PANDEMIC

Coronavirus and electricity: 3 issues to watch

The novel coronavirus' shutdown of American life is disrupting the electricity sector as state regulators, power companies and customers scramble to cope with millions of jobless claims and an inability to gather in large groups.

For some utility commissioners, that's translated into empty hearing rooms, technological snafus, "Zoom-bombings" and tough decisions about proposed energy projects.

In other cases, it's fueling pressure for regulators to ensure that people who have lost their jobs don't see their electricity cut off. Deferring or waiving bills will have implications for power companies' finances, a matter state regulators will be monitoring closely. There are also questions about pending dockets and projects that may be delayed because of the coronavirus.

"It's certainly something that has affected all of society, and the commission is not an exception to that impact," said Justin Olson, who regulates utilities as a Republican member of the Arizona Corporation Commission.

Utilities are keeping an eye on revenues and possible drops in demand. The outlook for pending generation and transmission projects should come into better focus over the next several weeks as utility companies report first-quarter earnings.

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But some effects of COVID-19 are beginning to emerge.

Pinnacle West Capital Corp., which owns Arizona Public Service Co., said recently that some nonessential planned work was postponed to later in 2020. Detroit-based DTE Energy said March 23 that it was "safely winding down and voluntarily suspending for the time being all non-critical infrastructure and maintenance work." DTE has said construction of the Blue Water Energy Center, a planned 1,146-megawatt facility designed to produce power using natural gas and waste heat, stopped in light of Gov. Gretchen Whitmer's (D) order halting nonessential business. But the company said the pandemic isn't expected to affect the center's spring 2022 opening.

Federal delays can further affect utility plans. The outlook for the proposed Gemini Solar Project in Nevada came into question last week, for example, after the Bureau of Land Management acknowledged a delay related to a record of decision. Gemini is slated to include 690 MW of solar capacity and 380 MW of battery storage.

Ricardo Graf, a managing partner at the project developer, Arevia Power, said in a statement that his company is "confident the process is working as best it can right now." NV Energy, the state's largest electricity provider, told E&E News via email that it looks forward to a "successful on-time completion." NV Energy would get electricity via a power purchase agreement, and Arevia said the project is scheduled to begin commercial operations in 2023.

And yet the power industry and those who oversee it have managed to keep the lights on even when much of the U.S. population is hunkering down.

For Olson, 41, efforts to slow the spread of the virus mean he's working at home from Mesa, Ariz., in a house he shares with his wife, Karyn; five boys; four girls; and a black Labrador retriever named Ares. The Arizona commission held an open meeting online last month, and Olson said he's also been on the phone discussing issues facing the industry.

"Certainly there's a lot of interest at the commission surrounding how this may impact our utilities," he said, and whether they're "prepared to be able to maintain critical services in the event of an outbreak impacting their employees."

In other states, like Texas, uncertainty surrounding how long the pandemic could last fed into one recent decision.

DeAnn Walker, the Public Utility Commission of Texas' chairwoman, voiced support on March 26 for a settlement on a proposed transmission line from a unit of American Electric Power Co. Inc. That was in part because she wasn't sure when the matter might move forward if it were sent back to an administrative law judge.

While Walker might not make that call in other situations, "in the one we find ourselves in, I think it's probably the best way to move forward," she said. The project couldn't proceed without the PUC's approval.

Here's what to watch as utilities, customers and state power regulators deal with the pandemic:

Utility squeeze

Falling energy demand, shuttered businesses and a pledge not to disconnect customers who can't pay their bills will put financial pressure on electric utilities in the months ahead. Many investor-owned utility companies have started warning shareholders of potential business risks.

Michigan-based CMS Energy Corp., Minnesota-based Xcel Energy Inc. and Ohio-based American Electric Power listed COVID-19 as a risk factor in filings with the Securities and Exchange Commission.

"This is a rapidly evolving situation that could lead to extended disruption of economic activity in our markets," AEP said in a filing. "We have instituted measures to ensure our supply chain remains open to us; however, there could be global shortages that will impact our maintenance and capital programs that we currently cannot anticipate."

The pandemic comes at a time when U.S. electricity demand has been flat or falling in many areas for years, and most of the nation's utilities aren't seeking to develop new coal or nuclear generation. Natural gas-fired units are still being pursued, as are a plethora of wind and solar projects by players throughout the sector.

