Electricity Policy

Fri07012016

Last updateThu, 30 Jun 2016 8pm

ISSN 2331-1223  Twitter

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Will distributed energy end the utility natural monopoly?

Will distributed energy end the utility natural monopoly?

By Steve Corneli and Steve Kihm

Continued improvements in distributed energy resources may erode or even end the natural monopoly characteristics of electric distribution utilities, requiring new regulatory and business models to preserve and enhance the continued social benefits of grid connectivity. 
I

n a recent report we wrote for Berkeley Lab’s Future Electric Utility Regulation series (online at FEUR.lbl.gov), we revisited the concept of natural monopoly and asked whether electric distribution utilities will remain natural monopolies if the capabilities and affordability of distributed energy technologies improve sufficiently.  Our basic conclusion: Don’t count on it.

The reasons are straightforward.  Natural monopolies only exist when cheaper alternatives can’t be provided by multiple firms.  The power sector has already seen cheaper and smaller electric generating technologies and competition from independent power producers (IPPs) erode the utility natural monopoly in generation.  In much the same way, continued improvements in the capabilities of distributed energy resources (DERs) to produce, manage and store electricity at ever lower price points would create widespread competitive alternatives to local electric utility delivery service.  If and when that happens, the distribution natural monopoly would fade, as a simple matter of economics.  This does not mean the distribution system or the grid itself should disappear or that it no longer provides critical value to society.  But new regulatory paradigms and business models would be needed to ensure and enhance the ...

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Maryland’s Supreme Court Loss: A Win for Consumers, Competition and States

Maryland’s Supreme Court Loss: A Win for Consumers, Competition and States

 By Scott Hempling

The Federal Power Act, like all collaborative federalism statutes, envisions a federal-state relationship requiring interdependence and cooperation.  But those principles include the statutory goal of just and reasonable rates for all affected states, not just one or even several.

Background: Just the Facts

D

ue to generation shortages in transmission-constrained areas, PJM capacity auctions were producing high wholesale prices in Maryland.  The Maryland Commission designed a three-part solution:  (1) Select through competition a wholesale generator to serve in the constrained area.  (2) Order Maryland’s retail utilities to contract for long-term capacity from the winning generator, at the price offered by that generator in that competition.  (3) Draft the contract so that the utility, using retail ratepayer dollars, will pay the generator any difference between the FERC-authorized PJM price and the generator’s contract price—with the payment conditioned on the generator being selected in the PJM capacity auction.  New Jersey passed a statute mandating a similar solution.  

Federal district courts and circuit courts struck both efforts, holding that the Federal Power Act preempted the state actions.  Maryland appealed to the U.S. Supreme Court.

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The Net Metering Riddle

The Net Metering Riddle

By Karl R. Rábago

Net metering opponents have done a masterful job in casting the debate around mistaken assumptions. As regulators conduct NEM 2.0 and Value of Solar proceedings, those errant assumptions should be exposed and the real questions addressed.

 

A

fter 25 years in the electric utility rate-making business, I have come to the conclusion that most rate “fairness” can be better understood if you keep this old math riddle in mind:

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Are Regulators’ Heads in the Cloud?  Primary Challenges to Utility Adoption of Cloud-Based Solutions

Are Regulators’ Heads in the Cloud?  Primary Challenges to Utility Adoption of Cloud-Based Solutions

By Brien Sheahan, Elizabeth McErlean, and Anastasia Palivos

While companies like Amazon, Google, Netflix and Uber are using the cloud and IoT to disrupt entire industries, offering dynamic pricing and services, utilities are lagging behind. As the energy landscape evolves, regulators must consider whether the technical and functional merits of the cloud can create value for utilities and ratepayers.

I.  Introduction 

I

ncreasingly, unregulated businesses are adopting cloud-based information technologies to improve service while leveraging back-office scale and security to generate greater value for consumers and shareholders.  Burdened by outdated accounting rules that incentivize investments in legacy technology, cloud adoption by public utilities is relatively low due in large measure by the failure of regulators to consider forwarding looking policies.  As the electricity grid evolves, cloud-based services will become necessary to manage a smarter, more efficient, and more distributed network and regulators will have to overcome antiquated views regarding how we think about rate-base and cybersecurity.

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An Economist’s Dilemma: To PV or Not to PV, That Is the Question

An Economist’s Dilemma: To PV or Not to PV, That Is the Question

By Ahmad Faruqui

In seeking to reduce $500 monthly utility bills in the most economic way, this Californian found himself engaged in an odyssey of the mind. Why couldn’t I accept the subsidy rooftop solar offers utility customers in a high-cost state? Could I do as well simply pursuing energy efficiency?
D

uring the past 12 months, my wife and I paid up to $500 a month for our combined electricity and gas bills during some summer and winter months.  The annual average was $300 a month.  The high bills hit the pocketbook hard.  But they also caused angst.

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Electricity Daily

Closing Diablo Canyon for clean energy

Closing Diablo Canyon for clean energy

July 1, 2016 -- The Breakthrough Institute is an environmental organization that’s completely committed to the central role of nuclear power in addressing the greatest environmental challenge of our lifetime: climate change. It’s not alone in that conviction. So it was no surprise when PG&E, owner of the Diablo Canyon nuclear plant, along with environmental, labor and other groups, proposed not ...

