Vol. 6: Issue 1 | February 2018
As state policymakers consider ways to pay for the nation’s transportation infrastructure, measures to implement a special registration fee on electric and certain hybrid vehicles are becoming more common. Eighteen states have enacted legislation requiring a special registration fee for select hybrid and plug-in electric vehicles. These fees are in addition to the standard motor vehicle registration fees. Several more states have introduced bills in 2018 including Kentucky (H.B. 45), New Hampshire (H.B. 1541) and Vermont (S.B. 271). In all three states, the fees range from $50 to $100 for plug-in hybrid electric vehicles and $100 to $200 for vehicles that run entirely on an electric motor and rechargeable battery.
Virginia legislators introduced a bill (S.B. 966) to end a rate freeze for Dominion Energy and to issue rebates to customers who overpaid during that time. Dominion’s rates were frozen in 2015, exempting the utility from rate review for five years, to shield customers from potential rate increases related to Clean Power Plan compliance. After the State Corporation Commission (SCC) criticized S.B. 966 for its potential to lead to more overcharging, Governor Ralph Northam stepped in to renegotiate the bill. The current version of the bill would subject Dominion to rate reviews by the SCC every three years, instead of every two years, as was the case before the freeze. Additionally, the bill requires Dominion to refund $200 million to customers for overpayments that the utility collected during the rate freeze, and also to pass the utility’s savings from the federal tax reform to customers. In future instances of utility overcharges, the bill allows Dominion to invest extra earnings in renewables, energy efficiency or electric grid upgrades. Furthermore, the bill requires Dominion to invest more than $1 billion in energy efficiency over the next 10 years and provides for the development of up to 5 gigawatts of new solar power.
So far, in the 2018 legislative session, a handful of states have introduced legislation to reduce carbon emissions, including bills to create carbon taxes and cap-and-trade programs. At least three states have introduced bills this session on carbon taxes or cap-and-trade—two Oregon bills (House Bill 4001 and S.B. 1507) and Virginia House Bill 1273 would establish cap-and-trade programs, and several bills in Washington state (S.B. 6096, S.B. 6203 and S.B. 6335) would create a carbon tax. A few additional states have carryover bills from the 2017 session that are pending. Massachusetts (H. B. 1726, H.B. 3473 and S.B. 1821), New York (A.B. 107, A.B. 3967 and S.B. 2846) and Rhode Island (H.B. 5369 and S.B. 365) are considering bills to establish a carbon tax. Vermont companion bills (H.B. 273 and S.B. 66) would establish a cap-and-trade program, while House Bills 532 and 533 would replace existing taxes with a carbon tax. Washington has more than half-a-dozen carryover bills to establish a carbon tax pending. Additionally, New Hampshire (H.B. 1230) and New York (A.B. 1919 and S.B. 4598) have bills pending to establish a study commission on creating a price on carbon.
The new year has begun right where 2017 ended: with a contentious nuclear support measure in New Jersey. After a measure to introduce Nuclear Diversity Credits (NDCs) during a lame-duck session ended in failure, a new bill (S.B. 877) has emerged 2018 which pairs NDCs with a much broader clean energy push supported by new Governor Phil Murphy. The move echoes a successful push in Illinois to pass a comprehensive energy reform bill, which included nuclear supports, along with provisions for renewables, energy storage and energy efficiency. If passed, it would be the fourth state to authorize supports for at-risk nuclear power plants. Ohio has its own nuclear support measure, although the bill appears to be stalled in committee, while Arizona has three resolutions recognizing the benefits of nuclear power and urging federal and state regulators to adopt policies that support nuclear. Florida’s H.B. 6071 would repeal cost-recovery for new nuclear projects, while legislators in Georgia and South Carolina are mulling changes to similar cost-recovery mechanism in the wake of significant cost-overruns at two nuclear power projects.
