State public utility commissions grappled with a wide range of issues in 2015, ranging from rate design to comprehensive utility business model reform.
In this retrospective, Advanced Energy Economy (AEE) looks back at the top 10 issues on commission dockets this year. With many of these proceedings still active in 2016, the coming year is bound to be even busier for regulators.
1. More states try to figure out the value of solar
At least a dozen states began to investigate the costs and benefits of distributed solar, looking at how much solar energy is worth to a utility, its solar and non-solar customers, and to society as a whole. The results of these studies are particularly important when establishing fair and equitable net energy metering rates, and may have far reaching implications for utility revenue models in the future.
Following in the footsteps of Austin Energy and Minnesota, Maine in March of 2015 created its own methodology. Hawaii, still in the midst of overhauling its distributed energy resource policies, adopted a new below-retail remuneration rate in October.
After a several-year investigation into the costs and benefits of solar, the Mississippi PSC on December 3 adopted a net metering rate equal to the utilities’ avoided cost, but with a temporary adder for presently non-quantifiable benefits.
Meanwhile, several other states have processes to value solar underway. The Arizona Corporation Commission — always at the forefront of solar debates — agreed to study the costs and benefits of solar between now and June 1, 2016. Georgia is set to issue a report on the value of renewable and distributed energy resources in preparation for Georgia Power’s 2016 IRP before the end of the year. Oregon opened a community solar proceeding, which gives the PUC authority to determine the value of solar and Pacificorp in Utah was ordered to do a cost of service study before their next rate case. Other states also in the mix include Iowa, Louisiana, California, and New York.
2. Debates over fixed charges heat up in over 20 states
As utilities have tried to address the emerging challenges to their business model, proposals for sharply higher fixed charges have become a contentious issue facing utility commissions.
Wisconsin has been ground zero for the debate, after approving three fixed charge proposals last year. Wisconsin Public Service proposed to increase its fixed charge from $19 to $25 after hiking it from $10 just last year. Xcel Energy joined the party by requesting an increase in its fixed charge from $8 to $18.
In 2015, fixed charges became a national issue, with electric utility proposals or investigations currently open in at least 20 states. An interesting thing to keep an eye on moving forward is the effect of a new report, Pathway to a 21st Century Utility, by Peter Kind, the author of a 2013 EEI report, Disruptive Challenges, which many utilities have cited as an impetus for their fixed charge proposals. The new report recognizes that fixed charges have many unintended consequences and may not be the answer to a utility business model in need of change.
3. New York’s energy vision comes into focus
This year was a busy one for the pathbreaking Reforming the Energy Vision (REV) proceeding. New York’s Public Service Commission is attempting to fundamentally redefine the role of the utility as an enabling platform to facilitate the widespread deployment of distributed energy resources (DERs).
Separated into two tracks, track one (order issued on February 26, 2015) established the utilities as the owners and operators of the distributed system platform and specified some of the functionalities required of the new platform. The order also significantly limited utility ownership of DERs, but allows some exceptions.
Track two, still underway, is exploring ways to reform ratemaking and better align utility revenue models with DER deployment, by proposing changes in how utilities earn a return on capital expenditures. Keep an eye out for utility-specific distribution system implementation plans (DSIPs), which are due in June, as well as a process for determining a new compensation mechanism for DERs (and potential replacement for net metering), which will consume most of 2016.
Further complicating matters is how REV will integrate with the proposed Clean Energy Standard, through which the Cuomo administration plans to codify its renewable energy goal of 50 percent by 2030.
4. PUCs begin to grapple with EPA’s Clean Power Plan
After much anticipation, the Environmental Protection Agency released the Clean Power Plan in August, which aims to reduce carbon dioxide emissions from existing power plants by approximately 32 percent from 2005 levels by 2030.
In total, 45 states have entered the litigation battle, with 27 attorneys general (and/or state agencies) currently involved in fighting the CPP and 18 states standing by to support EPA. EPA has given states a lot of flexibility to develop a plan that suits their needs, and it is still too early to tell how states will choose to comply. PUCs across the country have been working with their environmental agencies, which are responsible for developing state plans, to consider compliance options and their impact on the electric power system they regulate.
The Arizona Corporation Commission in November, and the Kansas Corporation Commission in December are some of the first states to open formal PUC proceedings, where they are investigating potential impacts and least-cost compliance options for the rule.
5. States start to modernize the grid
More than a half dozen other states have joined New York, California and Massachusetts in moving toward a more modern, clean, efficient, cost-effective, reliable and interactive electric system.
New Hampshire opened a proceeding in July investigating grid modernization, including the integration of variable energy sources, demand-side management resources, and smart meters.
The Washington, D.C. PSC opened its own investigation to modernize the energy delivery system in June, holding a kickoff workshop in October and a DER workshop in November.
The Minnesota PUC initiated a grid modernization proceeding this summer focused on distribution planning, with the e21 initiative as a driving force; a summary report on three stakeholder meetings and recommended next steps is due in February.
