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The time to act is now

AG Neronha successfully enshrines Act on Climate into all future utility dockets, including a planned docket on the future of gas infrastructure

Photo by Richard Asinof

R.I.Attorney General Peter Neronha announced his conditioned approval of the sale of National Grid to PPl on Monday, May 23.

By Richard Asinof
Posted 5/30/22
RI Attorney General opposed the sale of National Grid to PPL and, as a result, won more than $200 million in cost savings for consumers, and enshrinement of the Act On Climate law into all future utility proceedings.
When will political reporters in Rhode Island start covering the success of RI Attorney General Neronha in achieving more than $400 million in consumer savings [the sale of National Grid plus the legal settlements from the drug manufacturers, distributors and consultants] through his legal advocacy? How will the Act on Climate change the way that state agencies conduct their business? Will other states in New England follow Rhode Island’s lead in passing similar Act On Climate legislation? Will the Rhode Island Senate reject the attempt to approve the burning of plastic waste in Rhode Island, a proposal now pending to be voted on this week?
First, with the success of challenging the sale of CharterCARE by its private equity owners, Prospect Health, then with the rejection of proposed merger of Care New England and Lifespan, then with the advocacy on behalf of childhood lead poisoning prevention advocates to sue negligent landlords, then with the aggressive legal strategy to hold bad actors in the opioid drug epidemic accountable, R.I. Attorney General has become an outstanding public health advocate and environmental advocate in Rhode Island.
Combined with the conditions imposed on the sale of National Grid to PPL and the enshrinement of the Act On Climate in all future utility dockets, Attorney General Neronha has created savings for Rhode Island consumers of more than $400 million, an impressive outcome for the state's public health and environmental advocate.
Further, Attorney General Neronha has been a leading advocate in the charge to enact common sense gun safety laws in Rhode Island. The legal team he has assembled in the office's civil division has demonstrated how legal advocacy on behalf of the public good can make a difference in the lives of all Rhode Islanders.

PROVIDENCE – There were three big takeaways from the news conference held by R.I. Attorney General Peter Neronha on Monday, May 23. Two were explicit:

• R.I. Attorney General Neronha, under law serving as environmental advocate and as public health advocate, can protect Rhode Islanders, even when other state regulators fail to do their job.

• The Act on Climate law, enacted in 2021, is now enshrined as an enforceable, binding part of every future docket for utilities’ business in Rhode Island. This is particularly relevant as efforts are now underway to expand natural gas infrastructure in Rhode Island.

Translated, Attorney General Neronha may have “lost” the battle over the sale of Narragansett Electric to Pennsylvania Power and Light, or PPL, but his office rightly celebrated that it had won the war regarding future regulatory battles.

Further, his legal intervention secured more than $200 million in savings for Rhode Islanders that otherwise the sale of Narragansett Electric would have been saddled with ratepayers.

A third takeaway is still hiding in plain sight:

• Rhode Island is for sale, with private equity firms in a fevered hunt. The outgoing hospital CEOs, Lifespan’s Dr. Timothy Babineau and Care New England’s Dr. James Fanale, who failed in their bid to merge the two largest health systems into a monopoly, have made it perfectly clear in exit interviews to expect new partners to come a-courting.

The upcoming May 31 announcement by Partnership with Rhode Island, a group of CEOs from the state’s largest private employers, promoting the fact that they will be working with Gov. Dan McKee to capture a disproportionate fair share of future investment opportunities under the federal Bipartisan Infrastructure Law, should be a big cause for worry, because of the growing lack of corporate accountability.

[Editor’s Note: Perhaps not since Lincoln Steffens published his essay, “Rhode Island: A State for Sale,” in McClures Magazine in 1905, has the threat been so blatant.]

What the Attorney General said
It is important, then, to pay careful attention to the narrative that R.I. Attorney General Peter Neronha laid out at his May 23 news conference. His tone of voice was tinged with urgency and anger, as he laid out the facts in this case and the negotiated settlement to allow the purchase of National Grid by PPL to move forward..

Here is an extended, edited transcript of the news conference, because it arms readers [and sharers] of ConvergenceRI with the protection of the knowledge that they need to know as the new company, “Rhode Island Energy,” a functional monopoly, enters the marketplace.

Consider it an act of public service by ConvergenceRI. And, consider why no other news media outlet in Rhode Island is willing to make such an investment in time, space, and energy. Could it have something to do with who owns them?

