Utilities

NARUC chief talks shift away from power plan, urges regulatory certainty

This week, utility regulators from around the country are convening in Washington for the annual winter meetings of the National Association of Regulatory Utility Commissioners. At last year's meeting, the focus was almost entirely on the Clean Power Plan. What are regulators now most focused on as the Trump administration seeks to move away from the plan? During today's OnPoint, Robert Powelson, commissioner of the Pennsylvania Public Utility Commission and the new president of NARUC, explains how regulators' work is evolving as the political climate in Washington changes.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Robert Powelson, commissioner of the Pennsylvania Public Utility Commission and the new president of the National Association of Regulatory Utility Commissioners. It's nice to have you here.

Robert Powelson: Monica, great to be with you.

Monica Trauzzi: So regulators from around the country are convening in Washington this week for the annual NARUC winter meetings. At last year's meeting the focus was pretty squarely on the Clean Power Plan. The conversation has since shifted pretty dramatically. What are regulators most concerned about? What are they talking about this week?

Robert Powelson: So right now the buzz is obviously this presidential transition and how NARUC really articulates the issues that are impacting our member states. So Clean Power Plan as we know it I would say is on a hiatus, and with a new Supreme Court Justice I could see us hitting the reset button and looking at alternative ways.

I use my state as an example. Since 2008 we've seen a 32 percent reduction in NOx, SOx and mercury, reductions from our power plants. That's a market-based decarbonization that's happening in lieu of anything known as the Clean Power Plan.

So you couple that with discussions around WOTUS and a lot of people are like, "Ya know, let's be respectful of states' rights." I think there's a buzz at this meeting about our ability to effectuate some real positive changes on Capitol Hill.

Monica Trauzzi: How are you hoping to shape the conversation on the power plan era? Like you said, utilities in many cases are moving forward with plans to reduce emissions and to switch to cleaner sources of energy. So what should regulators be doing in light of all that?

Robert Powelson: So as you mentioned, our generation mixes change radically. I use that year 2008. In my state, we're the second largest natural gas production state in the country. We're not building right now new coal plants in Pennsylvania, but we are concerned about our ability and many other states.

We're getting away from fuel diversity and we're having issues around the viability of nuclear assets. It's great that my state and others have implemented renewable portfolio standards. We've harnessed renewable investment in our state, but most of your RTOs and ISOs will tell you that we've got to have a broader conversation around fuel diversity because we love our shale gas, but I can tell you from dealing with things like the polar vortex back in 2013, very troubling times in the ... power system.

Twenty-five percent forced outage rates of plants, and these are the kinds of things that you need to keep in mind as we're having conversations with Washington. We have a new administration, obviously.

I think that our conversation this morning, by the way, was about infrastructure investment. Here's an industry that says, "We don't need a handout. We don't need a stimulus grant, but what we need is regulatory certainty." That's what I think a lot of the merchant generators across this country are looking for. Regulatory certainty so I can go forward and build my plant and not have to deal with the Army Corps of Engineers coming in at the eleventh hour to halt a project.

Monica Trauzzi: Are you confident or is your sense at this point that the Trump administration is on board with all those things?

Robert Powelson: My dealings with the Trump administration, I think there's a very clear edict. We're going to invest in infrastructure and we are going to do it in a very efficient manner and with respect to environmental protection obviously, but I think if you look at the president's announcement on Dakota Access and TransCanada, very clear and concise where he wants to see infrastructure built and infrastructure cited.

Monica Trauzzi: I want to go back to the Clean Power Plan for a second. There's a lot of talk about what a replacement could look like if there is a replacement. Do you believe the Trump administration will move to replace the Clean Power Plan and, if so, what shape should that rule take?

Robert Powelson: So we're early into this. Recognizing that Secretary Pruitt, he'll have to make a recommendation to Congress whether he wants to litigate or look to say to the states, "Look, let your air regulator deal with it. If you guys want to have a RGGI-like trading mechanism, let's be respectful of that and go about your business." But a heavy-handed Clean Power Plan-like approach I think is really off the table at this point.