Other states are undergoing investigations that are less comprehensive, but still significant. Maryland held its first technical conference on the deployment of DER in October, with two more sessions expected before opening a formal proceeding in 2016. Illinois has begun a conversation on the regulatory treatment of software and services and is planning on opening a proceeding next year. Rhode Island and Connecticut have begun to explore aspects of grid modernization outside of a formal proceeding.
6. California still out in front
California’s passage of SB 350 raised the state’s RPS to 50 percent by 2030, doubled the target for cumulative energy efficiency savings in buildings by 2030, and established integrated resource plan requirements for investor-owned utilities (IOUs) by 2017. The bill showed that California still leads in advanced energy policy.
The California Public Utility Commission (CPUC) was also hard at work on a variety of proceedings to modernize the electric grid. Most notable is the Distribution Resource Plan (DRP) proceeding, which is focused on how utilities can better prepare for the integration of DER. Back in July, the big three IOUs filed their initial plans on adopting large-scale DERs from the top down. The ongoing integrated demand-side resource (IDER) proceeding is interrelated but focused more on the sourcing mechanisms that are needed to support customer adoption of DERs.
Other key California actions in 2015 included: utility net metering proposals in August for below-retail-rate remuneration; the CPUC directing utilities to prepare a menu of at least three opt-in time-of-use rate design pilots by New Year’s Day 2016; and the big three utilities moving forward with energy storage solicitations to comply with the CPUC target of 1.3 gigawatts of storage by 2022.
7. States look to satisfy corporate interest in renewable energy
An increasing number of major corporations have set climate and sustainability goals, expressing an interest in purchasing renewable energy to power their operations. Leading companies such as Apple, Facebook and Google have said clean energy is an important factor in deciding which states they choose to site their facilities. States are taking notice, with utilities and regulators feeling the need to give these big corporate customers what they want.
Xcel Energy in Minnesota proposed a pilot called Renewable Connect aimed at large businesses that want to buy renewable energy. In North Carolina, Google became the first company to participate in Duke Energy’s Green Source Rider program when it signed a 15-year agreement for 61 megawatts of solar power.
In September, Alabama Power received approval to offer 500 megawatts of renewable energy to customers through separate generation projects. Nevada Energy, in November, requested approval for 129 megawatts of new solar PPAs in response to Apple and Switch’s 100 percent renewable goals.
Growing corporate interest in direct procurement of renewable power is putting new pressure on states to allow PPAs with third-party generators. In July, Georgia became the 25th state (plus Washington, D.C.) to expressly allow third-party ownership of solar when the Solar Power Free Market Financing Act went into effect. Meanwhile, in North Carolina, an advocacy group, NC Warn, has gone to the utilities commission to test state law in hopes of opening up the market to third-party ownership.
8. Community solar goes nationwide
Currently, 24 states have community solar projects on-line, and 20 states have enacted or are moving toward shared renewables legislation. Minnesota has been at the forefront of the community solar trend, with Xcel Energy receiving applications for over 900 megawatts of community solar since opening up the application process for its Solar Rewards Community Program at the end of last year.
The California PUC, as part of its Green Tariff Shared Renewables Program (this includes both a green tariff and an enhanced community renewables component), required the big three utilities — San Diego Gas & Electric, Pacific Gas & Electric and Southern California Edison — to contract for 61 megawatts of capacity by the end of 2015.
9. Demand response could revert back to states
Despite the clear benefits of demand response (DR) in relieving stress on the power grid and saving money for customers, its immediate future is uncertain.
In October, the U.S. Supreme Court heard oral arguments on a case that could shift regulation of DR from FERC to the states. FERC Order 745 required DR to be compensated at the locational marginal price (LMP) in wholesale energy markets. The order was challenged by power generators, arguing that FERC is luring retail customers into the wholesale market by offering them subsidies to abstain from making retail electricity purchases.
This case will determine whether or not Order 745 will be overturned, with a decision expected no later than January. Invalidating the order could make DR an exclusively retail market offering, which would leave this peak-load management tool in the hands of state regulators, leaving a scattered and uncertain future for DR providers. While DR programs do exist at the distribution level, they make up a smaller share of the pie, as distribution utilities have conflicting incentives.
10. New leaders at PUCs
Nearly one-fifth of public utility commission seats turned over in 2015, and there were some notable changes in PUC chairs. Most notably, Commissioner Michael Picker was named president of the California PUC, Randy Iwase became the new head of the Hawaii PUC, Brien Sheahan took the reins of the Illinois Commerce Commission, and the former director of the Nevada Governor’s Energy Office, Paul Thomsen, moved over to lead the Public Utilities Commission.
Other significant chair appointments included Angela O’Connor in Massachusetts, Andre Porter in Ohio, Ellen Nowak in Wisconsin, Mark Vannoy in Maine, Ted Thomas in Arkansas, Jim Gardner in Kentucky, and Daniel Hall in Missouri. In addition, Travis Kavulla, Vice Chairman from Montana, was elected to be the new chair of the National Association of Regulatory Utility Commissioners (NARUC).
Coley Girouard is a policy and regulatory analyst for Advanced Energy Economy. AEE’s mission is to transform public policy to enable the rapid growth of advanced energy companies.
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