Locke Lord QuickStudy: Massachusetts Utility Regulator Proposes Modifications to Cost Allocation Methodology to Spur Renewables Deployment

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.‎

For more information on this proceeding, please contact David Bogan.