https://ilsr.org/3-forces-fighting-local-renewable-energy/
[links in on-line article]
Three Forces Fighting Local Renewable Energy and Three Ways to Fight Back
Written by John Farrell | Updated on Jul 24, 2017
If you’re reading energy news of late, you might have come across three
new ways that forces are aligning against local renewable energy. State
governments are increasingly pre-empting local authority on a range of
issues, including energy. Utility companies are undercutting state
regulation with their legislative lobbyists. And utilities are also
bringing their monopoly market power to bear in previously competitive
markets.
We’ll detail examples of each of these three disturbing trends, and ways
to fight back.
State Preemption
One of the most disturbing trends in politics is that of states
preempting local authority.
Across many economic sectors, we at the Institute for Local
Self-Reliance identify ways that cities can take charge of their local
economy. In energy, that includes ideas like a city takeover
(municipalization) of the utility, banning fracking, or increasing
franchise fees charged to private, monopoly utilities for use of public
property to deliver energy services.
Unfortunately, some state legislatures have decided to reduce local
authority to make these moves. Through municipalization laws passed
decades ago, states preempted or limited local authority to take over
utilities, instead favoring state regulation and oversight. State
lawmakers In Colorado in 2016 passed a law that overturns local bans on
gas fracking. In 2017, the Minnesota legislature considered a bill that
would add complexity when cities consider changes to franchise fees,
despite ample public notice and deliberation required by cities that
have such fees.
While there aren’t numerous examples of local energy policy preemption,
we fear it may grow as states become more accustomed to preempting
cities, or making it expensive for local governments to exercise
authority. In Arizona, for example, differences of opinion in a variety
of areas of regulation prompted the state government to threaten to
withhold local government aid to cities that enact ordinances that
conflict with the priorities of the legislature and governor.
States themselves are facing a preemption threat as well, with U.S.
Energy Secretary Perry suggesting he may find ways to favor large-scale
fossil fuel power plants over renewable energy producers.
Utility Political Power
A second area of threat is utilities flexing their political power to
avoid state regulation or boost their bottom lines. In Minnesota, for
example, monopoly utility company Xcel Energy — and its nearly 50
lobbyists — successfully pushed through a bill in 2017 that removes
Public Utilities Commission oversight of a proposed gas power plant. The
plant had not been prohibited, but commissioners had been skeptical of
its cost-effectiveness (for good reason). The utility also bullied this
local nonprofit for creating a parody video that accurately depicted the
gulf between the utility’s public image and its efforts to build the gas
plant.
Utilities have similarly flexed their muscle in statehouses across the
country. In Missouri, monopoly utility Ameren, with 40 registered
lobbyists at the state capitol, has stymied state efforts to reform the
utility system.
In Michigan, monopoly utilities spent over half million dollars on
lobbying in a year, and nearly $1 million more on an advertising
campaign to oppose deregulation and warn of energy shortfalls.
In Virginia, “no single company even comes close to Dominion in terms of
its wide-ranging influence and impact on Virginia politics and
government,” Larry Sabato, a University of Virginia professor and
political analyst, told the Richmond Times-Dispatch earlier this year.
Several candidates in the gubernatorial race are discussing rolling back
a 2015 law that allows the utility to keep excess profits instead of
returning them to customers. Dominion executives are contributing
heavily to the candidates that oppose such a rollback.
In Florida, the four biggest monopoly investor-owned utilities
collectively had one lobbyist for every two legislators, and spent more
than $12 million in lobbying from 2007-14 — along with $18 million in
campaign contributions. They dropped over $20 million in lobbying in
2015-16 alone, amid a push to pass a constitutional amendment that would
have limited rooftop solar in the Sunshine State.
In North Carolina, Duke Energy is threatening to go to the legislature
for changes to solar purchasing rules rather than wait for a conclusion
to a regulatory process underway at the Public Utilities Commission.
Influence can be localized, as well. In San Diego, where public
officials are considering a city takeover of electricity purchasing from
the utilities, incumbent monopoly San Diego Gas & Electric has a lot of
influence. The utility “donates to and lobbies San Diego’s elected
officials and has a strong voice at the Chamber of Commerce. So as the
city decides whether to implement community choice, political leaders
could take sides,” according to an NPR story.
Utility companies ostensibly settled for public regulation as a
condition of receiving a government-supported monopoly, but in many
cases that public oversight is obscured by the utility’s influence over
its supposed overseers. As the City Pages article about Xcel Energy’s
bullying behavior in Minnesota noted:
“Minnesota should take cues from the meddling ad Xcel’s lawyers so
disliked, and introduce a dose of honesty. Stop calling Xcel a
“regulated monopoly.” That first word just became obsolete.”
