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In this episode we continue our consideration of what Bill Massey in our first episode this season called "the battle of the statistics" between monopoly and competition advocates. We talk with Michael Giberson, an economist and senior fellow for energy with the R Street Institute, who notes the importance of taking statistics into proper context when attempting to contrast between monopoly utility regulation and competitive markets – particularly the need to account for the impact of inflation when looking at changes in electricity prices over time.
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Since the dawn of retail energy competition a quarter century ago, various factions pro and con have engaged in a "battle of the statistics" (as former FERC Commissioner Bill Massey termed it in Episode 1 of this season) regarding the benefits that consumers – particularly residential customers – obtain from competition in retail electricity service. Mostly, these statistical arguments have centered around price savings that residential consumers may or may not have obtained from having a competitive choice in energy suppliers.
In this episode, we hear from Constellation Energy's Rich Spilky, who on behalf of the Retail Energy Supply Association breaks down for us the body of RESA-sponsored work by the late former Illinois utility regulator Phil O'Connor that objectively sought to identify the consumer benefits of customer choice over time, with the price data adjusted for inflation. Spilky assisted O'Connor in these data analyses, which sought to objectively identify which states had effective retail energy competition, and to use federal government statistics to compare the performance of those retail choice states against that of states that retained traditional monopoly price regulation.
The results have been compelling. For both studies that Spilky assisted O'Connor in preparing – Restructuring Recharged and The Great Divergence – as well as in the analyses that Spilky has conducted independently since, this objective methodology has shown that electricity consumers in the 14 jurisdictions with effective customer choice have generally experienced downward price trends while their counterparts without choice in monopoly states have generally experienced upward price trends.
The analyses clearly show "there's something good going on in the competitive states, pricewise and cost-containmentwise, that's not happening in the monopoly states," Spilky says. "I think it's remarkable."Support the show
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The Biden administration in January announced a pause in reviewing export permits for liquefied natural gas (LNG) in order to better understand the impacts that the United States' world-leading LNG exports will have on domestic natural gas prices, climate change, and environmental equity. Could the pause threaten the U.S.'s position as the world's top LNG supplier?
Charlie Riedl, executive director of the Center for LNG, speaks to the the national security implications of the administration's pause – U.S. LNG was instrumental in Europe's pivot away from Russian gas in the wake of the Ukraine invasion – and says the regulatory action has prompted concerns among European allies and buyers regarding the reliability of the United States as an energy supplier.
The economic and environmental impacts of LNG exports have been studied and restudied, says Riedl, who sees election-year politics prompting the announced review. Given today's record-low prices for natural gas in the U.S. and the projected impact of the Environmental Protection Agency's recently finalized methane emissions-monitoring rules, the outcome of the new review should be a net positive for the industry, he suggests.Support the show
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The debate over the benefits of competition for energy consumers has persisted since the advent of retail competition for electricity and natural gas more than two decades ago. Consumers are stuck in a limbo between traditional monopoly regulation and competitive choice because the movement to deregulate energy pricing (much as most other formerly price-regulated industries were deregulated decades ago) has stalled in the wake of the catastrophic collapse of California's disastrously ill-designed market at the turn of the century.
Ever since, competition advocates have sought to expand the dozen or more states where competitive energy supply is available to consumers, but mostly have been thwarted in the face of monopoly utilities' deep-pocketed opposition. Today, emboldened monopoly utility interests, along with well-meaning but misguided consumer advocates, are supporting legislation in at least two states – Maryland and Massachusetts – that would effectively end competitive retail energy supply choices for residential customers.
Travis Kavulla, vice president of regulatory affairs at NRG Energy, is on the front lines of the battle by competitive energy suppliers to preserve customer choice for residential consumers. The former Montana utility regulator discusses the headwinds in states like Maryland and Massachusetts, but also the opportunities to expand retail energy choice in other states – such as South Carolina and Louisiana – where elected officials seek to reign in the increasingly higher costs their constituents pay to monopoly utility suppliers for electricity and natural gas.Support the show
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Our discussion continues with David Doniger, Natural Resources Defense Council senior attorney, who notes that flexible market-based emissions cap-and-trade programs have been applied somewhat ubiquitously to address a range of environmental issues, from eliminating lead in gasoline, to combatting acid rain, to phasing out ozone-depleting chemicals – even to allocating catch limits for herring, an issue incidentally connected to cases now pending before the Supreme Court challenging the long-standing legal precedent known as the Chevron doctrine.
