In January, we published a list of the top 10 utility regulation trends of 2018. With 2019 beyond the halfway point, we check in on the top public utility commission (PUC) actions and trends so far this year.
Ten prominent trends and actions stand out above the rest, from renewables increasingly dominating utility resource plans, to wildfires sparking utility safety and liability concerns in California, to transportation electrification investments becoming more widespread from coast to coast.
Below is an executive summary of the complete roundup, which has specific examples of state PUC action. (You can read AEE's full version here.)
1. Renewables dominating utility resource plans
During the first six months of 2019, the trend of recent years toward a more advanced, clean and flexible grid has continued. This has largely been driven by the continued price decline in renewables. In most states, it is now often cheaper to build new wind and solar plants (in some cases even when paired with storage) than to operate existing fossil-fuel power plants. Utilities are starting to take notice, and renewables are dominating their long-term resource plans.
At least nine states plus Puerto Rico and Washington, D.C. have now set 100 percent clean energy targets. New Mexico’s Public Regulation Commission approved Public Service Co. of New Mexico’s latest integrated resource plan, which calls for the retirement of all coal-fired generation by 2031. And in Michigan, DTE Electric Co. and Consumers Energy Co. proposed plans to phase out coal by 2040. We’ve also seen action in Colorado, Indiana, Georgia and Mississippi.
2. Rethinking the utility business model
Many states are exploring changes to the traditional cost-of-service regulatory model to move toward a system that better reflects new market conditions, allows utilities to take advantage of the growing service economy, and rewards performance against established goals rather than inputs.
Early this year, the Minnesota Public Utilities Commission finalized Phase 1 in its performance-based regulation investigation for Xcel Energy, and New York’s Con Edison filed a petition to increase annual electric and gas delivery revenues with earnings adjustment mechanisms, a performance incentive coming out of the Reforming the Energy Vision initiative. More performance-based regulation work is taking place in Colorado and Hawaii.
3. Distribution system planning for distributed resources
The distribution grid is the backbone of a reliable electric system used to deliver electricity from the transmission system to individual consumers. Modern planning processes are critical for providing essential electric service efficiently and cost-effectively. As distributed energy resources (DERs) deployment continues to grow, utilities and DER companies are seeking ways to maximize the benefits of DERs to the system, while maintaining reliability and reasonable costs for customers.
New York and California have continued to refine their distribution system planning processes in 2019, while several additional states have taken steps to implement processes of their own, including Hawaii, Michigan, Minnesota and New Hampshire.
A core output of distribution system planning is recognizing opportunities for new advanced technologies and services to meet system needs — which we explore next.
4. Non-wires alternatives to traditional utility investments
Non-wires alternatives (NWAs) to traditional investments in transmission and distribution equipment are increasingly being looked to as viable options in several key states.
The next steps to making NWAs a widespread reality are to 1) identify the areas where NWAs can meet a need at a lower cost than a traditional utility investment and 2) develop a framework to implement and/or procure the NWA solution. Several states have made significant progress so far in 2019.
Con Edison in New York outlined a plan to continue its Brooklyn-Queens Demand Management program through 2021. Central Maine Power and Emera Maine filed recommendations that would eliminate their existing incentive to favor transmission and distribution investments over NWAs. And the California Public Utilities Commission issued a ruling modifying the distribution investment deferral framework, an annual process to identify, review and select opportunities for third-party-owned DERs to defer or avoid traditional capital investments.
5. Wildfire liability challenging California utilities
In January, the largest investor-owned utility in California — Pacific Gas & Electric — filed for Chapter 11 bankruptcy because of accrued liabilities resulting from the devastating wildfires of 2018. As part of the bankruptcy process, PG&E sought and received approval for $5.5 billion in financing to support operations and ongoing safety initiatives during the bankruptcy process.
There are still a lot of unanswered questions that will need to be sorted out through the courts. One of the most important for the advanced energy industry will be whether PG&E is granted the ability to renegotiate a portion of their existing $34.5 billion in renewable energy contracts to help pay down their debts — a decision that could encumber California’s efforts to meet its clean energy and greenhouse gas reduction goals. Outside of the bankruptcy process, the wildfires kick-started wide-ranging investigations into wildfire prevention and cost recovery plans, as well as PG&E’s safety culture.
