Concentric Energy Advisors
The Concentric Connection • Fall, 2016 www.ceadvisors.com
Concentric Energy Advisors
Grid Modernization Forges Ahead in Several States

Utilities, legislators, and regulatory authorities across the U.S. are leveraging emerging technologies and innovative regulatory and business models to create a modern and more resilient electric grid that can accommodate large penetrations of distributed clean energy and serve evolving customer demands. These modernization initiatives range from the comprehensive, Commission-led, Reforming the Energy Vision (“REV”) proceeding in New York to deliberate phased approaches being pursued in states such as Minnesota and Massachusetts.

Grid modernization initiatives share many of the same goals for realizing the “future of energy” but vary in scope, policy priorities, and implementation strategy. Each approach reflects the specific conditions facing a state or utility. Restructured states, such as Massachusetts, require a different approach for grid modernization than do states with vertically integrated, investor-owned utilities, such as Minnesota. In this issue of The Concentric Connection, we highlight recent smart grid and grid modernization developments in several leading states.

New York
New York’s utilities filed their individual Distributed System Implementation Plans (“DSIP”) on June 30, 2016 (Case 14-M-0411) and are collaborating on a joint Supplemental DSIP to be filed on November 1, 2016. This joint filing will present common approaches to hosting capacity, interconnection, and other functions that are intended as an initial step in developing a statewide approach to implementation that will allow third parties to acquire customers efficiently. Two major policy issues remain under development even as utilities prepare to make large investments to enable Distributed Energy Resources (“DER”). One of these policy issues is the design of outcome-oriented incentives or “Earnings Adjustment Mechanisms” (“EAM”) for energy efficiency and system efficiency. The utilities proposed an EAM for distributed generation interconnections in September, 2016. Additionally, the NYISO has issued a high level roadmap indicating how DER would be incorporated in its reliability planning analyses. This roadmap will help create new opportunities for DER to participate in and service the NYISO wholesale market, as DER has generally been concentrated on serving only onsite customer load.

California
In the current phase of California’s Integrated Distributed Energy Resources proceeding (R.14-10-003), the California Public Utilities Commission is evaluating new utility regulatory incentive mechanisms intended to help balance the Commission’s objective of making the grid greener while not jeopardizing the revenues that utilities traditionally earn from capital investments. In addition, a separate Distribution Resource Planning proceeding (R. 14-08-013) is aimed at determining the values of and the locations for the deployment of distributed resources by the utilities. The analytical methodology will be tested through utility demonstration projects that are described in September 30, 2016 filings.

Minnesota
Minnesota has an ongoing Grid Modernization proceeding (E999/CI-15-556) organized in three phases: (1) the adoption of definitions and principles, (2) evaluation of implementation issues, and (3) the development of a long-term vision for the grid. Minnesota Public Utilities Commission Staff issued a report in March, 2016, and the Commission decided in a public meeting to focus initially on integrated distribution system planning. The first step in the focus on distribution planning was an October 24, 2016 stakeholder workshop.

Arizona
The Arizona Corporation Commission opened a generic docket (Docket No. E-00000J-14-0023) to develop a common methodology for determining the value of distributed generation as part of its efforts to resolve controversial net metering and rate design issues. The Hearing Division issued a recommended decision on October 7, 2016 that would compensate any excess solar exported to the grid at a generation value plus benefits attributed to deferred investments in transmission infrastructure and environmental attributes. This value would be determined on a five-year basis. The Commission is scheduled to consider this recommended decision in open meetings on October 27 and 28, 2016. Separately, Arizona Public Service is taking proactive steps to meet the need for a more flexible grid with the implementation of several solar, energy storage, and smart inverter pilot programs.

Massachusetts
The Massachusetts electric utilities filed 10-year Grid Modernizations Plans in August, 2015. The regulatory process to date has focused on an extended discovery process by stakeholders, with further process and hearings expected this fall. Massachusetts is now the third state with an energy storage mandate, after issuing a comprehensive report on September 27, 2016 that is receiving national attention.

Hawaii
The Hawaii Public Utilities Commission opened a generic docket in 2014 to review its DER policies (Docket No. 2014-0192). The PUC has approved Time-Of-Use rates to provide DER customers with more effective pricing signals to drive efficient electricity consumption and production decisions. The PUC is now addressing technical and market issues related to hosting capacity, interconnection standards, and tariff reforms in Phase II. On March 31, 2016, Hawaiian Electric submitted to the PUC a grid modernization plan and a 30-year energy plan that are designed to achieve Hawaii’s goal of meeting 100 percent of electric demand with renewable energy by 2045 (Docket No. 2016-0087). This proceeding was suspended on June 27, 2016, acknowledging the importance of the issues and promising further action.

Concentric’s Future of Energy Practice
Concentric’s Future of Energy team works with utilities on an array of grid modernization challenges, including resource planning, capital investment strategies for modernization, frameworks for incentive ratemaking, innovative approaches to cost recovery and rate design, and utility modernization strategies. The team also monitors and tracks the developments of grid modernization activities across the U.S.



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Latest News
Concentric Energy Advisors
Massachusetts Legislation Points to Energy Challenges and Innovative Solutions

On August 8, 2016 Massachusetts Governor Charlie Baker signed into law An Act to Promote Energy Diversity (the “Act”). The Act is noteworthy as it addresses several of the significant and evolving challenges facing the energy sector. These include: (1) procuring reliable, carbon-free energy supply resources, (2) advancing new energy technologies including offshore wind and energy storage, (3) the retirement of nuclear power generation, and (4) innovation in energy efficiency financing.



