Vol. 8: Issue 2 | February 2020
States are off to a big start in 2020 when it comes to policies affecting fossil fuels. The Indiana House passed HB 1414 earlier this month that would make it more difficult for utilities to retire coal plants in the state. Indiana is a top 10 coal producing state and supporters conclude that the bill will prevent unexpected retirements by requiring that utilities provide the Indiana Utility Regulatory Commission with at least three years advance notice of a plant closure. The legislation now moves to the Senate. Meanwhile, in Arizona, the legislature has passed a bill that would preempt local governments from banning natural gas infrastructure in new buildings. HB 2686, backed by utilities and homebuilders groups in the state, comes after a series of cities in California and Massachusetts set requirements that new residential buildings be electric-only to encourage consumers to transition off fossil fuels.
When Tesla’s direct-sales model expanded into vehicle markets across the U.S., several states amended their dealer franchise or licensing laws to either expressly prohibit or authorize manufacturers to engage in limited direct-sales to consumers. Colorado was among the states that banned the direct sale of cars but allowed manufacturers with preestablished dealerships to continue to engage in direct sales. This effectively allowed for Tesla to continue to sell cars at a limited number of locations in the state, but prevented new market participants from doing the same. A new proposed bill would change that. Senate Bill 167 would authorize all electric vehicle manufacturers to engage in direct sales, opening the door for other all-electric manufacturers, like Rivian, to sell directly to consumers in the state. The bill language is also broad enough to allow for manufacturers that produce vehicles that run on a range of fuels (internal combustion engine, hybrid and electric) to sell their electric-only vehicles through a direct-sales model.
Two states on opposite ends of the continental U.S. are each debating the same controversial plan to deal with unpopular and underperforming investor-owned utilities (IOUs): state takeovers. The California and Maine legislatures are considering whether to purchase privately owned utilities to correct course, improve service and lower energy costs. In California, the state has been on edge as Pacific Gas & Electric (PG&E), the nation’s largest IOU, looks to emerge from bankruptcy proceedings, sparked in part by the company’s liabilities from several deadly fires caused by its equipment. The proposed terms of its restructuring proposal have drawn some scrutiny from state policymakers who claim the plan doesn’t comply with AB 1054, passed by lawmakers last year. The legislature is now considering SB 917, which would require the state to purchase all shares of PG&E and create a public-private partnership to operate the new utility, with portions of the grid available for cities and counties to purchase and establish their own municipal utilities. The proposal was reportedly modeled after New York’s takeover of the Long Island Lighting Company in 1986, which resulted in establishing the Long Island Power Authority. In Maine, the legislature has passed a bill to explore a state-backed takeover of the state’s two largest IOUs, Central Maine Power and Emera Maine. HB 1306 requires a feasibility study to determine the costs, benefits and legal issues surrounding a takeover that would create a consumer-owned entity called the Maine Power Delivery Authority. In each case, the IOUs are opposed to the proposals.
A trio of bills that passed the Massachusetts Senate by a 36-2 vote in January are headed to the House. SB 2477 calls for net-zero carbon emissions by 2050, increasing the state’s current target of 80% below 1990 levels by the year 2050. The governor has signaled his support for a net-zero carbon policy. SB 2476 would require the Massachusetts Bay Transportation Authority to purchase and lease zero-emission vehicles starting in 2030 and to have a completely zero-emissions fleet by the end of 2040. The third bill, SB 2478, sets efficiency standards for a variety of fixtures and appliances, including faucets, toilets and computers. The efficiency standards are projected to reduce utility bills and lower carbon emissions. Meanwhile, both chambers of the Virginia legislature passed comprehensive clean energy bills that would establish a mandatory Renewable Portfolio Standard (RPS)—the state’s RPS had been voluntary—and move the state toward joining the Regional Greenhouse Gas Initiative (RGGI). In addition to establishing a mandatory 100% RPS, both bills would also require utilities to procure a certain amount of energy storage by 2035 and direct the state Air Pollution Control Board to adopt regulations necessary to join the RGGI program.
