Massachusetts Considers Approach to Grid Modernization

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1047129_18534666In October, the Massachusetts Department of Public Utilities opened an investigation to explore policies that would enable Massachusetts to “take advantage of grid modernization opportunities.”  The Department consciously chose the term “grid modernization” as more accurate (though less catchy) than the commonly used  “smart grid.”  The idea behind the investigation is that new technologies and practices have the potential to provide benefits (increased reliability, reduced electricity costs, reduced electricity consumption, enhanced customer choice, shifting of demand to off-peak periods, reduced greenhouse gas emissions, etc.), but that policy changes may be necessary to realize those benefits in a timely and cost-effective manner.

The Department convened a working group of stakeholders (including state agencies, the Massachusetts utilities, ISO New England, consumer groups, the Attorney General, numerous clean energy companies and industry groups, environmental groups, and competitive suppliers), and tasked that group with preparing a report on the current status of the electric grid in Massachusetts, capabilities and technologies that could improve the functioning of the grid, and policy recommendations.  (Full disclosure: I participated in the working group as a member of the New England Clean Energy Council’s delegation.)  The working group submitted its final report to the Department on July 3.  A comment period is now open until July 24, 2013.

The report is interesting for a number of reasons.  It collects a large amount of information, presents general principles and recommendations developed by important stakeholders, and – perhaps most importantly – includes several comprehensive regulatory proposals.  The regulatory changes proposed in the report range from incremental modifications to existing regulatory schemes to significant rethinkings of the regulatory model that Massachusetts uses to oversee utility investments.  A large number of stakeholders signed on to a proposal that would involve pre-approval and performance-based ratemaking elements for grid-modernization investments – a proposal designed to incent utilities to adopt forward-looking investment strategies sensitive to societal benefits.

The ball is now in the Department’s court.  The working group recommended that the Department move forward with a proceeding or proceedings that would lead to formal guidance and perhaps adoption of new policies.  We will have to wait to see how the Department responds, but I would be surprised if we have to wait very long.  This process could be the beginning of real changes in how Massachusetts regulates investment decisions by electric utilities.  If the Department adopts policies that successfully facilitate adoption of “smart grid” or “grid modernization” technologies, the capabilities of the electric grid in Massachusetts, and corresponding opportunities for cleantech innovation, could be expanding in the near future.  Stay tuned.