Did you think we’d finished talking about nuclear power? Oh, no—not yet. There’s a lot going on outside of state capitols too. California regulators have approved the early retirement of the Diablo Canyon nuclear plant—the only remaining nuclear plant in operation in the state—while also rejecting various aspects of the utility’s plan to mitigate the impacts of the loss, including a plan to replace the capacity with only renewable energy and storage. The plant’s two reactors will cease operations by 2025. By chance, that happens to be the year that Iowa could also lose its only nuclear plant, as officials at the Duane Arnold nuclear plant signaled that the economics were not favorable once the plant’s current power purchase agreement runs out in 2025. Meanwhile, one of two beleaguered nuclear build projects has cleared a significant hurdle in moving toward completion: Georgia regulators unanimously approved the completion of the Vogtle project, although questions loom over the fate of nuclear production tax credits (PTC) believed to be integral to the project’s success. The nuclear PTC did not make it into the final tax overhaul passed by Congress.
The EPA has given Oklahoma preliminary approval to regulate coal ash disposal—which will likely mean that the state will be the first to gain that authority. The Water Infrastructure Improvements for the Nation Act of 2016 gave EPA the authority to approve state coal ash permitting programs as an alternative to the citizen lawsuits that are the main enforcement mechanism under the original federal regulations published in 2015. Utilities favor state permitting programs, but states appear hesitant to take on the new regulatory responsibility. To date, Georgia is the only other state to submit an application.
State agencies have denied permits to pipeline developers across the Mid-Atlantic, creating significant hurdles for federally-approved projects. While the Federal Energy Regulatory Commission (FERC) has been working its way through a significant backlog of pipeline applications, project developers in New Jersey, New York, North Carolina, Pennsylvania and Virginia have all experienced problems and delays with state permits. Not only that, but FERC recently upheld a New York state decision to withhold permits for the Constitution Pipeline, saying it was wary of undercutting state rights. Pipeline developers are taking the fight to the courts, with the Constitution permit dispute being appealed to the U.S. Supreme Court. Meanwhile, FERC continues to process and approve projects—most recently, the PennEast pipeline. However, the process by which the federal regulator reviews projects could be set to change. FERC Chairman Kevin McIntyre said the agency will review is policy on certifying natural gas pipelines for the first time since 1999.
It’s now over four months since Hurricane Maria took out much of Puerto Rico’s electric grid, and still around a third of the U.S. territory’s residents are without power. The heavily indebted state-owned utility, PREPA, even had to shut down two power plants recently because it couldn’t afford the fuel. PREPA has been at the center of controversy for some time—and it’s only intensified during the recovery. Most recently, federal agents discovered a warehouse full of around 3,000 pieces of electric restoration equipment that has not been use for power restoration, prompting the governor to call for a U.S. Justice Department investigation. The governor has also called for privatizing much of PREPA, although the utility’s fate rests in the hands of three separate entities. One of those entities is the Puerto Rico Energy Commission, created in 2014—the only state regulator ever to oversee PREPA. The energy commission recently released a detailed proposal for microgrid regulation on the island. The U.S. Department of Energy is also working on three microgrid pilot projects for manufacturing sites on the island to develop more resilient and independent electrical systems.
In an Eversource utilities rate case, the Massachusetts Department of Public Utilities (DPU) approved mandatory demand charges—which bill customers for the period of their highest usages—for net metering customers and approved the elimination of optional time-of-use rates for residential customers. Eversource requested demand charges to address a cost-shift from net metering customers to non-net metering customers. The DPU agreed, stating that Eversource utilities adequately demonstrated this cost-shift. Critics of the decision hold that, due to a lack of advanced metering equipment installed in the state, customers will be unaware of what time the peak occurs and will be unable to take appropriate actions to manage demand charges. According to the North Carolina Clean Energy Technology Center, at least 10 states took action, either through introduced legislation or utility proposals, on residential demand or solar charges in 2017.
Governor LePage issued an executive order placing a moratorium on new wind development in certain parts of Maine and established the Maine Wind Energy Advisory Commission. The order prohibits the issuing of new permits for wind turbines in western and coastal Maine, as well as on coastal islands and along significant avian migratory pathways. The moratorium will remain in place until the Wind Energy Advisory Commission issues a study on the impacts of past and future wind projects on the state’s tourism economy and provides recommendations for potential regulatory changes. The commission’s meetings will be closed and will not be subject to Maine’s Freedom of Access Act, meaning that the committee will not be required to release agendas, minutes or documents that guide any recommendations to change state wind regulations.