In Oregon, legislators and members of the public have voiced strong opposition to Oregon’s cap-and-trade bill (SB 1530), which sets more aggressive statewide greenhouse gas emissions targets and requires emitters to purchase allowances to pollute. The legislature resumed consideration of a state cap-and-trade policy after similar legislation failed in 2019. SB 1530 has been the subject of protests and rallies over the course of the month, and following complaints that the bill was being pushed through without adequate discussion, progress on the bill was halted to allow for additional debate among legislators. Speaker Tina Kotek announced plans to introduce an identical house version of the bill to provide more time for debate. House Republicans have argued that the cap-and-trade legislation is being pushed through the process too quickly and boycotted a recent floor session in an effort to slow the pace of legislation.
FERC Order 841 aims to create a level playing field for energy storage by requiring the regional transmission organizations (RTOs) and independent system operators (ISOs) to craft rules allowing for storage resources to compete in regional energy markets. However, the National Association of Regulatory Utility Commissioners (NARUC) and others are mounting a challenge to FERC’s order, claiming it infringes on state authority by reaching into the distribution system, which is typically controlled by local utilities and not FERC. In contrast, the attorneys general in California, D.C., Massachusetts, Michigan and Rhode Island, are supporting FERC and the order, arguing that wholesale market barriers have been holding back the growth of storage and the order will produce significant health, economic and environmental benefits for their states.
The New York State Energy Research and Development Authority (NYSERDA) is seeking to procure another 1 to 2.5 GWs of offshore wind by the end of 2020. NYSERDA recently filed a petition to kick off the regulatory approval process for its most recent large-scale wind solicitation, putting the state on track to procure more than 4.3 GW of offshore wind by the end of the year and solidifying New York as a major player in in the regional offshore wind market. While New York is already on track to meet its near-term targets, NYSERDA’s latest procurement solicitations would move the state closer to meeting its offshore wind target for 2035.
The current upheaval surrounding a recent federal order relating to state-backed resources has been years in the making. As states imposed greater requirements on electric generation—usually showing preference to zero carbon and renewable resources—the interstate electricity markets overseen by the Federal Energy Regulatory Commission (FERC) have become a staging ground for larger conflicts over market principles and states’ rights. In its December order, extending the PJM Interconnection’s Minimum Offer Price Rule (MOPR), FERC brought these issues to a head and has almost guaranteed the matter will be settled in federal court. From the outset, the decision drew a strong dissent from the lone Democratic commissioner, who said it would “freeze out” states that are guaranteed jurisdiction over resource decision-making by the Federal Power Act. Since then, a number of stakeholders have asked for a rehearing, including state officials and PJM itself. PJM argued the order is overly broad, over-prescriptive and needlessly interferes with state policies and a number of the 13 states within the PJM footprint have also expressed concerns, including Illinois, Maryland, New Jersey and Ohio. States outside PJM are also concerned about the order, including Connecticut, which referenced the MOPR decision in registering its dissatisfaction with ISO-New England’s progress in aligning market operations with the state’s aggressive decarbonization goals. What ultimately happens in PJM will resonate across the country, so for the time being all eyes will be on how FERC navigates the next few months. If FERC grants the rehearing requests, the issue will undergo additional review by the commission. Compounding matters substantially, FERC approved orders in late February that narrow exemptions for clean energy projects in the New York-ISO capacity market—a move many observers liken to the MOPR decision due to its potential to raise capacity prices and counteract state clean energy policies. New York and other stakeholders also have the opportunity to file rehearing requests. Regardless of FERC’s decision in response to rehearing requests, these proceedings have the potential to dramatically reshape state energy policy in the coming years.
In July 2017, two South Carolina utilities pulled the plug on the construction of two new nuclear reactors at the V.C. Summer plant, and the state has been dealing with the aftermath ever since. Already, one of the utilities, SCANA Corp., was purchased by Dominion Energy. Now it appears likely that the other utility, state-owned Santee Cooper, will be bought out as well. After a bidding process that saw a variety of proposals, the South Carolina Department of Administration recommended NextEra Energy’s bid, which would pay off Santee Cooper’s nearly $8 billion in debt. In all, the acquisition is valued at close to $19 billion, including $941 million in consumer refunds and a four-year rate freeze. However, NextEra’s proposal would also eliminate around 700 jobs—about 40% of Santee Cooper’s workforce. Other bidders include Dominion and Santee Cooper’s new executive team. Over the coming month, South Carolina’s House and Senate budget committees will select their preferred bids, with the final decision resting with the full legislature.
