Edison Electric Institute

Investor-owned utilities get caught in the partisan crossfire, as candidates engage in a national food fight over tax policies.

America’s electric utilities understand their central role in taking efficiency and conservation to the next level. Accordingly, the industry has nearly doubled its spending on efficiency measures in the past few years. But encouraging customers to save energy won’t be enough to keep pace with the electricity demands of a growing digital economy. The country’s efficiency efforts will be most effective as part of a clean energy portfolio strategy.

California’s new feed-in tariff (FIT) is creating a burgeoning market for green energy investments, but the policy has sparked a fierce battle over state authority to dictate wholesale power transactions. A federal case will determine whether the 1978 Public Utility Regulatory Policies Act pre-empts states from requiring purchases that exceed utilities’ avoided cost.

Low carbon prices might not produce sufficient incentives for firms to innovate and reduce emissions in the long run. But relatively high carbon prices can be politically unacceptable and invite consumer backlash. Where’s the right balance? A PUC chairman offers an alternative approach to managing GHG emissions.

On March 18, the day after this issue went to press, FERC was scheduled at its decisional meeting to open a new formal inquiry on the role of demand response in regions that already have competitive wholesale power markets. In particular, how much money should grid operators pay to electric customers who promise not to buy wholesale power?

Power delivery efficiency gains constitute a valuable utility asset that can offset or defer new generation and T&D investments. Enabling technologies, utility demonstration projects and supporting regulatory frameworks are needed to validate potential savings.

The Senate’s deadlock over carbon cap-and-trade legislation has not deterred FERC Chairman Jon Wellinghoff from an agenda bent on promoting renewable energy and fighting climate change. Last fall, even as Congress dithered, FERC launched a landmark initiative that likely will lead to sweeping new rules for expanding the nation’s electric transmission grid, grounded on Wellinghoff’s belief in wind, solar, and green power resources.

In June 2008, the New York Public Service Commission (PSC) established the electric energy-efficiency portfolio standards for New York’s investor-owned utilities. In its order, the PSC directed utilities to file three-year energy-efficiency plans. Later that year, the PSC issued a supplemental order approving shareholder incentives for utilities successfully implementing their portfolios. If all goes according to plan, the six affected IOUs stand to earn about $27 million annually in performance incentives over three years. The structure of the incentive mechanism approved by the PSC presents risk factors that might affect utilities’ ability to realize the full earning potentials the mechanism offers.

Proving the need for new infrastructure construction for energy purchases has become more complicated for utilities. State commissions reserve the right to revisit rate-base investments after the fact, even when they’ve been pre-approved.