Guest Interview with Ron Binz - Principal of Public Policy Consulting and Former Chairman of the Colorado Public Utilities Commission
My first work in energy advocacy was on behalf of low-income customers as an expert witness
for Legal Aid in a case involving cost overruns at a nuclear plant. From there my work evolved
to representing all customers (as the Colorado State Consumer Advocate). As I began fully to
appreciate the environmental implications of energy production and use, I understood that
consumer advocacy must include environmental advocacy.
You have been both a State Commissioner and a State Consumer Advocate. Many
people think that is the role of a State Commissioner (i.e. to be an advocate for the
consumer against the utilities). So why is an “official” advocate needed?
In my experience both as a Consumer Advocate and as a Commissioner, an “official” Consumer Advocate can provide a Commissioner with a much-needed, well-developed hearing record. Good decisions don’t simply happen by accident. Besides having a good idea, an advocate before a Commission must give the Commission the basis on which to adopt that good idea. I also think that, viewed from outside, a well-functioning Consumer Advocate can also add credibility to the regulatory process.
During your time as Commissioner, how much did developments in other states affect what the Commission did? Did such developments lead to things being initiated in Colorado that were not otherwise underway? Did they affect a proceeding that was underway?
You may be surprised to know the limited impact that developments in other states have on the business of a Commission within a given state. Commissions operate in a legal and political environment that tends to be quite unique in any situation. I certainly learned from my Commissioner colleagues, but the direct application of findings and decisions in other states was relatively limited.
Being a state regulator appears at times like a balancing act, where you have to act on behalf of the electricity customer, but also be fair to the utility, and also try to “move the ball forward” in terms of improving the overall electricity system. Is that what it is really like?
One of the main roles of a Commissioner is to balance the interests of the parties. That’s a “judicial” role. But Commissioners also have a “legislative role.” Within the authority provided by the legislature, I saw the Commission not simply as an umpire calling balls and strikes, but also as a leader on policy implementation. During the period between 2007-2011, Colorado moved forward rapidly to create a “New Energy Economy,” and I was proud that our Commission played a part in that. We did it by rewriting rules on resource planning, on renewable energy development, and on energy efficiency. We used our authority to encourage the utilities to diversify their portfolios, consider future environmental requirements, and move to more sophisticated rate structures.
What did you most wish you had when you were Commissioner in the way of help? More parties involved? More data and information? More Commission staff?
One of the greatest resource needs for Commissions is to have staff capability to look ahead to emerging issues. Too often a commission is mired in the day-to-day requirements of cases brought to the Commission. In such situations, there is a great temptation to be only reactive. As Chairman, I helped create a new unit in the Colorado PUC staff whose task is to prepare the Commission and its staff for new and emerging issues. We were able to use ARRA (stimulus act) funding to expand this division, to great effect.
Relatedly, commissioners and their staff need much greater access to educational resources: publications, conferences, seminars, etc. Too often, these basic amenities are considered “enrichment” when they are in fact “core.”
Some describe Demand Response as a new type of energy efficiency, and a new twist on the kind of supply-side decisions that Commissions have made for many years. Does Demand Response present a totally new “thing” to Commissions than they have had to grapple with in the past?
In Colorado, a “vertically-integrated” state, we’ve been familiar with utility-sponsored “DSM” programs like interruptible loads, direct air conditioning controls, etc. for many years. Demand Response provided by third parties, which my Commission pioneered in Colorado, is a new thing and somewhat unfamiliar, but it’s really a logical extension of utility-sponsored programs. We treated DR and EE very much like generation resources, requiring the utilities to list it on their “Loads and Resources” table, right there with the gas turbines. As retail level smart grid investment begins to develop, I expect to see a lot more Demand Response opportunities, even in states, like Colorado, that do not have wholesale market competition.
One of the biggest changes that seems to be inevitable is a move to time-based pricing of electricity. Yet electricity pricing is probably one of the most politically charged items that a State Commissioner has to deal with? What is your prognosis on how this plays out?
I am very interested in this. The benefits of the consumer smart grid will not be unlocked until we move to dynamic pricing for residential and small commercial customers. It can be a tricky thing for state regulators to accomplish though. I’ve been promoting a “Top 20” approach in which a state Commission makes a time-of-use tariff mandatory for the largest 20% of electricity users in the residential and small commercial customer classes, and optional for others. I favor an easy-to-understand structure, like set prices in fixed time periods, possibly with critical peak pricing.
Typically the top 20% of users consume over 40% of the energy; these will often be air-conditioning customers, are very “peaky,” and will likely be the ones motivated to install control equipment, contract with smart grid suppliers, etc. Adopting the Top 20 approach would jump-start interest in smart grid for these customers and, importantly, for the smart grid vendors waiting in the wings. I think this is a politically feasible way of making a big move on dynamic pricing and will “break the ice” on this topic.
What advice do you have for DR and Smart Grid companies who are trying to make major changes in the electricity system that require state regulatory approval?
In vertically-integrated markets, the key is effective participation in the state’s integrated resource planning process. I think state regulators are becoming more and more receptive to both DR and EE as meaningful resources. The IRP is the place where decision makers can see all the possible supply-side and demand-side approaches at one time.
If a state has a weak or ineffective IRP process, your association should try to move the Commission or the legislature to strengthen the planning process. In competitive wholesale markets, FERC has been blazing a path for DR participation, and you’ll need to exploit those openings.
Over the next two decades, utilities will be under tremendous pressure to expand their capital budgets: huge sums must be invested in all aspects of their business, driven by aging infrastructure, environmental requirements and changing fuel economics. DR needs to position itself as a way utilities can off-load some of those obligations to others in a sensible, reasonable-cost manner.
Finally, I’m convinced that DR and EE are going to become important compliance channels for coming new EPA carbon regulations for existing utility generation resources.
What advice do you have for young professionals who are interested in the demand response and smart grid area? What do they need to do or understand?
- Stay educated about the entire electric power industry, not just your piece of it.
- Steep yourself in information about the policy drivers in this industry.
- Develop a coherent vision of the future electricity industry and learn how to convey that to stakeholders like customers, utilities and policy makers in familiar terms they will understand and accept.
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