With energy utilities faced with the most sweeping changes in a century, state regulators now wrestle with a vital question. Should they promote change or respond to initiatives others lead?
Some states, most notably New York and California, are aggressively leading the charge, while others are holding back, waiting for others to innovate – and waiting to see which policy innovations are most promising.
The Energy Times recently sat with state regulators from around the country to discuss these issues. They included Lisa Edgar, of Florida and the president of the National Association of Regulatory Utility Commissioners, Philip Jones of Washington, Robert Kenney of Missouri, Robert Powelson of Pennsylvania, Paul Roberti of Rhode Island and Gregg Sayre of New York.
This is the first part of a series of article sponsored by Burns & McDonnell.
ENERGY TIMES: To what extent will state regulators drive the change in the utility industry?
Sayre: We have more than 30 energy-related initiatives in New York State. It's way beyond public service commission's scope. It is an awful lot more than just integrating distributed energy resources into a distribution system platform. We have a competitive process for microgrids with demonstration project funding just announced. We have the REV initiative with demonstration project proposals just out. We are
looking at a community solar initiative that will allow people who can't install
their own rooftop solar to participate in that market in a more centralized basis. We are looking at additional funding for a green bank to smooth the process to provide capital market acceptance of green energy projects for funding. The state is also funding battery research and microgrid research. We have attracted solar panel manufacturer in the Buffalo area. It all comes together into the state's energy policy. It's not just the commission driving the train. It's coming from a few inspired policy makers. The utilities are jumping onboard. Con Edison in particular, understands the importance of this. The other utilities, though, are also supportive of this whole initiative. They recognize that the technology is changing around them.
Jones: What New York is doing with REV is very interesting. We are looking at it. We are a little more cautious than New York. We went through a very painful period of the West Coast energy crisis a decade ago when wholesale and retail prices spiked. When I first took this job, I was told I was going to be a judge. We are presented with petitions for rate cases and rule makings, and then we respond to them. We are not policymakers. But over the years, I've become a little more proactive on the policy side. Let's face it, because of technology, because of environmental issues, we have a lot of other external forces trying to tell us or advise us what to do. But it's not our job to say the utility of the future should look like “X”. We think that's the job of the utility.
Powelson: Pennsylvania has focused on resiliency and updating aging infrastructure on the gas and the electric side. Pennsylvania is ahead of many states on smart grid deployment. Smart meters were being deployed in Pennsylvania under statute dating back to 2008. What do customers want behind that meter? The last thing we need is to have dumb rate structures behind those meters. Customers are embracing things like real time pricing. But a segment of customers are not interested in going out and picking their retail energy supplier. They just want safe, reliable power delivery to their home. Pennsylvania has transformed it's power sector. We are a net exporter of power. We are a net producer of natural gas.
Roberti: When we implemented the Telecom Act, it wasn't actually the Telecom Act that created the revolution and the evolution in the telecom sector. It was technology. There are things that are likely going to happen that will truly spark the transformation of energy that a lot of us want to see happen. The price of solar is coming down. Once storage, real economical storage comes, then you will have something happening.
Kenney: You're question is to what extent regulators are driving change. We are driving change when it is appropriate. In other instances, we are being responsive and reactive.
Edgar: There will always be a need for some form of regulation. Every state is unique. I think mine is the most unique because we probably all do. I've been doing this job for over ten years. When I first came to the commission, we had a number of state legislators who said to me, ‘We look to the Public Service Commission to be experts, to help advise us on what should be done, what needs to be done, what issues the legislature should be looking at.’ That has certainly changed in my state. Now the legislature reminds us often that we are not policy makers. It's a pendulum. It swings one way, then, over time, will begin to swing back.