NERONHA: [Here is] the status, and frankly, the resolution of our litigation involving the purchase of Narragansett Electric by PPL from National Grid.

I am going to spend some time with this today, because this is an incredibly important [and complex] transaction for Rhode Island.. I think, because of that complexity, that sometimes, all of us collectively, in the public and in government, our eyes tend to glaze over.

But this is a really important matter for the people of the state of Rhode Island, in a lot of ways. I am going to walk us through how we got to where we are today [reaching a settlement with PPL approving the sale, with conditions].

The bottom line is that as a result of our litigation, we have secured over $200 million in value for Rhode Islanders; we have ensured an adequate storm response, should that happen [because we all know that it will, the history is pretty clear about that]; and we are also advancing our climate goals.

I want to point out that in the [sales] agreement we reached with PPL and National Grid, specifically with PPL, to approve the sale and withdraw our objections to the sale, the benefits and protections afforded to Rhode Islanders significantly exceed the Division of Public Utilities and Carriers’ set of conditions put on the sale, when they approved it earlier this year.

As I said, [our new sales agreement creates] more than $200 million in value to Rhode Islanders; I will get into the details about that; [it ensures] concrete action on climate mandates and investments, which were ignored by the DPUC. And, as I said earlier, the [previous] provisions [approved by the DPUC] were inadequate for storm response.

Most importantly, the agreement that we reached today is enforceable in court, and so if PPL, as the new owner of our public utility, does not do what it agreed to do, we can go to court to enforce it.

A little bit of background
NERONHA: I think the background is important to fully understand the scope of what we are talking about here.

National Grid delivers electricity and gas in New York, Massachusetts and Rhode Island, to over 20 million customers. They operate in Rhode Island through Narragansett Electric I want to point out [the] 20 million customers, because I want to compare that to PPL.

Narragansett Electric has a functional monopoly over electric and gas operations in Rhode Island. They have 486,00 electric customers and 257,000 natural gas customers.

When there is monopoly, it is particularly important for state regulators – this office being one of them, as you have seen in other contexts, health being one of them. In this context, the Attorney General, as an advocate on behalf of the public, [needs to] pay close attention, so that we can protect the interests of all Rhode Islanders.

PPL Corporation, Pennsylvania Power and Light, is an energy company headquartered in Allentown, Pennsylvania. It delivers electricity to customers in Pennsylvania, Kentucky and Virginia; it delivers natural gas to customers in Kentucky. They have 2.5 million customers, so, it is significantly smaller than National Grid, particularly as it pertains to storm response. And that was a real concern to this office, [about] the ability to surge resources when we need them the most, by a much smaller company.

The proposed transaction
NERONHA: The background for the proposed transaction was essentially this. In March of last year, 2021, PPL announced plans to purchase Narragansett Electric from National Grid for $5.3 billion.

In May of 2021, PPL, National Grid and Narragansett Electric filed a petition seeking the necessary approval for the Division of Public Utilities and Carriers, the DPUC, [for the sale].

I am going to stop here, to make a point of clarification, There is something called the Public Utilities Commission, and then there is something called the Division of Public Utilities and Carriers. What this transaction needed approval from was the Division of Public Utilities and Carriers, not the PUC itself.

Under Rhode Island General Laws, Section 39-3-25, the DPUC is required to find: “The facilities for furnishing service to the public will not be diminished [as a result of the sale]”; and that the terms of the transaction are consistent with the public interest.

So, service to the public will not be diminished, and the terms of the transaction are consistent with the public interest.

I would argue that this is a broad standard. It gives any regulator broad leeway to advocate in a way that benefits the public – that service to the public will not be diminished, and that the terms of the transaction are consistent with the public interest.

The Attorney General intervenes
NERONHA: On June 24, 2021, this office filed a motion to intervene in the DPUC proceedings. We did that to ensure that the interests of Rhode Islanders would be protected.

There were a number of ways that we could do that in my capacity as Attorney General. One way is through our statutory authority as the [designated] Environmental Advocate for the state, pursuant to the Environmental Rights Act. We have the statutory authority and obligation “to take all possible action” for “the protection, preservation and enhancement of air, water land and other natural resources located within the state.” We have other powers as well, but that is just one of them.

There were several other interveners. I am really grateful to these fellow interveners for their advocacy: the Acadia Center, the Conservation Law Foundation, the Green Energy Consumers Alliance, and the state Office of Energy Resources.