But Congress and the Supreme Court have rejected attempts to apply this flexible market-based approach to controlling greenhouse gas emissions. Today, few in Washington even attempt to suggest emissions cap-and-trade as a response to greenhouse warming, and instead call for Congress to put a "price" on carbon. But Doniger notes that putting a price on carbon involves establishing a new tax, and he doesn't see a carbon tax gaining traction among Republicans in Congress.
"I don't think we're going to see carbon taxes because the one whole party has become the anti-tax party. It's a dead letter to one whole party," Doniger says. But he does see merit to cap-and trade, and points to bipartisan congressional agreement in 2017 to employ cap-and-trade in phasing down ozone-depleting HFCs.
"There is life in the old cap-and-trade design yet," Doniger says. "There are variations of emissions trading that we continue to promote because the flexibility reduces costs for industry and therefore lets them reach farther for the same total regulatory costs."Support the show
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Who better to discuss the ramifications of the Supreme Court's apparent path toward striking down the long-standing legal precedent known as the Chevron doctrine than the lawyer who argued the original case 40 years ago?
Natural Resources Defense Council Senior Attorney David Doniger is a lion of the environmental movement who has been instrumental in the environmental group's efforts to rein in air pollution from fossil fuels and emissions of ozone-depleting chemicals. He has been a fixture at the NRDC since 1978, except for the years during the Clinton administration when he played key environmental roles at both the White House and the Environmental Protection Agency.
Doniger discusses recent oral arguments before the Supreme Court in a case challenging the Chevron doctrine and the ramifications of unwinding the regulatory deference legal principle. We also discuss the history of efforts to regulate carbon emissions that contribute to climate change, and how a key Supreme Court decision blocked the government from adopting economically efficient solutions and limits the Environmental Protection Agency to promoting technology-based solutions in a rulemaking expected to be finalized in the coming months.Support the show
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Energy lawyer and law school professor William Massey, at 10 years the longest-serving commissioner ever at the Federal Energy Regulatory Commission, discusses the vast body of legal precedent finding FERC has expansive authority under the Federal Power Act and Natural Gas Act, and reviews pending cases before the Supreme Court that may test whether this expansive view of FERC's authority will continue under the court's new Major Questions Doctrine.
"The courts have said FERC’s authority is at its zenith when it comes to remedying undue discrimination. And FERC has remembered that and bases many of its policy choices on finding undue discrimination in either natural gas or electricity markets," Massey says. "We'll have to wait and see whether this Major Questions Doctrine, as it plays out over the next few years, whether it limits FERC’s authority in certain ways."
Massey also speaks to FERC's early days restructuring natural gas and electricity markets in the 1990s, the vast economic benefits that consumers have accrued as a result, and suggests that opening up the electricity sector to greater competitive forces will help policy makers bring about the clean-energy transition in response to the climate change threat at least cost to consumers.Support the show
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The world's burgeoning billions have been kept fed thanks to the "Green Revolution" of the 20th century, which featured new hybridized crops with enhanced yields. Often deemed a miracle of science, it was also made possible by energy-intensive industrial fertilizers. Fritz Haber and Carl Bosch were each awarded the Nobel Prize for their contributions to the widely used processes for synthesizing ammonia from nitrogen taken from ambient air and hydrogen derived from fossil fuels. These ammonia-based nitrogen fertilizers, along with mined fertilizers, today help to feed the world, something Thomas Robert Malthus never envisioned in his 18th century writings warning of overpopulation.
Today we are concerned with another green revolution that seeks to end the use of fossil fuels, which when burned create emissions that are dangerously warming the atmosphere and creating the need for a second agricultural revolution to ensure the world's billions can still be fed in the face of drastic climatic extremes. So as we look to decarbonize the world's economy and phase out the use of fossil fuels, what is the fertilizer industry doing to green its highly fossil fuel-dependent industrial and mining processes?
