Vol. 8: Issue 9 | September 2020
Michigan Senate Resolution 142, introduced this month, encourages the Michigan Public Service Commission to study alternative and innovative rate design mechanisms, such as fixed system access, demand charges, time-of-use rates and other options, that account for the changing customer use of the electric grid. The resolution references evolving technologies and the use of customer-owned generation, energy storage, electric vehicles and energy management capabilities that are changing the way energy customers use the grid. If passed, the resolution would recommend the PSC study these issues and explore how the traditional ratemaking process should evolve to account for these evolving technologies and the behaviors of electric customers in the state.
Electric utilities in California may be the first in the country to have a legislature back their attempts to recover revenue shortfalls experienced as a result of the COVID-19 pandemic. While many utilities have sought approval to track and recover lost revenue related to customer non-payment and reduced electricity usage, California lawmakers are the first to act on the issue through the passage of AB 913. The new law allows electric utilities to apply to use fixed charges to recover verified revenue shortfalls experienced as a result of the pandemic’s impact on the economy and electric usage. It requires the California Public Utility Commission to assess and verify the lost revenue claims, and to ensure that costs included are just and reasonable. The law claims that securitization will stabilize rates “by smoothing rate increases over a longer period of time.” Utilities in many other states have presented similar cases before state regulators. However, many state regulators are operating without clear guidance from the legislature.
New Jersey Governor, Phil Murphy signed into law Senate Bill 232, requiring the state Department of Environmental Protection to evaluate the impacts on overburdened communities when making permitting decisions for certain types of facilities, including those facilities that are major sources of air pollution. Overburdened communities are defined as those with 35% of households qualifying as low-income, 40% of households identifying as minority or member of a tribal community, or 40% of households having limited English language proficiency. In particular, the new law imposes additional requirements on those seeking a permit for a new facility or facility expansion located in an overburdened community. Such requirements include completing an analysis of environmental impacts, including cumulative impacts of a proposed project, and organizing a public hearing to engage with affected community members.
The California legislature recently passed Assembly Bill 841, establishing requirements surrounding investment in transportation electrification and energy efficiency. Specifically, the bill would require that no less than 35% of utility investments in transportation electrification, including charging infrastructure, target underserved communities. The law would also require utilities to establish and invest in targeted energy efficiency programs designed to reduce energy and water consumption and improve air quality in schools.
Governor Phil Scott recently vetoed comprehensive climate legislation passed by both chambers of the Vermont legislature, citing concerns that the bill would expose the state to costly litigation. Both the House and Senate responded quickly by successfully overriding the governor’s veto. The new law establishes enforceable statewide greenhouse gas (GHG) emissions reduction targets up to 80% below 1990 levels by 2050 and creates a 23-member climate council tasked with developing a climate action plan with programs and initiatives necessary to achieve the state’s new GHG reduction requirements. Importantly, it also includes a citizen suit provision, allowing any person to commence legal action for the state’s failure to adhere to the law’s implementation deadlines.
Exelon recently announced plans to close two of its nuclear reactors in Illinois, blaming revenue shortfalls due to declining energy prices and market rules that make it more difficult for nuclear to compete. The utility has said that the Dresden and Byron nuclear plans will retire in the fall of 2021 without additional state support. Some stakeholders, including representatives from Illinois Gov. J.B. Pritzker’s office, believe Exelon’s “threats” of plant closures are to secure more funding from the state. Exelon receives a subsidy for other nuclear plants in Illinois, through the Future Energy Job Act passed by the state legislature in 2016. Nuclear advocates though have said that keeping the plants online will be crucial to reaching the state’s carbon-free goals. The Dresden plant is currently licensed to operate for another decade, while the Byron facility is licensed for another 20 years.
The Alabama Public Service Commission unanimously approved a $5.42 a kilowatt monthly surcharge for customers with solar power, allowing Alabama Power Co. to collect the surcharge as a fee for providing its customers with backup power. Environmental advocates claim the controversial fee is an attempt by utilities to slow the growth of rooftop solar. While other utilities charge a backup tariff, this surcharge will be the largest fee of any investor-owned electric company, according to Karl Rábago, an energy consultant with the Pace Energy and Climate Center in White Plains, N.Y.