I also wanted to extend my thanks to the Advocacy section of the DPUC. Within the DPUC, they actually have an advocacy section, and they were involved in the hearings as well. I would argue that their work was outstanding. They agreed with us; not the hearing officer at the DPUC.

The Attorney General objects
NERONHA: It was not until Aug. 19, 2021, and only after a hearing, that the DPUC [granted] this office and our fellow interveners [the status] to intervene. This office, along with the other interveners, as well as the DPUC’s own advocacy section, then participated in four days of hearings before the DPUC in December of 2021.

Those hearings followed extensive discovery conducted on a relatively short timeline. At the conclusion of those hearings, this office, the other interveners, and DPUC’s own advocacy section asked that the DPUC deny approval of the proposed transaction.

We were concerned that by severing Narragansett Electric from National Grid’s regional system of shared services in Rhode Island, Massachusetts and New York, it could result in new costs, or transition costs, that could be borne by Rhode Island ratepayers.

We also believed that there was insufficient evidence in certain areas, like “storm response,” to show that PPL would not “diminish” services – or substantially increase costs for Rhode Islanders.

There was insufficient evidence to show that the transaction was consistent with Rhode Island’s Act On Climate.

The Act on Climate requires all state agencies, including the DPUC, to conduct their business and make decisions with the state’s climate goals in mind.

DPUC approves sale, AG sues
NERONHA: On Feb. 23 of this year, the DPUC granted approval of the transaction over our objections. Following the approval, National Grid and PPL, as one might expect, quickly moved to close the [deal], to get it over and done with, and to block off any legal avenues that we might pursue to change the dynamic.

This office filed a motion to stay the transaction and an appeal of the DPUC decision in Providence County Superior Court.

Why did we appeal? For a lot of reasons:

• First of all, the DPUC, in approving the sale, did so under a new and incorrect minimal legal standard that ignored Rhode Island law and its own previous decisions.

• The DPUC declared that its review of the sale did not “prescribe or justify an evaluation of post-transaction rate impacts.”

Translated, [the DPUC was claiming post-transaction rate impacts were not relevant to its decision-making process.

• The DPUC failed to compare pre-and post-transaction services and rates.

• The DPUC expressly ignored the Act on Climate’s command to consider the climate’s impacts on the transaction.

Judge Stern grants AG’s motion to stay
NERONHA: On April 1, 2022, Superior Court Judge Brian Stern granted our motion to stay. He found that this office had a reasonable likelihood of succeeding on the merits, showing that the hearing officer improperly approved the transaction, without properly considering whether it was “consistent with the public’s interest.”

Judge Stern stated that the hearing officer “failed to meaningfully consider the transaction’s direct impact on ratepayers.”

And, I thought this was very interesting at the time, and it remains interesting to me today. As he noted in his decision granting our motion for a stay, Judge Stern found that the hearing officer, in granting approval for this transaction, had ignored the same standard he himself had used in a case in 2006 – in the Southern Union case.

Again, as Judge Stern pointed out, in the Southern Union case, the same hearing officer, in determining whether the transaction was consistent with the public interest, “considered the transaction’s impact on low-income rate-payers.” Those were Judge Stern’s words, not mine.

In National Grid/PPL transaction, however, the same hearing officer stated that determining whether the standard for approval is met, “must be based on an evaluation of the proposed buyer’s ability to provide utility services.”

[In the National Grid/PPL decision, the hearing officer said]: “Comparing the utility’s prospective operating costs for providing such utility services is not a valid direct prerequisite under this approval standard.”

Think about that for a minute. [Assuming the voice of the hearing officer]: In granting our approval, what the standard is isn’t in the public interest, we don’t need to get into comparing operating costs pre- and post-transaction.

[Resuming his own voice, Neronha continued]: I would argue that interpreting this law that way is not in the best interests of Rhode Islanders.

Judge Stern also said, “This would seem to suggest that considering the potential for increased costs is immaterial to determining whether the transaction in question is consistent with the public interest.”

These are Judge Stern’s words, not mine. Judge Stern continued: “However, the hearing officer in Southern Union considered, in detail, the economic impacts the proposed transaction had on low-income ratepayers as well as the impact on environmental remediation costs.”

Shifting legal ground
NERONHA: So, the sands moved under our feet in this case.

According to Judge Stern: “In National Grid/PPL, the hearing officer held that consideration of ratepayers specifically is no longer necessary” because ratepayers are included within the general public.

