Rhode Island utility sale could be complicated by state climate law

The Rhode Island Attorney General’s Office says state regulators should block the sale of the state’s largest electric distribution utility until the buyer assures that it can comply with the state’s ambitious new climate law.

PPL Corp. announced in March that it had agreed to acquire Narragansett Electric from its parent company, National Grid, for $5.3 billion. The Federal Energy Regulatory Commission approved the sale in September. PPL is now before the state Division of Public Utilities and Carriers seeking final approval.

In written testimony for the attorney general’s office, consultants Mark Ewen and Robert Knecht, principals at Industrial Economics, noted that the state’s Act on Climate, enacted into law earlier this year, sets one of the most aggressive goals for greenhouse gas reductions in the nation. And while PPL Corp. “appears to agree that it will need to undertake extraordinary efforts” to meet those goals, it has offered “little in the way of proposals” for doing so, they said.

Narragansett Electric distributes electricity and natural gas to about 780,000 customers in Rhode Island. PPL is a utility holding company that operates three electric/gas utilities providing service in Pennsylvania, Kentucky and Virginia.

Under state statute, in order for the sale to be approved, regulators must determine that “the facilities for furnishing service to the public” will not be diminished, and that the terms of the sale are “consistent with the public interest.”

Clean energy advocates have called on regulators not to approve the sale without ensuring that PPL is committed to modernizing the electric grid, prioritizing in-state renewable energy generation, and complying with the Act on Climate.

That law requires policymakers to come up with a plan to reduce emissions to 45% below 1990 levels by 2030, 80% below by 2040, and net-zero by 2050.

That nation-leading law “should be of interest to a company that wishes to be forward-looking,” said Kenneth Payne, a former senior policy advisor to the state Senate who has been involved in drafting numerous renewable energy policies over the years. “Someone who wants to stick with the old status quo? … That’s not what we have in mind here in Rhode Island.”

Ewen and Knecht also flagged what they called PPL’s apparent expectation of a continued expansion of and investment in its natural gas distribution network. They recommend that as a condition of the sale, the company be limited to spending on gas mains needed for public safety and completing projects already underway.

Then within a year after the sale, PPL should have to submit a detailed evaluation of the long-term viability of the natural gas distribution system in the context of the Act on Climate, the consultants said.

The Acadia Center, an intervenor in the proceeding, shares the same concern, said Hank Webster, Rhode Island director and staff attorney.

“Both National Grid and PPL seem to plan on continuing to expand the natural gas distribution system precisely when we need to be reducing our reliance on fossil fuels,” Webster said. “They clearly think it’s the largest area of rate-based expansion for them. That’s at odds with the law.”

Experts for the state have also expressed misgivings about how the proposed sale will impact ratepayers, who currently benefit from National Grid’s large, regional presence.

Gregory Booth, a consultant testifying on behalf of the advocacy section of the public utilities division, said Narragansett currently has the support of about 5,100 National Grid employees who provide “significant cost and capability synergies.” That support will be lost in the proposed acquisition, which will unwind “decades of integration” between Narragansett Electric and National Grid’s operations in Massachusetts and New York, he said.

“The acquisition cannot be found to be in the public interest without specific information in the filing demonstrating that PPL will achieve the same level of operational efficiency,” Booth said in his testimony.

National Grid’s work to date on a grid modernization plan and advanced metering would also likely be lost in an acquisition, he noted. Proposals in those areas were before state regulators, but were put on hold after the sale was announced. Now, PPL is “signaling” that its own advanced metering and modernization plans may not be compatible with National Grid’s investments in those areas, Booth said.

Seth Handy, a lawyer representing several solar developers who are seeking intervenor status in the proceeding, noted that National Grid had delayed implementation of advanced metering in Rhode Island because they were working first on programs in New York and Massachusetts.

“They said, we will be in a much better position to implement it in Rhode Island after that,” Handy said. “Now, we are left in the lurch.”

Handy said he was encouraged by experts’ attention to clean energy issues in the proceeding so far. The public interest demands the “utility’s proactive implementation of new policies and practices in managing the distribution and transmission systems,” he said.

PPL and National Grid have until Nov. 23 to submit rebuttal testimony. The division will hold public hearings on the petition next month. A decision is expected at the end of February.

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