We talk with Alzbeta Klein, CEO of the International Fertilizer Association, freshly returned from COP28 in Dubai, where for the first time the world's nations agreed to the need to phase out fossil fuels to temper the runaway climate change we are experiencing. "Food is energy, and we need to understand that connection," Klein says. "We need to understand the transition for the energy markets, and we need to understand the transition for the food market because the two go hand-in-hand."
We also hear from Hiro Iwanaga of Talus Renewables, a nitrogen fertilizer startup at the forefront of using photovoltaics to crack hydrogen from water, rather than fossil fuels. Also freshly returned from Dubai, Iwanaga talks about his company's demonstration project now under way in Kenya, and the company's next projects here in the United States. "The green hydrogen tax credit that was passed as part of the Inflation Reduction Act makes our product cost-competitive," he explains.
Also, Brandon Kail of Rocky Mountain BioAg speaks to his company's approach employing soil microbes as the foundation of a non-fossil fuel-based approach to plant nutrition, and Divina Gracia P. Rodriguez of the Norwegian Institute of Bioeconomy Research tells us about an EU-funded project in Ethiopia she is spearheading that seeks to address barriers to the adoption of human urine-based fertilizers.Support the show
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Matthew Hunter was a power trader in the Western market in 2000, when California's poorly designed and managed electricity market imploded costing consumers hundreds of millions of dollars. After that, he spent much of his career at the Federal Energy Regulatory Commission and the Commodities Futures Trading Commission. He gives us a deep dive into hedging – futures markets, derivatives and swaps – and how these complex price-risk mechanisms don't necessarily protect consumers in the end.
A leading reason that California's market failed so spectacularly was because state law prohibited the state's Big Three utilities from hedging their price risk. At the height of the resulting energy and financial crisis, California officials rebuffed FERC's recommendations to allow the utilities to hedge their spot-market risk, and instead intervened in the market to purchase long-term power at crisis-inflated costs, saddling the state's consumers with those costs for the last two decades.
Fast-forward to the extreme weather-induced collapse of the Texas market in 2021, and Hunter predicts that, as in California, consumers will be again stuck with the tab. Hedging instruments are generally pegged to a price index for the commodity, and Hunter asserts that, in Texas, unreasonably high natural gas index prices translated to the price indices for electricity, contributing to the dramatic escalation in electricity prices. Hunter objects to consumers being the backstop for financial losses incurred by speculators in the market.
"If you go from a nominally and totally reasonable . . . gas price to an unreasonable gas price that then transfers itself to an unreasonable power price through contract terms of index-to-index, then it seems perfectly reasonable to roll back the index gas price to roll back the index power price to something that is reasonable," Hunter asserts. "I am not saying that it shouldn't be a scarcity value (but) there's no reason for gas even under scarcity conditions to be twelve hundred dollars per MMBtu or a thousand dollars."Support the show
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State Senator Tom Davis of South Carolina is a rare breed in politics today. At a time when no other state is actively considering competitive reforms to their traditionally monopoly-regulated utility sectors, and many politicians in states already benefiting from competition in electricity are promoting anticompetitive measures, he is leading the push for his state's consumers and economy to benefit from greater customer choice and competition among electricity providers.
The Republican lawmaker discusses how the multibillion-dollar V.C. Summer nuclear debacle in South Carolina in 2017 jolted him and other Palmetto state lawmakers to take a deep dive into utility regulation. He provides specific details of the electricity reform legislative proposal he will unveil Nov. 30 for consideration by the Legislature during next year's session. A political pragmatist, Davis looks to move the entrenched monopoly steamship by degrees.
"The ideal at the end of the day is going to be a system where providers have to compete and the ones that can generate power most efficiently and most cheaply and most reliably win, and that consumers have choices on their side," Davis says. But he suggests it's not politically realistic to think the ideal outcome can be accomplished in one fell swoop.
"I think it's important for us to move incrementally" in pursuit of the ideal during next year's legislative session, Davis says. Calling politics "the art of the possible," he described a legislative process that ponders, "What can we get across the finish line? What can we get out of subcommittee and full committee and if it gets to the floor, what can we do to overcome anybody who wants to object or to filibuster?"