On September 23, 2020, California Governor Gavin Newsom signed an executive order directing the state Air Resources Board (CARB) to consider regulations that would require all new cars sold in the state be zero-emission by 2035, and all new trucks and buses operated and sold in the state be zero-emission by 2045. These transportation initiatives are part of the order’s broader focus on transitioning the state’s economy away from fossil fuels. Another important component of the order directs state regulators to support workers in a low-carbon economy by developing a just transition roadmap that focuses on jobs. The order was prompted by the need to address climate change as the state is battling wildfires. Over 50% of California’s greenhouse gas pollution comes from the transportation sector.
The West is on fire and the Gulf is underwater. That’s been the general theme over the past month, with little immediate relief in sight. Over 3 million acres have burned in California so far this season, with nearly 30 active fires in the state. In order to manage increased electric load caused by soaring temperatures, the state grid operator and utilities have resorted to rolling blackouts, while the state’s utilities have been cutting power—sometimes to areas serving 150,000 customers—to avoid sparking fires with their equipment. Meanwhile, Colorado, Idaho, Oregon and Utah are all experiencing intense fire seasons exacerbated by significant heat, drought conditions and strong winds. Oregon is investigating whether downed power lines may have contributed to several of its fires. In the Gulf, the problem has been with water—primarily along the Louisiana and Texas coasts. The area is still recovering from Hurricanes Laura and Sally, with Tropical Storm Beta now moving heavy rain and storm surges to an area already inundated by water. Hurricane Laura knocked out power to tens of thousands of customers in Louisiana, while Hurricane Sally left an additional 500,000 customers without electricity across Gulf states. As a measure of how active the 2020 hurricane season has been, the U.S. National Hurricane Center ran out of storm names for only the second time in its history and is having to resort to naming storms after letters in the Greek alphabet. While the 2010s were by far the most destructive and costly decade since the 1980s for natural disasters, the 2020s are certainly off to an ominous start.
The Environmental Protection Agency issued a final rule relaxing previous effluent limitation guidelines for wastewater from coal facilities. The final rule is similar to the one proposed in 2019, but extends the timeline for plants to comply and exempts any coal facilities closing, repowering or switching to natural gas by 2028. The EPA’s revisions will apply to wastewater generated at coal-fired power plants when sulfur dioxide is removed from the facilities’ emissions, as well as water used to flush the bottom ash out of plants and into coal ash pits. Additionally, the EPA approved authority for Wyoming to regulate underground carbon dioxide injection wells as part of the state’s effort to capture emissions from coal-fired power plants. The decision makes Wyoming the second state, after North Dakota, with primary enforcement authority over these wells under the Safe Drinking Water Act.
The Federal Energy Regulatory Commission (FERC) formally rejected a proposal by the New York Independent System Operator (NYISO) to better promote renewables in its capacity market. The commission called the NYISO’s request “unjust and unreasonable and unduly discriminatory” because it favored resources supported by state policy—specifically nuclear power plants and renewables—over those that do not receive such support, such as fossil fuel generators. Separately, FERC also denied qualifying facility (QF) status to a facility in Montana with a net capacity of 80 MW of solar power, the legal threshold under the Public Utility Regulatory Policies Act. The commission noted that because the facility’s gross capacity is 160 MW, it does not meet the legal threshold for a QF. Further, the commission cited but did not rule, on the presence of a 50 MW battery storage unit, specifically, whether the battery is a separate QF completely as well as how battery storage should be considered, if at all, in determining a QF's power production capacity. In a separate decision, FERC approved a new rule that will likely boost renewables by allowing behind the (electricity) meter products like rooftop solar arrays, batteries, electric vehicles, and demand response programs to band together and participate in wholesale energy markets. These products, and the companies that own them, will now potentially have access to new revenue streams that further incentivize the adoption of renewable products. On the fossil ledger, the commission has implemented a new process for responding to requests for rehearing in light of the U.S. Court of Appeals for the District of Columbia Circuit's ruling that FERC lacks authority to use tolling orders. The commission, which must abide by the 30-day response deadline in both the Natural Gas Act and the Federal Power Act, has issued an order indicating that requests may be deemed denied if FERC fails to respond within that time period. This will allow petitioners to appeal and move their case to federal court, should they choose to, in a much timelier fashion.
