RI ratepayers to get $8 million in National Grid billing scandal settlement. What to know.

WARWICK – Rhode Island Energy has agreed to pay nearly $8 million to compensate ratepayers for a billing manipulation scheme that occurred under the watch of National Grid, the previous owner of the state’s largest gas and electric company.

The money, which was agreed to in a settlement approved by the state Public Utilities Commission on Wednesday, will pay back Rhode Islanders for actions by National Grid, which over a nearly decade-long period intentionally misfiled invoices in the state’s energy efficiency program to earn higher incentives for its shareholders.

The payment from Rhode Island Energy will go into a fund supported by ratepayers that is used to cover some of the costs of storm damage to the energy system.

It comes on top of $2.4 million that National Grid credited back to the state energy efficiency fund in 2022 after a preliminary investigation found dozens of instances in which employees had filed invoices in the wrong billing cycle to circumvent annual caps on payments received as an incentive to help homes and businesses conserve electricity.

All of the instances of misreporting occurred before May 2022, when Pennsylvania-based PPL Corp. bought the Narragansett Electric Company from National Grid and renamed it Rhode Island Energy. With about 780,000 customers in the state, the company is the dominant heating and electric supplier in Rhode Island.

The settlement was agreed to by the Division of Public Utilities and Carriers, the Office of Attorney General Peter Neronha and Rhode Island Energy.

“While Rhode Island Energy did not create this issue, we are taking responsibility for resolving it in a way that benefits our customers,” Caroline Pretyman, spokesperson for Rhode Island Energy, said in a statement “We have already put in place processes and controls to ensure this type of activity would not happen under our ownership.”

At the meeting Wednesday in which the utilities commission approved the settlement, chairman Ronald Gerwatowski called the billing scandal “a major black eye on what was otherwise an outstanding, nation-leading energy efficiency program.”

He said the repayment amount is unprecedented for a utility in Rhode Island but that it’s warranted for behavior he described as “egregious.”

“Rhode Island Energy is accepting the financial responsibility, but we are very much aware that Rhode Island Energy did not engage in the improper billing practice,” he said.

Governor Dan McKee applauded the settlement.

“I am pleased that my administration’s efforts have resulted in the recovery of significant dollars that would otherwise have been borne by ratepayers in the future,” he said in a statement. “This settlement not only holds National Grid accountable, but also puts directives in place to prevent any similar issues.”

Nearly a decade of manipulated bills

Rhode Island’s energy-efficiency program is a fundamental part of the state’s effort to curb greenhouse-gas emissions. Perennially ranked among the most effective in the nation, the program, which has a $134 million budget this year, provides homeowners and businesses money to insulate buildings, upgrade appliances and replace old lighting.

The program is funded by surcharges on gas and electric ratepayers. Efficiency improvements benefit the energy system as a whole by reducing the need for upgrades to transmission and distribution pipes and wires, leading to net savings for ratepayers.

The utility – formerly National Grid and now PPL – manages the program and is paid an incentive for meeting energy-savings targets. Payments over the last decade have ranged from about $3 million a year to more than $6 million. Those payments are capped. Once the utility reaches its targets in a given year, any additional energy savings won’t lead to a bigger incentive.

National Grid employees worked around this restriction by delaying the filing of invoices at the end of the year when the company was at or near its targets, according to a 2022 report commissioned by the company. The invoices were for things like high-efficiency light bulbs and heating and cooling equipment.

‘This proceeding shook my confidence’ in the utility

Three years ago, the state utilities commission launched an investigation into the practice known as “invoice stacking.” The utilities division and the attorney general’s office subsequently joined the investigation.

In a report to the state agencies, National Grid calculated the total customer impact of the improper billing to be about $323,000 in the years the practice was employed between 2012 and 2021.

But the division argued that all annual performance incentives that were associated with invoice stacking should be repaid, plus interest. After negotiations, the parties settled on a total figure of $10.4 million to be repaid.

The $2.4 million that National Grid paid back over several months in 2022 was used to offset the energy efficiency surcharge paid by ratepayers, effectively reducing their bills.

The remaining $8 million that the company will pay is going to Rhode Island Energy’s storm contingency fund, which is currently in the red. The fund is replenished through a surcharge on ratepayers and is used to pay for overtime and outside contractors to repair storm damage to poles, wires and other energy infrastructure. Because that damage can be extensive, the money in the fund can easily be exhausted, and it has been running at a deficit in recent years.

Gerwatowski said the repayment will help ratepayers by paying down the principal that’s owed to the fund as well as preventing more interest from accruing.

For comparison’s sake, the utilities division calculated that if the money were credited directly back to electric ratepayers instead of going to the storm fund, it would have amounted to a one-time $6 bill credit, according to spokesman Thomas Kogut.

The settlement includes safeguards to ensure that bills won’t be similarly manipulated again.

“In order for us to have confidence that ratepayers are receiving reliable value that can be shared with the utility’s shareholders, it requires that we believe that the utility is acting honestly and in good faith, and this proceeding shook my confidence,” said utilities commissioner Abigail Anthony. “I’m really glad for the work that the parties have done to make sure that the harm caused is resolved and that the division and Rhode Island Energy are working to right the ship for the future.”

This article originally appeared on The Providence Journal: RI Energy to pay $8M to settle National Grid billing scandal