What are the top energy policy issues to track as we approach the November election? In part three of our “Energy & the Election” blog series, we dive into carbon pricing, state emissions policies, and what it means for your electric bill.
As voters report increased financial anxiety and prioritize the economy amidst a global pandemic, polling shows demand for power that is reliable and affordable. And when it comes to keeping our economy thriving and reducing carbon emissions, a market-based approach offers the best of both worlds.
Since introduced, competitive power markets have helped incentivize greater efficiency, lower cost electricity options and innovation. By reducing more localized monopoly control over power generation, our nation has seen significant benefits in addition to unlocking more affordable electricity: emissions reductions, more energy choice, and improved reliability and efficiency as a result of regional planning and resource sharing across ISOs and RTOs like PJM Interconnection, ISO-New England and others.
As candidates and policymakers propose energy legislation, they can look to competitive power markets – and competitive power suppliers – to deliver both economic and environmental results.
Heading into November and looking to 2021, here are four policy and regulatory issues to watch, with big implications for our competitive energy future.
Key Competitive Energy Policy Issues
1. Carbon Pricing and Emissions Reductions
Carbon pricing isn’t a new idea, but it’s gained increased support and momentum in recent months – for good reason. Putting an equitable and appropriate price on carbon is an example of a market-based approach to reducing emissions that retains the benefits of competition – and it’s endorsed by top economists, business leaders, energy companies, and environmental advocates. By putting a price on carbon, and not favoring a particular technology or resource, policymakers target the ultimate goal. And by giving credit to all power generators and other technologies that reduce emissions while allowing the market to determine the least cost solutions, we can incentivize companies to innovate and invest in efficient, economic projects.
EPSA supports market-based solutions to reduce emissions, including carbon pricing, that allow all resources to compete fairly. An economy-wide approach that takes all industries and sources of emissions into account would deliver the greatest impact at the least cost.
In light of political challenges, carbon pricing in regional wholesale electricity markets would also be more efficient than other state-level or a patchwork of policies. A Clean Energy Standard that credits natural gas and other low-emitting resources could also align with market dynamics and provide a cost-effective path forward as long as it is properly designed and allows for lower emitting resources to participate based on their contribution.
Every ton of emissions avoided is a step forward regardless of the tool used and brings us toward a cleaner energy future that encourages innovation and cost savings for consumers – without hampering the reliability of essential electric service.
2. State Energy Policies
State leaders play a critical role in developing policy solutions that work for their constituents. Today, many states are looking for answers to meaningfully reduce emissions at a cost customers can afford, spark innovation, and help keep reliable electricity flowing. But policymakers are best served to choose the path that creates a durable foundation for sustainable environmental progress – not one that hampers innovation, interrupts reliable electric service, or takes us back to a time of increased monopoly control over power generation resources.
Competitive power markets are a strong foundation for states seeking economic and environmental wins. By aligning emissions reductions or other goals with regional wholesale electricity markets, and ensuring that all resources have the opportunity to compete on a fair playing field, states can more efficiently and cost effectively achieve their objectives. EPSA is working with stakeholders and policy leaders at every level to find competitive approaches to achieve their emissions reductions goals.
But anti-competitive policies like the Fixed-Resource Requirement (FRR) being explored in states like New Jersey and Illinois would undermine the benefits competition offers to all consumers in the region. Not only does the FRR concentrate market power, it also slows new clean energy development and has been estimated to raise costs in all states – as high as $368 million annually in New Jersey. These costs are not lost on many states, as New Jersey and Illinois proceed with investigations into the options that best serve their needs. EPSA is actively engaged with state leaders – by detailing the many challenges with the FRR, and demonstrating how market-based, competitive approaches better assist them in achieving secure greater emissions reductions at a lower cost. We are pleased to see states taking a thorough, thoughtful approach to understanding how certain policies would impact consumers, competition and the grid.
New England states, New York, Texas, the Midwest, and California have also tackled big energy questions this year – from how to reliably integrate intermittent renewable resources to carbon pricing to new market rules that encourage competition. Each state has its own needs and circumstances, and EPSA seeks to be a partner for all looking for workable market solutions to designate the least cost resources that meet consumer needs.
3. Ethics and Consumer Protection
Recent utility investigations and customer-funded power plant bailouts in Ohio and Illinois point to the need to reduce political influence when it comes to power generation, let markets determine which least-cost resources stay online or get built – and keep investment risk with companies, not consumers. Curbing localized monopoly influence will also demonstrate to these states the advantages of energy policies which harnesses the power of the regional competitive market to designate the least cost resources to meet consumer needs and achieve their objectives.
In Ohio, an alleged $60 million bribery effort led to the passage of a more than $1 billion bailout for the state’s nuclear and coal plants and the arrest of Ohio’s House Speaker – all funded through customer bill increases that will go into effect Jan. 1 if the state legislature doesn’t act. EPSA is part of the Coalition to Restore Public Trust, a group pushing for the repeal of power plant bailouts in Ohio and greater consumer protections and transparency.
Illinois state leaders and nuclear owners are also under scrutiny for alleged bribery and political influence peddling to secure favorable legislation to direct higher profits to plant owners and shareholders – at customers’ expense. The state’s governor, J.B. Pritzker, has made clear he understands the challenges with the FRR and will push for greater consumer protections, ethics, and market-based solutions to secure clean energy.
Because utilities can earn back a percentage of construction projects and operations through additions to customer electric bills, there can at times be incentive to choose higher cost options. In states like Virginia, where power generation competition is virtually nonexistent, utilities have the latitude to propose high-cost plans and raise customer rates. In a recent plan, Virginia utility Dominion would raise individual customer bills by more than $800 each year. If the project costs go up or it doesn’t produce all or any of the power expected, utility customers would still see those charges reflected in their monthly bills. Dominion’s “captive customers” have seen their home power bills rise nearly 29% since 2007, primarily to cover new construction projects, according to state regulators.
4. FERC Leadership
The Federal Energy Regulatory Commission (FERC) is the federal agency responsible for overseeing wholesale power markets and ensuring they are just and reasonable. The U.S. Senate is currently considering two nominees to the Commission who will play an important role as the markets and grid evolve. At EPSA, we look forward to seeing the seats filled and working with a full FERC bench to advance competitive solutions to complicated issues.
Meanwhile, FERC continues to consider important issues including how to fairly integrate new resources and technologies into markets (Order 2222). The Commission also held a day-long technical conference on carbon pricing in the organized wholesale electricity markets that started an important dialogue which will help move the issue forward. FERC last week introduced a first-of-its-kind proposed policy statement on carbon pricing, which will drive that conversation ahead. Going into 2021, the Commission will no doubt tackle many more complex regulatory questions that ultimately enable Americans’ access to reliable, affordable and cleaner electricity.
While not all of these issues make it into the nightly news or debate talking points, they are critical to the future of the power grid – and your daily life as an electricity user. With a market-based approach, we can keep costs low, increase reliability, drive environmental progress and spur innovation.
Allowing competition to play a bigger role in energy policy should be a no-brainer. It’s something both sides of the aisle can do to produce winning results for all.