State Utility Commissioners at Ground Zero

Posted on July 15, 2015
Posted By: Stephen Heins
 
State utility commissioners in all 50 states are under a lot of stress. First, they must formulate and plan for the future of their states' electrical grids and at the same time, keep their eyes on the developments in Washington and on the EPA whose Clean Power Plan (CPP) is the elephant in their room. It could be argued that they have a job far worse than the Maytag repairman: Instead of having nothing to do, they have everything to do. Currently, they may have the most difficult job in the US. All without a clear instructions book from their states or the finalized regulations from the EPA.

While the EPA's 1200 page Clean Power Plan of 2014 has received 4 million public comments, there also have been study after study comprised of thousands upon thousands of pages from interest groups across the political spectrum. Furthermore, there have been hundreds of op-ed pieces on the subject. However, the state utility commissioners have received virtually no tangible guidance. This then is a rudimentary discussion of all the dangers facing commissioners as they continue to plan and implement their historical duties without a crystal ball.

Beginning with New Deal in the 1930's, a "cooperative federalism" was developed to include a division of responsibilities between the states and the federal government for electric power and air pollution. By the passage of the Clean Air Act of 1970, the EPA set the minimum standards for the states to best implement their individual state utility plans to meet those goals with approval of the EPA. This partnership included all relevant units of the federal government, including the Department of Energy and Federal Energy Regulatory Commission.

Before the EPA's 2014 announcement of their unprecedented new regulations, the public utility commissions had to develop rules and regulations to ensure a robust and still flexible electrical grid for their state. The sheer complexity and interaction between the state commissions and all other involved parties is even more staggering when one throws in the body politic, climate change, unanswered constitutional questions, environmental issues and the lack of the final regulations of the EPA'S Clean Power Plan.

At this time, the methodology of rate design is still in doubt, because it is still unsettled whether the CPP will be mass-based or rate-based. Moreover, the practical technology to implement such a plan is also uncertain, given the impracticality of solutions such as large scale wind or solar, coal carbon capture and marine power. Also, the practical sources of new energy are still in doubt, with the uncertainty of an adequate supply of natural gas and gas pipelines, especially given the ongoing debate over coal and fracking, simply because 90 percent of the current source of "cleaner" natural gas is derived through fracking,

Then, there is the debate over the "social costs of carbon," which lacks a definitive and thoroughly scientific or medical approach to determining the health impacts of pollution and greenhouse gases. With the jurisdictional issues and pecking order, implementation continues to be a question. Additionally, the rules governing the separations of power among the three branches of government are still undecided: Ultimately, will the EPA and state air pollution agencies be the final arbiters? Will the other national and state agencies become second-class citizens?

As state utility commissioners, they are being forced to deal with a plethora of different voices including the media, environmental groups, industry and the utilities themselves. All at an inflection point in history where this energy/environmental debate over all of the above issues have state, national and international implications and ramifications.

Finally, the inability of anyone to accurately predict the immediate future and certainly the distant future is problematic, in spite of the confidence expressed by some scientist and the International Panel on Climate Change. To quote Casey Stengel, "Never make predictions, especially about the future."

Without a definitive timetable or a book of instructions, our state utility commissioners are being asked to be the wisest men and women in the room, all the while balancing all of these important factors. Literally, they are at Ground Zero!

 
 
Authored By:
Stephen Heins, aka “The Blizzard of One,” is an energy consultant and nationally-published writer who has gained some attention for his expertise in energy, federal regulations, environmental and broadband policy issues.Heins promotes economic development, energy efficiency and emission reductions at the local, state and national levels. He has published more than 70 articles and op-ed pieces on energy, energy policy, utility industry and environmental issues for newspapers, energy and trade
 

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Comments

July, 15 2015

Ferdinand E. Banks says

What about predictions about the past, by which I mean CORRECTLY INTERPRETING the past.

If the people giving the orders or their flunkies could do that, then there is a good chance that we wouldn't have to Think and worry about the future to the extent we have to Think and worry about it now.

July, 15 2015

Stephen Heins says

Fred, your point is a little obscure and probably a little condescending.

Does your point have anything to do with my piece? If so, what?

July, 16 2015

Ferdinand E. Banks says

I don't find it difficult to predict the future, Steve. I've Always been good at this and a bit surprised that other persons are not as good. Of course the thing that really surprises me is their inability to interpret and learn from the past.

But please note, when I say "good" I mean better than most. I dont mean that I am batting 90% or more.

As for whether my comments have anything to do with your piece, they have everything to do with it. I walked into bookstores in New York City and Indianapolis and asked about energy economics books, and in both cases was told that the only books they had were those by Ferdinand E. Banks, which wasn't what I wanted to hear.

I probably had a few things to say in those books about the items in your contribution - I don't remember - but I don't have enough nor do I know enough, and on those visits to the bookstores was hoping to find out more, which I didn't..

What I do know is that things you seem to feel are mysteries COULD AND SHOULD easily be spelled out so that even your favorite president could understand them. For instance there are people in the EIA who could do this, and despite thinking of myself as a very smart gent, I can't figure out why we don't or can't get the information we need from those people and that organization.

July, 17 2015

Stephen Heins says

Sorry Fred, your answer reveals that you don't have much of a sense of real world US electricity and the electrical grid. The soon to be announced EPA's Clean Power Plan and its regulations have created an enormous uncertainty of all things electrical.

Europe must be less complex.