Electric cooperatives talked last week about the lost revenue they face as restaurants and other commercial and industrial businesses are closed to maintain social distancing.

For the Cherryland Electric Cooperative in Michigan, seven or eight revenue contributors of the utility's top 10 commercial accounts temporarily stopped operating.

"That's at least a half-million in revenue that I won't see," said Tony Anderson, Cherryland Electric's general manager. "It's going to hit every aspect of that co-op."

The Berkeley Electric Cooperative in coastal South Carolina agreed to return $4.5 million in account deposits to customers, giving them what is likely a much-needed boost at this time for those who are out of work due to businesses being closed.

Electric cooperatives typically serve rural areas of the state. The coronavirus has spread faster in cities, but rural areas typically have less resources, which means the virus could pack a bigger punch in those places.

Co-ops also don't have corporate shareholders to help absorb the revenue losses. That money must be made up another way, typically by raising everyone's rates down the road.

The Tennessee Valley Authority, the nation's largest publicly owned utility, is offering up to $1 billion in credit support to 154 local power companies that may face financial hardship as their own customers struggle to pay their electric bills.

Each of these local utilities has a long-term contract to buy electricity from TVA. The federal agency is offering to take care of those payments for the local power companies that may be cash-strapped to the point that they can't run their own operations, TVA CEO Jeff Lyash said in a recent news conference with reporters.

"This is a high-fixed-cost business," Lyash said. "If customers can't pay right now, and you can't make a payment, we'll make it for you, so we can all be confident that you can keep the lights on."

In a report this week, Moody's Investors Service said the coronavirus pandemic "is creating logistical and social challenges" for U.S. regulated utility rate cases. It said power, gas and water utilities likely will see schedules for 2020 rate case proceedings delayed or postponed, noting examples in New York. Delays could affect earnings and cash flow.

But Moody's added a note of optimism: "For now, we expect state regulatory commissions to continue to provide a broad suite of timely cost recovery mechanisms and to address current challenges like lost revenue and incremental expenses."

Investor-owned utilities likely will ask to recoup money in rate cases down the road.

Atlanta-based Southern Co.'s Georgia Power unit already has raised the issue with state utility regulators, according to a March 27 email obtained by E&E News through the Georgia Open Records Act.

The electric company started suspending disconnections and waiving late fees for customers who can't pay their bills. The company expects that to drive up business costs while it is trying to operate while federal and state emergencies are in place, the email from a company attorney to members of the Public Service Commission staff said.

Georgia Power wants to defer those costs to the next rate case in three years.

Consumer relief

Across the country, people are having difficulty paying electricity bills because of layoffs, delayed work or other coronavirus-related financial troubles. At the same time, U.S. utilities are facing growing calls to ban electricity and water shut-offs, and to provide waivers of late payment charges and reinstatement of services to customers who might have been cut off.

A recent post on the Energy Institute blog from the Haas School of Business at the University of California, Berkeley, asked: "Can We Stop Paying Utility Bills for a Bit?"

The piece by Catherine Wolfram, a professor of business administration, argued that "regulators should enact a temporary utility bill moratorium." She suggested it could last three to six months — or longer, if needed.

"This doesn't mean that customers should get free electricity, natural gas and water," she wrote. "They will just be able to defer paying for these services while we focus on stemming the spread of the virus."

The idea, Wolfram said, is that utilities generally have pretty good credit, and regulators could let utilities add nonpayments tied to the pandemic to future bills. And she said everyone wouldn't have to take advantage of the bill moratorium. But utilities would essentially be treated as banks to help keep businesses and people afloat, she said.

A national plan hasn't emerged in that exact form, but many utility customers across the country are seeing reprieves from utility disconnections if they're in a crunch because of the coronavirus-led downturn.

States have taken varying approaches to utility issues stemming from the crisis, according to a list from the National Association of Regulatory Utility Commissioners. Questions remain about what policies affected customers may encounter at various electric cooperatives and municipal utilities across the country.

Direct Energy LP, which has competitive retail electric operations in parts of the United States, stressed the importance of deferring — and not wiping away — electricity bills for those in need. The company also said it supports a screening process, noting that the virus situation could go on for months.

"A blanket public disconnection suspension is not sustainable," said Ned Ross, director of governmental affairs at Direct Energy.

How to approach troubled customers was particularly complicated in Texas, which includes areas with retail electric choice as well as traditional integrated utilities, municipal providers and electric cooperatives.

