Order 25582 - RI Energy: 2026 Annual Energy Efficiency Plan

            This matter is before the Public Utilities Commission (Commission) upon The Narragansett Electric Company d/b/a Rhode Island Energy’s (Company) 2026 Annual Energy Efficiency and Conservation Procurement Plan (2026 Plan) filed on October 1, 2025.[1]

By way of background, the Company submitted a proposed 2024-2026 Three-Year Energy Efficiency and Conservation Procurement Plan (Three-Year Plan) in Docket No. 23-35-EE to provide ratepayers with savings on energy bills, reduce energy consumption, and protect the environment through efficiency programs that were cost-effective, reliable, prudent, and environmentally responsible, as required by the Least Cost Procurement (LCP) Statute (codified at R.I. Gen. Laws § 39-1-27.7) and the Commission’s LCP Standards.[2] A more thorough discussion of the Three-Year Plan can be found in Order No. 25092.[3]

The 2026 Plan represents the final year of the Three-Year Plan and provides savings goals, budgets, funding plans, and a proposed performance incentive mechanism (PIM). The 2026 Plan also details the strategies, market approaches, programs, and measures that will be offered in the 2026 calendar year.[4] The programs and measures proposed to be offered in the 2026 Plan are set forth in Company’s filing.[5] The Commission will not restate every program and measure here, because they have undergone extensive review previously. The absence of any substantial discussion in this Order regarding many of the programs and measures in this filing should not be construed as meaning that they were not evaluated by the Commission. It is simply a matter of necessity that this Order focuses on matters where discussion or modifications are required. Nor should it be construed that the Commission has reviewed and approved every program, measure, or strategy. The Commission’s review, while thorough and extensive, is constrained by the size of the filing and the time that the Commission has available for review.

The Company’s proposed budgets to implement the electric and natural gas efficiency programs are funded through an energy efficiency factor that is collected from ratepayers through a fully reconciling funding mechanism. According to the Company’s pre-filed direct testimony, the 2026 Plan focuses on customer affordability and “balancing near-term bill impacts with the long-term economic and environmental benefits of program investments[,]” and that it reviewed programs’ past performance and future projections in making prudent adjustments and prioritized administrative cost-cutting.[6] Consequently, the Company has proposed budget reductions for both the electric and natural gas portfolios in 2026.

With respect to the electric portfolio, the Company has proposed a budget of approximately $62.9 million, which is a reduction of about ($19.0 million) or (23.2%) from 2025’s approved levels.[7] This sizeable budget decrease is explained by the Company’s reductions to, among other things, the EnergyWise Single Family (a reduction of about $1.4 million), Income Eligible Single Family (a reduction of about $2.9 million), and Commercial and Industrial (C&I) programs (collectively, a reduction of about $11.1 million).

On the natural gas side, the Company has proposed a budget of approximately $33.0 million, which represents a reduction of about ($2.0 million) or (5.8%) from 2025’s approved levels.[8] The largest decreases came from the C&I programs (collectively, a reduction of about $2.8 million), but the Company increased its budgets for the EnergyWise Single Family and Income Eligible Single Family programs (collectively, an increase of about $1.8 million).

As alluded to above, the Company prioritized reducing administrative costs, such as program, planning, and administration, marketing, and sales, training, and technical assistance.[9] However, other programmatic changes were explained in the 2026 Plan. For instance, the Company stated through testimony that it had improved its pre-weatherization barrier remediation process by providing more turnkey solutions integrated with HEAT Loan financing.[10] Additionally, the Company is implementing cost-control measures in the Income Eligible Single Family Program, including caps on appliance replacements and allowing customers to pay the difference if they choose to replace premium appliances.[11] The 2026 Plan also provided that the Company would review vendor fees for appliance replacement and delivery with the goal of eliminating extraneous costs.[12] Furthermore, the Home Energy Reports program will transition to an e-mail format this year, which will eliminate costs from physical mailings. The 2026 Plan represents an all-electronic iteration of the Home Energy Reports program will require roughly 32% of the prior budget but yield about 70% of the savings.[13]

