The Rhode Island Public Utilities Commission (PUC), in a written order issued on Oct. 7, said that it finds it to be in the public interest to allow Block Island Power Company (BIPCo) to retain ownership and control of its generating facilities for the purposes of selling emergency generation at retail within its service territory.
Should BIPCo seek to participate in the wholesale market, it must first return to the PUC for a review of its waiver request, the PUC said.
As noted in the order, BIPCo in March sought a waiver from certain requirements of the 1996 Utility Restructuring Act (URA). Specifically, BIPCo sought exemptions from the requirement to transfer ownership of generation facilities to an affiliated company; the prohibition against selling electricity at retail; and certain standards of conduct.
If the waiver were granted, BIPCo said, it will continue to own its generation facilities and use them to provide backup and reliability in the case of any discontinuance or loss of power from the mainland.
In support of its petition, BIPCo filed testimony of its rate consultant, David Bebyn, who concluded that allowing BIPCo to retain ownership and control of its generation would be “better, simpler, less costly, and will provide [Block] Island with safety and the best likelihood of reliable and adequate service” at reasonable rates.
Bebyn also said that there would be additional ratepayer costs associated with divestiture that would not exist if ownership remained with BIPCo. For example, he said that the company would have a difficult time finding a buyer for the generation at fair market value. Selling at a cost below fair market value would result in stranded costs to the seller (BIPCo), which would then be entitled to recover those costs from its ratepayers. That would be avoided by keeping a single entity, the PUC added.
The PUC in May held a hearing on Block Island for the purpose of hearing from the public on BIPCo’s request, and none of the speakers opposed the waiver, the PUC said. In June, the state Division of Public Utilities and Carriers filed a memorandum indicating that it had reviewed BIPCo’s rationale and considered the unique circumstances surrounding BIPCo’s request, namely its location 12 miles off the coast of the mainland of Rhode Island. The division opined that the possibilities are real that there could be service interruptions from the mainland, the PUC added.
During an evidentiary hearing that the PUC held in July, Bebyn responded to concerns about future capital costs associated with the generating units, indicating that maintaining one regulated company with the generation assets would require PUC review of any future capital costs in the same manner as the current practice. In other words, the PUC added, if BIPCo were to approach the PUC in the future with a proposal to take on debt in order to replace a generating unit, nothing would change in terms of the PUC’s jurisdiction over the rate recovery of costs incurred by the generation aspect of the business.
Bebyn said that BIPCo would be required to develop new rates to provide for standard offer service and last resort service to customers who choose not to buy generation from competitive suppliers. However, unlike with divestiture, the company will not be required to separate all of the assets into two separate sets of books with separate employees, the PUC added.
Reliability of utility service is of utmost importance to ratepayers and the request by a utility on an island 12 miles from the mainland squarely addresses reliability, the PUC said.
“In the event power is interrupted because of a fault on the mainland, the undersea cable, or a piece of equipment on the island between the cable and the distribution system, BIPCo will be in the position of supplying the generation,” the PUC said.