Congress is moving toward enacting a package of energy legislation. The House is expected to pass the Clean Economy Jobs and Innovation Act (H.R. 4447), a major piece of energy legislation that combines numerous introduced bills into a single 900-page piece of legislation that includes provisions on building codes, energy efficiency, workforce training, research and development, environmental justice, critical minerals and fighting climate change. Meanwhile, a much smaller (in scope) Senate bill has seen its fortunes for passage improve following a bipartisan agreement on hydrofluorocarbons. The American Energy Innovation Act does not include many of the provisions contained in the House bill. Thus, it remains unclear if the two chambers can reach an agreement on a final energy package before the 116th Congress wraps up at the end of this year.
The U.S. Department of Agriculture recently announced $371 million to build and improve critical electric infrastructure in 11 states—Alaska, Arkansas, Iowa, Kentucky, Michigan, Minnesota, Nebraska, New Mexico, North Carolina, South Dakota and Wisconsin. The funding will cover 10 projects in these states to help build and improve electric service infrastructure and modernize power grids in rural communities.
NCSL’s energy program recently hosted a webinar focused on issues facing the energy workforce as part of the Energy, Environment and Transportation Fall 2020 Webinar Series. The Building the 21st Century Energy Workforce webinar hosted policy and industry experts to discuss how energy transitions, large-scale workforce retirements, and the COVID-19 pandemic are affecting an energy sector that employs 6.7 million Americans. You can access presentation slides and a recording of the webinar here.
As part of NCSL’s Base Camp 2020, Kristy Hartman, NCSL energy program director, hosted a session focused on the role of state and federal regulators in shaping energy markets and generation mix. The webinar featured legal and policy experts who discussed the impact of recent federal regulatory actions expanding federal jurisdiction and how these policies could shift with a change in administration. Panelists also highlighted the need for regional coordination to ensure policy objectives aren’t frustrated by conflicting state policies or market response. Click here to learn more about NCSL’s Base Camp 2020 and The State-Federal Clash Over the Energy Mix.
The U.S. Department of Energy’s Office of Cybersecurity, Energy Security, and Emergency Response (CESER) has created a “Hurricane Hub” to provide planning and emergency response support to states, localities, Tribes and the energy industry. DOE is designated as the Energy Sector-Specific Agency for energy emergencies under the U.S. Department of Homeland Security’s National Response Framework. In this role, DOE works to support public and private sector partners before and during natural disasters. Its Hurricane Hub is one such effort, offering situation reports on the various storms and their recovery efforts.
The American Council for an Energy-Efficient Economy (ACEEE) issued a new report finding that as some states end their moratoriums on utility shutoffs, one-quarter of all U.S. households, and two-thirds of low-income households, are struggling with high energy burdens, spending more than 6% of their income on energy bills. The report also finds that, compared to white households, Black, Hispanic and Native American households spend more of their income on energy costs, with Black households spending 43% more, Hispanic households spending 20% more and Native American households spending 45% more.
Sierra Club, Plug In America, Electrification Coalition and Forth Mobility partnered up to create the fourth edition of “AchiEVe: Model Policies to Accelerate Electric Vehicle Adoption”, a toolkit offering options on a range of policies aimed at increasing electric vehicle adoption. The report includes information on direct sales legislation for passenger vehicles, recommendations for dealerships, policies targeting businesses and how they can electrify, and policies for electrifying medium- and heavy-duty vehicles.