With 2024 being an election year, Davis says he is hitting the ground running to accomplish legislative objectives before campaigning and politics become a distraction. "2024 is going to be an incredibly busy year from an electoral perspective. And so that's why it's important right now . . . to focus on some of these issues before we all get swept up in the politics of campaigns and elections," he says. "It's important to dial our energy into, and our focus into, what are some important public policy reforms to accomplish in 2024. That's why I'm placing so much emphasis on this right now because I do think there's a window of opportunity for us."
Regardless of how far along the continuum to a competitive ideal the legislative process allows for next year, it won't be the endgame, Davis suggests, promising that subsequent legislative sessions will see further efforts to reform the state's electricity sector to produce better outcomes for consumers by moving the state ever further along the continuum to a competitive ideal. "It's absolutely essential that we bring to bear on that system of power generation more market forces, more competition, because you're not going to get the best technologies, you're not going to get the lowest costs, you're not going to move toward what I think is a better future if you don't have that dynamic working in that space."Support the show
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More than two decades ago when the Federal Energy Regulatory Commission sought to put large regional wholesale power markets in place nationally, Western states were a hotbed of opposition to the since-abandoned goal. But today there are two competing proposals for competitive day-ahead wholesale power markets as the region has come to recognize that market-based regionalization helps cost-effectively and reliably integrate increasing amounts of variable renewable energy resources.
The Western Power Trading Forum's Scott Miller breaks those down for us, and explains why he's optimistic that the two nascent efforts under way today will one day result in establishing a Western regional transmission organization, or RTO.
"The desire to get to an RTO with the simplicity of a single tariff is something that I think will manifest itself as people get some experience," Miller says. "I'm betting on the fact that once people get some experience in this day-head market, they're going to want to get to the single tariff, with probably some Western twists that are different."Support the show
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UK-based Octopus Energy has seen extraordinary growth since launched in 2015 by fund-management firm Octopus Group. It's heavily invested in renewable energy in the UK and elsewhere, and it has retail energy supply operations in Australia, Germany, Italy, Japan and New Zealand, with its U.S. arm headquartered in Houston. As its name would suggest, Octopus has its tentacles everywhere all at once in competitive energy supply, it would seem. And that reach promises to extend even further with the company's Kraken software platform, which it doesn't keep to itself but licenses to other retail energy providers.
The fact that the company chose Texas as the first energy market in the U.S. to invest in serves as a strong counterpoint to baseless criticisms of the ERCOT market in the wake of the deadly Winter Storm Uri outage. It's simple: Texas, with its wholesale power market unencumbered by the price caps hobbling competitive eletricity markets in the Northeast, provides the price signals Octopus needs to actively engage its residential customers in aggregating demand response and distributed solar energy resources, and shares the proceeds the company earns in the wholesale market with its participating retail customers. Its recent pilot during the month of August saw participants earning, on average, 20 cents per kilowatt-hour on their self-produced renewable energy they, through Octopus, sold back into the grid rather than consume during critical events in ERCOT, or roughly twice what might have been available via net metering. Some customers made nearly $1,000 that month for arbitraging their energy use and "exporting" their clean energy to the grid, says Octopus Energy US CEO Michael Lee.
"What we're really doing is really aligning customers to say, yes, you want to produce your power and you want to sell it back," he says. "Let's move on beyond this product called net metering, and let's align the financial outcomes to the customers." It's an example of what Lee describes as moving beyond the "Retail 1.0" offered by most energy suppliers today to a much more consumer-centric "Retail 2.0."
"Usually, net metering is a one-for-one credit. But because we were able to find financial incentives they were getting more than one-for-one and some people were getting a 20-to-one credit because they were getting $1 or $2 a kilowatt-hour for their exports for the entire month of August," Lee says of the recently concluded pilot. "My personal opinion is that Retail 1.0 has quite underserved the market. There's a huge opportunity to completely rethink what retail energy is going forward and what it looks like for customers and how that benefits all the players, the grid, the utilities – everyone."Support the show
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Electric utility monopolies have captured headlines in recent years by sparking catastrophic wildfires and fomenting public corruption scandals in several states. "There are probably other things like this going on we just haven't found out about," remarks John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance. We spoke with him about his recent article in the American Prospect, How private monopolies fuel climate disaster and public corruption.