As for the 2026 Plan’s C&I programs, the Company explained through testimony that incentives for non-controlled LED lighting will be phased out by 2027, with 2026 serving as a transition year emphasizing lighting controls and performance lighting.[14] The Large C&I New Construction program will also adopt more stringent Energy Use Intensity ranges, aligning with neighboring states and encouraging higher efficiency building design.[15] The Company’s witnesses also represented that Combined Heat and Power (CHP) projects will be subject to reduced incentives and stricter eligibility, and that the Company would require CHP projects to achieve at least 45% carbon reduction to be eligible for incentives.[16] The Company is not proposing any CHP incentives in this docket and will instead propose CHP incentive budgets in a separate filing.[17]

The Company projected that the 2026 Plan’s electric portfolio would save 492,828 net lifetime MWh, 72,649 net annual MWh, 12,057 net annual winter kW, and 13,572 net annual summer kW from passive energy efficiency.[18] The Company’s updated schedules showed that the cost of procuring those savings was about $8.3 million less than the cost of additional supply when excluding interstate benefits and delivered fuels.[19] The electric portfolio is forecasted to deliver about $156.3 million worth of benefits, of which $27.8 million are projected to flow to customers in other New England states.[20] The Company also projected that the 2026 Plan’s natural gas portfolio would save about 2.0 million net lifetime MMBtu and 183,280 net annual MMBtu through passive energy efficiency.[21] The Company’s updated schedules showed that the cost of procuring those savings was about $1.8 million less than the cost of additional supply when excluding interstate benefits and delivered fuels.[22] The natural gas portfolio is forecasted to deliver about $62.4 million worth of benefits, $5.7 million of which are projected to flow to customers in other New England states.[23]

The electric and natural gas Energy Efficiency Program (EEP) charges are not based on the Company’s proposed budget, but rather on the “customer funding required” (i.e., the proposed budget, less any positive balance due to an overcollection from the prior energy efficiency program year). For the electric portfolio, the EEP charge will be designed to recover the net program costs over a 9-month period beginning April 1 because the Commission has temporarily dropped the charge to $0/kWh for the period of January through March. This was ordered in another docket to reduce winter bill impacts on customers.[24] After the winter period, commencing for usage on and after April 1, the EEP charge would then be set at $0.01032/kWh from April through December.[25]

On the natural gas side, the proposed natural gas EEP charge is $1.404/MMBtu for Residential and Income Eligible customers. This represents a $0.254/MMBtu or 22.1% increase from last year’s charge.[26] For C&I customers, the proposed natural gas EEP charge is $0.142/MMBtu, which represents a ($0.388) or (73.2%) decrease from last year’s charge.[27] The Company projected short-term bill increases for Residential and Income Eligible natural gas customers, but a short-term bill decrease for C&I customers. All participants are projected to see long-term bill decreases ranging from (0.28%) to (3.02%). However, when considering the benefits shared by all customers, all customer classes are projected to see bill increases.[28]

The Company did not propose structural changes to the PIM as previously approved by the Commission in Docket No. 5076. However, the Company did include a new modeling assumption (discussed later in this Part) that, if approved, would affect the accounting of PIM-eligible net benefits. The Company’s PIM calculations appear in Tables E-8A, E-8B, G-8A, and G-8B, as updated on December 5, 2025.[29]

For 2026, the electric sectors through which the Company’s performance incentive may be earned (Residential and C&I) were the same as in 2025. The combined PIM-eligible net benefits increased for 2026. The Company proposed an electric portfolio payout rate of 7%, which is the same rate used to calculate the 2025 Plan’s payout pool.[30] Due to the slightly larger amount of PIM-eligible net benefits, the Company’s target incentive pool is about $2.85 million.[31] The Company has also proposed to lower the maximum Income Eligible electric service quality adjustment (SQA) from $475,000 to approximately $341,200, an adjustment that is directly scaled to the increase in total Income Eligible PIM-eligible benefits between 2025 and 2026.[32] Residential and C&I sectors are not eligible for SQAs in 2026.

