Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to...
2008 CEO Forum: Conservation Compact
Utilities test new models to encourage investments in efficiency and conservation.
Efficiency investments might increase rates for non-participating customers, but their rates would have gone up in the alternate scenario as well.
That’s how we view it and the Idaho commission does too. We have a team made of our employees, Idaho commissioners, environmental groups and other state groups that provide oversight to our energy-efficiency programs. It’s done in a collective way, and provides assurance we are doing the right things first, and doing projects that make economic sense for our customers compared to the alternatives.
Fortnightly: How does the trend toward a smart grid and advanced metering figure into IDACORP’s business strategy?
Keen: We view smart-grid applications and advanced metering technologies as value enhancements for our T&D systems. The hype is well out in front of the applications, but we think it’s moved far enough now to do most of what we’d like it to do—enhance reliability and resource management and contribute to quality customer service. So we’re implementing AMI this year. It will give us the ability to send price signals to customers. That has become increasingly important. If we can find ways to get people to pay more for electricity during times when it costs the most to produce it, people will change their behavior voluntarily. It’s certainly more practical to do that today than it was before, because the technology has caught up.
And automated meter reading, of course, will produce manpower savings. We’re planning on a three-year implementation, with planning and bids this year, and implementation in 2009 through 2011.
Fortnightly: What’s your perspective on mandatory greenhouse-gas regulation?
Keen: GHG regulation now seems certain to happen. If applied appropriately, either a carbon tax or a carbon cap-and-trade mechanism could work. Whatever the form it takes, it’s important that regulatory efforts be applied economy wide. The electric utility industry is probably the easiest to regulate, but if carbon regulation is to succeed, no single sector should be unfairly burdened. More importantly, time frames should also be consistent with development of the carbon capture and sequestration technologies needed to comply. The key is getting adequate research dollars collected and applied toward developing the necessary technologies.
In a cap-and-trade program, how allowances would be apportioned is the million-dollar question, raising serious issues of effectiveness and fairness no matter how the apportionment is done. Whatever method takes place, it is appropriate that companies gain some recognition for the wisdom of earlier decisions to invest in, and develop, emission-free forms of generation. I don’t believe it’s appropriate for the allocation method to come out in a way that’s biased against companies with a smaller carbon footprint today. Some of the concepts I’ve heard discussed might do that.
It’s possible for the industry to come together and strike a balance, but the devil truly is in the details.
Fortnightly: Do you think the utility business proposition is changing? If so, how does the regulatory compact need to change?
Keen: The business proposition has changed already, and the regulatory compact needs to be strengthened and renewed in order for needed infrastructure to be sited, built