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Concentric Expands its Presence in Mexico

On August 12, 2014, Mexico’s sweeping and historic energy reform became law, and the expected investment to take advantage of the business opportunities is just as impressive as the reform itself. According to UBS, during the next ten years, investment in the energy sector could be as high as US$120 billion, or 10% of the size of the Mexican economy in 2015. If even just a portion of this investment materializes, the capabilities of the domestic market (technical, financial and regulatory) will be expanded dramatically. These events represent both opportunities and challenges for market participants.



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Concentric Energy Advisors
Concentric Energy Advisors
PPL Solutions, LLC / Hansen Technologies Limited

Concentric recently served as the sell-side financial advisor and manager to PPL Services Corporation in the divestiture of PPL Corp. (NYSE: PPL) subsidiary, PPL Solutions, LLC (“Solutions”). Headquartered in Bethlehem, PA, Solutions provides billing, business processing outsourcing, call centers, and information technology services to competitive electric and gas suppliers and regulated utilities in the US.



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Case Studies
Concentric Energy Advisors
Estimated Savings for New York Consumers from the Millennium Pipeline Eastern System Upgrade Project

Concentric independently evaluated and estimated the potential savings benefits to energy market participants as well as greater economic benefits in New York associated with Millennium’s Eastern System Upgrade project (the “ESU project”). As proposed, the ESU project would increase natural gas deliverability on the existing Millennium Pipeline by approximately 200,000 Dth/day from Corning, NY to its interconnect with Algonquin Gas Transmission in Ramapo, NY. The ESU project is expected to come online in September 2018.

Concentric’s assessment involved conducting a natural gas market simulation to quantify the impact the expansion project would have on gas prices, as well as estimating the impact on electric prices, and overall economic impacts.



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Concentric Energy Advisors
Puerto Rico Electric Power Authority Rate Restructuring Expert Witness Services

The Puerto Rico Electric Power Authority (“PREPA”), an electric service provider to 1.5 million customers in Puerto Rico, has not had a rate increase in over twenty-five years. PREPA’s financial position has been eroded through legislated subsidies and tariffs, as well as a declining economy and load profile (due to the additions of renewable energy resources). PREPA has been operating under a forbearance agreement since 2014 under which its creditors have agreed not to force it into bankruptcy while it explores ways to pay its overdue debt.

Concentric Vice President, Ralph Zarumba, and his former consulting firm are assisting PREPA in their first rate case filed under an independent regulator, the Puerto Rico Energy Commission.



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The Foster Report's Featured Story
Shale Producer Lawsuit Promises Bumpy Ride for New Pennsylvania Regulations

Just days after the Pennsylvania Department of Environmental Protection (DEP) pulled the wraps off its new regulations comprehensively addressing a host of wellsite surface area management issues, the Marcellus Shale Coalition (MSC), requested a state court to intercede, hold invalid a considerable number of the substantive provisions, and enjoin their enforcement.

The MSC’s insistence on upfront injunctive relief to protect the oil and gas developers from having to alter their current compliance processes during judicial review of the new regulations promises an early test of the merits of the trade association’s allegations.



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Concentric Energy Advisors
New Hire Announcements
Former Bloomberg BNA Editor Joins The Foster Report

Concentric Energy Publications, Inc. (“CEPI”) is pleased to announce that Denise Ryan has joined The Foster Report as Editor in Chief. Prior to joining The Foster Report, Ms. Ryan worked at Bloomberg BNA for more than ten years. Most recently, she served as Senior Legal Editor for the Healthcare Portfolio Series and prior to that as Senior Legal Editor for Daily Tax Report.

Ms. Ryan is an attorney with extensive experience writing and editing across a wide range of legal and governmental agency related topics. “I am looking forward to developing new and innovative ways to present the unique content of The Foster Report to our readers,” said Ryan.

The Foster Report celebrates its 60th anniversary this year. Over the years it has become a respected resource for regulators, attorneys, gas/oil/energy associations, and many energy industry participants. Recognizing this, The Foster Report is now providing all “60 years worth” of historical reports for subscribers on its new website. The archives will provide a valuable research tool to compliment the current reporting.

“The Foster Report is a trusted resource for reporting on natural gas and oil pipeline activities in North America,” said James M. Coyne, President of CEPI. “We look forward to continuing the Report’s legacy while transitioning to a digital era with Denise at the helm.”



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Concentric Energy Advisors, Inc. Announces Hiring of Two Officers

Concentric Energy Advisors, Inc. (“Concentric”) is pleased to announce that Ralph Zarumba has joined the firm as Vice President and Gregg Therrien has joined as Assistant Vice President.

Mr. Zarumba has more than 30 years of experience performing economic, regulatory and financial analysis. He has specialized in theoretical and applied techniques of electricity cost and pricing analysis, market analysis, and regulatory policy. Mr. Zarumba has testified as an expert witness in multiple jurisdictions and is currently leading a team that is supporting the Puerto Rico Electric Power Authority in its first rate request before an external regulator.  Prior to joining Concentric, Mr. Zarumba served as a Director in the Energy Practice at Navigant Consulting.

Mr. Therrien is a former utility executive who has held Director level positions at Connecticut Natural Gas Corporation and affiliated companies for more than 15 years.  Most recently, he served as the Director, Gas Construction at Connecticut Natural Gas and The Southern Connecticut Gas Company and Director, Regulatory & Tariffs at UIL Holdings, Inc.  Mr. Therrien’s experience includes developing regulatory strategies and addressing technical rate case issues such as utility cost of service, rate design, tariff writing and administration, as well as leading pricing, gas cost accounting, gross margin and load forecasting efforts for regulated utilities.



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Careers at Concentric
Concentric Energy Advisors
Concentric is Seeking a Utility Finance Expert

We are looking for an experienced individual that can direct a team of financial analysts and assume responsibility for a diverse set of client work products including expert testimony, reports and presentations on cost of capital and other financial issues, asset valuations, due diligence, and other transaction support services.



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