WARWICK, R.I. — After months of hearings and negotiations, an energy initiative called grid modernization is moving forward in Rhode Island, along with new gas and electricity rates.

On Aug. 24 the state Public Utilities Commission (PUC) approved a new model for compensating National Grid for operating and maintaining utility poles, transmission lines, and substations. For the next three years a portion of National Grid’s revenue will also go to making the power grid more cost-efficient and accommodating to renewable power, electric vehicles, and energy storage.

The so-called Power Sector Transformation Initiative blends the traditional work of National Grid with Rhode Island’s new energy and transportation goals. The objectives include 1,000 megawatts of renewable energy and high-tech electric meters. These technologies are projected to reduce long-term costs for ratepayers by having third-party companies pay fees for providing new services to the grid. High-tech meters and information networks are expected to make the grid less prone to outages by providing real-time information.

When the effort was launched in 2017, it was the first time in five years National Grid submitted a change to its distribution rate to the PUC. The process included dozens of public meetings and debate that included making a price adjustment to the utility supply rate, or the cost of supplying electricity and natural gas to customers. With the PUC’s vote, the negotiation process concludes and an advisory group and National Grid will enact the grid-modernization goals.

The PUC’s decision also requires National Gird to lower electricity rates by the amount of tax savings the utility received from the recent federal income tax cut. Nevertheless, in the first year the bill for the average residential ratepayer will increase $3.67 a month. The average residential gas customer will see a $10.78 decrease in their annual bills. They will see increases in years two and three of 1.9 percent and 1 percent, respectively.

In years two and three, the typical residential electricity bill will increases less than 1 percent annually, to $1.03 and 44 cents respectively.

Commercial and industrial electric customers’ monthly bill impacts will range from 1 percent to 5 percent in year one, depending on the customer class and usage. The increases will be less in years two and three.

Commercial and industrial gas customers will experience increases of less than 2 percent in years two and three.

The new rate structure doubles the discount offered to qualifying low-income residential customers to 25 percent of their total bills.

“It represents a strong step forward for low-income utility consumers, most of whom should see a significant reduction in their overall rates under this settlement,” said Jennifer Wood, executive director of the Rhode Island Center for Justice and the George Wiley Center ratepayer advocacy group.

The grid-modernization plan will be funded through a reduction in what National Grid can earn each year. The utility’s annual earnings will be reduced from 9.5 percent to 9.275 percent. The reduction is $54 million below what National Grid initially requested. Overall, National Grid will see a 4.3 percent increase in its electric distribution service and a 2.7 percent increase in its natural-gas business.

The rate and grid transformation negotiations began in November 2017 with the Division of Public Utilities and Carriers, National Grid, the Office of Energy Resources, and 12 intervenors made of energy advocacy groups.

One of the intervenors, Acadia Center, welcomed the PUC’s decision.

“Rhode Island has jumped into a leadership role among New England states seeking to reform utility regulations,” said Daniel Sosland, president of Acadia Center. “Embracing the changes needed to modernize the energy system will deliver large economic, public health, consumer, and environmental benefits to all Rhode Islanders.”

The new program was also applauded by the Northeast Clean Energy Council, Sierra Club, People’s Power & Light, the Natural Resources Defense Council, ChargePoint, and New Energy Rhode Island.

“Today’s settlement represents a solid step forward in Rhode Island’s efforts to promote clean, electric vehicles, a critical component of the state’s greenhouse gas reduction strategy,” said Josh Berman, senior attorney with the Sierra Club.

Coinciding with this development will be the rollout of up to 30 public electric vehicle charging stations that are being funded through settlement money from the Volkswagen emissions scandal. Portions of that settlement will also fund investments in energy storage.