S

"Never make predictions, especially about the future."

Casey Stengel

July, 18 2015

Jan Dietrick says

Regional Economic Modeling Inc. has run some forecasts of the impacts of various prospective policies for putting a price on carbon. They do unbiased studies with transparent assumptions. One study commissioned last year by Citizens' Climate Lobby forecasts that when 100% of a fee on fossil fuel extraction is returned to households, GDP and jobs rise and greenhouse emissions and health indices decline. The study rationalizes a conservative economic approach for internalizing the social cost of carbon.

By the way there is transparency in the calculations of the social costs to let planners in the ballpark for what kind of policy is needed. Shell and BP and the utilities have calculations that are putting it over $50/ton, some have it already over $70. These are not secrets. The uncertainty is the timetable for the political will to make shadow pricing become a real carbon tax. The timelines for decisions made by PUCs stretch out far past when Congress will enact a carbon tax or fee that is responsive to scientist consensus and slowing growing bipartisan support. The Pope's visit on September 24 could be an inspirational moment for a federal price on carbon to finally send a global price signal toward a sustainable planet.

The movement for Community Choice Aggregation is also going to achieve big efficiencies far sooner than anything the PUCs can affect. They need to both encourage and monitor the developments of every new CCA that launches, The recent request for bids for renewables by Sonoma Clean Power produced 50X more renewable energy than needed. For the sake of precaution, why don't planners start right now using a shadow price that steadily rises to $100/ton by 2025. That is steeper than most industry would like, but it is what the Pope and the scientific community are advocating, i.e. transition at wartime speed. Citizens' Climate Lobby's policy is based on reaching $100/ton in 10 years. What if the shadow or real carbon tax is too ambitious and we stop our dependence on fossil fuels even though we may not have to all the while improving GDP and stabilizing a rise in jobs? Who would be unhappy except investors in fossil fuels?

Wisdom among PUCs calls for phasing out of reliance on natural gas along with coal that will be prohibitively expensive for various obvious reasons before they can even contract for the construction of any new gas-fired plants. They must anticipate the accelerating development of renewables in a market-based approached with a carbon tax that is distributed 100% into the economy to allow the market under price corrections to reveal what works best.

If the Commissions will advocate to members of Congress for a revenue neutral carbon fee and dividend policy, they will be off the hook, because, in this case at least, injecting those revenues onto Main Street will protect low income families and small businesses as the market operates both directly and indirectly to stabilize energy generation, the economy and the climate.

July, 18 2015

Ferdinand E. Banks says

Your statement about me and the real world is partially correct - perhaps more than partial. My inability to deal with charlatans and know-nothings has seriously interferred with my career prospects, although it was a boon for my authorship and travel ambitions. As for the EPA, I wouldn't be surprised if I was smarter than a whole ballroom of those dudes and dames. As for the complexity of Europé, the answer is yes and no. Not coomplex at all as long as the human input is kept under Control.

July, 18 2015

Stephen Heins says

Jan,

You, too much be from eU.

Your solution does not include the various relationships between electrical grid members like, utilities (inestor-owned, municipal and cooperatives) , state utility commissions, state and regional transmission companies, state legislation, state agencies, federal agencies like DOE, FERC, EPA, the White House, the Supreme Court and the House of Representative and the Senate.

Then, carbon tax and cap and trade are shiny ideas, with no any examples of success. EU ETS, RGGI and CA's cap and trade are seriously flawed and imperfect.

S

"For every complex question, there is an answer clear, simple and wrong."

H.L. Mencken

July, 21 2015

Ferdinand E. Banks says

Let's see now. I call myself the leading academic energy Economist in the World, but I have NEVER ...NEVER used the expression "shadow price" in my work on energy. In case anyone is interested, this is a very simple concept that has no Place whatsoever in this discussion at the present time. .

July, 23 2015

Stephen Heins says

Fred, I know that any given new piece remains really written about you. Actually, the new energy technology has left you behind, mostly.

"The cynics are right nine times out of ten."

H.L. Mencken

July, 25 2015

Ferdinand E. Banks says

If by the new energy technology you mean wind and solar, then you are absolutely correct. I live in a country (Sweden) where the charlatans and hypocrites in the academic World and a few other places choose to ignore the brilliant advice of tennis star Bill Tilden: ALWAYS CHANGE A LOSING GAME, AND NEVER CHANGE A WINNING GAME.

They ignore it because they Think that what you call the new energy technology has something to offer, and it probably has - though definitely not in Sweden and probably not in the U.S. Frankly, I don't see how a man who understands the silliness of 'cap and trade' - which you obviously do - can fail to understand that a lot of THE NEW ENERGY TECHNOLOGY makes absolutely no sense at all.

July, 25 2015

Stephen Heins says

In 1900, the head of Patents Office wanted to close the Office because "everything worthwhile had been invented."

The same was said in the late 1990's, as I recall, while I worked in the developing Broadband community.

You have said as much in 2015. Sorry, Fred, the convergence between energy and technology is still unfolding and I for one will be watching.

I head to the annual Bakken Energy Conference in N.D. tomorrow for 4 days. Yes, I likely will report on the state of energy and technology thereafter.

Best,

S

July, 26 2015

Ferdinand E. Banks says

There are better things to Watch in summer Stockholm, Steve, but even so I am not as dumb as the last two American presidents. Your expression 'the convergence between energy and technology' is Worth considering.

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