Value of the grid and disruptive forces debated

Megawatt Daily
By Tom Tiernan
May 21, 2020

As a White House representative praised state regulators for
helping electric utilities adapt to new technologies, a panel of
regulators Tuesday discussed how the value of the power grid and
consumers’ tolerance for higher power costs will factor in future
ratemaking decisions.

Regulators from New York, Massachusetts, Maryland and
Hawaii discussed their efforts to aid integration of renewable
resources, enhance demand response and reduce emissions from
power plants at a Washington conference. Utility officials and
others examined what they consider the strongest forces
disrupting the utility business model, from distributed generation
and microgrids to rooftop solar and energy storage as part of the
National Town Meeting on Demand Response and Smart Grid.

President Barack Obama’s National Climate Assessment offers a
preview of how the Obama administration is driving the power
industry to address environmental challenges, including the
upcoming proposal from the Environmental Protection Agency on
carbon emission standards for existing power plants, said Ali Zaidi,
Deputy Director for Energy Policy at the White House Domestic
Policy Council. The proposal from EPA, due to be released in June,
is undergoing inter-agency review following extensive engagement
with states and industry representatives, Zaidi said.

EPA is trying to be flexible in what can be considered an
emission compliance plan under section 111(d) of the Clean Air
Act, Zaidi said, but he did not provide any preview or details on
what would be in the proposal.

Because states will have to file implementation plans under
the upcoming EPA proposal, efficiency advocates are hoping that
state efficiency efforts or energy reduction goals that result in
fewer emissions from power plants will be allowed to count as
section 111(d) compliance strategies.

“We are seeing tremendous innovation. We are seeing
tremendous leadership at the state level,” Zaidi said.

The annual conference brings the demand response sector
together, with Tuesday’s speakers focusing on regulation and the
changing role utilities are taking in some states. With a high
reliance on renewable resources and incorporation of storage to
address intermittency, Hawaii is providing a “postcard from the
future” of what the power grid could look like in other states, said
Lorraine Akiba, commissioner at the Hawaii Public Service
Commission. “We’re looking to give guidance to utilities to
transform themselves,” Akiba said.

The New York Public Service Commission has a new initiative,
dubbed reforming the energy vision, that includes a lot of similar
elements to reduce peak demand, maintain resource diversity,
enable more DG technologies and improve reliability, said PSC
Chair Audrey Zibelman.

Grid reliability and resiliency can mean different things to
different consumers, and balancing the costs of those efforts and what
utility customers can tolerate through rate hikes can be a challenge,
added Kelly Speakes-Backman, commissioner at the Maryland PSC.

Public Service Electric and Gas sought about $2.6 billion from
New Jersey regulators to enhance reliability and invest in
infrastructure, and it received approval for about $1.2 billion, said
Ralph Izzo, chairman and CEO of PSEG.

Because utility ratemaking is based on prior test years and past
expenditures, it is ill-suited for new technologies, said Paul DeMartini,
managing director at Newport Consulting Group and a former
executive with Southern California Edison. “Looking backwards is not
the way to get to the future,” DeMartini said, recounting the
difficulties he faced when California regulators questioned SoCal Ed
expenditures because the utility was looking to spend money on
advanced meters and other technologies that were new.

Whether utilities should turn over more services to
competitive suppliers was discussed at the conference, with
speakers acknowledging that it would be a challenge drawing a
line on where utilities can compete with outside suppliers. “You
can’t have a functional market if the market maker is a
participant,” because the company will take steps to benefit itself,
said Steve Cornelli, senior vice president of strategy and
sustainability at NRG Energy.

By their nature as local energy suppliers, municipal utilities are
taking innovative steps on demand response, renewable integration and
other services in California, Texas, Tennessee and Florida, added Sue
Kelly, president and CEO of the American Public Power Association.

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