The California Public Utilities Commission opened an investigation to determine if PG&E, as currently constituted, is able to provide safe electric and gas service and to review alternatives to PG&E's current management and operational structures; established a Commission Advisory Panel of experts to advise on corporate governance issues; introduced four proposals for public comment to improve PG&E’s safety culture; and adopted a set of criteria and a methodology for conducting a financial “stress test” for future wildfire cost recovery.
6. Increasing access to renewable energy
As renewable energy has become more competitive on price, customers are increasingly looking for ways not only to power their operations with 100 percent renewable energy, but also to dampen price volatility and reduce energy costs. There are several avenues and best practices that states and utilities can take to increase access to renewable energy ranging from direct access programs to renewable energy tariffs to community solar programs.
This year, Xcel Energy in Minnesota filed for approval to expand its pilot renewable energy tariff aimed at businesses (Renewable*Connect) into a full-fledged program. The California Public Utilities Commission opened a rulemaking to implement SB 237, reopening the state’s Direct Access program. In Virginia, Dominion Energy filed an application for a 100% renewable energy tariff for customers with under 5 MW of peak demand. And Florida Power & Light proposed a solar subscription program (SolarTogether) for customers of all rate classes.
7. Community-choice aggregation
Community-choice aggregation or municipal aggregation has been around for a few decades, but it has risen in popularity over the past couple of years, driven in large part by communities wishing to take control over how their energy is generated.
The concept of CCA is fairly simple. CCAs are classified as governmental entities, most often formed by cities and/or counties, that procure power on behalf of their residents. While the CCA provides power for residents, the designated utility still provides transmission and distribution service in the area.
In California, CPUC staff estimated that by 2025 over 85 percent of California’s IOU retail load could be served by CCAs and other Direct Access providers (up from about 20 percent today). New York recently refined its framework to make it easier to form CCAs, leading several municipalities to file implementation plans.
Meanwhile, the Massachusetts Department of Public Utilities opened an investigation into improving the retail electric competitive supply market and established two working groups. This is timely, as the City of Boston petitioned the DPU to approve a CCA plan to procure power for its residents.
8. Strategies to electrify transportation
The deployment of electric vehicle charging infrastructure has risen to the fore in many jurisdictions, as improvements in technology have dramatically expanded the EV market and PUCs have continued to develop focused transportation electrification strategies.
California continues to lead on transportation electrification, with 49 percent of the nation’s electric car sales originating in the Golden State. A new CPUC process, DRIVE OIR, to develop a transportation electrification framework is underway with a staff proposal expected in October.
Besides developments in Wisconsin, Missouri, New York, Vermont and Arizona, there were utility proposals or statewide investigations in Colorado, Delaware, Iowa, Maryland, Michigan (DTE Electric and Consumers Energy), Minnesota, North Carolina, Oregon, South Carolina (Duke Energy Progress and Duke Energy Carolinas) and Texas. Many are eyeing the benefits of electrifying transportation, including the medium- and heavy-duty vehicle sector.
9. Grid modernization investments for DERs and large-scale renewables
Grid modernization is often used in the electricity industry as a catchall term for grid investment. However, at AEE, we view grid modernization as part of the foundational investments needed to enable a reliable and flexible grid. Such a modern grid platform is essential to fully integrating DERs, balancing increasing levels of large-scale renewables and enhancing the customer experience.
The first step toward grid modernization is often advanced metering infrastructure, similar to Indiana Michigan Power’s filing in Indiana. Other states are looking at grid modernization more holistically like the Arkansas Public Service Commission and in the District of Columbia.
10. Net metering and valuing DERs
Net energy metering (NEM) has been successful in spurring the adoption of distributed generation across the country. As net-metering-eligible resources continue to decline in price, the number of NEM customers has increased, which has led to pushback in many jurisdictions.
Over the past couple of years, states have taken various approaches to successor tariffs to NEM, ranging from reductions in net metering rates for exported electricity to the development of regulatory structures to more precisely value and source services from DER. This year saw significant action in Connecticut and New York, with some less favorable trends in Idaho and Louisiana.
Coley Girouard is a principal at Advanced Energy Economy. Read his complete roundup with more details on state PUC action here.