Electric Distribution Utilities: Guidance on Utility Distribution System Planning and Order Requiring Continued Investigation

In New England, the restructuring of the electricity market had led to reduced energy-supply costs and reduced carbon emissions. However, costs and rates associated with electricity transmission and distribution were rising due to factors including limited sales growth, declining system productivity, and an outdated regulatory structure. Although those costs were rising, technological advancements in areas including energy efficiency, energy storage, demand response, distributed generation, and electric vehicles all had the potential to enhance customer service, save customers money, and enable more flexibility in how energy services were provided. The New Hampshire Public Utilities Commission (the commission) considered whether to realign the state’s outdated regulatory structure in light of these advancements. A working group of commission staff made recommendations for new rate-design principles, including that the rates should (1) compensate utilities and consumers fairly, (2) provide appropriate and efficient price signals, (3) incentivize customers to invest in distributed energy resources (DERs) (i.e., small-scale electricity-generation and storage resources) and make wise electricity-usage choices, (4) give consumers control and choice while protecting vulnerable customers, and (5) reflect cost-causation principles. One customer-equity rate-design proposal before the commission was the office of the consumer advocate’s suggestion that if an investment’s incremental benefits were disproportionately accruing to a specific class of customers, the commission should direct the utility to allocate and recover the cost of the investment based on an apportionment of the investment’s marginal benefits instead of based on the embedded and marginal costs of the system. The commission considered the various proposals and issued a guidance document.