Utility Market Power
In most markets, utilities also wield a disproportionate amount of power
over their potential competition. A recent report on distributed solar
in the Washington D.C. explains many of those powers:
Grid connection: “Pepco has significant control over this process,
including the availability and clarity of information provided on its
website, the ease of the application process, the responsiveness of its
customer service, and the speed and accuracy with which applications are
processed and the final approval to operate given.” A recent study
showed the slowest utility to provide interconnection pre-approval took
75 times longer than the fastest.
Fees on customers with distributed generation: “Pepco also has some
control over the fees assessed on DG customers, and the rate design that
determines the value of their net metering credits.” Though Pepco must
ultimately secure regulatory approval for these charges, it leads the
conversations with those authorities. In other states, utilities have
won fee increases without providing evidence of increased costs.
Grid capacity: “Pepco manages its distribution system and can
propose to invest in new technologies or infrastructure upgrades to
support additional distributed generation [and] Pepco has the ability to
propose non‐traditional alternatives (such as greater distributed
generation) to address the load growth. … However, non‐traditional
alternatives to utility investments generally do not align with a
utility’s business model, which provides a rate of return on any capital
investments.”
Customer trust: “Utilities are more trusted than retailers,
manufacturers, and other service providers in helping customers optimize
their energy consumption … utility‐provided information regarding
options for distributed generation could help connect customers with DG
providers and reduce customer acquisition costs.”
Lobbying: “Pepco can engage in lobbying for measures that support
or discourage distributed generation.”
In some cases, utilities wield this power to threaten market share of
existing players. Two solar pilot programs in Arizona in 2015 were among
the first to offer a utility-owned distributed solar program, which
enabled customers to receive solar on their rooftop with a much lower
upfront cost (and much less lucrative long-term return). With fair rules
for competition (such as requiring utility-owned projects to be provided
by subsidiaries rather than the incumbent monopoly company, and
preventing utilities from exclusively advertising their own product in
customer bill inserts), this might be fine. But in the case of both
Arizona utilities, the utility offerings are a complement to lobbying
efforts to reduce the value of distributed solar, for example by cutting
net metering.
The efforts to reduce competition aren’t limited to investor-owned
monopolies. The municipal utility serving San Antonio began offering a
“roofless solar” subscription and a solar roof rental program over the
last two years. The rental program is nearing 5 megawatts of installed
capacity, and was pitched as a way to reduce the supposed “cost shift”
in benefits from non-solar owners to solar owners. (In fact, there’s
plenty of evidence that the cost shift is largely a utility-sponsored
myth at today’s level of solar capacity.)
Other utility-sponsored efforts to enter the distributed generation
market include a power provider in New Jersey and proposals to allow
California investor-owned utilities to get in the game.
Of course, interest from utilities in this market may not translate to
solar installations. A foray into distributed solar by investor-owned
monopoly Georgia Power has netted just five installations out of over
10,000 inquiries.
How To Reclaim Local Power
Fortunately, there are ways to fight back against these pressures and
reclaim local power. To battle preemption, the solution has been forming
alliances of cities. While cities may not all agree with one another on
policy issues from wages to sick leave to energy, they tend to be in
agreement that they don’t want a state power grab. Pressure from the
League of Minnesota Cities helped undercut legislative preemption
proposals, and such pressure has worked in other states as well. In
addition, cities sometimes adapt their strategies to work around
preemption. When the state of Minnesota preempted a plastic bag ban in
Minneapolis, the city announced it would look for alternatives to the
ban that could still reduce plastic bag use.
Utility political power can also be reduced. Terrific research from the
Energy and Policy Institute has uncovered how utilities use ratepayer
funds for their membership in trade organizations that often oppose
their customers’ interests. This revelation has led some state
regulatory commissions to disallow the practice (in full or in part), by
instead requiring utility shareholders to pay for such memberships that
primarily benefit themselves. And even when utilities continue to swing
a heavy bat, they may lose, as did Florida Power & Light in its attempt
to amend the Florida Constitution in order to fortify its monopoly.
Utility market power is a legacy of 100 years of monopoly control, but
it’s weakening, thanks to technological shifts. The advent of affordable
solar plus storage may not let utility customers “cut the cord,” but it
will give them crucial leverage to demand fair treatment in the
distributed energy marketplace. Already, states like New York are
exploring ways to transform the grid into a platform for transacting
energy rather than a skewed monopoly playing field. Key rules include
community shared renewable energy and net metering or fair value of
solar, among others. Cities can help by setting up bulk purchase
programs for customers to buy solar, energy storage, or make energy
efficiency upgrades. They can also encourage adoption of inclusive
energy financing to make energy savings more accessible.
There’s no question that there are threats to local power, but as the
economic and technological transformation continues toward
decentralization, communities will find they have more power at their
disposal to fight back.