We at State & Local Energy Report are working to sponsor dialogue between different levels of government on issues of energy efficiency, technology and economics in order to foster communication and support progress in this important field. Recently we spoke with David Coen, president of the National Association of Regulatory Utility Commissioners (NARUC), about the challenges facing states at a time when forward-thinking energy policies come up against the realities of belt-tightening and uncertainties about federal energy legislation. A member of the Vermont Public Service Board since 1995, Coen has served in a variety of regional and national leadership positions, including chair of the Consumer Affairs Committee of the New England Conference of Public Utilities Commissioners (NECPUC), chair of the Board of Directors of the National Regulatory Research Institute and on various NARUC committees.
Q: Congress is considering a new energy bill. What provisions are you watching most closely?
We will be paying close attention to a number of issues. Number one is whether Congress will address carbon reduction. NARUC supports a well-designed federal policy for reducing carbon emissions because the economic uncertainty of inaction is hampering investment in energy infrastructure. Our consumers are the ones who pay the costs of building new generation and transmission projects, and without a clear plan from Congress, those costs are going to grow.
Although we have not taken a formal position on whether cap and trade is the best approach to reducing carbon, we believe that if Congress pursues such a path, it can do so in a way that does not overburden the consumer. We fully expect new climate rules to increase power prices, just as we fully expect prices to go up even without carbon restrictions. But we believe Congress can ensure that the consumers who will be paying for the infrastructure upgrades also share in the benefits of a cap-and-trade market.
Here’s how: Congress can allocate any free emission allowances for the electric utility sector to consumers through their regulated Local Distribution Companies [LDCs]. The key word there is “regulated.” LDCs are regulated by NARUC members in every state. This means that the state commissions will be obligated to treat any proceeds derived from these credits as income that must be shared with their ratepayers. This can be done through a number of ways—either through direct rebates on consumers’ bills or through investments in energy efficiency and clean-energy programs.
Since our members deal with these issues every day and know what is in the best interest of our ratepayers, we believe our members should be given a sufficient amount of flexibility to use those proceeds in state-specific ways. There is no need to unnecessarily tie our regulatory hands, particularly when energy efficiency and clean-energy programs are essential to reducing our emissions.
We also have concerns about efforts to preempt state authority over transmission siting. We believe consumers are better served when decisions about where new power lines will go are best made by the state regulators who know the area best.
Q: What steps can state energy commissions take to help lay the groundwork for a clean energy economy? How can the federal government support the role of commissions?
Taking the first part of that question, I will tell you that states have already built the foundation for a clean-energy economy. Our members, either by legislative fiat or on their own authority, have implemented every kind of clean-energy program under consideration by the federal government. From decoupling to aggressive demand-side management programs to renewable portfolio standards, the states have done and continue to do it all. If Congress does end up passing climate-change legislation, the work we’ve done at the state level will make the transition much easier. We’re not starting from scratch, and for that we have our state agencies, legislatures and governors to thank.
For the second part of the question, I would recommend that the federal government continue to let us do what we do best: innovate. Everything we’ve achieved in Vermont, for example, has all happened on our own. Our Efficiency Vermont utility has saved energy and money, and we did it without a federal mandate. California has also implemented groundbreaking efficiency initiatives, and just about every other state has followed suit with some kind of appropriate measures. So I would ask the federal government to let us continue to learn from each other and promote innovative clean energy programs.
Q: Federal cap-and-trade legislation looks increasingly unlikely in the foreseeable future. If the federal government does not move forward with either cap or trade provisions, do you see states taking the lead by implementing initiatives like RGGI (Regional Greenhouse Gas Initiative)? Would you envision such state actions having a funding—trade—component that would fund energy efficiency and renewable-energy programs?
Well, RGGI has been up and running for about two years now, and states in the West and Midwest are working to set up their own regional trading programs. So I think state agencies have already taken the lead.
Right now RGGI is set up so that states can use the revenues for various activities, including efficiency and renewable energy. In Vermont, because we already have a strong electric efficiency program, we’ve used RGGI revenues for heating and process-fuel efficiency programs. Other RGGI states have used revenues to develop or strengthen efficiency programs. These investments save consumers money while also reducing carbon emissions.
We’ve left it up to the individual states to use those revenues as they see fit. The results are positive and we believe can serve as a model for a broader federal plan.
Q: What do you see as some of the major national challenges facing public service commissions, and how do you see organizations like NARUC helping to address those challenges?
Like all state agencies, we are impacted by the current financial situation. Many of our members are furloughing staff and taking other measures to scale back on costs. This is an unfortunate situation, but we are dealing with it as best we can.