And, according to Judge Stern: The “general public’s” interest, according to the hearing officer, denotes a “generalized, harmonious relationship with the public as a whole.”

If you can tell me what that means, I’d be grateful.

And, according to Judge Stern: Compared to the Southern Union standard, “This is not the same standard nor clarification, but an entirely new standard.”

And, what drives this “entirely new standard?” Convenience for the utility companies.

That is what the hearing officer said in his decision. “The Division also believes a further clarification is needed to discourage attempts by future parties – [that is your Attorney General, among others] – to define ‘public interest’ so narrowly and subjectively as to render all sections of 39-3-25 reviews unduly time-consuming and expensive to adjudicate and unduly burdensome to the [Energy Companies]; all of which the Division finds, paradoxically, to be ‘inconsistent with the public interest.’”

Think about those words for a minute, and what they mean for Rhode Islanders. For the hearing officer, who established this new standard of generalized, harmonized relationships, all that matters is that the utility company’s “fitness, willingness and ability properly to perform the services proposed.”

Translated, are they in the black? Meaning, do they have money? And, do they know how to deliver energy? If they can do that, that is all that is required.

Judge Stern, in response to that statement, said, “Notably, the hearing office herein makes broad, sweeping statements, without any citation of statute, case law, or applicable regulation to support these propositions.”

Judge Stern [continued]: “Evidently, the hearing officer desires that the approval process be streamlined because he believes that it is unduly time-consuming and expensive to adjudicate, and places an undue burden on the energy companies.”

I would argue we should be asking ourselves, “What undue burden in terms of our rates and in terms of our climate, and in terms of our health, are we placing on Rhode Islanders?” That’s the question.

However, the transaction is one of the largest transactions in this state’s history, at approximately $5.3 billion, impacting a large portion of businesses and residences within the state.

So, according to Judge Stern, again his words, not mine: “Thus, although this court agrees that efficiency is an important consideration, [and who could argue with that], efficiency cannot be prioritized over the level of diligence required for a transaction of this magnitude.”

Folks, this is a big deal.

We are giving the monopoly of energy in Rhode Island to somebody else. There is an opportunity here to get it right, for Rhode Islanders, now and in the future. The time to act was now, not later.

So, the standard was wrong. The bottom line is that the impact on ratepayers should and does matter to whether this transaction should have been approved by the DPUC.

Judge Stern pointed out that the hearing officer failed to make any determination that the ratepayers would not be unfavorably impacted by the transaction.

Judge Stern also said: “The hearing officer characterized issues related to ratepayer risks as inappropriately before the Division, and consequently, refused to consider such risks.”

The hearing office was plainly wrong.

While the Public Utility Commission, according to Judge Stern, has the authority to set utility rates, the Division has the authority to assess the impact of those potential rates on ratepayers in Rhode Island, when considering whether the transaction is, in his words again, “consistent with the public interest.”

There is clearly a difference between actually setting the utility rates, which is what the PUC does, and considering the effect of potential utility rate increases and costs may have on ratepayers.

Judge Stern: “The hearing officer was incorrect.”

Acting On Climate
NERONHA: Before talking about the Act On Climate, I spent a lot of time just going over Judge Stern’s decision [on granting a stay]. Why? Because one of our [office’s] biggest problems with the DPUC decision was this: It gives the wrong legal standard. It was an entire legal standard that gave the minimal amount of protection to Rhode Islanders, rather than one that gave the maximum protection.

The Act on Climate is important, it is real, and it matters. And, until we as a state recognize that, take action, specific action, with that kind of urgency in mind, we are not going to meet our goals.

In government, we have this tendency to do everything that is right here in front of us. You know, none of us are going to be here forever – I’m talking about being in office. And so, we tend to focus on what is right in front of us. The Act on Climate makes us think about the future, but to act now.

And, in issuing the approval for this transaction, the hearing officer, in our judgment, essentially ignored the Act On Climate. And Judge Stern agreed. He said: “The Division failed to adequately consider the environmental impacts of the transaction in accordance with the 2021 Act On Climate. This provides the Attorney General with an additional ground upon which to challenge the Division’s order on the merits.”

As Judge Stern pointed out, “Section 42-6.2-9 of the Act On Climate sets out specific decarbonization goal for the state, including a 45 percent reduction in greenhouse gas emissions from 1990 levels by 2030.”

