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Utilities, environmentalists seek out ‘path to success’

(Photo by Satoshi Kaya via Creative Commons)

(Photo by Satoshi Kaya via Creative Commons)

Utilities are often at odds with environmental advocates over how to advance clean energy and efficiency goals without falling into a “death spiral” of declining demand and shrinking revenue.

However, a new agreement between a major environmental group and an organization representing investor-owned utilities shows there is also a lot of common ground.

The Natural Resources Defense Council and the Edison Electric Institute on Wednesday released a document, simply titled “EEI/NRDC Joint Statement to State Utility Regulators,” in support of policies to help guide a rapidly changing electrical grid.

While the organizations have issued joint statements in the past, the latest version is noteworthy because it wades into the thorny issue of distributed generation, which many see as posing an existential threat to traditional utility business models.

The agreement recognizes the continuing trend of customers installing their own generation, while calling for policies to ensure utilities are fairly compensated for maintaining those customers’ access to the grid.

“This agreement helps chart a path to success,” said David Owens, an EEI executive vice president, in a news release.

The joint agreement [PDF], which was presented at the winter meeting of the National Association of Regulatory Utility Commissioners, calls for:

• Shifting utilities’ focus from providing energy as a commodity to a service-based approach.
• Ensuring utilities’ revenue for maintaining and improving the grid is not tied to retail electricity sales (also known as “decoupling“).
• Net metering policies that fairly compensate both the utility and the customer.
• policies that allow for real-time pricing.
• Providing opportunities for utilities to profit from “performance based incentives,” such as improving efficiency or adding clean energy sources.
• Ensuring efficiency services are broadly accessible.
• Support for smart grid technologies.

‘A better way forward’

The statement comes amid a backdrop of declining electricity demand and more widespread adoption of solar power, which both cut into utility profits.

Distributed solar can benefit utilities and their customers by lowering demand during peak daylight hours and potentially eliminating the need for other new generation capacity. However, utilities have long argued that other customers are effectively subsidizing solar installations because those solar customers are still using the grid while paying less to maintain it.

Several states are currently grappling with policies to resolve this. For example, Minnesota last year passed a law requiring regulators to establish a “value of solar” formula to ensure utilities pay “precisely what that solar is worth to their system,” in the words of John Farrell of the Institute for Self-Reliance.

Also, decoupling revenue from electricity sales would provide utilities alternate ways to recover their fixed costs for maintaining and upgrading the grid. The strategy is also seen as a way to promote efficiency — currently, if a utility’s revenue is tied to electricity sales, it has little incentive to encourage customers to conserve.

“This path-breaking agreement steers us toward new and innovative ways to increase and speed the deployment of clean energy resources,” said the NRDC’s Ralph Cavanagh.

“In some states, the significant progress of innovative, clean distributed technologies has clashed with outdated theories of regulation, pitting utilities against clean energy companies,” Cavanagh wrote on the NRDC’s Switchboard blog.

The agreement, Cavanagh says, “reflects NRDC’s belief that clean-energy-oriented business model changes will come faster and more successfully to the utility sector if the utilities themselves are in support, and that these reforms represent a better way forward.”

Jesse Jenkins, an energy researcher at MIT, voiced enthusiasm for the agreement on Twitter.

“If 2013 was the year of the ‘utility death spiral,’ 2014 is fast shaping up to be the year of solutions-oriented dialogue.”

The NRDC is a member of RE-AMP, which also publishes Midwest Energy News.

Correction: An earlier version of this story misspelled Ralph Cavanagh’s last name.

Comments (3)

A good first step would be an immediate end to utility anti-solar efforts in rate cases, IRP dockets, stand-by charge applications, avoided cost dockets, etc., especially those against customer, distributed, and third-party solar. Or it will look like this is just cover for an ongoing war on solar campaign currently. The way it works is this – what matters is what utilities, not their trade associations, say to regulators in private and public state hearing rooms, not in the press. I look forward to what the individual utilities do. Moreover, no one should have to buy into utilities’ erroneous assumptions about Impacts of distributed energy resources just to start a conversation.

By Karl R.. Rabago on Feb 13, 2014

Exactly right. However, I think the bigger issue is protecting “natural” monopolies through territorial laws. We should be using the grid as backup and do away with utility business models that protect and facilitate investor roi’s that essentially conflict with ratepayer interests concerning huge transmission and generation investments and subsequent rising electricity costs which are dubious. Figure that out and you’ve done something worthwhile.

By johnmi on Feb 13, 2014

My electric cooperative embraces load control and efficiency mainly because it lowers it’s peak power charge. They don’t embrace solar because even though it may provide peaking power in summer it will not provide it in the coldest days of winter. Most co-op members would not vote for net metering unless it reduced cost and the way costs are accounted for now it probably won’t. So besides solar costs coming down even further, EPA existing plant CO2 rules will be the best economic reason the cooperative will have to promote solar.

By L klisch on Feb 13, 2014