A group of 24 states and several other parties have backed an Arizona utility, Salt River Project (SRP), in its attempts to fight off an antitrust lawsuit by SolarCity Corp. over installation fees for rooftop solar. SolarCity filed the lawsuit in 2015 after SRP approved a plan requiring solar customers to pay additional distribution charges and demand charges. SolarCity accused SRP of anticompetitive actions that were designed to eliminate solar competition. SRP moved to dismiss the case, however a district court denied the motion, allowing the suit to proceed, and the 9th U.S. Circuit Court of Appeals dismissed SRP’s appeal in 2017. Typically, parties are not allowed to appeal decisions until a case has fully run its course in a lower court. However, SRP asked the U.S. Supreme Court to decide whether a public entity can immediately appeal a court order denying immunity, which the justices agreed to resolve. A 24-state coalition, led by Tennessee, filed an amicus brief in the Supreme Court supporting SRP and stated the importance of allowing public entities to file immediate appeals on immunity decisions in antitrust suits. Several other parties including national associations representing governors, counties, cities and mayors also filed an amicus brief supporting SRP, and the American Public Power Association and the Large Public Power council also filed a brief on behalf or SRP.
Throughout much of the past six months, all eyes in the electric sector have been trained on the five commissioners at FERC. After Energy Secretary Rick Perry issued a directive to FERC seeking a mandate for competitive electric markets to provide cost-recovery to fuel-secure resource like coal and nuclear plants through a Grid Resiliency Pricing Rule, an entire industry held its breath in anticipation. Well, in early January, FERC unanimously rejected the proposal, and instead sought input from grid operators on how to improve system resilience. However, that doesn’t mean the conversation over pricing is over. Several market operators have filed their own proposals with FERC to change the way markets compensate certain resources. For example, ISO-New England and PJM Interconnection have each filed proposals to change their capacity markets to account for the subsidies received by certain generators, while PJM has also issued a price-formation proposal that would raise prices in order to provide incentives to “inflexible” units, like coal and nuclear. It appears the debate over how to price electricity is just heating up.
It’s official: 2017 was the most costly year for disasters on record. At $306 billion in total damages, it was never even close. The previous record was set in 2005, the year of Hurricane Katrina, at $214 billion. Officially, the year also tied for the most billion-dollar disasters in a calendar year, at 16. However, that really only holds true if you count all of the wildfires in the West as a single disaster, even though there were multiple separate fires that individually caused more than $1 billion in damages. Hurricane Harvey caused $125 billion in damages on its own, with Maria and Irma accounting for another $140 billion combined. Unsurprisingly, the year coincided with the highest insurance losses—with insurers set to pay out a total of $135 billion. Congress has already approved over $40 billion in disaster aid, but an additional $81 billion that has been approved by the Senate has languished in the House since December. All this comes as the National Institute of Building Sciences released new cost-estimates that suggest disaster preparedness measures pay off more than previously thought. The study says that for every $1 spent through federal grants to mitigate damage from disasters, $6 of future disaster response costs are avoided. Previously, the NIBS had established a $1-for-$4 ratio, which was used for budget and planning purposes.
Cyberattacks are a persistent threat these days, and the attacks are getting more sophisticated by the day. To get a fuller picture of this, FERC has proposed a new rule that would require companies to report all attempts—whether successful or not—to insert surveillance or other software and viruses inside grid systems. The idea is to enhance the reporting requirements in order to keep up with trends and tactics. Currently, companies only have to report cyber-attacks that do damage. The National Institute of Standards and Technology recently called for electric systems to be designed from the outset with cybersecurity as a primary consideration. The moves come as many in the industry process the news that, for the first time, hackers breached an industrial control systems at an industrial facility. The facility, which shut down as a result of the breach, is located in the Middle East.
