Department of Public Utilities Proposes Rethink for Distribution System Planning and Interconnection Costs

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Foley Hoag LLP - Energy and Cleantech Counsel

On October 22, the Massachusetts DPU issued an Order opening a new docket (DPU 20-75) that seeks comments on a proposal to shake up the way the electric distribution system is planned and paid for in Massachusetts.  As I see it, the core idea is to move from being reactive—upgrading the system piecemeal when individual distributed resources seek to interconnect—to being proactive—planning prospectively for the integration of the distributed generation resources we know are coming.

The DPU’s proposal would fundamentally change current practice.  Currently, in most situations, if an upgrade to the distribution system is needed to interconnect a distributed resource, that distributed resource is responsible for the full cost of the upgrade before it can interconnect, even if the upgrade benefits other customers.  This approach is often referred to as “cost causation.”

The proposal in DPU 20-75 would have the electric distribution companies implement a forward-looking planning process to identify system upgrades needed to accommodate both expected load growth and expected interconnection of distributed resources.  The planning process would also identify cost-effective upgrades to enable the interconnection of additional distributed resources.  Importantly, the planning process would be linked to the Commonwealth’s clean energy and climate policies, which are driving development of distributed resources.  System upgrades identified through this process would be paid for by electric distribution companies and eligible for cost recovery through a reconciling charge that would be offset by charges paid by the interconnecting resources that benefit from the upgrades.  There are many details to work out before this proposal could be implemented, but the DPU provided a reasonable starting point in an attachment to its Oder.

This is a big step.  There has long been frustration among those seeking to develop distributed resources in Massachusetts that rising interconnection costs create a barrier to achieving the Commonwealth’s goals for clean energy and block the development of projects that would otherwise provide significant benefits.  As interconnection costs have risen, state policies promoting clean and distributed resources have advanced, and the penetration of distributed resources on the system has expanded, the concept of “cost causation” (the straw that breaks the camel’s back buys everyone a new and stronger camel) has seemed more and more outdated.  In a world where much of the distribution system needs investment to enable the energy future that state policies are driving towards and upgrades to the system frequently provide benefits far beyond the ability to interconnect an individual project, there should be a better way of funding the transition of the distribution system into the future envisioned by state policy than through ad hoc interconnection upgrades supported by individual projects.  This docket is an effort to find a better way.

The DPU has asked for comments on its proposals, which are due by December 17, 2020.  It has also scheduled a conference call for November 4, 2020.  Input from diverse stakeholders will be critical to developing an effective alternative to the status quo.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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