Electric Grid Modernization in Mass: What It Means for Utilities
According to the Electric Power Research Institute, the US will need to invest $124 billion between now and 2030 to upgrade its electric distribution system, and these upgrades will require state utility commissions to thoughtfully plan for and oversee the investments. Last week, Massachusetts became one of the first states to begin this process by taking a bold step to modernize its electric grid, joining states like New York and Hawaii, which recently introduced similar measures.
On June 12, 2014, the Massachusetts Department of Public Utilities (DPU) ordered utilities to file ten-year grid modernization plans. These plans will spell out how utilities plan to incorporate modern technology to improve electric service and connect clean energy resources to the grid. This will provide customers access to cleaner and higher quality electricity service at a lower cost.
Massachusetts’s grid modernization plan as a model
The DPU’s carefully planned and inclusive process should serve as a model for other states considering how to modernize their grids. Almost two years in the making, the DPU opened its investigation into grid modernization on October 2, 2012 with a series of DPU-facilitated workshops. The DPU then formed a working group, inviting input from a variety of stakeholders through comments and public hearings. Environmental Defense Fund (EDF) provided input, along with many other groups, and the DPU issued its recommendations on July 2, 2013.
The DPU’s grid modernization plan and vision will be grounded in sound economic analysis and has four primary goals:
- reducing the impacts of electric outages;
- reducing the cost of electricity through better management of customers’ electricity usage;
- integrating distributed and clean energy resources into the grid; and
- better management of utility workforce and assets.
Utilities must file cost-benefit studies to support their grid modernization investments. The DPU will closely review whether the proposed investments will improve electric service to customers, and will use performance metrics to measure the progress made toward the DPU’s goals. Performance metrics are central to EDF’s advocacy on grid modernization because it provides the basis for measuring whether the utility actually delivers on the promised benefits.
Good for customers and utilities
Utilities will track their grid modernization expenditures and be allowed to recover costs associated with the investments as they are incurred, a departure from the traditional practice of cost recovery through periodic requests and lengthy reviews of all aspects of a utility’s operations. The DPU acknowledged that these changes are needed in order to incentivize utilities to make the sizable investments needed. Furthermore, the DPU will review and pre-approve investments, removing uncertainty about whether these investments would be approved after they have been made. Utilities will still be required to subsequently demonstrate that they implemented their projects cost-effectively.
The modernization plans may incorporate new technologies and strategies, if supported by a cost-benefit analysis. For example, volt/VAR optimization would allow utilities to better measure and balance the flow of electricity on the grid. By eliminating waste in the electric system, utilities would be able to serve customers more efficiently and cost-effectively. Additionally, advanced metering would provide customers energy consumption information which would enable them to shift their usage patterns to a time of day when electricity is less expensive. This would also encourage the adoption of clean energy by allowing customers to sign up for utility rate plans that provide favorable rates for owners of solar panels and electric vehicles. These advanced technologies could also lead to fewer and shorter-duration power outages.
The DPU has developed a framework to ensure customers will benefit from grid modernization without sacrificing utilities’ ability to remain financially sound. The DPU has provided an excellent example for other states to implement the significant grid upgrades our country needs.
This article was republished with permission from EDF.
John Finnigan is a senior regulatory attorney with the EDF.
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