This week, the Supreme Court declined to review the Federal Energy Regulatory Commission's approval of a cost allocation system for new transmission lines for renewable sources in the Midwest. How will this move by the court influence the debate over cost allocation in Midwestern states? During today's OnPoint, Howard Learner, executive director of the Environmental Law and Policy Center, discusses challenges to modernizing the nation's transmission system and talks about Midwestern states' varied approaches to addressing distributed generation and net metering.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Howard Learner, executive director of the Environmental Law and Policy Center. Howard, great to have you back on the show.
Howard Learner: Good to join you.
Monica Trauzzi: Howard, this week the Supreme Court declined to review FERC's approval of a cost allocation system for new transmission lines for renewable sources in the Midwest. What's your reaction to the move and the impacts that you could see in Michigan, Indiana, Illinois and Wisconsin, which were the states that were ...
Howard Learner: First of all, it's hard to read too much into the Supreme Court not granting certiorari on a case. They do that for lots of reasons. They may have found the 7th Circuit decision to be right; they may have found the issue to be not that interesting for their review, but the 7th Circuit decision largely upheld prior case law. The 7th Circuit is saying the cost causers and beneficial users of transmission should bear responsibility for paying for it. And FERC is going to have that issue squarely on its platter right now with a special payment being asked for to keep a coal plant running in the Upper Peninsula of Michigan, 90 percent of which is being used to serve two mines in the western Upper Peninsula, but customers in Wisconsin are going to be charged to pay for it. A number of the Wisconsin utilities, the Wisconsin Public Service Commission, and a number of environmental groups and consumer groups have said: "Wait a minute. If the mines are causing the costs and are the beneficial users, they should pay." So that issue now from the 7th Circuit is squarely in front of FERC, and you have a pretty broad range of parties saying that's a legal principle that needs to be followed. Watch that test case.
Monica Trauzzi: So this big question though is, are customers going to see higher bills resulting from these new transmission lines that are focused on renewable energy?
Howard Learner: Well, renewable energy wind power can bring costs down. Building new transmission of course passes costs on to consumers. Some of the transmissions being used for renewables, some of that transmission is being used for coal. So what you have to do is not look at it as one size fits all, but look at particular transmission lines and really say, No. 1, are the costs justified? Are the benefits greater than the costs, and therefore you can build a line? Or had the world changed in which a particular transmission line, and there are a number of lines that are being challenged on this basis, given the demand has gone down is there less need for the lines, they shouldn't be built? Secondly the question is is the line carrying renewable energy like wind power, or is it carrying coal and natural gas? The premise of what the Midwest independent system operator did is that these transmission lines, they call them the MVP lines, are supposed to be carrying wind power. Some of them do, some of them don't very much. And that's going to be an issue both before the regional commissions and also an issue before FERC.
Monica Trauzzi: Also in the news are natural gas price spikes in the Midwest that we saw this winter resulting from the cold weather. FERC is going to be taking a look at this. What's at issue here? I mean, is the grid just simply not capable of performing when we have this extreme weather?
Howard Learner: Well, the real issue is this winter was extraordinarily cold in the Midwest, and natural gas came at a premium. FERC should take a look at this. The state commission should take a look at it. We ought to figure out whether we had short-term problems or long-term problems. But one way or the other, the question is, is the extreme weather, the coldest winter we've had in years, unusual? Or is this the new typical future? And that will affect how decisionmaking is done.
Monica Trauzzi: On the whole, though, the Midwest has seen a drop in energy demand. How are efficiency programs and technological advancements influencing electricity use in your region?
Howard Learner: Well, in the Midwest heartland and nationally, there's a quiet revolution in energy efficiency. What's happening is, more efficient refrigerators, air conditioners, lighting, pumps, motors, other appliances are going into homes and businesses. And here's the game changer. The Midcontinent Independent System Operator, MISO, just came out with numbers saying they're predicting a negative 0.75 percent demand over the next three years. That's based on utility data. Previously they'd been a plus 1 percent. So over three years there's about a 5 percent difference in demand, and that's huge in terms of savings for businesses and residential consumers. It makes a huge difference in terms of capital investment decisions being made by utilities whether to retrofit coal plants or nuclear plants. And it's very important in terms of whether some of the transmission will be needed. And this is happening really for three reasons. First, technological improvements. Lighting, CFLs, LEDs are coming on the market from Philips and GE and Cree. And those LEDs are far more energy efficient, about 90 percent more, than incandescent bulbs. That's taking a big chunk out of demand. Secondly, the energy efficiency programs that the state public utility commissions are doing. When you invest in five states in the Midwest, $2.5 [billion] to $3 billion over several years, hopefully that has an impact, and it is. So Commonwealth Edison is now looking at minus 0.2 percent. Xcel Energy is looking at declines in Minnesota. Ameren in Missouri and Illinois is looking at declines. Those energy efficiency programs are having an impact. Finally, the federal appliance standards are taking effect. When you buy a new refrigerator today it's much more efficient than your old one. And as refrigeration goes into grocery stores and homes and businesses being more efficient, demand goes down, as our economy is improving, and that's a win, win, win. That's good for businesses' bottom lines, that's good for job creation, it's good for less pollution, and people save money on their bills.
Monica Trauzzi: Back to transmission. A key component of the administration's Quadrennial Energy Review is going to be taking a look at the nation's transmission system. From the Midwest perspective, what would you offer as key elements to modernizing the nation's transmission system?
Howard Learner: There are two pieces that need to be modernized. The first is what I'll call the basic blocking and tackling. That's taking the existing system, transmission and distribution, and making sure that it's working well, it's not decaying. Some of it is very old. Making sure that it's smart and can do what consumers need, and taking things like old capacitors and so forth and making sure they're up to snuff today. It's not as sexy, but that basic blocking and tackling is really important for what businesses and people want in their homes. The second is longer line transmission, and that's the opportunity, for example, to bring wind power from the Great Plain states, say North Dakota and South Dakota, where it's very windy, but not that many people live, and get it to the load centers in places like Chicago. From an environmental group perspective we're very interested and supportive of those lines if they're carrying wind power and clean renewable energy, as some of them are saying that they're doing. And also we have to look at the numbers and must make sure that the benefits exceed the costs and they make good economic sense.
Monica Trauzzi: One final topic here, the Iowa Utilities Board is analyzing how it should address the potential widespread use of distributed generation. DG has proven to be a contentious topic in many regions around the country, particularly when it comes to the cost allocation element. As you consider the future of the grid and utility busy models, what role should distributed generation be playing?
Howard Learner: Distributed generation, particularly solar, plays a vital role in terms of reliability, cleaning up the air and saving money for consumers. The efficiencies of solar panels are going up, the costs are coming down, and those entities that are getting behind it I think will be in good shape. People who are trying to stop the progress technologically when it comes to solar are going to be like the utilities that had landline telephones that tried to stop wireless telecommunications. It almost never works to stand in the way of technological progress. And that's why I think you're seeing about 20 of the states and a number of utilities saying, "How do we make distributed generation and solar work for us and work for our customers?" And then we have some places like Iowa where the Iowa Utilities Board at the urging of a couple of the utilities, is trying to stop solar or hold it back and put in regulatory barriers. And ultimately I think they'll be as successful or not as some of the landline companies who were trying to hold off wireless and things we use today, that it's hard to imagine when we look back that utilities were opposing.
Monica Trauzzi: All right, Howard, we'll end it there. Thank you for coming on the show again.
Howard Learner: You're welcome, good to join you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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