President Donald Trump released the budget request for Fiscal Year 2021, which includes $35.4 billion to fund the U.S. Department of Energy—a cut of more than $3 billion over the FY2020 enacted budget. The request increases defense spending, through the National Nuclear Security Administration, but proposes eliminating all funding for the U.S. State Energy Program, Weatherization Assistance Program and Low-Income Home Energy Assistance Program. Most non-defense programs saw decreased funding proposals for the next fiscal year. However, similar funding requests have been proposed over the past several years but have all been rejected on a bipartisan basis by Congress. After Trump tweeted that he plans to seek alternatives to the Yucca Mountain nuclear waste repository, the budget request for DOE includes no funding for the licensing of the project in Nevada. The budget would also support implementation of an interim storage plan and a focus on alternative technologies that can be deployed “where there is a willingness to host.”
Two more large-scale renewable energy projects on tribal lands are advancing in the early months of 2020, with the Bureau of Indian Affairs publishing a final environmental analysis of a major wind project on the Campo Indian Reservation and releasing a notice of intent to study expansion of a solar project on the Moapa River Indian Reservation. Advancing these policies is part of a broader effort by the U.S. Department of Interior to prioritize large-scale renewable energy projects on tribal lands. In further support of tribal renewable energy development, the U.S. Department of Energy is kicking off its 2020 Tribal Energy Webinar Series with a focus on best practices and case studies for developing energy projects on tribal lands. You can access the full schedule for the webinar series here.
Following the 2015 release of over 4.6 billion cubic feet of natural gas from the Aliso Canyon underground storage facility near Los Angeles, federal regulators have now finalized a new rule to oversee the safe operations of similar facilities. The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued the new rule in January that will apply to around 200 facilities across the country. The rule enacts minimum federal safety standards and aims to address concerns that stemmed from the Aliso Canyon leak, including standards for inspection, enforcement and training. The rule also clarifies reporting requirements. Congress directed PHMSA to undertake this rulemaking in the PIPES Act of 2016.
While pipelines provide the cheapest and safest means of moving oil and natural gas to market, several high-profile accidents have placed renewed scrutiny on the safety and operations of pipeline infrastructure. In partnership with the federal government, states play a significant role in overseeing and enforcing pipeline safety initiatives, and NCSL has released a new report detailing how state legislatures contribute to that goal. “Safe and Reliable Pipelines: A primer for state legislatures” details this federal-state relationship and looks at steps that states have taken to update statutory requirements, establish building and inspection standards, replace aging infrastructure and enhance overall system safety.
As the new decade gets underway, many states are looking at options for bolstering protections against cyberattacks—and the energy sector is an area of particular focus. A recent report suggests policymakers are right to be concerned, with cyberattacks against industrial control systems, like those used to operate refineries, pipelines and the electric grid, rising by 2,000% year-over-year in 2019. Luckily, NCSL has released a new report that tackles this difficult issue. “Cybersecurity and the Electric Grid: The state role in protecting critical infrastructure” looks at how legislatures are increasing standards and reporting requirements, and enhancing cyber-protections, in addition to offering a broad background on how the federal government and industry are addressing the issue.
A new report from the National Consumer Law Center explores the value of installing smart thermostats in low-income residences that participate in weatherization programs. While the installation of a smart thermostat can be cost-effective for residential utility customers, it is often neither cost-efficient nor appropriate for weatherization client residences due to occupancy, energy usage, and behavioral patterns. The report concludes the decision to install smart thermostats should be resolved by on-the-ground weatherization field specialists, in consultation with the clients they serve.
Sixty-eight percent of U.S. consumers are now being served by utilities that have publicly stated carbon or emissions reduction goals. Nineteen of these utilities have goals to reach carbon-free or net-zero emissions by 2050. The Smart Electric Power Alliance Utility Carbon Reduction Tracker allows users to view this information in a new, easy-to-navigate interactive map.