When will RI see promised Time-Varying Rates on electric bills? | Opinion

• Rhode Island Energy is installing advanced smart meters for all electricity customers.
• The new meters allow for Time-Varying Rates, which can lower costs for customers and the grid.
• While the utility profits from the $188 million meter investment, the system for customer benefits is delayed.
• The utility is currently seeking to increase its profit margin in a new rate case before state regulators.

Rhode Island Energy is currently installing advanced smart meters for all electricity customers. Clean energy and environmental advocates have championed advanced metering for decades because the systems enable incentives for conservation, solar integration and energy storage. The primary vehicle for realizing these benefits is Time-Varying Rates (TVR).

Unlike legacy meters, advanced meters track when electricity is used, not just how much is used. TVR encourages customers to shift heavy usage, like running a clothes dryer or charging an electric vehicle, to off-peak overnight hours when wholesale power is cheap and cleaner. This flattens the grid’s peak demand, brings down wholesale energy costs for everyone and reduces our reliance on polluting “peaker” power plants.

The Rhode Island Public Utility Commission (PUC) is charged with balancing the interests of utility customers with value to utility shareholders. It sets the formulas by which the utility is compensated.

The primary means the utility is compensated is based on a Return on Equity invested (ROE) that is predetermined by the PUC and currently set at 9.275%.  Rhode Island Energy’s capital investments are funded through roughly 51% equity (shareholder capital) and 49% debt. For every $100 million the utility spends on infrastructure, about $51 million is financed via equity, allowing shareholders to collect an annual pre-tax profit of 9.275% on that portion, or roughly $4.73 million. The more the utility spends, the more their shareholders earn.

At a cost of over $188 million for the new meters, Rhode Island Energy shareholders will collect nearly $9 million a year in profit for 20 years from the equity portion of that investment alone, while also saving money on labor by eliminating the need for truck based drive-by meter readers. 

But advanced metering was supposed to benefit ratepayers as well as the utility. Though the meter expenditures were approved by the PUC in 2023 and the meters installations are expected to be completed by the end of this year, it is expected to take until at least 18 months after the meter rollout is completed to implement the billing system infrastructure needed to enable Time-Varying Rates.

The upgrades that deliver more profit to the utility bottom line was fast tracked, while the investment needed to implement the primary benefits to ratepayers is being slow walked. Why weren’t the software upgrades and hardware deployment run in parallel?

Right now, the PUC is weighing a huge general rate case (Docket No. 25-45-GE). Rhode Island Energy has proposed aggressively hiking its profit margin, seeking to raise its ROE from 9.275% to 10.75% and expand its equity share from 51% to 57%.

In their 2022 advanced metering filing, Rhode Island Energy suggested the new infrastructure would yield $729 million in benefits over 20 years. So far, the utility is seeing plenty of that benefit on its bottom line, while ratepayers have mostly seen higher costs. The PUC should reject the utility’s requested rate increases, preserve the current rate structure, and insist that Time-Varying Rates be fully operational before any further rate changes are considered.

Fred Unger is a retired energy project developer and clean energy advocate based in Providence.