The rise of customer-owned energy resources has triggered a “seismic shift” in the energy business, according to Cass Larson, vice president of pricing and contracts at Tennessee Valley Authority -- the largest unregulated utility in the Southeast.
So in order to ensure that electricity remains reliable and affordable for all 9 million of its customers, while keeping up with technology change, TVA is looking to implement a new pricing plan that turns the concept of incentivizing energy savings on its head.
The utility recently published a post entitled “A New Pricing Paradigm,” in which Larson argues that unless power companies reinvent themselves, they won’t be able to guarantee the quality of service that customers have come to expect. He suggests that companies fail when they don’t adapt -- just look at the example of RadioShack.
“RadioShack went from the largest technology retailer to a memory because of changing technology,” he said.
Technological advancements have allowed homes and businesses to use less and less electricity in recent years. The problem with the current pricing structure -- based mainly on electricity usage -- is that lower demand makes it harder to cover the costs of maintaining the grid.
“Right now, we are not at a crisis point," Larson said. Still, by acting early, customers know which direction the utility is headed, allowing them to make better, more informed decisions.
The companies and individual consumers that are pursuing energy efficiency and rooftop solar today are the ones who can most afford it, leaving those who cannot afford to invest in the latest technologies to “make up the difference,” according to Larson.
Utilities have long complained of the cost shift from solar customers to non-solar customers. But rather than get into a value-of-solar proceeding and propose dynamic new rate structures, TVA appears to want a rate structure that simply rewards greater energy usage instead of less.
“We are looking at a model in which the more energy you use, the more the price goes down, and the less you use, the higher the price you’d pay,” said Larson. “It is the same principle as buying in bulk at the grocery store.”
Incentivizing energy use “will have a particularly vitalizing effect on economic development -- attracting energy-intensive businesses to the Valley, and encouraging expansion among businesses already here --which means more, higher-paying jobs for Valley residents,” he continued.
Pre-empting an outcry from solar power supporters, Larson highlighted TVA’s renewable energy programs and insisted the utility is not anti-clean energy. But he did build a case against distributed solar. Larsen said large-scale solar is the “fairest way” to incorporate renewable energy on the grid because it’s less expensive than small, local generation. There’s also no cost shift. Plus, “large-scale solar solutions mean people don’t have to deal with rooftop construction and maintenance.”
As a separate, but potentially related matter, TVA is looking to update its procedures for complying with the National Environmental Policy Act (NEPA). The public review period for the proposed changes ended on September 6.
According to the Southern Alliance for Clean Energy, TVA’s proposal would dramatically narrow the circumstances in which it seeks public input into decisions under NEPA going forward. The organization said this change is troubling in the context of TVA’s new pricing proposal, which would discourage customer investment in energy-saving technologies, and rooftop solar in particular.
TVA has expressed a bias against distributed solar and has been restricting solar choices for customers for several years, according to Stephen Smith, executive director of the Southern Alliance for Clean Energy. “The proposed changes to public input (with respect to NEPA) could exclude the impact of TVA’s rates on customer energy choices from consideration,” he said.
In other words, changes to NEPA procedures could prevent critics from weighing in on rate reform.
“We believe that TVA should only extend categorical exclusions to those actions that would clearly have minimal impact on public health and the environment, such as human resource decisions,” said Smith. The utility should “keep the door open for the public to engage in important decisions that affect customer’s pocketbooks and public health.”
I’ve contacted TVA to learn more about the “new paradigm” proposal and how the utility hopes to reform its pricing structure. I hope to share more in the coming days.
California debates 100% renewables, regional ISO and CCAs
Several high-profile energy bills are under consideration in California, with the current legislative session scheduled to end on September 15.
SB 100, Senator Kevin de León’s bill that would set a target for 100 percent renewable energy in the state by 2045, is among those to be decided. The legislation has already passed in the state Senate, and is now awaiting a vote in the Assembly. SB 100 builds on current law, which requires power producers to generate 50 percent of their electricity from renewable sources by 2030.
