuss the Recommendations WG Agrees With
Other recommendations--All
Developing/refining Matrix Over Time –Jonathan/Paul
Method for each Category (row) in the matrix including data needs, valuation approach, and both streamlined methods and strategy for methods with more detail and precision over time
Approach—who will develop values (and role of stakeholders)
Reconsideration of rows over time (add/subtract/refine)
Other
Concluding guidance for use of tool--All

Rate Design Principles
Review and come ready to discuss the three principles still under discussion (see above), and to review the entire list to see if any major high-level principle regarding rate design was still missing (and if so to propose one or more additional principles).
Rate Design Recommendations (and background information)
Todd will identify important background data from previous Grid case, and Raab to post on website.
TVR material from Ahmad Faruqui, Brattle—Tim supplied and Raab posts
Worcester (AMI/TVR) Pilot 2nd Evaluation—Grid provides, Raab posts
Proposal on DG compensation—Karl (NEERI) drafts
Grid delineate the types of expenses that it thinks should be recovered in the customer charge, WG reviews
Jonathan/Paul—draft potential recommendations on TVR and location-based pricing based on discussion for WG review

Appendix I: Attendees
Organization / First Name / Last Name / 9/23 / 10/27 / 11/21 / 12/16
Acadia Center / Abigail / Anthony / X / X / X / X
Leslie / Malone (alt) / X / X
Mark / Lebel
Conservation Law Foundation / Jerry / Elmer / X / X / X / X
Direct Energy / Marc / Hanks / X / X / X / X
Pamela / Rutkowski
Div.of Public Utilities & Carriers / Macky / McCleary / X / X
Steve / Scialabba / X / X / X
Jonathan / Schrag / X / X
Jon / Hagopian / X
Christy / Hetherington / X
Joel / Munoz / X
Tim / Woolf (Synapse) / X / X / X / X
E4TheFuture / Jenny / Weissbourd
EERMC / Marisa / DeSautel
Scudder / Parker / X / X / X / X
Kate / Desrochers / X / X
Mike / Guerard / X
Energy Development Partners / Frank / Epps
Russell / Maymon / X
George Wiley Center / John / Willumsen-Friedman / X / X / X / X
Camilo / Viveiros (alt) / X / X / X
Chloe / Chassaing / X
National Grid / Tim / Roughan / X / X / X / X
Celia / O’Brien / X / X / X / X
Jim / Patterson / X
Jennifer / Hutchinson / X / X / X / X
Mary / Coleman / X / X / X / X
Meghan / McGuiness / X
Ryan / Constable / X / X / X
Alan / LaBarre / X / X / X
Courtney / Lane / X / X
Organization / First Name / Last Name / 9/23 / 10/27 / 11/21 / 12/16
Tamela / Bailey / X / X
Jeanne / Lloyd / X / X
Kate / Grant / X / X / X
NECEC / Janet / Besser / X / X / X
Jamie / Dickerson (alt) / X / X / X / X
New Energy, LLC / Seth / Handy / X / X / X / X
Karl / Rabago (alt) / X / X / X / X
Office of Energy Resources / Danny / Musher / X / X / X / X
Office of Lt. Governor / Leah / Donaldson
John / Farley
Mike / McElroy
Erika / Niedowski
People’s Power & Light / Kat / Burnham / X / X / X / X
RI Manufacturers Assoc / William / McCourt
RI PUC / Todd / Bianco / X / X / X / X
Cynthia / Wilson Frias / X / X / X / X
Linda / George / X / X / X
Solar City / Carine / Dumit
Brendan / Reed (alt)
Thad / Culley
TEC-RI / Doug / Gablinske
Utilidata / William / Pratt / X
Jesse / Reyes (alt)
RI PUC’s Mediator/Consultant / Jonathan / Raab / X / X / X
Paul / Centolella / X / X / X
Observers / Fred / Unger / X / X / X
Julie / Michals / X
Michelle / Carpenter / X / X / X
Michele / Leone / X
Kayte / O’Neill / X / X
Doug / Sabetti / X / X
Alan / Nault / X
Aaron / Regenberg / X
Dan / Garvey / X

[RKR1]

[RKR2]I feel this overstates the concensus. There is a lot of variability in TVR rate design. I would say there was a sense that TVR options should be studied further.

[RKR3]Concur.

[RKR4]I really didn’t hear this level of specific agreement.

[RKR5]I agree with this, but in fairness, don’t recall a concensus of the room on the issue.

[RKR6]Mostly what I heard was strong concerns over equity. High locational costs may be to no “fault” of the customers, and may instead, in the short term, be an issues of overlooked maintenance and upgrades. This needs a lot of work to reach the stage of concensus. I do agree that there might be a program of “adders” that could reward DER developers who have a choice to cite in an optimaly location.

[RKR7]This can only be fair if we are talking NET costs after a full evaluation of costs and benefits. I was not one of those members.

[RKR8]This is too general a statement to call concensus around – and potentially misleading. For my part, I don’t think customer charges should be used for anything except those costs and portions of cost that vary exclusively with customer count.