Farrell speaks to how the investor-owned utility's interests in earning a return for its shareholders typically don't align with the interests of its customers or the environment. "You have concentrated ownership and power over the system in a way that's not terribly accountable to people," Farrell observes.
Farrell advocates municipalization, seeing publicly owned monopolies as an improvement over for-profit utility monopolies, particularly when it comes to cost of capital. But he also advocates for greater competition in electricity, and for adopting measures such as independent distribution system management and quarantining the monopoly from competitive markets. "When you create a competitive market, it really needs to be truly competitive. And the idea of letting the monopoly continue to participate is problematic," he says.Support the show
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The flood of financial headlines on the offshore wind industry have been quite bearish in recent months. The industry has been buffetted by strong post-COVID headwinds – dramatic inflationary pressures and supply chain problems – that have rendered several Atlantic coast projects uneconomic. After writing down its assets by $2.3 billion, Orsted's stock has been punished by the market as the company threatens to walk away from uneconomic projects unless their terms can be renegotiated to reflect changed economic circumstances. Offering another barometer of the deep bear market for offshore wind were recent lease auctions in the U.S. and UK, which received little to no interest.
Putting this all into perspective for us is Kris Ohleth, executive director at the Special Initiative for Offshore Wind. While acknowledging the near- and medium-term challenges churning the waters for the industry, Ohleth remains bullish on the long-term prospects for offshore wind in the United States:
"If you look at the decarbonization and clean-energy goals that we have for this nation, there is literally and absolutely no way to meet them without offshore wind. It is a technology of scale that is the only one, in fact, available for coastal states – for many coastal states in the United States – to meet their state and the overall national clean-energy targets that we need, especially as we continue to electrify our transportation systems and our building units. So there's a real demand for it. And I believe that the market will recorrect and we will make additional incremental progress towards commercialization in the United States in the next decade."Support the show
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The Environmental Protection Agency's new proposed rules to significantly crack down on carbon emissions from fossil fuel-fired power plants, as published, promises to aggravate growing power grid reliability concerns, EPSA president and CEO Todd Snitchler suggests. "I think we need to be thinking a little more holistically and not siloed in the rules in order for us to make sure that we can achieve the outcomes that policymakers want us to achieve, while still ensuring system reliability. That has to be first and foremost," Snitchler says.
More broadly on grid-reliability concerns, Snitchler rejects assertions by some that competitive markets and RTOs are particularly vulnerable to outages and reliability issues. "I know that there are a number of views about what the right model is," he says, but he notes there are increasing reliability concerns in monopoly-regulated states as well as the clean-energy transition ratchets up. "I don't think there's a one-size-fits-all and we should just copy a different market because it allows vertically integrated utilities to carry the day because, even in that example, they're not able to get done, I think, some of the things that maybe some advocates would say that they can."
While there's little expectation the industry concerns will benefit anytime soon from a historically fractured Congress, Snitchler suggests lawmakers missed a key opportunity for bipartisan agreement during a recent debate over whether to include energy project permitting reforms in the Inflation Reduction Act.
"There was a time when energy wasn't quite so partisan. I think we would do well to try to think about constituents first," the former Ohio lawmaker and utility regulator says. "If you need to have transmission, and we all agree that we're going to need to have natural gas pipelines in order to power the system, those should go together. And that's where I think room for compromise would exist. That would be a best-case scenario in Washington because both sides would have something to gain. And they would be able to take that home and say, look, I won. And it would, in the end, result in a more reliable, more efficient power system."Support the show
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Commissioner Mark Christie of the Federal Energy Regulatory Commission has been a prominent advocate of the need to overhaul the competitive market design at the heart of the regional wholesale power markets that have evolved in the U.S. over the past 25 years ("It's time to reconsider single-clearing price mechanisms in U.S. energy markets", Energy Law Journal, May 2, 2023).
The fossil fuel-fired "dispatchable" generation units that Christie sees as crucial to ensuring power grid reliability are retiring faster than passively fueled renewable energy resources can be brought on to replace them. In our discussion, Commissioner Christie makes clear that his top target for reform is capacity markets, not the security-constrained economic dispatch model employing locational marginal pricing, or LMP, in real-time and day-ahead spot markets. LMP is the central design element of all state and regional competitive wholesale power markets in the U.S.
