Don’t Hold Your Breath for Any Progress Stemming from the Joint Statement by NRDC and EEI

In their widely heralded “joint statement” last week, the Edison Electric Institute (EEI) and the Natural Resources Defense Council (NRDC) articulated a “path-breaking” agreement to enable more efficiency and clean energy from utilities. At first blush it seemed to reflect an emerging understanding of the need to sustain energy utilities while enabling more efficiency initiatives and customer-owned distribution in ways that can improve the environment.

But beyond the EEI’s press release and NRDC’s optimism, the reality is their statement is a muted effort to help states advance their regulations with each of their priorities front of mind. It was hardly a call-to-action some are describing it as. 

Since I wrote about this last week and raised several similar issues the statement seems designed to address,  let’s parse the words of the joint statement to see what, if anything, will likely come from this pact.

If you haven’t yet, you can find the joint statement here; you can also find  comments by the NRDC’s Ralph Cavanagh here and EEI’s press release here.  

First, we all have to realize that real progress only can be made only by state utility commissions, many of which seemed unwilling to seriously consider moving beyond regulatory compacts in states that for decades have rewarded utilities only, or mostly, for selling more kilowatt hours.  Now that electricity demand nationally is flattening and may be declining, the time has come for tradition-bound states to re-engineer the traditional regulatory compact.

Here are some questions to help determine if the thrust of the recommendations in the joint statement will bear fruit:

From recommendation #1: “utility businesses should focus on meeting customers’ energy service needs” and “should not focus on levels of retail commodity sales.”As perhaps the most over-arching principle in the joint statement, this will be the toughest nut to crack. In remarks to yours truly, Cavanagh was quick to cite his “repeated unwillingness to deliver some kind of ‘mission accomplished’ message.”

From recommendations #2: commissions “should provide for reasonable and predictable annual adjustments in utilities’ authorized non-fuel revenue requirements.” I agree. But watch closely for how regulators define “reasonable”. We’re talking about fixed charges needed to improve and protect the grid and enable smart meters; but those charges should stop there and not penalize ratepayers who choose to generate some of their own electricity. There could be several ‘devils’ lurking in those details.

From recommendation(s) #3: “ . . .operators of on-site distributed generation must provide reasonable cost-based compensation for the utility services they use while being compensated fairly for the services they provide.” Here we go again, what’s reasonable? And what does the latter half of that statement mean for net metering, which wasn’t mentioned anywhere? Compensated at the retail rate? At wholesale?

“Customers deserve the opportunity to interconnect distributed generation to the grid quickly and easily.” There are numerous hurdles some solar power users have to climb through to make their rooftop solar systems function in sync with the electricity they still need from the utility. Because solar panels generate electricity when it’s needed most on very hot days and even some very cold days, the permitting rules and other requirements  should be removed or least streamlined.

From recommendation(s) #4: “Utilities deserve assurances that recovery of their authorized non-fuel costs will not vary with fluctuations in electricity use.”  I could not agree more, provided those costs are truly reasonable and don’t effectively penalize solar rooftop owners. I think you can see a common thread emerging from these recommendations that call for decoupling utility profits from electricity sales.

“Customers deserve assurances that costs will not be shifted unreasonably to them from other customers.” Careful here. One of the quickest rebuttals to enabling rooftop solar is that utilities will incur new costs that non-solar customers shouldn’t have to pay for. I’ve yet to see any credible accounting of that.  If anything, there may very be a measurable net benefit to society from rooftop solar from reduced emissions and stress on the grid, especially during times of peak demand.  Will utilities and regulators consider that in a rulemaking? It should work both ways. I addressed the value of solar in a column last month here.

Recommendation #5: “. . . consider expanding investor-owned utilities’ earnings opportunities to include performance based incentives tied to benefits delivered to their customers”  . . . that “improve energy efficiency, integrate energy generation and improve grids.”  Yes to all the implications this statement implies, although â€" again - it leaves much to interpretation. Most important, let’s provide incentives for utilities to make more money for their shareholders IF they deliver the services that their regional economies need and which contribute to cleaner air and water that are now possible with technological advances. Let’s authorize higher rates reflecting these priorities.

The other three recommendations seem to hit on these aforementioned priorities so I’ll stop there.

Of the 34 states (according to Cavanagh) that have yet to decouple utility profits from electricity sales, here’s a short list of states whose investor-owned utilities have the most work to do. We’re talking about â€" in alphabetical order â€" Alabama, Florida, Kansas, Kentucky, Mississippi, Missouri, South Carolina, Virginia and West Virginia.

In my column last week I showcased how the Washington (state) Transportation and Utilities Commission worked with Puget Sound Energy and several stakeholders to forge a responsible path forward with decoupling. Here, I’ll explore a state known my many to be a laggard when it comes to forward-thinking energy policy â€" Virginia â€" and how it treats its largest electric utility, Dominion Virginia Power.

Virginia is interesting not only for its refusal to decouple electricity rates but because the state has decoupled profits from sales by natural gas utilities. Why one and not the other?

Virginia's State Corporation Commission consists of, from left, Mark C. Christie, James C. Dimitri and Judith Williams Jagdmann.

To cite a recurring theme among efficiency and clean energy advocates who live mostly in the Northern Virginia suburbs of Washington, DC, in some college towns and / or in the Newport News / Norfolk region where the Chesapeake Bay meets the Atlantic Ocean, many ratepayers feel as though Dominion Virginia Power is seriously lagging in innovation, smarter grids and cleaner energy options sprouting in many states.  Some surveys in these areas signal a willingness to pay more for electricity IF the utilities do more to sustain the environment and enable them to control their usage.

The body regulating electricity in Virginia is the State Corporation Commission. It has three members, serving staggered 3-year terms. They are put there by a joint vote of the state House of Delegates and state Senate. Because each chamber has been controlled by Republicans and previous governors overwhelming have been conservative, if not mostly Republicans, regulations are consistently interpreted as favoring Dominion Virginia Power: profits rise if sales increase, plain and simple.

Dominion Virginia Power’s headquarters sit barely a mile away from the Commission in downtown Richmond. Executives sometimes serve on the transition committees for incoming Republican governors.  While that did not occur after Democrat Terry McAuliffe won the Governor’s mansion last November and Democrats secured a tie-breaking majority in the Senate, the commission is not expected to change its fundamental course, even if one or more of the commissioners move on.

A well-respected Republican member of the Republican-controlled House of Delegates who has been on the receiving end of many appeals from Dominion Virginia Power lobbyists during the current and previous General Assemblies, chose his words carefully in asserting the utility and the commission have a “cozy relationship.”

Will the EEI-NRDC joint statement change lead to changes in Virginia and these other lagging states?  Two attempts for inputs from a Dominion Virginia Power executive yielded nothing by late last week.

So stay tuned. But I wouldn’t hold my breath.