The economy is also taking its toll on the consumers we serve. This is a real challenge for us as we gear up to spend a lot of money on new energy and telecommunications infrastructure. Even if Congress does not pass climate legislation in the near future, investments in the clean-energy future still must be made, and those investments will be paid for by our consumers. As regulators, we have to balance the immediate needs of our ratepayers with the long-term view of our future energy demands and requirements. This is becoming a major issue for our members.
Thankfully, NARUC is well-situated to provide our members with the support they need. Through our meetings and educational opportunities, we are providing state commissioners access to their peers and academic experts. This facilitates the sharing of best practices and allows our members to see how other commissions are dealing with these same challenges. We have established a top-flight training system that helps new members and staff learn on the job. We also have a responsive and accountable leadership chain that gives our members the opportunity to implement new programs and initiatives to improve the association.
Q: Vermont is considered one of the leaders in developing new energy efficiency models and programs. Can you describe some of the challenges the commission faced in developing these programs?
The key to our success in Vermont is effectively communicating the goals we are trying to achieve. Some consumers, particularly large commercial and industrial customers, were primarily concerned with rate impacts. But over time, these customers accepted the new rates. And although [the rates] went up due to efficiency efforts, their overall electricity bills have declined because of the benefits provided by such programs. So most of the challenges we dealt with concerned our communications and outreach strategies. I think the biggest problem is explaining to consumers that although their rates might increase because efficiency investments, their usage and bills may decline.
Q: Do you expect there to be a national renewable portfolio standard (RPS)? Do you and other public service commissioners (PSC) take this into account during the implementation of state RPS’s?
NARUC doesn’t have a position on a national renewable portfolio standard. As you know, the majority of states have some kind of renewable standard or target. While NARUC has not advocated for or against a national standard, it remains clear again that state agencies are well ahead of the federal government on this issue.
While I can’t speak for all states, I do know that some of our members pursued an RPS to spur federal action. That is also why a number of states are participating in the RGGI system as well, because they wanted to take a leadership role.
Q: Offshore wind resources in the East and transmission options being considered that stretch from the Midwest to the East are the source of some tension. How are commissions balancing these issues?
We are balancing these issues by performing our duties as set forth in our various state statutes. Our members are obligated to ensure that any new transmission upgrades are necessary to support reliability and keep on the lights. Siting transmission is not something that can be done overnight, it takes time to find the best routes that will have the least impact on ratepayers.
Our members are certainly aware of the desire to get the renewable resources from remote locations to the load centers. But that doesn’t necessarily mean the best solution is to build a massive transmission line from the Dakotas to the East Coast. You mentioned offshore wind; some states may determine that local resources can best meet their demands rather than trucking in wind from halfway across the continent.
We have to remember what the end goal is. Are we trying to make the system cleaner, more efficient, more reliable and better for consumers? Or are we just hoping to build new lines for the sake of it? These are important questions. Most consumers don’t know or frankly don’t care if their power come from local resources or from several states away. But they do care how much it costs and whether it will be reliable. This is what we should be focusing on: ensuring consumers have better, more reliable and affordable service. State agencies are statutorily required to make this happen.
Q: The advent of federal ARRA Smart Grid funding and collaboration with states and the private sector is unfolding in a variety of ways across the nation. How are commissions engaging in this issue?
The stimulus bill included a healthy amount of funding for our state agencies so we can keep up with all the energy-related projects in the ARRA bill. The Department of Energy has made significant ARRA funding available to our members to focus on these issues. Last year DOE made available about $50 million in ARRA funding to state commissions for assistance in ARRA-related activities. Our members have worked closely with DOE to receive the money and put it to good use.
More recently, NARUC received a cooperative agreement with the Energy Department called the State Electricity Regulators Capacity Assistance and Training, or SERCAT, also funded from the stimulus bill. SERCAT has a few different elements, such as consultant assistance, which allows state agencies to hire expert consults on projects ranging from energy efficiency to time-of-use rate impacts.
Also, ARRA provided $14 million to state commissions and governors’ offices for the establishment of an Eastern Interconnection–wide transmission planning board. The 39 States and the District of Columbia formed the Eastern Interconnection States’ Planning Council (EISPC) in response, and we are beginning our work. EISPC will work with the industry-led Eastern Interconnection Planning Collaborative and study potential transmission development for the entire interconnection.
And as I’m sure you know, the ARRA bill contained seed money for the development of smart grid projects. Although the grants were distributed to utilities, our members play a big role in bringing these projects to fruition. Where applicable, our members are analyzing these projects and determining if they are in the best interest of their ratepayers. State commissions are excited about the potential of the smart grid, but we also must make sure the projects will bring about the promised benefits. No one should be given a blank check, because in this case, they are paying with ratepayers’ money.
Posted on: August 3rd, 2010