"I think in the real-time energy markets, the real-time energy markets and the use of LMP has saved consumers money by getting economic dispatch, by getting the least-cost unit dispatched. So I think in the real-time energy markets, I think there has been consumer savings," Christie says.
"There's many functions to RTOs and I think that the most important function of all, and the one I think where they’ve provided undisputed benefits, has been to provide a larger balancing authority," he says, adding: "Probably the biggest single benefit of RTOs has been that they've provided a regional system operator, which I think has been of tremendous benefit to reliability and also, I think, to cost savings because they can dispatch cheaper resources across a broader territory."
But Christie, an ardent states rights advocate, does not see FERC's role as ensuring these consumer-friendly regional power markets are ultimately in place everywhere, which former FERC Chairman Pat Wood attempted to do 20 years ago. "How you regulate your utilities is really an individual state decision" to make, and not FERC's, he says, calling Wood's Standard Market Design "massive overreach and an invasion of basically state retail authority."
Nevertheless, Christie says, "I don't think that, frankly, the real-time energy markets, which use LMP, what's called locational marginal pricing, are really the first place we ought to be concerned. I think the real concern and we ought to focus on first is in the capacity markets," Christie elaborated, asserting that capacity markets should be replaced with utility self-supply programs that incorporate integrated resource planning by state regulators. IRP is a central element of standard monopoly utility regulation.
"I think an IRP process – it gets you the best mix of a balanced holistic approach where you can balance all the different resources that you need and try to get them at the best cost to consumers, which is what the goal ought to be," Christie says. "Everything we do as regulators in the energy area has got to be about what's good for consumers. We have to look at what is going to get consumers reliable power at the least cost. And I think everything we do, we’ve got to be asking ourselves, is this the best thing for consumers?"Support the show
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Massachusetts is actively considering Gov. Maura Healey's longstanding demand to end competitive retail energy sales to residential customers. As part of this debate in Massachusetts and elsewhere, the Retail Energy Advancement League commissioned the Analysis Group's Paul Hibbard, a former Massachusetts utility regulator, to provide a comprehensive examination of retail energy choice. We talk with the report's author as well as Chris Ercoli, REAL's president and CEO.
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There's something like a couple dozen proposals now for development of small modular reactors (SMRs), widely seen as the future of nuclear power as a participant in the clean-energy transition. Publicly traded NuScale* is at the vanguard of this trend. We spoke with the Nuclear Energy Institute's Matt Crozat about the prospects for SMRs and nuclear's role in the clean-energy transition at a time when we thought the first of Georgia Power's new Vogtle nuclear power units would have already been brought online. But a "degraded hydrogen seal" was only the latest delay for the $35 billion expansion project funded by ratepayers captive to a monopoly utility supplier. We also spoke at a time when Putin's invasion of Ukraine became even more fraught amid reports Russian troops may have planted explosives at the Zaporizhzhia nuclear plant they've commandeered.
Crozat sees the prospect of new nuclear technologies and the growing acceptance among the public and policy makers of nuclear's critical role in the clean-energy transition as reasons for optimism on nuclear's future.
"We have as a starting point all of these utilities that have commitments to be carbon-free by mid-century. And that's creating a lot of pressure looking for technologies that can help bring low-carbon solutions into the portfolio, which also requires making sure you have the ability to provide the reliability and resilience to the grid that we need to have that be successful. And nuclear is standing out as one of the possible technologies that can do a lot of the roles alongside of wind and solar and batteries and these others, but it's really becoming something – it needs something that looks like nuclear to make the system work," Crozat says. "A lot of people are coming to this conclusion. At the same moment, we have new technologies that are offering nuclear in different packages than before. And it's really changing the calculus as people are approaching this as a possibility."
Our conversation touches on new nuclear, the apparent lack of investor interest in NuScale despite its regulatory progress, carbon taxes, nuclear waste disposal, competitive markets versus monopoly regulation, exporting U.S. nuclear technology, and the prospects for sabotage at Ukraine's Zaporizhzhia plant.
As for Zaporizhzhia, Crozat doubts Russia will sabotage the plant: "Russia itself has a very long-term strategic interest in having nuclear energy being a viable strategic outcome. They want to sell reactors, too."