Further, Judge Stern found: “Importantly, the Act On Climate requires all state agencies, including quasi-public agencies, to conduct their regular business with the achievement of these goals in mind.”

So, according to the courts, “The Division is required to consider the climate impacts of the transaction, to the extent that they fail to do so, provides the petitioner, that would be us, with yet another basis to challenge the order on the merit.”

The failure of the DPUC to consider the Act On Climate as broadly as they could was one of the principal reasons we appealed that decision.

Better outcomes
NERONHA: Let’s get to what has been achieved. There will be no distribution rate increases for three years, [which was part of the initial DPUC decision to approve the sale], and we have built on that.

• There is a $50 million combined rate credit for gas and electric customers

• There is a $43.5 million discharge of bad debt for accounts that are overdue and owed that are unlikely to be recovered.

There is also a commitment to maintain National Grid’s program to work with at-risk customers to ensure that their bills remain getting paid. That was the result of some litigation that was brought a few years ago, and we required a commitment that that work continue to happen, to make sure that those customers find ways to keep their power on. That’s good for them; it is good for ratepayers, and for Rhode Islanders in general.

The DPUC decision would have allowed for cost recovery of about $103 million from ratepayers [avoiding costs for an IT system and a local gas facility that would not be built if National Grid had retained ownership. As a condition of our agreement with PPL they cannot seek to recover those losses from ratepayers.

With respect to Act On Climate, what the DPUC required was for PPL to submit a report 12 months from now, with some goals for the Act On Climate. Respectfully, in our view, that was not good enough. We can’t wait 12 months for a report with no guidelines for what that report should contain, if we are serious about meeting our goal. The law requires it; our future requires it.

More, better outcomes
NERONHA: With respect to renewable energy, [the deal ensures PPL]:

• To maintain the timeline that supplies are connected to the grid, to make best effort to improve the process, as soon as practical.

What we hear a lot is that getting renewable energy resources to the grid is too time consuming. We are really going to hold their feet to the fire on this.

• A guarantee that costs for new smart meters will not exceed the National Grid estimates already in place, and $2.5 million to be contributed the Renewable Energy Fund, which is maintained by CommerceRI, to fund these projects.

• Under our agreement, every time, every time PPL makes a filing in Rhode Island, whether it be before the DPU or elsewhere, they have to submit an impact statement on how that utility filing will impact the Act On Climate goals.

We are not talking about theory anymore. We are not talking about general statements. We are not talking about an end-of-year report. We’re talking about every time they want to do something, they will need to take the Act On Climate law into account. That is long overdue, and it is going to happen now.

With respect to the Act On Climate report itself, in our view, that report has to have concrete things in it.

The first is that they engage a consultant to author the report. If you don’t bring experts in, you are not going to have much of a product at the end.

The second is to involve stakeholders, Rhode Islanders, in the report’s development process.

The third is to analyze the use of energy efficiency programs and to study the capability for solar growth and electric storage. The latter is important; it’s something that state Sen. Dawn Euer brought to my particular attention. If we want to convert to renewable energy sources, we have got to start planning about how we are going to deliver them.

New docket on gas infrastructure
NERONHA: We anticipate, we believe, that there will soon be open under the PUC docket, a gas docket for the future of our gas infrastructure. [In the deal], we required PPL not to oppose that PUC docket, and to provide up to $2.5 million to this office, for experts to participate both in the Act On Climate report and in the OUC future of gas docket.

Why is that important? I would argue that we have terrific lawyers in this office. But our lawyers, and everything we do – from health care, to consumer protection, to lead paint, you name it – requires the use of experts.

And our experts’ budget, as given to use by the General Assembly, is less than $1 million per year, for everything we do. It used to be less. It used to be around $60,000. We have had that increased recently to $750,000.

We can’t represent you as Rhode Islanders unless we have the expertise, particularly in these complicated areas. So now, we will be in a better position to advocate for Rhode Islanders.

For the future gas docket, we have got to figure out how our gas future intersects with our climate future, in a way that preserves the natural resources and climate, but also makes sure that Rhode Islanders are getting adequate and efficient energy. We anticipate that this will be a public process, an opportunity to improve the current system, to understand how we can maintain efficient and effective service while we transition – and while ensuring that future ratepayers are not saddled with the cost of transition.

Again, when you are talking about a monopoly, as a regulator and as an advocate, we have to carefully make sure that Rhode Islanders don’t pay the cost of these kinds of transition projects. It is going to take a lot of work, and we are prepared to do that.

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