The Interior Department announced an ambitious and unprecedented effort to reorganize the department. Under Secretary Ryan Zinke's reorganization proposal, the department would be divided into 13 regions based on watersheds and geographical basins, rather than state boundaries. The proposal would centralize authority with a leader overseeing each region. This change would also move the headquarters of major bureaus within the department, including the Bureau of Land Management and the Bureau of Reclamation. Although the department has released a frequently asked questions document, many questions remain regarding timing, chain of authority, the role Congress plays, among others. The Western Governors’ Association also wrote a letter to Secretary Zinke this month concerned that states had not had the opportunity to weigh in on these changes. Interior isn’t the only agency changing its organizational structure. The Department of Energy also recently announced that the current office of the Under Secretary for Science and Energy (established in 2013 during Secretary Moniz’s tenure) will be separated into two Under Secretary positions so that there will once again be three Under Secretaries: the Under Secretary of Energy; the Under Secretary for Science; and the Under Secretary for Nuclear Security and NNSA Administrator.
President Donald Trump issued a decision at the end of January on a high-profile trade case on imported solar photovoltaic modules and cells. After the U.S. International Trade Commission (ITC) ruled that low-cost, imported solar panels and modules have caused “serious injury” to the U.S. solar manufacturers, the ITC sent remedy recommendations to Trump, who would issue a final decision on the case. Trump’s recent decision imposes a 30 percent tariff on imported crystalline silicon photovoltaic modules and cells. The first 2.5 gigawatts of imported cells will be exempt from the tariff in each of the four years. The tariffs will decline by 5 percent each year, ending at 15 percent by 2022. The 30 percent tariff is slightly lower than the highest tariff—35 percent—recommended by ITC commissioners, and much lower than the 50 percent tariff proposed by the plaintiffs in the case, Suniva and SolarWorld. As a result of the 30 percent tariff, the Solar Energy Industries Association has estimated that 23,000 solar jobs will be lost this year, and GTM Research projected a roughly 10 percent decrease in solar deployment through 2022.
It’s getting harder to ignore solar energy, whether it’s the increasingly large installations and panels visible on rooftops or utilities’ decisions to include more of it in their resource mixes. The cover story of the February issue of State Legislatures explores the rapid growth of solar energy and the economic development and employment opportunities that solar offers. Learn more about the utility-scale, community-scale and customer-sited solar sectors and read about policy trends and recent legislative action on solar in this new article, “Plugged into Solar”.
The Electricity Market Policy Group at Lawrence Berkeley National Lab recently released a report, State Engagement in Electric Distribution System Planning, which documents state activities in electric distribution system and grid modernization planning. It reviews a broad range of legislative and public utility commission activities, including those that deal with grid modernization investments, non-wires alternatives to traditional distribution system investments, capacity of distribution systems to integrate distributed energy resources and many others.
The Solar Energy Industries Association recently released the fourth installment of its five-part white paper series on grid modernization. The paper—entitled, “Getting More Granular: Compensation for Distributed Energy Resources”—focuses on the ways that utilities can more effectively operate the grid. Through examining the experiences of two leading states—California and New York—the paper discusses the grid benefits offered by distributed energy resources (DER), the locational value of DER, and location-based compensation for DER.
Lawrence Berkeley National Lab (LBNL) recently released the results of the first nationally representative survey of residents who live within close proximity to large wind turbines. The three-year effort led by LBNL concluded that a large majority of individuals who live half-a-mile to five miles from a large wind turbine have positive attitudes toward turbines in their community. The study also considered other aspects, including perceptions of and possible stress reactions to wind turbine sounds, shadow flicker, lighting and landscape changes, as well as participation in and perceived fairness of the wind power project’s planning and siting process.
National Association of State Energy Officials (NASEO) developed Energy Efficiency Pathway Templates to help states recognize the air quality benefits of energy efficiency. The templates are designed to promote dialogue between state energy offices and air quality regulators on opportunities for energy efficiency programs that advance state efforts to attain air quality management objectives and state and local greenhouse gas targets. Templates are designed to be used to summarize key facts and features of energy efficiency programs and policies, and discuss program goals, authorities, funding and implementation. NASEO created templates for building energy codes, building performance standards, energy savings performance contracting and local led building performance programs.