Oct 13 - Knight Ridder/Tribune Business News - Timothy C. Barmann The Providence Journal, R.I.

State regulators are close to completing rules that will shift more of Rhode Island's electricity supply to renewable resources.

The Public Utilities Commission is adopting the regulations to implement a 2004 state law that requires electricity suppliers, such as National Grid, to buy more power that comes from "green" sources, such as wind turbines and solar panels.

Right now, about 2 percent of the electricity supplied by National Grid (the former Narragansett Electric) comes from renewable resources. Beginning in 2007, the law requires green power to supply 3 percent of the electricity consumed in the state.

That percentage increases each year, until it reaches 16 percent in 2020.

The PUC has to file the rules that will govern this gradual shift with the Secretary of State's office by, said Doug Hartley, energy policy adviser for the commission.

The idea behind the law is to lower reliance on fossil fuels, such as natural gas, coal and oil, to generate electricity in the region. Shifting to renewable energy, supporters say, will eventually stabilize and even lower energy prices because there will be less demand for traditional fossil fuels.

Similar laws have been passed in 18 other states, including Connecticut, Massachusetts, Vermont and Maine in New England.

But in the short term, shifting energy supply to renewable resources is likely to push up electricity rates, Hartley said.

Supporters of the law, such as the Rhode Island Public Interest Group (RIPIRG), have predicted the increase will be modest.

National Grid last year projected that rates will rise by no more than 25 cents a month for a typical residential customer in 2007. In 2010, it could cost an extra 62.5 cents a month, the company said.

Hartley said yesterday that no one knows for sure how much bills could rise because of the new law.

National Grid has also predicted that there will not be enough renewable energy available to buy for its customers in the first years of the program.

In that case, the company is required to make an "alternative compliance payment" to a fund overseen by the Rhode Island Economic Development Corporation. The EDC would then use the money to help foster the production of renewable energy.

The payment would be equal to 5 cents per kilowatt-hour of renewable electricity that the company was obligated to buy.

While the concept of shifting to more renewable energy is simple, the details to make it work are complex, Hartley said.

For example, the rules have to establish ways to make sure that electricity generators are really making electricity from renewable resources, such as burning clean wood chips, rather than burning construction debris.

The PUC has adopted a set of proposed rules and yesterday the agency took testimony from the public about those rules.

Many of the items discussed were arcane details, such as how to ensure that the amount of solar or wind power generated by homeowners and businesses are accurately entered into a computer system that keeps track of electricity generation in the region.

Another area of debate was whether to detail on a customer's bill any extra charges incurred by power companies to comply with the new law.

The PUC has proposed that those charges be separated and itemized; National Grid and other advocacy groups want those charges to be built into rates.

"Obviously, we're in favor of consumer knowledge," said Matt Auten, an advocate for RIPIRG, which had been pushing to pass the law for several years.

But he said itemizing those charges on the bill "would be the wrong place," he said.

Since utility bills don't detail societal costs of using fossil fuels, such as increased incidences of asthma, it wouldn't be fair to single out the increased costs associated with shifting to renewable power sources, he said.

James Grasso, who heads an energy-consulting company, urged the PUC to assert control over how the EDC spends the money from the alternative-compliance payments. The law requires a newly formed board to oversee that trust fund.

"Nobody on that board has experience in renewable-energy contracts," Grasso testified.

National Grid disagreed with a proposed rule that would require the company to enter into long-term contracts with renewable-energy suppliers. Doing so, the company argued in a letter to the PUC, would slow the development of a competitive marketplace for electricity, and could result in "stranded costs" that would be passed on to ratepayers.