EDITOR'S NOTE:The Energy Times recently discussed the most pressing energy issues of the day with a panel of state regulators, including the top leadership of the National Association of Regulatory Utility Commissioners, at their summer meeting in Nashville. The exchange, edited for style and length, was sponsored by Oracle Utilities. This is part of a five-part series.
Philip Jones – Washington Utilities and Transportation Commission, past president of NARUC
Travis Kavulla – Montana Public Service Commission, president of the NARUC
Richard Mroz – New Jersey Board of Public Utilities
Robert Powelson – Pennsylvania Public Utility Commission, incoming president of the NARUC in 2017
Scott Rupp – Missouri Public Service Commission
Greg White – National Association of Regulatory Utility Commissioners, executive director
ENERGY TIMES: Nuclear power seems to be on the ropes. A number of nuclear owners indicate that they cannot operate profitably in an era of flat demand and abundant, cheap gas. What must regulators do?
POWELSON: State policies, like renewable portfolio standards, were adopted that never foresaw this day of reckoning with nuclear power plant economics. We have subsidized renewables. Those training wheels have to come off or legislatures should go back and tell nuclear utilities, ‘you do a nuclear project that counts toward the renewable portfolio standard requirements.’ It's 7 ½ years too late in many cases.
ENERGY TIMES: Why didn't nuclear utilities talk about this five years ago?
POWELSON: We kind of did around the carbon tax and with cap and trade. That didn't happen. We don't have a hard cut price on carbon. So, here lies the dilemma. The federal government did pick winners and losers in the tax code. The federal production tax credit has wreaked havoc on Midwest nuclear power dynamics. Is it a cancer spreading east? Yes, I am concerned. I am definitely concerned in Pennsylvania.
MROZ: We are discussing three separate issues. The first is generation and economics. The least cost generation source should win. Second, the facilities we want are low carbon. Third, closing a plant has economic impact. The closure of a large nuclear power plant has a big impact on a state. State regulators, state officials and the industry need to determine exactly which of those is a priority. What is the prevailing policy that we want to pursue? The federal government at the policy level needs to drive this conversation. I think FERC needs to be part of this conversation, and I think the regional transmission organizations need to be from a reliability standpoint. RTOs have a responsibility to ensure that critical generation assets are running. Some of the RTOs are starting to look at whether there's an overconcentration in natural gas.
ENERGY TIMES: Do any of you have an idea of what kind of mechanism might work on a national level to help nuclear power?
WHITE: A carbon tax. That's a simple and elegant solution that is apparently deemed politically unpalpable.
JONES: The carbon tax would be the most academically sound, elegant, simple way to do it. If you really want markets to function, tell the market what the price is and markets will work.
KAVULLA: It would be an interesting study to add up all of the policies whose ostensible purpose is to decarbonize the energy economy. Federal tax policy and state tax policy, certain federal and state rate making, preferential treatment to certain renewable or non-emitting sources of supply, the clean power plan. Add those all up and calculate the implied price of carbon within them. Then, compare what kind of price you would need to set to get the same amount of carbon reduction but through direct prices on carbon. I bet in the end, we will pay many multiples, 3, 4, 5, times the cost to get the same carbon reductions you otherwise would through a direct price on carbon. If your goal is indeed to reduce carbon, it is a little strange you don't have any policies that directly affect the reduction of carbon.
ENERGY TIMES: You come from a coal state.
KAVULLA: I do.
ENERGY TIMES: Is coal generation dead in this country?
KAVULLA: It is a struggle. And it's paradoxical because Montana's fortunes are hinged mostly on supplying coal to foreign markets, where coal is still very much in demand.
ENERGY TIMES: What are the long-term prospects for coal-powered generation in America?
RUPP: Having watched Peabody and Arch Coal Coal go bankrupt, the future of Missouri with coal is questionable. We are a very heavy coal state. We are a very conservative state. You tell the market a price and the markets will react. It is efficient. But Missourians would rather see Peabody and Arch Coal as vibrant, strong companies. A carbon tax would go over like a lead balloon in Missouri.
POWELSON: There is a void in the national energy policy. Here lies the problem. We are all over the place as a country. States are dealing with energy efficiency, renewable portfolio standards and ballot questions on carbon pricing. Post-November, the Department of Energy and the Congress need to get really seriously focused on energy policy. Coal has to be part of the energy mix. As a country we are getting away from that discussion
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