I'm not going to argue the fact that the Supreme Court has given the EPA the ability to regulate carbon, but I think what you'll see in this discussion is letting the states really drive —

Monica Trauzzi: Is the Clean Power Plan really heavy-handed, though? Much of what it prescribes has already been achieved.

Robert Powelson: Going back to my example of without it we're seeing sizable reductions in NOx, SOx and mercury emissions across this country. You couple that with the investment around renewables in states like mine and Texas and others that are integrating renewables.

I just think when we talk about the Clean Power Plan, and I've spent a lot of time working with the prior administration on conversations about this, there are a lot of unintended consequences now that are rearing their ugly head. One is price formation around nuclear plants that were supposed to be part of those compliance plans for states.

I think the clear directive in the current outline of the Clean Power Plan is a nationally prescribed renewable portfolio standard for states. That really is what got a lot of this debate started where our ... power system is based on economic dispatch; the least cost unit. Now we're in a regime or we're on hold now, but a discussion around economic dispatch. Here lies these issues. States like mine took early adoption measures to implement things like energy efficiency, renewable investment, not receiving credit for that.

These were the conversations that got a lot of states' legislators, Republicans and Democrats alike, in a very combative posture with the EPA.

Monica Trauzzi: So you don't think states need a mechanism like the Clean Power Plan in order to reduce CO2 emissions.

Robert Powelson: I think there needs to be some type of light regulation to allow for states that want to invest in next-generation technology and address climate goals.

California is an example of more recently Governor Brown announcing we're basically doubling down on our renewable portfolio standard, but in doing so we're not going to count nuclear as part of that.

Other states are moving in a much more, I'll call it hybrid approach. We want all the above resources to count.

So again, in a states' rights ... role, I think the states are really the incubation labs for addressing climate.

Monica Trauzzi: There was a meeting last week at the White House about a carbon tax. Is that something you'd be in favor of?

Robert Powelson: Well certainly I have a great deal of respect for Secretary Baker. He is a true statesman. When he speaks, people listen. I think some people in the industry, if there could be industry consensus around a carbon tax, it's the most efficient way to go about this, but I can tell you from sitting through the debate of the cap-and-trade debate, I don't know if there's an appetite in the Congress to address a carbon tax.

Monica Trauzzi: You spoke a lot about infrastructure earlier. Obviously FERC plays a role in that. Are regulators concerned about the lack of quorum at FERC right now?

Robert Powelson: We are. We're very concerned. You have a potential situation where you talk about infrastructure, this could wreak havoc on our interstate pipeline system.

You also have a number of potential LNG export licenses that are being reviewed. You still have the oversight of wholesale power markets. So this agency will conceivably be hamstrung without a quorum.

So I think organizations like NARUC, a number of industry types, other consumer groups, have expressed a concern about this.

Monica Trauzzi: What assurances, if any, have you received from the commission?

Robert Powelson: In terms of the ability to —

Monica Trauzzi: The ability to move forward and have a plan in place.

Robert Powelson: Well, I'm interviewing Chairman LeFleur at NARUC, so I'll find that out in a day here.

Monica Trauzzi: Excellent. Beyond the Clean Power Plan, what are the things, your key priorities moving forward through your year as president?

Robert Powelson: So I outlined three ambitious goals. One is a discussion about infrastructure. You're looking at industries, gas, electric, water, telecom, very capital-intensive. We've got a lot of innovation out there in the market, so innovation is the second theme. Ahead-of-the-meter or behind-the-meter technology.

So recently we had our innovation task force kickoff. It was amazing the presenters at that and the turnout just for a discussion around innovation. We started with the topic of battery storage.

Then the third theme is workforce investment. This industry, whether it's in gas, water, electric circles, we're losing a lot of talented people.

The average lineman in this country, the average age is something like 56 years old. So how do we through a workforce development initiative really retrench, repopulate, retrain people to come into these jobs? Part of that is a focus around military hires and really focusing on things like troops to energy and supporting those type of initiatives. That's where I think NARUC plays a key role in convening the thought leaders to come up with solutions of how do we get more utilities engaged in hiring our veterans.

Monica Trauzzi: We're going to end it right there on that note. Thank you so much for coming on the show.

Robert Powelson: Thank you. My pleasure.

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

[End of Audio]

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