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Burned by an aborted nuclear power plant new build that saddled the state's consumers with hundreds of millions of dollars in needless costs for years to come, South Carolina's Act 187 established a legislative study committee to ponder whether the state's electricity consumers might not be better off with competitive reforms of the Palmetto State's 150-year-old monopoly regulatory regime. A centerpiece of the committee's considerations is a sweeping analysis of the competitive options the state could pursue, comprehensively put together by the Brattle Group.
We talk with two of the report's authors – John Tsoukalis, principal, and Andrew Levitt, senior consultant, at the Brattle Group – about their report with the top-line conclusion that South Carolina electricity consumers could save up to $300 million annually if the state's utilities participated in some form of large regional transmission pooling organization. The biggest cost savings, they determined, among the various scenarios considered in the report, were projected from a scenario envisioning if the entire Southeast region, not just South Carolina, were to throw in with PJM Interconnection, the large regional transmission operator encompassing from Illinois across to Pennsylvania, New Jersey, Maryland (PJM) and Virginia, in order to create a large, diverse wholesale power marketplace that helps minimize the considerable costs of meeting resource needs and operating a reliable powergrid.
As directed by Act 187, the Brattle analysis also examined the potential consumer savings available from conducting a consolidated statewide integrated resource planning (IRP) process, rather than the less efficient utility-by-utility IRP planning that the state's utilities undertake with regulators to determine development or acquisition of new generation resources to meet reliability needs – and then performing competitive solicitations to help develop any new resources.
Also as required by the law compelling Brattle's analysis, the report delved into the Third Rail of electricity politics: restructuring utility regulatory oversight to provide some form of competition in retail sales to consumers, whether residential or the large industrial and commercial customers. "Part of what I guess people don't really understand is, you can't really do retail choice unless you have competitive wholesale markets that are working already," Tsoukalis explains, calling the potentially near-term savings from grid regionalization the "low-hanging fruit" of the options available to lawmakers to consider going forward.
"There's so many options" in the report for lawmakers to consider, Levitt notes. "You can take a mix-and-match approach, different ways through governance, different ways to do transmission planning. You can share these things and not share those things. I'm 100% confident that there's a solution out there that will match the political will that's present at the moment. I don't myself know what the solution will be, but we're available to help craft it."Support the show
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Grid Strategy's Rob Gramlich and Electric Advisors Consulting's Frank Lacey detail the findings of a policy analysis paper they co-authored, Serving Customers Best: The Benefits of Competitive Electric Vehicle Charging Stations.* We also talk with Doug Kantor, general counsel for NACS, the international association for the convenience store industry, which sponsored the policy analysis.
The analysis found EV charging customers will be served best if utilities are not permitted to extend their monopoly into the nascent retail EV charging business. Yet utility regulators in states across the country are already ordering utility investments in public EV charging stations. The lack of proper economic incentives in the utility regulatory model is already becoming clear as reports abound that utility charging stations are often out of commission, in remote areas, or otherwise unavailable to drivers needing to charge their vehicles.
Convenience stores view transportation electrification as an opportunity, not a threat, to the century-old gasoline retailing business, Kantor says. NACS sponsored the policy analysis to highlight the "potholes in the road" facing convenience stores, he says. "The way electricity markets work now doesn't work really well with a competitive business model."
The paper identifies utility regulatory policies that will discourage private-sector investment in EV charging infrastructure and urges policy makers to address these problems now rather than later when the costs to consumers could be much higher.
"We're at the very beginning of this. It will be much more efficient for everybody if we get this right now instead of waiting. If we have to undo things that we've already done, that becomes costly and inefficient and subject to litigation," Lacey notes.
"There's going to be a tremendous amount of investment and [to] achieve the investment needs we have to do it efficiently. And we need to make it work best for consumers," Gramlich says. Utilities have a "key role" to play in electrification and the overall transition to a clean-energy economy, but EV charging should not be part of that, he says. "There are disadvantages to utilities being involved in certain activities ... that could harm service and could raise costs. And we want to get, in this sector like the other sectors, the best service at the lowest cost."
* Energy Markets Podcast Host Bryan Lee is a co-author of the NACS-sponsored EV charging policy analysis paper.Support the show
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