There’s been a strong push to pass the bill, including from inland area political leaders, environmental groups and some celebrities. But opposition to SB 100 is mounting. Trade unions backed the bill when it was announced earlier this year, but now electrical workers and utility employees say they are opposed, the Los Angeles Times reports.
The unions, which represent roughly 120,000 workers, are particularly concerned about the increased adoption of distributed energy resources. They fear small-scale renewables and energy storage will result in job losses for their members and a less reliable, less regulated electricity grid.
Union leaders said they want SB 100 to include an amendment that would require lawmakers to review the results of utility DER pilot programs before committing to a 100 percent renewable energy goal for the state. A spokesperson for de León said such an amendment is “completely unrelated to SB 100.” The Sierra Club’s Kathryn Phillips said the unions' fears are "irrational" because an ambitious clean energy target will create more jobs
The two labor groups represent roughly 120,000 workers total. "What's the rush?" pic.twitter.com/uax4pfzgb1— Chris Megerian (@ChrisMegerian) September 7, 2017
In a related development, The Desert Sun reports that Assemblymember Chris Holden is drafting a bill that would allow the California Independent System Operator to become a regional entity. The move would allow California to import and export renewable energy across state lines, which could save customers billions on their electricity bills and help to achieve the 100 percent renewable electricity goal. But critics point out that the law would also require California to give up sole control of its power grid, and give officials in conservative states like Utah and Wyoming influence over the Golden State’s energy mix.
Holden’s bill will have to be finalized by Monday in order to be considered this session. The Utility Reform Network’s Matthew Freedman said the bill is being rammed through with backing from Governor Jerry Brown and certain special interest groups. He called the 11th-hour deal making "an example of Sacramento dysfunction at its worst."
Also, more details emerged this week on opposition to community choice aggregation (CCA) in California. Last week, we noted legislation was being drafted to put a freeze on CCAs in the state. On Wednesday, lawmakers held a hearing on the issue where California Public Utilities Commission President Michael Picker said that CCAs are effectively forcing the state to deregulate, RTO Insider reports.
“We are being deregulated from the bottom up, and there is no real plan as to how it fits together,” Picker said. He later told lawmakers: “I am looking to you for direction.” California's investor-owned utilities argue that CCAs stick non-participating customers with the bill for long-term energy procurement decisions that the utilities made years ago. Roughly $180 million has already been shifted from CCA customers to utility customers, according to PG&E Senior Vice President Steven Malnight. And that number could grow to $500 million by 2020, he said.
Lawmakers at the hearing were generally concerned about these issues, and the Senate Committee on Energy, Utilities and Communication plans to hold additional discussions on the future of CCAs.
Meanwhile, it appears the proposal to temporarily halt community choice is losing momentum. The Local Energy Aggregation Network (LEAN) reported on Friday afternoon “advocacy against the CCA freeze threat is working.”
Public comment closes in Eversource rate case
August 31 was the deadline for public comment on Eversource’s latest rate case (17-05), which seeks a fixed fee increase of $96 million and proposes to implement a peak demand charge for residential solar customers. The Massachusetts utility also proposed the creation of a “monthly minimum reliability charge” for new net metering customers and a 41 percent reduction in net metering credit rates paid to non-residential solar customers, such as schools and businesses.
The rate case was met with strong opposition last week, the Greenfield Recorder reports, including from the Massachusetts Municipal Association, the Metropolitan Area Planning Council, and a consortium of municipal leaders from around the state.
Climate Action Now spokesperson Adele Franks said Eversource’s proposal “would dissuade people, businesses and municipalities from installing or subscribing to solar arrays.” However, Eversource representatives say the changes are intended to make sure that all customers pay their “fair share” for use of the electric grid. The utility has requested that the rate changes take effect in two stages, the first taking place on January 1, 2018.