Summary of Major Provisions of the Rhode Island Utility Restructuring Act of 1996 (H-8124 Substitute B3)

Travel of the bill

Introduced February 7, 1996

Passed House June 11, 1996

Passed Senate August 1, 1996

Signed by Governor August 7, 1996

Administrative provisions

Establishes a new position of administrator, as separate from the Commission, to be appointed by the Governor, with the consent of the Senate, for a six year term.

Retail Electric Licensing Commission established to submit plan to legislature by 1/1/97 with recommendations for taxation of distribution, transmission and generation companies, for changes to the regional power pool, and for consumer protection and access to books and records.

By 1/1/97, PUC to establish regulations for nonregulated power producers to meet operating and reliability standards of power pool.

PUC shall participate in FERC proceedings relative to wholesale all-requirements contracts, to assure that termination fees to be paid by consumers are consistent with legislation. Expenses for this purpose up to $100,000 reimbursable by utilities.

By 1/1/98 and annually for next four years, PUC shall report to Governor and legislature on developments in power supply market in state, estimated savings to consumers, progress towards RTG and other power pool reforms, status of electric industry restructuring in other New England states, and recommendations for statutory changes.

Nonregulated power producers must file application with Division pursuant to regulations issued to protect public interest.

The Commission may suspend the taking effect of new rates for no longer than seven months from their filing (as opposed to current nine months).

Electric utility restructuring plans

Utilities required to file plans for transferring ownership of generation, transmission and distribution facilities into separate affiliates, with nondiscriminatory access to transmission and distribution facilities to wholesale and retail customers and to nonregulated power producers.

Wholesale power suppliers to be nonregulated. May apply to become EWGs; this is in consumers' interest and will not provide any unfair competitive advantage.

Wholesale power suppliers to cooperate with environmental officials in states where their generating facilities are located to reduce emissions toward 1/1/96 new source standards.

Provision of retail access and standard offer

Electric utilities to provide retail access to customers:

Up to 10% of total kwh sales by 7/1/97 to new commercial and industrial customers with 200 kw demand, existing manufacturing customers with 1500 kw demand, and the state of RI;

Up to 20% of total kwh sales by 1/1/98 to all existing manufacturing customers with 200 kw demand, all municipal accounts;

All customers within three months after retail access is available to 40% or more of New England kwh sales, or by 7/1/98. Commission may extend by six months.

Electric utilities to provide standard offer to customers that do not choose other suppliers within three months after retail access available to 40% of New England kwh sales and extending through 2009.

Standard offer to equal price paid by customer in year ending 9/30/96, automatically adjusted for 80% of change in CPI and adjusted with Commission approval for other factors reasonably out of control of distribution utility and its wholesale power supplier.

Once customer purchases from another supplier, utility not required to provide standard offer. No withdrawal fee for leaving standard offer unless so contracted; no residential customer may be required to pay.

By 1/1/97, utilities to file unbundled rates, to become effective 7/1/97.

Last resort power supply

Utilities to arrange for last resort power supply for customers no longer eligible for the standard offer and unable to obtain service from another supplier, by soliciting bids in the market plus a fixed contribution to be included in distribution rates charged all other customers.

Transition charges

Termination fee for all-requirements contracts to be recovered by nonbypassable charge paid by all customers of distribution company. Fee to include following costs of wholesale supplier:

1. Regulatory assets, including those of affiliated fuel suppliers, and obligations for post-retirement health care costs;

2. Nuclear obligations, including decommissioning and costs independent of operation;

3. Above-market payments for purchased power plus buyout or buydown payments;

4. Net unrecovered costs of generating plants, including natural gas conversion costs and above-market pipeline demand charges.

Transition charge to continue until liabilities satisfied, with annual reconciliation of items 2 and 3 (except nuclear costs independent of operation).

Recovery spread over period from 7/1/97 through 12/31/09.

Equity return on unamortized balance of items 1 and 4 at one percentage point above BBB long term utility bonds.

Charge to be 2.8¢ per kwh from 7/1/97 to 12/31/00. Subsequently to be set by Commission, with adjustment for over- or under-recoveries in first period.

A wholesale power supplier receiving termination fee shall offer to sell, buy down, or assign to others at least some portion of its power purchase contracts. May keep 10% of savings realized.

It must also subject at least 15% of its non-nuclear generating facilities to market valuation through lease, sale, spin-off or other method. (More if so required in another state.) Shall file implementation methodology with Commission by 7/1/97. Commission to approve or reject within ninety days. Commission rejection to be based on finding that methodology not likely to approximate market value of utility's assets. Companies then submit applications for approvals necessary to commence valuation. Commission to be provided with quarterly status reports on relevant proceedings before other regulatory agencies.

Valuation to be completed within six months after retail access available to 40% of New England kwh sales or receipt of all regulatory approvals, whichever later. Commission may extend six months.

Contract termination fees to be adjusted (uniformly to end of period) to reflect valuation, net of estimated revenue lost by wholesale power supplier as a result of retail access prior to valuation, and net of distribution company's share of capital investments made after 12/31/95 necessary for safe operation or to improve environmental performance or to increase fuel diversity or flexibility, with regulatory authorization. Net also of reasonable transaction costs including the cost of refinancing, and revenue lost from reduced return on equity. Equity return to be used is that of distribution company as of 12/31/95.

Performance-Based Rates

Distribution companies to implement performance-based rate plans. From 1/1/97 to 12/31/98, overall base rate increases allowed to the level of inflation, plus Commission-approved changes for factors outside utility's control. Utility may apply for changes in fuel adjustment, DSM and purchase power clauses, and for revenue-neutral rate design changes, and accounting changes.

By 11/15/96 and 97, companies shall file their earned return on common equity for preceding (to 9/30) year. May increase base rates, excluding costs of fuel and DSM, by the inflation rate.

Returns higher than 1.5% above current allowed return to be credited 100% to customers. Returns between current and 1.5% above to be credited 50%. Returns of less than 6%: utility may increase base rate by inflation plus impose surcharge to recover revenue not achieved.

Commission shall establish performance standards on safety, reliability and customer service, allowing company to be penalized or rewarded up to one percentage point on equity.

Rates to low income customers shall not be increased in accordance with PBR.

Standards of conduct

Standards of conduct for affiliated generating and distribution companies are defined. These standards require such companies to maintain separate accounting records, require their employees to "function independently," and prohibit the sharing of information between such companies except through established, public channels. Distribution companies must maintain logs available for Commission audit, describing circumstances in which discretion was exercised regarding affiliate relations.


The Commission and Division are required to submit to the Governor and General Assembly two reports annually summarizing all hearings and orders.

Existing rules and regulations regarding service termination, debt collection and other terms of service remain applicable to all distribution companies.

2.3 mills/kWh will be collected at the distribution level to fund DSM and renewable resources for a period of five years. The Commission may increase this amount, and shall allocate these funds between these resources. After five years, the Commission to determine the level of this charge.

No electric distribution company may operate in the service area of a distribution company willing to provide service at comparable terms and prices to customers of a nonregulated power producer.

Electric cooperatives may be aggregators of customers only; they may not resell electricity. Cooperatives are not required to be legal entities.

The Rhode Island Base Load Renewable Resource Facilities Electricity Purchase Act is stricken in its entirety.

Electric companies are no longer required to file their long-range energy plans.

Section 2 of the bill amends the Energy Facilities Siting Act to allow a town or city where a proposed facility would be located to request funding from the developer for studies of the environmental impacts of the proposed facility. The town or city could the lesser of $100,000 or 0.1% of the estimated cost of the proposed facility.