The Company’s proposed natural gas performance incentive is entirely allocated to the C&I sector and the payout rate remained constant at 10%.[33] The Company’s target incentive pool is about $34,500, which aligns with the decrease in natural gas PIM-eligible net benefits in 2026.[34] The Company also proposed to lower the maximum Residential and Income Eligible SQAs to about $399,000 and $146,400, respectively, adjustments that are directly scaled to the increase in total Residential and Income Eligible PIM-eligible benefits between 2025 and 2026. The C&I sector is not eligible for an SQA in 2026.[35]

1.      Delayed Conversion Assumption

The 2026 Plan introduced a new modeling assumption (the “delayed conversion assumption”), under which 75% of delivered-fuel heating customers, 50% of electric resistance heating customers, and 25% of natural gas heating customers who receive weatherization services in 2026 are presumed to convert to electric heat pumps over the 20-year weatherization measure life. For simplicity, the Company assumed that the heat pump conversions would occur at the midpoint of the measure life (i.e., ten years after weatherizing). This assumption changes how lifetime savings are calculated for weatherization measures in the electric and natural gas portfolios, specifically under the EnergyWise Single Family and Income Eligible Single Family programs. As provided in testimony, the Company “calculated the weatherization savings for a heat pump heating baseline . . . and used this to calculate a weighted average annual savings for a ‘weatherization, delayed conversion’ measure.”[36]

In prior years, weatherization savings were calculated entirely relative to a participant’s existing heating baseline (MMBtu for delivered-fuel and natural gas, and MWh for electric resistance) across the full 20-year measure life. Under the delayed conversion assumption, however, for the latter 10 years of the measure life, 75% of delivered-fuel weatherization savings and 25% of natural gas weatherization savings would be reclassified as electric rather than non-electric savings. Through testimony, the Company explained that the delayed conversion assumption “increases electric system benefits in the Comparison of the Cost of Efficiency to the Cost of Supply and in the calculation of PIM-eligible net benefits.”[37] The Company’s modeling assumption was the subject of extensive discovery and questioning at the evidentiary hearing, which will be discussed in subsequent Parts of this Order.

The Company maintains that the 2026 Plan complies with the LCP Statute and LCP Standards in that it is cost-effective, reliable, prudent, and environmentally responsible. A detailed analysis is found in the Company’s filing.[38] The Company asserts that it analyzed the electric and natural gas portfolios and programs proposed for 2025 and determined that they meet the criteria for cost-effectiveness under the Rhode Island Test (RI Test)[39] and LCP Standards.

The Company’s updated schedules show that the electric portfolio is expected to have a benefit-cost ratio of 2.08 when considering benefits regardless of jurisdiction, and 1.71 when considering only those benefits and costs accruing to the Company.[40] The natural gas portfolio’s benefit-cost ratios are projected to be 1.64 and 1.49, respectively.[41]

The Division of Public Utilities and Carriers (Division) submitted pre-filed direct testimony of Jennifer Kallay. The Division recommended that the Commission approve the 2026 Plan as filed, including four electric programs and two natural gas programs that exceed the cost of supply (when excluding interstate benefits and delivered fuels, but including participant costs) because the Company’s justification for continuing those programs was valid.[42]

The Division made additional recommendations for the Commission’s consideration, including to direct the Company to target gas incentives to more efficient condensing heating system equipment replacements as soon as possible, to direct the Company to serve incremental Residential and Income Eligible weatherization and heat pump demand up to 10% of the total portfolio budget, to transfer funds from the Company’s revolving loan funds to the general energy efficiency fund and apply those funds to the 2026 Plan, and to direct the Company to work with stakeholders to further develop the assumptions and methodology concerning the delayed conversion assumption.[43]

The Office of Energy Resources (OER) filed its notice of intervention on October 15, 2025. OER submitted comments broadly supporting the 2026 Plan and recommending approval as filed. However, OER found that the Company’s existing information on HEAT loans (which are available for customers to access lower-cost financing on energy efficiency projects) to be insufficient. Accordingly, OER requested that the Company create a new webpage with information on the HEAT loan program, including customer eligibility, participating lenders, and interest rates to improve customer knowledge of and trust in this offering, and that the Company provide more detailed information on this offering in future reports and plans.[44]

The Energy Efficiency and Resource Management Council (EERMC) moved to intervene on October 2, 2025. The LCP Statute provides a role for the EERMC to review energy efficiency plans before they are filed with the Commission. The EERMC held a meeting on September 25, 2025, and unanimously voted not to endorse the 2026 Plan.[45]

