Utilities are struggling to predict the costs of greenhouse gas regulation. In the quest for a greener planet, how much should consumers be asked to pay for environmental benefits that might be...
Bench Report: Top Ten Legal Decisions of 2010
2010 Law & Lawyers Report
stunned the power industry in March, when he led FERC to propose forcing regional wholesale power markets to pay the full market-clearing locational marginal price of energy for DR resources—as if DR was exactly equivalent to electric generation supply.
FERC’s proposal has sparked disagreement between the famous electric industry economists William Hogan and Alfred Kahn and their respective constituencies (power generators versus efficiency minded smart grid proponents), with “Bill” arguing that consumers cannot “sell” power they haven’t bought, and “Fred” claiming the increasing-cost nature of electric service (as opposed to, say, shoes) simply demands that DR be valued at full LMP.
The debate even led senior commissioner Philip Moeller to disagree publicly with his chairman on how to effectuate a true smart grid: through incentive payments for DR through wholesale markets, per Wellinghoff’s vision, or through dynamic retail pricing and consumer response, as per Moeller. (Demand Response Compensation in Organized Wholesale Energy Markets, Docket No. RM10-17, March 18, 2010, 130 FERC ¶61,213.)
3. Smart Grid Skeptics
Maryland PSC shocks industry by rejecting BG&E’s AMI plan.
Though it has since granted conditional authority for Baltimore Gas & Electric to go ahead with a planned deployment of advance metering infrastructure (AMI), the Maryland Public Service Commission in June surprised the industry by rejecting BGE’s proposed $835 million smart grid initiative—which proposed $482 million for the actual meter rollout, plus $353 million for ongoing management and monitoring—even as the DOE granted BGE $200 million in stimulus funding under the American Recovery and Reinvestment Act (ARRA).
The PSC faulted the plan on a number of key counts: 1) insufficient focus on communications equipment linking meters with customers; 2) lack of detailed plans for customer education and outreach; 3) mandatory time-of-use rates for residential customers with no cost-benefit analysis, versus the optional TOU preferred by state regulators; and 4) a surcharge providing dollar-for-dollar recovery of infrastructure investment costs, rather than deferral accounting on a regulatory asset theory.
The BGE decision arrived in a context of growing unease in some jurisdictions regarding smart grid rollouts. Programs in Colorado, Texas, and in PG&E’s California service territory met with ratepayer resistance and even outright backlash, giving rise to a new industry term—the “Bakersfield Effect.”
BGE eventually won the PSC’s grudging acceptance for the smart grid pilot program, after the utility cured certain program defects and promised to recover only 25 percent of project costs through its “cost tracker” surcharge. The PSC still harbored qualms, however, pointing out that only 11 of some 26 utilities in 15 states deploying AMI were financing their smart grid projects through direct cost recovery clauses. (Md. PSC Order No. 83410, June 21, 2010, as modified in Order No. 83531, Aug. 13, 2010, at 283 PUR4th 165.)
4. Troubled Waters
Massachusetts court beats back attack on Cape Wind Project.
Issuing a key precedent on the reach of state permitting schemes for power projects to be sited in federal waters, the Massachusetts Supreme Judicial Court turned back the latest attempt by preservationists to block construction of the proposed Cape Wind project, with its planned deployment