NEM filed comments in the PURA's review of variable electric rates as required by recently passed Public Act 15-90. The new law bans residential electric variable rate contracts.

The law specifically provides that, "On and after October 1, 2015, no electric supplier shall (A) enter into a contract to charge a residential customer a variable rate for electric generation services; or (B) automatically renew or cause to be automatically renewed a contract with a residential customer and, pursuant to such contract, charge such customer a variable rate for electric generation services."

However the law also charged the Connecticut PURA with opening a, "proceeding to develop recommendations and guidance regarding (1) what type of generation services rate structure is best suited for residential customers who allow a fixed contract with an electric supplier to expire and begin paying a month-to-month rate for generation services from such supplier; and (2) what rate increase is just and reasonable if a generation services rate increase is necessary after the expiration of a fixed contract and such customer begins paying a month-to-month rate. The authority shall report, in accordance with the provisions of section 11-4a, the findings of such proceeding to the joint standing committee of the General Assembly having cognizance of matters relating to energy, on or before January 1, 2016."

NEM's comments noted that the Authority’s interpretation of the new law will have a significant impact on the ability of residential electric consumers to be cost-effectively served in the competitive retail electric marketplace in Connecticut. The main issue for consideration by the Authority is the definition of “variable rate” and “month to month rate” in a manner that is consistent with consumer usage and understanding of the terms, prior Authority decisions and practical considerations underlying the structure, pricing and risks of contractual agreements. Accordingly, NEM recommended that the term “month to month rate” be interpreted as a rate that is subject to change on a monthly basis.

The full text of NEM's Comments is available on the NEM Website.

As required by the Commission in its Track 1 Order in the Reforming the Energy Vision (REV) proceeding, Staff filed a White Paper on Utility Ratemaking and Utility Business Models. The White Paper is directed at correcting the "financial misalignment" between utilities economic interest, and the interests of Distributed Energy Resource (DER) providers, other service providers and customers.

After a discussion of the shortcomings of the current utility ratemaking practices, the paper suggests: "1) utility business model reforms including opportunities for market-based earnings (MBEs); 2) incremental ratemaking reforms to the utility revenue model; and 3) rate design reforms to reflect the needs of the evolving energy marketplace."

The White Paper posits that, "As DSP capabilities and DER markets develop, utilities will have the opportunity to increase revenues earned from serving as a platform for customers and DER providers to employ DERs and manage customer bills, thereby participating in achieving system efficiency and other policy objectives. Increased MBEs will have the dual benefit of 1) encouraging utilities to support access to their systems by DER providers who can improve the economics of the system and add value to end use customers, and 2) offsetting required base revenues derived from ratepayers. . . . Current performance incentives should be maintained, and new performance incentives, referred to here as earnings impact mechanisms (EIMs), adopted. . . . The eventual shift in balance from traditional regulatory incentives to MBEs opportunities will complete the transition to a business and regulatory model where utility profits are directly aligned with market activities that increase value to customers. System costs can be reduced and, to some extent borne, by participants who benefit directly from the market, resulting in fewer costs that must be socialized among all ratepayers."

The White Paper explains potential sources of MBEs to the utilities - "customer origination via the online portal; data analysis, co-branding; transaction and/or platform access fees; optimization or scheduling services that add value to DER; and advertising." "A primary vehicle anticipated for utility MBEs will be 'platform service revenues' (PSRs). PSRs are revenues that utilities, in their capacity as DSP providers, will earn from market participants."

The White Paper posits that the system value of DER should be determined to be LMP+D - the energy value established by power markets plus all other values associated with distribution level resources - resulting in the "full value" of DER on a time and location-specific basis.

The White Paper also offers a number of rate design reforms. These include:
1) incorporation of a peak-coincident demand charge in place of some portion of the kWh and fixed customer charges, dependent upon the implementation of advanced metering functionality;
2) increasing customer participation in existing opt-in TOU rates;
3) development of a smart home rate that provides more granular price signals to permit more active participation by customers;
4) improved C&I customer rate design;
5) placement of the low income discount in the basic usage block; and
6) revision of standby rates and development of a reliability credit to be earned by customers reducing load below contract demand over two consecutive summer periods.

Comments on the White Paper are due October 5, 2015, and reply comments are due November 1, 2015. The full text of the White Paper on Utility Ratemaking and Business Models is available on the NEM Website.

Staff will convene the third collaborative meeting on consolidated ESCO billing (CEB) on August 19, 2015, at 10:30AM at the Commission's Albany headquarters. The purpose of the collaborative is to investigate and evaluate operational issues associated with CEB, and ensuring that CEB be implemented in a fashion that is consistent with Commission rules. A detailed agenda is forthcoming. The full text of the Notice of Collaborative is available on the NEM Website.