1.      Position on the 2026 Plan

The EERMC submitted pre-filed direct testimony of Councilor Peter Gill Case and the EERMC’s consultants, Craig Johnson and Adrian Caesar.[46] Mr. Gill Case noted the EERMC’s support for lowering administrative costs, but also its concern around the decrease in savings goals and associated investment in energy efficiency this year relative to 2025.[47] He further stated the EERMC’s concern “that as a result of significantly reducing its savings goals for 2026, [the Company] may be able to earn a significantly higher shareholder incentive for its performance in 2026 than it earned in 2024 for a similar level of performance.”[48]

Mr. Gill Case articulated the EERMC’s contention that there is room for the Company to be more ambitious while still allowing for a reduction in the systems benefit charge.[49] To that end, the EERMC worked with its consultant to identify additional savings to present for the Commission’s consideration. Based on that analysis, the EERMC proposed and requested that the Commission approve an incremental savings goal of 557,735 lifetime MWh and 2,229,682 lifetime MMBtu, and corresponding incremental electric and natural gas portfolio budgets of about $4.7 million and $1.5 million, respectively to achieve those additional lifetime savings. The EERMC’s proposal was premised on scaling up measures in 2026 with planned energy savings less than actual savings from 2024 and scaling up measure-level spending accordingly.[50]

2.      Budget Proposal

The EERMC also submitted pre-filed direct testimony to justify its budget proposal for 2026.[51] Section 6.2.H.i.b of the LCP Standards require the EERMC to “[p]rovide testimony, reasonable documentation, and justification for the budget level to support a Commission allocation of the requested amount. The budget must reflect reasonable costs, be reasonably needed to carry out its duties, and be reasonable related to the expense types identified in the statute.”[52] The EERMC approved a proposed budget of $891,900 at its July 17, 2025 meeting and asks for the Commission to approve same.[53] The EERMC’s proposed budget represents a decrease of ($88,275) or about (9%) from its budget allocation in 2025.[54] The proposal includes reduced allocations for consultant and legal services, the elimination of the EE and Climate Awareness Campaign, and an increased allocation in the amount of $8,750 for Community of Practice and Lecture Series public education activities.[55]

The Division stated that its role as ratepayer advocate necessitates that the Division balance program expansion with other charges, whereas the EERMC “appear[s] to view energy efficiency and its costs in a vacuum, without regard to other bill impacts.”[56] The Division also touted the Company as being in the best position to estimate achievable savings due to past experience.[57] Finally, based on the Commission’s directives in Docket No. 25-28-GE, the Division asserted that the EERMC’s testimony regarding the impact of its proposal was no longer accurate.[58]

The Company stated its belief that the 2026 Plan “strikes the appropriate balance of compliance with Least Cost Procurement’s mandate to invest in cost-effective energy efficiency while also considering costs to customers.”[59] The Company also noted that if it can achieve more savings through additional spending, it is able to spend up to an additional 10% of the approved budget as provided for in the 2026 Plan.[60] Finally, through reply testimony, the Company explained that the performance incentive is not dependent on the planned benefits in the 2026 Plan, but rather the actual benefits reported at the end of the program year.[61]

As noted above, the Company’s proposed electric and natural gas portfolio budgets are approximately $62.9 million and $33.0 million, respectively, and the EERMC’s alternative proposal seeks incremental increases of about $4.7 million for the electric portfolio and
$1.5 million for the natural gas portfolio. Although the EERMC’s proposal would result in slightly higher portfolio budgets, the competing proposals, especially regarding the Residential and Income Eligible sectors, are so close that the practical difference between them is immaterial.[62]

The Commission commends the EERMC’s presentation of its case and advocacy for its position. Estimating higher savings targets and backing into incremental budget amounts is not necessarily an unreasonable methodology. However, the Commission’s responsibility is to remain anchored to the evidentiary record before it.

The record reflects significant and overlapping sources of uncertainty affecting the 2026 program year, such as maturation and saturation of lighting markets, broader market transformation effects, inflationary pressures, and Rhode Island Energy’s relatively new energy efficiency program administration.[63] Taken together, these factors make it difficult to determine with confidence whether changes in savings and participation reflect structural or macroeconomic constraints on efficiency potential, or programmatic shortcomings. Based on the record, the Commission is not persuaded that increasing portfolio budgets would resolve that uncertainty.

