Energy Markets

NARUC head Marsha Smith discusses effect of carbon reduction programs on consumers

As electric utilities prepare for a carbon constrained future, what financial impact will the consumer bear once a carbon reduction program is implemented? During today's OnPoint, Marsha Smith, president of the National Association of Regulatory Utility Commissioners and a member of the Idaho Public Utilities Commission explains which elements should be included in a cap-and-trade program so the consumer does not bear an unfair burden. Smith also discusses why she believes renewable energy tax credits should be extended this year and she talks about the future of nuclear and clean coal as part of the U.S.'s clean energy future.


Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Marsha Smith, president of the National Association of Regulatory Utility Commissioners and a member of the Idaho Public Utilities Commission. Marsha, thanks for coming on the show.

Marsha Smith: Thank you very much. It's my great pleasure to be here.

Monica Trauzzi: Marsha, something that's coming back into focus on the Hill in recent days is the extension of tax credits for renewable energy projects and they're set to expire at the end of this year. Why are these so vital?

Marsha Smith: Well, it's important that we encourage renewable energy to be installed and delivering energy so we can have an appropriate diversity in the resource mix for our generation. And NARUC has long supported these kinds of incentives. We just passed a resolution at our winter meetings encouraging the investment tax credit for solar. And last summer we passed a resolution encouraging the approval of a 10-year renewal of the production credit for new solar, wind, geothermal, and biomass facilities.

Monica Trauzzi: Are you hopeful that Congress will be able to pass through a bill like this that would extend these credits?

Marsha Smith: Yes, we think it would be very beneficial to the renewable industries.

Monica Trauzzi: And do you see it happening this year?

Marsha Smith: Well, I'm not a forecaster and so I'll leave that in the hands of those who might be.

Monica Trauzzi: And, obviously, another big focus this year is global warming legislation. The Lieberman-Warner bill has passed through the Senate EPW committee. What's your take on this bill and the impact it would have on your industry and consumers?

Marsha Smith: Well, I guess instead of speaking to that bill specifically, which I'm not knowledgeable in depth, I would just say that we, as an organization of state utility commissions, are on record supporting action by Congress. Because right now utilities need to get financing to make investments in new facilities and as long as there is uncertainty about what Congress is doing and how much it will cost there's uncertainty about getting the investments made that they need to serve the customers.

Monica Trauzzi: On the flipside of that though you have this recent EIA analysis of the Bingaman-Specter bill and that found that implementation of the standards presented in the bill would cause a jump in electricity rates and gas prices. So, something like that might not serve the purpose that you're talking about.

Marsha Smith: Well, all of this is going to cost money and I think maybe that's the underappreciated fact. But I think the public is demanding that we pay attention to climate change issues and they're interested in having action. And so I think it's important that we do that, but it will cost money and there will be no way around the fact that new resources, whatever they are, will be more expensive than older resources.

Monica Trauzzi: So, what are the key elements of a cap-and-trade program that you see as necessary for the consumer not to bear this big burden?

Marsha Smith: Well, in the ultimate end I think consumers will always bear the burden. In a resolution passed in November the NARUC did list a set of principles that we think if Congress chooses to do a cap-and-trade type of mechanism they should adhere to. The primary one being that we believe that initially credits should be allocated at no cost to load serving entities and in that way the persons with oversight over those entities could make sure that the benefit of the credits goes to the consumers.

Monica Trauzzi: And how would a cap-and-trade program impact the roles and responsibilities of state regulators like your self?

Marsha Smith: Well, if the credits were allocated to the load serving entities then the regulator would have the opportunity to specify or allocate them on the local level. And so that is the way we would see ourselves, having a role of getting those to the consumers benefit ultimately.

Monica Trauzzi: And also having a say in the types of the emissions control technologies that power companies would use, right?

Marsha Smith: I think that may vary from state to state. In our state we've always viewed ourselves not as a substitute for the company's management. So, the decisions with regard to the technology and the types of facilities they actually install, we think, belongs at the company level, not at the commission level. But certainly we review what they do to determine if it was prudent.

Monica Trauzzi: So, essentially at this point, is it just a waiting game until Congress passes some form of legislation?

Marsha Smith: Well, I think all the utilities know that this is a potential and, in fact, I think at the National Electricity Delivery Forum, which is going on right now, they did an audience survey and I think 60 percent of the audience believes Congress will act in the next three years. So, I think they anticipate some action will be taken and they're preparing for that by doing their integrative resource plans that is their plans for how to serve their future loads by adding a cost for carbon facilities. So that sometimes changes the resource stack, so it means they go out and they acquire more renewables and they're doing more energy efficiency as opposed to planning to build coal plants or gas.

Monica Trauzzi: And intertwined into all of this is the consumer. And the commissions are really here to serve the public interest. So, how should the consumer be engaged and educated when it comes to these issues and the future of clean energy?

Marsha Smith: Well, it would be wonderful if consumers would go out and have an understanding of just where their power comes from. I think most people don't understand the complex system that is in place to ensure that they have electricity. And, of course, the number one thing that everyone can do is to be more efficient in the way they use it and don't waste it, because the more you use the more the companies have to go out and find it. Of course, the least expensive kilowatt that you have is the one you don't use. So, efficiency is really important right now.

Monica Trauzzi: And many consumers don't realize that electricity comes from coal generation.

Marsha Smith: Yes. A lot of our electricity in the United States comes from coal. And if you think in terms of energy security, that's actually a good thing because coal is what the United States has a lot of.

Monica Trauzzi: But we need to make a clean. So how do you ...

Marsha Smith: We do need to make a clean.

Monica Trauzzi: What's the path for that at this point?

Marsha Smith: Well, I have been heard recently to note that we're behind the curve on research that would enable us to use the coal we have in an environmentally responsible way. So, in my view, we need to put our smartest minds to work at finding out the best way to use that coal, because I have great confidence in the ingenuity of the American people, that we have people who could do that.

Monica Trauzzi: And also nuclear energy and the storage of spent fuel is something that came up ...

Marsha Smith: Yes.

Monica Trauzzi: ... in your meeting this week. It's very controversial and there are some people in Congress who are staunchly opposed to Yucca Mountain and the storage of spent waste in Nevada.

Marsha Smith: Right.

Monica Trauzzi: What's your take on the current discussion that's happening in Congress relating to nuclear and the storage of spent fuel? And where do you see this going considering where the Yucca project stands at this point?

Marsha Smith: Well, in fact I'm sure after looking at resolutions this week, our longest one dealt with the storage of spent nuclear fuel and, of course, the United States has not fulfilled its part of the bargain of the nuclear fuel deal which it was supposed to take ownership of that and provide a place for storage. So, it's an area of great concern. Nuclear is certainly one of the fuels we should probably look to in the future in developing our diverse portfolio of resources, but we really need a resolution to the storage issue to make that a reality.

Monica Trauzzi: OK, I think we're going to end it right there and I thank you for coming on the show.

Marsha Smith: Thank you very much. It was my pleasure.

Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.

[End of Audio]



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