What role should the federal government play in guiding the electric power sector's evolution? During today's OnPoint, Joy Ditto, senior vice president for legislative and political affairs at the American Public Power Association, discusses the regulatory and market factors at play in the transformation of utilities. She also weighs in on transmission and infrastructure challenges that could face public power under the Clean Power Plan.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Joy Ditto, senior vice president for legislative and political affairs at the American Public Power Association. Joy, thank you for coming on the show.
Joy Ditto: Thank you so much for having me, Monica.
Monica Trauzzi: Joy, as electric utilities transform their business models to accommodate new consumer demands, abundant natural gas supplies and the cost competitiveness of renewables as well, what do you see as the role of the federal government in sort of helping guide that transition?
Joy Ditto: Well, I think the role of the federal government is relatively narrow, particularly -- well, first of all, for APPA members who are consumer-owned, locally owned electric utilities. They're not-for-profit. They are governed at the local level by elected or appointed officials, and so the role for them is -- it's very narrow in terms of what the federal government can and should do in terms of encouraging local entities like ours to do certain things to transition to this new world. However, I think there are some things that the federal government can do in a very positive way to incentivize utilities across the country to invest in renewables, invest in new technologies. So research and development is one of those things that is, I think, a very important piece of what the government can do, and we've seen some very important things come out of the government in recent years. Storage is a huge issue, particularly to incorporate more variable renewables, and I think that's one area that the federal government can definitely play a great role. So that's one role there. Other types of incentives perhaps would be helpful. Grants, for example, like for smart grid technologies, deployment of those types of initiatives would be a good way that the federal government could play a role.
Monica Trauzzi: And a key part of the discussion is the role of natural gas, and we see many utilities making investments in natural gas because it's simply better economics than sticking with coal, but you believe that there's too much of an emphasis placed on natural gas in EPA's Clean Power Plan. If utilities are already going in that direction, isn't the regulation just in line with what the market's already doing?
Joy Ditto: Well, the regulation goes well beyond sort of the market's role, as I think you know. There's a -- there are mandates, and they're related to sort of deployment of renewables outside of your state. Can you count those toward the targets and timetables under the Clean Power Plan? That's certainly outside of sort of just letting the market do what it will with regard to natural gas. So I mean, there are a number of features. Also, the timelines are very aggressive. There are four building blocks, one of which is natural gas, but another one is renewables, for example. So, no, I think it does go beyond just letting sort of the marketplace dictate where utilities are investing.
Monica Trauzzi: And you've recommended that EPA give states more discretion in implementing the final rule. One of the key elements of the proposal is state flexibility, so what do you mean by discretion, and kind of what additional flexibility are you looking for?
Joy Ditto: Well, I think there is a little bit of flexibility with regard to the state can propose a plan, but the targets and timelines are hard. There's not any flexibility with regard to that, at least right now. We're proposing such flexibility, but there isn't now. So really, the federal government has come in and said this is what you have to do and given some pretty strong parameters about what -- even what wiggle room states have with regard to meeting those targets and timelines. So there's a little bit of flexibility. I wouldn't say the states have a lot of flexibility under this plan, and I think they need a lot more to be able to make it affordable for our members who are in small communities across the country and providing electricity on a not-for-profit basis. That -- any additional costs are going to flow directly to our customers, so we'll feel that. We also are in a position where we may be stranding some of our investments that have been made, you know, in recent years. Very clean coal technologies, other types of technologies, other investments we've made. We may have to say we cannot continue to use power from those generating facilities, which means that our customers have to absorb the remaining capital cost of that facility in addition to investing in new types of facilities. So we -- and we may not have a choice under the Clean Power Plan with regard to certain facilities.
Monica Trauzzi: Behind the scenes, are you concerned with the potential jurisdictional challenges that might exist between FERC and EPA on the power plan?