Several data points in the record warrant particular consideration. The Commission notes that in 2024, the Company incurred approximately $1.04 in electric program costs to deliver $1.00 in electric system benefits, a result that bears directly on the relative cost of energy efficiency compared to avoided power system costs at that time.[64] In addition, the 2026 residential natural gas programs are projected to produce negative PIM-eligible net benefits, an indicator that the cost of energy efficiency is outpacing avoided natural gas system costs.[65] This is particularly notable because the natural gas portfolio primarily reflects gas savings, unlike the electric portfolio, which incurs electric ratepayer costs for delivered fuels savings. These metrics, among others, caution against the notion that higher spending will yield improved outcomes for customers.

At the same time, Rhode Island Energy’s 2026 projections show materially higher PIM-eligible net benefits than those planned in 2024 and 2025, and substantially higher than the 2024 actual benefits, while projected costs are lower.[66] The Company forecasts that the 2026 portfolio will deliver approximately $0.70 in net benefits for every dollar spent, compared to approximately $0.09 in 2024.[67] These projections suggest improvements in portfolio cost-effectiveness.

With respect to the residential sector, which was the primary focus of the EERMC’s testimony at hearing, the record shows that projected residential electric savings for 2026 are modestly higher than in 2025 and materially higher than in 2024.[68] The record shows that the residential program offerings remain broadly consistent with prior years, and that the lower proposed residential budget is attributed in part to reduced administrative costs, including the phase-out of Home Energy Reports and reductions in the cost of home energy assessments.

The Commission acknowledges that projected electricity savings in the C&I sector are lower. The EERMC’s proposal relies heavily on incremental savings from custom new construction measures, which the record indicates can be lumpy and limited by pipeline availability.[69] While a project like the waste heat recovery system discussed at the hearing could potentially yield additional low-cost savings, the Division expressed skepticism regarding the project and the Commission is not persuaded on this record to authorize additional incentive funding for measures the Company itself has not proposed.

Accordingly, the Commission does not find evidence in the record that a clearly identified problem exists that would be remedied by increasing the overall energy efficiency budget. The residential programs appear positioned to deliver increased electric savings at lower administrative cost, while challenges in the C&I sector appear more closely related to broader market conditions and project development constraints than to underfunding.

The Commission further notes that the Company retains flexibility to pursue additional efficiency savings should opportunities materialize. The Company may exceed its total approved portfolio budget by up to 10 percent with notice to the EERMC, OER, the Division, and the Commission, and may exceed that threshold subject to Commission prudency review.[70] The Commission notes that the EERMC’s proposals are within the Company’s overspending guidelines in the 2026 Plan, again showing that although EERMC seeks slightly higher budgets, the difference between the Company’s proposal and the EERMC’s alternative proposal is immaterial.
The Commission also notes the Company’s proposed budgets will result in a lesser rate impact, which aligns with a prevailing interest in providing rate relief.

For these reasons, the Commission approves the Company’s proposed electric and natural gas portfolio budgets. As referenced above, the EERMC’s budget proposal of $891,900 can be accommodated in full because of the Commission’s directives in Docket No. 25-28-GE, which increased the customer funding required for the 2026 energy efficiency plan. Accordingly, the EERMC’s budget request is approved.

In connection with the Company’s energy efficiency programs, the Company also maintains revolving loan funds (RLFs) for customers to obtain affordable, long-term financing for energy efficiency projects. Specifically, the Company maintains an Electric Large C&I RLF, an Electric Small Business Direct Install RLF, and a Gas Large C&I RLF.[71] Upon inquiry by the Division and the Commission, the Company estimated that it could transfer $1.5 million from the Electric Large C&I RLF, $800,000 from the Electric Small Business Direct Install RLF, and $1.375 million from the Gas Large C&I RLF to the general energy efficiency fund and apply those funds against the 2026 Plan’s customer funding required.[72] The Division recommends that the funds identified by the Company should be returned to ratepayers by way of reducing the customer funding required. Based on the Division’s recommendation and the Company’s seeming lack of opposition, the Company is directed to transfer $1.5 million from the Electric Large C&I RLF and $1.375 million from the Gas Large C&I RLF to the general energy efficiency fund.

However, the Commission declines to disturb the Electric Small Business Direct Install RLF because it was discovered over the course of the hearing and post-hearing discovery that the Electric Small Business Direct Install RLF is comprised of Regional Greenhouse Gase Initiative (RGGI) funds, not ratepayer funds.[73] In response to Record Requests, OER stated that any unused RGGI funds should be returned to OER for future allocation plans.[74] The Commission will await further information before determining an appropriate action regarding these funds.