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NRDC report: There’s an immense challenge and payoff in electric vehicles

NRDC report: There’s an immense challenge and payoff in electric vehicles

“Widespread adoption of electric vehicles (EVs) is an essential strategy for driving carbon pollution out of the transportation sector. Large-scale deployment of EVs can also help replace dirty power plants with clean energy like wind and solar power. And EVs powered by those renewable resources are virtually emissions-free.” So begins the executive summary of a new and important NRDC report , “Driv...

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Tesla Motors’ buyout of SolarCity: Perhaps not so crazy an idea after all

Tesla Motors’ buyout of SolarCity: Perhaps not so crazy an idea after all

Initial reaction to Tesla Motors ’ proposal to acquire SolarCity produced skeptical reactions from financial analysts—despite, or possibly because of, connections between the companies. Tesla CEO Elon Musk is chairman of SolarCity’s board, and there is other board overlap, as Bloomberg reported. But Bloomberg recalls when Apple opened its first stores, Cleantechnica reported . Apple’s approach transformed...

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Do utilities ‘suck’? Or is it the regulatory model that guides them that needs a fix?

Do utilities ‘suck’? Or is it the regulatory model that guides them that needs a fix?

David Roberts synthesizes the wonky, abstruse issues of today’s electricity industry as effectively as Robert Moog contrived to synthesize music some 50 years ago. His latest post for Vox.com, “ The simple reason most power utilities suck ,” actually concludes it isn’t that utilities try to fall short of what’s needed from them today but that the business and regulatory models under which they still fu...

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Can regulation outperform a carbon tax?

Can regulation outperform a carbon tax?

“Carbon taxes and caps may be most effective in economic theory, but smart regulation will produce better climate policy for our political reality.” That’s the title of Simon Fraser University economics professor Mark Jaccard ’s blog post on the Policy Options website. Jaccard explains that while putting a price on carbon may be popular with economists, environmentalists and all manner of executives and...

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NE generators, irate over state PUC and distcos’ gas import plan, seek FERC relief

NE generators, irate over state PUC and distcos’ gas import plan, seek FERC relief

June 30, 2016 -- Think life is sweet in organized markets? Think again. A battle royal has broken out in New England, where two ISO New England generators— NextEra Energy and Public Service Enterprise Group —have asked FERC to block New England states’ efforts to have electric ratepayers underwrite the cost of an expanded natural gas pipeline. “State regulators in Massachusetts, New Hampshire, Connecticut...

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Editorials

Will distributed resources end the distribution natural monopoly? If so, then what?

Will distributed resources end the distribution natural monopoly? If so, then what?

The electricity industry seems to be plagued by a multitude of “interesting problems.” They’re problems that can’t—or at least shouldn’t –be ignored. While after nearly 40 years we are still grappling with the consequences of the energy supply sector of the industry becoming competitive, with passage of the Public Utility Regulatory Policies Act (as evidenced by several excellent panels in FERC’s t...

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What decided Diablo Canyon’s fate?

What decided Diablo Canyon’s fate?

As an outsider, weighing the things known and not known behind PG&E’s decision to retire its two-unit, 2,240-MW Diablo Canyon nuclear plant, shocking as it was, in the end it wasn’t surprising.

Among the things that are both known—and unknown—about the remaining years for California’s last surviving nuclear plant are these:

Relicensing . As the project’s existing licenses expire in November 2024 ...

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Rethinking the climate change challenge from a deeper, wider position

Rethinking the climate change challenge from a deeper, wider position

Cambridge University engineering professor M.J. Kelly has written a paper that challenges much of today’s accepted wisdom about the climate change threat.

It addresses that problem but also steps back from it to look into the abyss posed by a related problem: the need to supply a growing, changing world with energy and how best to do it—thoughtfully and conscientiously.

Reading the paper was unsettlin...

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America’s long fever dream of boundless nuclear power: What’s a country to do?

America’s long fever dream of boundless nuclear power: What’s a country to do?

America’s relationship with civilian nuclear power is curious: it’s like the story of the aging playboy who can’t let go of his alluring but high-maintenance showgirl. The two love each other, dreaming of what might have been and what might be. They can’t quite make the relationship work, but can’t let go either.

I don’t suggest this perhaps inapt metaphor idly, because I have great respect for tho...

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How wide did the Court open the barn door in offering solace to the States?

How wide did the Court open the barn door in offering solace to the States?

I have a predisposition to root for the underdog. With that admission, while I sympathize with the plight of generators, their viability crimped by suddenly cheap gas; and with great respect for the work of PJM Interconnection and the Federal Energy Regulatory Commission, I had wished that FERC and the courts might have found room to sanction the scheme Maryland had cooked up in rendering its deci...

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Arizona parties back away from cliff to consider the possibility of compromise

Arizona parties back away from cliff to consider the possibility of compromise

We were pleased—and a little surprised—to learn the Arizona pro-solar and pro-utility combatants and their proxies have agreed to put down their legal weapons (is Arizona an open-carry state?) and discuss possible compromises that might advance their respective interests.

The battle of ballot measures was shaping up to be one of competing constitutional amendments, divisive and costly no matter whi...

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