Utilities:

NARUC's Honorable discusses role of regulators in distributed generation debate

How should state regulators be influencing the business model evolution facing the electric power sector? During today's OnPoint, Colette Honorable, president of the National Association of Regulatory Utility Commissioners, discusses the role of regulators in the net metering debate, the transition to a diversified fuel supply, and transmission planning challenges. Honorable, whose name was circulated as a potential candidate to chair the Federal Energy Regulatory Commission, also comments on the nomination of Norman Bay to lead the agency.

Transcript

Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Colette Honorable, president of the National Association of Regulatory Utility Commissioners. President Honorable, thank you for coming on the show.

Colette Honorable: Thank you, Monica.

Monica Trauzzi: So at this year's NARUC winter meetings, Energy Secretary Moniz talked about the administration's Quadrennial Energy Review and called for more emphasis on infrastructure and fuel diversity. How should state regulators be involved in this process as the administration moves forward with its review?

Colette Honorable: Well, Monica, we were delighted that the secretary came over, along with White House officials, to take up this issue. We call it TS&D. And so we too are focused on infrastructure, what are our needs? What will it cost ultimately for consumers? And the states are in a prime position to offer input, and the secretary has certainly indicated that he wants input from the states, and particularly from utility regulators, and we anticipate being able to participate with the administration directly, but also in various workshops and listening sessions. As you may be aware, it's quite early yet, and so they are still working on the process, but at the appropriate time I'd like to share with you about my focus this year as the president and how the two might intersect.

Monica Trauzzi: We will definitely talk about that. I want to talk about distributed generation for a moment first though. It's a critical debate that's facing regulators and utilities, and the role of net metering and cost allocation is pretty heated in some states in the United States. So on the state level, it's probably going to shape up to be one of the key discussions that we see in 2014. How do state regulators move forward on this? How do they manage the discussion?

Colette Honorable: Let me say, Monica, in 2014, DG, as we call it, will be an issue probably internationally. We interact with our colleagues all over the world, not only in the U.S., and this is a major issue for them as well. As economic regulators, it is our job to balance the interests of the industry who have to be on the front lines and carry out this very important work, invest in the infrastructure, and so they need the capital to do it. We also balance the interests of the consumer. We want them to be able to have optionality, to be able to place solar panels on their roofs if they so desire, and also to inform them about better ways, more efficient ways to use energy. In a way that when we strike that proper balance, it will be in the public interest, and we have to take into account a number of perspectives. What are the costs? Who should bear the costs? And in a way that allows for innovation and progress, and ultimately fuel diversity.

Monica Trauzzi: How much power should the consumer have in shaping the future direction of the electric power sector?

Colette Honorable: As a national association, we do not try to paint with a broad brush. We try to observe the diversity among the states. We try to provide education, advocacy when necessary, but to allow the states to shape their own fuel mixes; to allow them to be in control of the types of fuel sources that work for them, whether it's state by state or region by region.

Monica Trauzzi: And reliability is a key concern as we look to diversify fuel supplies. How does the industry effectively diversify but still maintain reliability?

Colette Honorable: Interestingly, we are studying that right now at NARUC, and I believe that through the QER process we'll take up that issue as well. As economic regulators, our role is to ensure affordable, safe and reliable utility service. The utilities on the front line, they must plan both a generation and distribution or transmission of energy in a way that absolutely ensures reliability, so that when the customer flips on the light switch, the lights come on. And also so that we can prepare for potential disruptions on the grid and ultimately be able to timely respond to them.

Monica Trauzzi: And are EPA's power plant regulations a concern in terms of impacts on reliability? How should utilities ...

Colette Honorable: I wouldn't use the word concern. I would say that we have desired to have input into that process, and I want to commend EPA Administrator Gina McCarthy. She has heard us. The states, through resolution at our November meeting of our national association, said to the EPA, as you evolve with the development of 111D, we hope that you will respect the states' needs to be flexible in fashioning solutions that work for us, as I just mentioned, to allow diversity among states, among regions, and also in a way that ultimately ensures that we can ensure reliability for the customer.

Monica Trauzzi: FERC's Order 1000 establishes a way to address some of the modernization challenges that the grid is facing, and in particular the creation of new power lines. Is there enough flexibility built into Order 1000 for the states?

Colette Honorable: We have been able to work with FERC, although this will continue to evolve. And as you may imagine, sometimes there are state-federal tensions, but I am hopeful about the notion of cooperative federalism. We all have our roles to play, but ultimately it is the states who site the transmission lines and who must answer locally to the people that we serve. However, FERC has a role to play too with regard to regional transmission organizations, independent system operators, and we will continue to work with FERC. I've been very pleased about the role that acting Chairman LaFleur has carried on this far, and we will continue to work with FERC, our colleagues there, also in the regional process to ensure that we do this job well and do it right.

Monica Trauzzi: So talk to me about some of the themes that you hope to establish and work through as president of NARUC.

Colette Honorable: Thank you, I'd be delighted. This year my theme is equip to lead. So it's a message to empower the state regulator. We're going to focus on three, and we have been focusing on three significant issues. Pipeline safety is one, what we are doing and how we can do it better to ensure that we avoid pipeline safety incidents that could result in a loss of life. Second we're focusing very intently on the issue of resilience and reliability. And when I say resilience I'm referencing not only disruptions to the grid, such as a severe weather event, cybersecurity issues or a physical attack, but also how we integrate distributed resources. We've just had this discussion. And how we do that in a way that allows customers options but also is affordable and balanced. And certainly a reliability focus is within our core function as regulators. And finally, a focus on diversity, fuel diversity, and we know that the diversity of our generation mix is the strength of the U.S. energy sector, but also a focus on diversity in the truest sense of the word. As the energy sector right now is poised to respond to the need to replace our aging workforce and find folks to succeed them that are trained in the STEM curricula, and also workplace diversity, ensuring that the people who serve the energy sector public reflect the people that we serve.

Monica Trauzzi: Your name had been mentioned as a potential candidate for FERC chair prior to Norman Bay's nomination. Is that a job you would want?

Colette Honorable: I would say to you, Monica, that's humbling by the way, I have more on my plate than I can say grace over. The NARUC presidency is almost overwhelming. There's a lot to do and a lot for me to do at home. I chair my Arkansas Public Service Commission. I love what I do. If and when that opportunity arose it would be an honor to serve, but I'm delighted for the present candidate and we wish him well, and I issued a statement to that effect immediately after his nomination.

Monica Trauzzi: All right, we'll end it right there. Thank you very much for coming on the show.

Colette Honorable: Thank you, I appreciate it.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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