Although the Company did not propose a modification to the PIM in the 2026 Plan, the EERMC raised a salient point in its testimony regarding how savings targets interact with potential performance incentives. Specifically, the EERMC stated that because planned net benefits are lower in certain sectors of the 2026 Plan, the Company could earn a higher performance incentive in 2026 than it earned in 2024 for delivering a comparable level of absolute performance.[75]

In reply testimony, the Company stated that the performance incentive is based on actual benefits achieved at the end of the program year.[76] While that statement is correct, it doesn’t fully capture the mechanics of the PIM. The performance incentive is calculated based on achieved net benefits, but the Company’s earnings are based on the Company’s achievement of net benefits as a percentage of planned net benefits. As a result, lower planned net benefits can increase the achievement ratio for a given level of absolute performance and move the Company into a higher payout adjustment band.

This effect is most apparent in the Commercial & Industrial sector. While total PIM-eligible net benefits projected for the 2026 plan are higher than those planned in 2024 and 2025, the C&I portion of planned net benefits is 25% lower.[77] In 2024, the Company delivered approximately $16.5 million in C&I PIM-eligible electric net benefits, or approximately 43 percent of planned net benefits, for which it earned approximately $609,000 in performance incentive rewards.[78] If the Company were to deliver that same level of C&I net benefits in 2026, the achievement would represent approximately 57 percent of planned net benefits, crossing a payout threshold and resulting in materially higher incentive earnings under the existing design. This outcome reflects the structural of the PIM, not an increase in underlying performance.

The Commission does not object to the Company proposing a plan based on its best estimate of achievable potential. However, the Commission finds it appropriate to adjust the performance incentive structure to ensure that incentive payments remain proportional to the size of planned net benefits and do not increase solely as a result of reduced targets.

Accordingly, the Commission adopts adjustments to the payout thresholds and payout rate adjustments applicable to the PIM. These adjustments shift the payout thresholds upward so that incentive sharing begins at a higher level of achievement. The adjustments also reduce the share of each dollar of net benefits earned at mid-range levels of achievement and preserves full incentive payments only at higher achievement levels.

Although the reduction in planned net benefits is most pronounced in the C&I sector, the Commission finds it reasonable to apply these PIM adjustments across the entire portfolio. Doing so also responds to concerns raised by the Division regarding uncertainty in planning assumptions, specifically the assumptions underlying the accounting of savings and benefits associated with electric resistance, delivered fuel, and gas weatherization to account for delayed heat pump conversions for a portion of the planned installations. Performance incentives function most appropriately when regulators have a high degree of confidence that ratepayers are receiving net value that can be shared with the utility. Where such confidence is lower, it is reasonable to require a higher level of demonstrated achievement before incentive sharing begins. Thus, modifications to the PIM adopted by the Commission scale the incentive to the size of planned net benefits, and address reasonable skepticism in the delayed heat pump conversion assumptions.

In Docket No. 22-33-EE, approving the 2023 Annual Energy Efficiency Plan, the Commission directed Rhode Island Energy to develop a plan to achieve 750 annual conversions from electric resistance heat to air source heat pumps by 2025, with at least 25 percent of participating customers being income-eligible.[79] The Company filed its plan in February 2023, focusing primarily on income-eligible customers and establishing targets of 60, 120, and 190 conversions in 2023, 2024, and 2025, respectively.[80] The record reflects that actual participation has fallen well short of those targets, with the Company reporting 28 income-eligible conversions in 2023, 64 in 2024, and 21 in 2025, and projecting 140 income-eligible conversions in 2026.[81] At hearing, the Company explained that this is a challenging market and described difficulties distinguishing electric resistance heating from other forms of electric appliance use, particularly in cases where customers have an oil boiler or furnace but rely on electric space heaters.[82]

            The Company believed that it was constrained by the Plan language to refrain from potential fuel switching, but the Commission sees no policy rationale for placing restrictive eligibility criteria for electric resistance heating to heat pump conversion measures. Accordingly, the Company is authorized to serve households that are currently screened. The Company should develop actionable criteria for identifying electric resistance heating customers, such as the use of a defined period of winter electric load data or other reasonable indicators, with appropriate guardrails to prevent gaming by non-income eligible customers. The Commission expects the Company to reflect these criteria in the current and future program plans and implementation.  

