Massachusetts Utility Regulator Proposes Modifications to Cost Allocation Methodology to Spur Renewables Deployment

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Introduction

On October 22, 2020, the Massachusetts Department of Public Utilities (“Department”) ‎announced an investigation into a) the distributed energy resource planning of the regulated ‎electric utilities with the state; and b) the assignment and recovery of costs for required ‎infrastructure modifications related to the interconnection of distributed generation.  ‎

Resource Planning

Assigned D.P.U. 20-75, the Department proposes that all Massachusetts utilities, on an annual ‎basis, conduct a rolling ten-year assessment of its distribution system. Specifically, the ‎Department proposes to identify system upgrades necessary to accommodate the interconnection ‎of facilities beyond those currently proposed, including distributed energy resources. The ‎Department is also proposing to offer specialized ratemaking treatment for system infrastructure ‎projects that meet its resource planning goals.‎

Recovery of Infrastructure Modification Costs

The Department has historically utilized the “cost causation” principle in setting rates or ‎providing for the recovery of costs by utilities – that is, the entity that incurs the cost is ‎responsible for paying the cost. This principle applies to distributed energy resources, at times ‎requiring them to pay significant and prohibitive system upgrade costs as a condition of ‎interconnecting to the distribution system.‎

As part of the system planning process outlined above, the Department proposes to require that ‎utilities identify the cost and kilowatt capacity enabled by proposed capital investment projects.  ‎Based on the information provided, the Department would then establish a dollar-per-kilowatt ‎fee to be allocated to each facility benefiting from the utility’s investment generation – that is, ‎any facility (e.g., solar, wind, energy storage, hydro, fuel cell) interconnecting with the host ‎utility.  The Department’s proposal aims to address the allocation of significant costs for system ‎upgrades required for individual distributed energy resources.‎

Conclusion

The Department’s proposals make clear that it aims to remove development roadblocks for ‎distributed energy resources. Massachusetts has aggressive clean energy and climate policy ‎objectives, and the Department clearly views long term system planning as an avenue towards ‎deploying more distributed energy resources in the state. The Department’s proposal and the ‎signal it sends to stakeholders suggests that it is aggressively trying to remove barriers and spur ‎additional deployment of distributed energy resources in the state.‎

Comments on the Department’s proposal are due on December 17, 2020, with reply comments ‎due on January 14, 2021.‎

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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