Joy Ditto: I think, you know, what we would like to see, frankly, is a bigger role for FERC in this regard, and I say that because, you know, we sometimes have concerns about FERC overreach in certain areas, but in this regard, honestly, FERC is the expert on reliability, and they work with the North American Electric Reliability Corp., as you know, in terms of discerning what reliability impacts there are on the system on an ongoing basis, not just under regulatory approaches, but just in general. So we would really like to see a greater role for FERC going forward. What that might mean for the current plan, I'm not so sure. There have been some, you know, FERC has taken a look at some of the issues related to the Clean Power Plan most recently and are continuing to do so, which we're very heartened by. On the other hand, we may need to see a legislative approach that actually brings FERC into the process early on. For example, any kind of proposed rule, whether it be under EPA or another federal agency like the Surface Transportation Board or the U.S. Army Corps of Engineers. If they're proposing something that could impact electric reliability, FERC may need to review that and say, "This could have a real liability impact," and maybe report to Congress on that before a rule goes final so that there is some awareness of or understanding of the reliability -- the potential reliability impacts of a proposed rule from the federal government.
Monica Trauzzi: And do you think that there are legs in Congress to pass such a legislative fix?
Joy Ditto: You know, we are certainly, I think, that concept is being floated and, as you know, there are a couple of energy bills that are going to start moving here soon in both the House and Senate, and I think it's certainly something that could be included in such an energy bill, so we certainly be looking in a supportive way at provisions like that.
Monica Trauzzi: We're hearing many conversations in support of a reliability safety valve and how that could minimize the potential for reliability issues with the Power Plan. How do you think that mechanism should or could be structured?
Joy Ditto: Yeah, you know, that is -- there are several different ways, and frankly that is not necessarily where I've been putting my emphasis. The regulatory folks have been looking at that, and my expertise is more on what Congress is looking at. I know that there are a variety of ways that we've ... off ramps and, you know, over the years when we've looked at this issue before. I think we are open as APPA to looking at what a safety valve -- what kind of safety valve would be workable for our members, and I think you'll see us supporting such a safety valve when we sort of home in on what those particulars are. And that's a little different than what I just described, right. So the safety valve would relate to sort of the current plan, and if there were major reliability impacts, and you again would have a pause or an offramp or however the specifics are structured. What I was speaking about before really would be for sort of future regulatory actions for really any agency. So you could even have -- you could see both be included in either an energy bill or a bill devoted to the Clean Power Plan or recommendations to EPA, and I think we'll sort of be doing all of the above as APPA.
Monica Trauzzi: One final question here. Sort of the other piece of the puzzle is transmission and infrastructure and some of the challenges that are there. What challenges exist for your members on transmission and infrastructure, particularly if the Clean Power Plan is enacted?
Joy Ditto: Yeah. I think there are several sort of issues with regard to infrastructure. One being natural gas pipeline. You mentioned earlier that natural gas is being used more and more, both from a marketplace standpoint, but also we'll be pushed toward it under the Clean Power Plan even more than we are today. So you need natural gas pipeline to be able to service these new power plants, and that pipeline just doesn't exist in all parts of the country. It just naturally -- the natural gas isn't in certain parts of the country, so you have to pipe it in. So historically we've had more regional generation, so if there's coal in a region, coal's produced in that region. If there's natural gas in a region, natural gas is produced in that region and then the pipe gets built to take it to the power plants. So we really need to build out a lot of pipeline infrastructure. We need additional storage for natural gas. So there's really a lot of money that needs to be spent to get us to that point. In addition to transmission facilities are always needed. We always feel like the more robust the transmission grid, the better for reliability purposes and for affordability purposes. The more constrained, the more expensive things get. So both under the Clean Power Plan, and even without it, frankly, we'd be supporting additional transmission in this country.
Monica Trauzzi: All right. We're going to end it there. Thank you for coming on the show.
Joy Ditto: Thank you so much for having me. I really appreciate it.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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