By statute, the Company is required to identify and support the installation and investment in CHP projects in its energy efficiency plans.[83] As referenced above, while the Company is not proposing any CHP incentives in this docket, the Company is reducing its incentives and tightening eligibility requirements for CHP projects.[84] The Company proposed non-variable incentives ranging from $300 to $550 per net kW, depending on the fuel type.[85]

During the proceeding, the Company’s witness explained that the Company does not negotiate CHP incentive rates and instead treats the incentive levels identified in the Plan as non-negotiable.[86] Looking forward, large efficiency incentives, including for CHP projects, should generally be negotiated as a matter of policy. The objective of an incentive is to provide no more support than necessary to advance qualifying projects, and guard against free ridership. Approval of an energy efficiency plan should not be understood as approval of specific incentive levels. If the Company believes that Plan language constrains its ability to negotiate incentives or requires uniform incentives levels across customers and time, the Commission expects the Company to revise or strike that language in future filings.

To avoid the need for refiling or further delay if the Company proposes CHP incentives in future filings, such proposals must clearly define the “with CHP” and “without CHP” cases. At a minimum, such filings should include (1) a baseline of future energy use with and without the CHP installation, (2) estimates of electric and natural gas emissions using the EC4 methodologies, including certificate-based accounting for electric and gas consumption measured at the retail meter, and (3) fuel consumption and fuel cost estimates under both scenarios.

Another issue raised through discovery and at the hearing was an approximately $1.9 million incentive for an Organic Rankine Cycle (ORC) heat exchange project that was not specifically identified in the 2026 Plan.[87] The Division was first notified of the ORC project in November of 2025, and the Company first met with the Division to discuss the project after the Division had filed its testimony in this docket.[88] The Company’s witness explained that the Company notified the Division of the project as a courtesy, since the $1.9 million incentive was less than the $3 million threshold where notification would be required.[89] Additionally, the Company’s witness explained that the Company had provided a commitment letter regarding the $1.9 million incentive to the customer either the week before, or the week of, the evidentiary hearing.[90] In post-hearing Data Requests, the Company also stated that its staff visited the ORC project site and the ORC project is currently in the installation process.[91]

The Commission was similarly made aware of this ORC project during discovery and the evidentiary hearing. It was unclear from the testimony at hearing whether the incentive was needed in order to move forward with the project. This raises a question of prudency (i.e., should the Company have offered the incentive if the customer would have installed the ORC project on its own). The evidence in the record suggests that a contractual commitment may have already been made to the customer. However, the Company did not include the incentive payment in its calculation of program costs or benefits for the 2026 program year. Whatever the sequence, the Company is proceeding at its own risk, and the prudency of the incentive payment will be subject to further review by the Commission based on a more complete record of the facts.[92] While the Company may be contractually committed to make incentive payments to the customer based on its commitment later, the Commission nevertheless finds that it would not be appropriate under these circumstances for the Company to include PIM-eligible benefits and costs related to the ORC project in its performance incentive calculations for the 2026 program year. Furthermore, to promote greater transparency with respect to large incentive projects, the Commission directs the Company that notification pursuant to Section 8.2.7 of its energy efficiency plans shall be required of all incentive offers of $1 million or greater per measure.

First, the Division recommended directing the Company to target gas incentives toward more efficient condensing heating system equipment replacements as soon as possible.[93] The Commission acknowledges the merits of this recommendation and notes that this issue was raised at hearing. The Commission finds that the Company has discretion to adopt or further evaluate this approach within its existing program design authority, and that the Division retains the ability to continue to advocate for such changes through ongoing oversight. Currently, the Commission does not find it necessary to issue a directive on this point.

Second, the Division recommended directing the Company to serve incremental Residential and Income-Eligible weatherization and heat pump demand up to 10 percent of the total portfolio budget.[94] The Commission notes that the Company already has the flexibility to respond to higher-than-expected demand, including the ability to exceed sector or portfolio budgets subject to existing rules and performance accountability mechanisms. Again, the Commission does not find it necessary to issue a further directive on this issue.