For the competitive space, the PUC recently announced the creation of the temporary COVID-19 Electricity Relief Program to provide a way for retail electric providers to recover a portion of the cost of providing uninterrupted services to customers facing financial hardship. The program means competitive retailers must stop disconnections of eligible residential customers.

"Because the cost of these temporary measures will ultimately be borne by rate payers (including customers with suspended disconnects whose final balances are not totally offset by the COVID-19 surcharge on actively paying customers), they should be reserved for those in dire circumstances," the PUC said in a fact sheet.

Direct Energy called the Texas program a good first step for affected customers, but it suggested more will need to be done to support providers as the issue continues. Consumer advocates likely will be watching to see if the plan provides adequate relief to people who need help. And experts expect to see a rise in electricity debts in Texas and elsewhere that customers may not be able to pay and whose costs could be spread among other customers.

Charlie Harak, manager of the energy unit at the National Consumer Law Center, suggested a number of additional priorities beyond disconnection moratoriums, including suspension of late fees, reconnection fees and deposit rules. He also backed looser rules around payment plans. An open question is how might the returns of utility companies be treated, if differently at all.

"We're not looking to bankrupt utilities," Harak said. "But to use a business phrase that's used a lot, hey, if all of America is taking a haircut, utilities don't have to take a haircut? Seems like an odd conclusion."

To the east of Texas, utility bills are of particular concern in New Orleans.

City Council President Helena Moreno, a Democrat, and other local leaders recently sent federal officials a letter asking for more funding through the Low Income Home Energy Assistance Program (LIHEAP).

The document — which was signed by leaders from Entergy New Orleans, the Alliance for Affordable Energy and the Greater New Orleans Housing Alliance — included thanks to federal leaders for providing $900 million for the LIHEAP program in recent legislation. But it requested more funding in a future stimulus package.

"As the temperatures continue to rise into our typically hot summer, the newly jobless will face additional harm if they cannot afford basic services to maintain their health and safety," Moreno and others said in the letter.

Tech troubles

Social distancing and stay-at-home orders have forced state utility regulators to get acquainted quickly with technology such as Zoom videoconferencing in order to keep up with routine meetings and hearings, some of which may be required by law.

"From our perspective, the only public meetings that need to be happening are absolutely essential ones" and ones that are procedural, said Logan Atkinson Burke, executive director of the New Orleans-based Alliance for Affordable Energy.

The FBI highlighted a growing worry in a news release last week: reports of conferences being disrupted by pornographic or hate images as well as threatening language. The FBI urged organizations to make meetings private and listed steps on how to avoid "Zoom-bombing."

But the New Mexico Public Regulation Commission fell victim to a Zoom disruption last week when the agency's online meeting was hijacked and racist and lewd comments appeared (Energywire, April 2).

Other commissions have gotten tangled up in less abrasive technology troubles while getting used to new setups.

Three commissioners at the Texas PUC were spread out inside their normal meeting room on March 26 to observe social distancing. Interested parties could watch online and call in to speak.

But noise took over at various times, including the sound of typing that led one caller to say she couldn't hear.

"I'm going to ask the person typing to ... mute your phone," said Walker, the PUC's chairwoman. "And if you can't hear me, it's because you're typing."

Andrew Barlow, a PUC spokesman, said via email that the PUC is "still working out a few kinks in our teleworking systems." People can comment by filing in the docket system, he said, and the PUC is talking "with companies who provide a more moderated approach to ensure everyone who deserves to be heard in one of our open meetings is."

The Florida Public Service Commission met March 31 with the chairman, another regulator, and some PSC staff and others in a room. Other regulators joined by video, being shown collectively on a screen.

The meeting moved along smoothly, but there was a distinct echo coming from the microphones in the hearing room.

The Georgia PSC tested its Zoom software — using audio only — at routine committee meetings last Thursday. There were some mild kinks including initial problems accessing the meeting and a few regulators accidentally talking over each other or keeping the "mute" button on. The PSC used the video option for a routine administrative session this week.

PSC Chairman Chuck Eaton said last week that he talked with the agency's information technology staff and executive director about buying Zoom software when the coronavirus started spreading throughout the United States. They were on hold with the company with an eight-hour wait.

"I thought, 'Wow, I wish I went out and bought the stock,'" Eaton said, laughing.

Reporter Jeffrey Tomich contributed.

Twitter: @edward_klumpEmail: eklump@eenews.net

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