Third, the Division recommended directing the Company to work with stakeholders and the Office of Energy Resources to develop assumptions and methodologies for accounting for weatherization with delayed heat pump conversions that are grounded in current practice and supported by data.[95] The Commission agrees that additional experience and research are appropriate and addresses this issue through modifications to the PIM, as described above. Thus, the Commission declines to issue an additional directive here but expects continued engagement and refinement of these assumptions in future filings.

On December 29, 2025, the Company made a compliance filing with revised schedules showing the $1.5 million and $1.375 million transfers from the Electric Large C&I RLF and Gas Large C&I RLF, respectively. The compliance filing also reflects updated rate impacts.[96] The electric EEP charge in light of the Commission’s decisions will be $0.01004/kWh only for the months of April through December.[97] The natural gas EEP charge for Residential and Income Eligible customers will be $1.403/MMBtu.[98] For C&I gas customers, the charge will be $0.064/MMBtu. The Commission approved the Company’s compliance filing at its December 31, 2025 Open Meeting.

Accordingly, it is hereby:

1.      The Company is directed to transfer $1.5 million from the C&I Electric Revolving Loan Fund identified in response to Record Request 12 to the 2026 electric portfolio fund balance in Table E-1C from the Company’s December 5, 2025 filed corrections and updates.

2.      Regarding the $1.375 million from the C&I Gas Revolving Loan Fund identified in response to Record Request 12, the Company is authorized to transfer $1.375 million from the C&I Gas Revolving Loan Fund to the 2026 gas portfolio C&I fund balance.

3.      The EERMC’s budget request of $891,900 is approved.

4.      The Company’s proposed budgets and savings targets for the electric and natural gas portfolios as they appear in the Company’s December 5, 2025 filed corrections and updates are approved.

5.      The Company is directed to make a compliance filing consistent with Item III from the Company’s compliance filing in Docket No. 25-28-GE for rates to be collected from electric ratepayers for the months of April through December 2026.

6.      The Company is directed to implement the market and income-eligible residential gas rates as updated on December 5, but to file a compliant updated rate for C&I.

7.      The Company is directed to exclude any PIM-eligible costs and benefits achieved from the Organic Rankine Cycle (ORC) Engine project referenced in the Company’s response to Record Request 1 when calculating the achieved 2026 program year achievement. This means that if the Company does provide incentives for this project in 2026, those incentives and savings associated with the project are excluded from the PIM calculation.

8.      The Company is directed that “Notification of Large Customer Incentive” requirements in Section 8.2.7 of the Plan shall be required of all incentive offers of $1 million or greater per measure.

9.      The Performance Incentive Mechanism design is adjusted such that Threshold 1 for low achievement is from 0% to 35% of planned net benefits and the adjustment rate is 0. The Company receives no cash incentive for performance in that band.

Payout rate threshold 2 is equal to or greater than 35% to less than 60% and the payout rate is the actual percentage achieved. For example, for 50% achievement of planned net benefits, the Company gets 50% of 7%, or 3.5 cents for every dollar, not 7 cents.

Threshold 3 is equal to or greater than 60% and less than 85%, and it will be the actual achievement plus 10%. So, 65% achievement gets the Company 75% of 7%, which is 5.25 cents for every dollar, not 7 cents.

Then, the final threshold for high achievement is equal to or greater than 85%. At that point, the Company gets the full 7%, or 7 cents for every dollar in net benefits achieved.

10.  The Company is authorized to implement the programs described in the 2026 Plan, subject to the revisions made through other Motions.

11.  The Company’s compliance filing from December 29, 2025 is approved.

12.  The Company’s motion for protective treatment of confidential information found in its responses to the Division’s Third Set of Data Requests is approved. The records shall be exempt from public disclosure under R.I. Gen. Laws § 38-2-2(4)(B).

13.  The Company’s motion for protective treatment of confidential information found in its response to Record Request 1 is approved. The records shall be exempt from public disclosure under R.I. Gen. Laws § 38-2-2(4)(B).

EFFECTIVE AT WARWICK, RHODE ISLAND ON JANUARY 1, 2026 PURSUANT TO OPEN MEETING DECISIONS ON DECEMBER 22, 2025 AND DECEMBER 31, 2025. WRITTEN ORDER ISSUED JANUARY 16, 2026.