Although the American Public Power Association is celebrating its 70th year in 2010, it was the future, rather than the past that speakers focused on at the opening session of the Customer Connections Conference, Oct. 24, at the Sheraton Park Hotel in Anaheim, Calif.
After showing a video on the history of the association, APPA General Manager Mark Crisson moved on to discuss the challenges facing the utility industry. “Public power is well positioned to address these challenges,” he told more than 225 attendees.
At APPA’s recent fall meeting, the board of directors developed the list of priorities the association will focus on in the coming months. APPA had fall meeting a couple of weeks ago.
- Climate change and emissions regulations potentially coming from the Environmental Protection Agency topped the list. Congress is unlikely to act on any climate legislation, leaving the EPA to step into the void. Utilities are not yet on the list of industries the EPA will be able to tell how to regulate and control emissions. However, with almost half of the power in the United States coming from coal, the industry is experiencing a lot of uncertainty. There are series of regulations in EPA queue that will drive electric generation to gas and away from coal.
- New infrastructure is needed for utilities to meet their mandate for reliability, demand growth and renewables integration. Already in Midwest there are places where more wind is being generated than economically can be integrated. Siting and cost allocation issues are very contentious. There is consensus in the industry that increased Federal authority is needed on siting rules. The Federal Energy Regulatory Commission is in process to address both issues. Most public power utilities want to own and operate their own renewable generation. APPA has made progress on getting legislation introduced in both the House and the Senate that would remove the caps on Clean Renewable Energy Bonds. Public power needs incentives that are comparable to the private sector. Crisson said that the jury is still out on nuclear, but the low-carbon resource can help reduce emissions and provide base load to firm up renewables.
APPA recently released a study identifying challenges of a large-scale switch from coal to gas. The cost of changing over the entire coal-fired fleet could cost $750 billion. Even the likelier scenario of converting 25 percent is very costly. The study has initiated a dialogue with EPA about challenges of transporting and storing natural gas and retrofitting power plants for the fuel.
- Pending financial regulation legislation creates potentially gives the Commodities Futures Trading Commission (CFTC) jurisdiction over financial products in regional transmission organizations (RTOs) and independent system operators (ISOs). APPA is concerned that the CFTC doesn’t understand utility industry.
- Public power utilities must now meet mandatory reliability standards. APPA is working with the National Energy Regulatory Commission (NERC) to develop the standards.Cyber security is an issue of great concern to Congress. Crisson warned that the House Grid Act could include distribution, which would interfere with NERC-FERC process. APPA is closely involved on this since if the industry doesn’t act, Congress will.
- Workforce development continues to be an issue but APPA members are dealing in creative ways.
- Demand-side initiatives should be pursued and integrated into resource planning. These measures are a good way to develop customer relations, to explain why changes are important to customers as well as the power provider. Members need a strategy for demand-side initiatives, or someone else will step in. You can work with third party providers.
- APPA members have adapted to restructured markets, but the market bias does not work well for the public power model. Developing meaningful RTO performance metrics will help, but it is unclear how effective markets will be in providing for new demand.
Crisson identified several trends going forward that the industry will have to grapple with:
- Upward pressure on energy costs. Increasingly expensive to access oil and gas.
- Transition to low carbon economy. Public power will be impacted no matter how rules proceed.
- Technology will play an expanded role. We will need to be smart about how we employ it. It can enhance customer service.
- Relationship with customers is more important than ever. They need to understand why PP is doing what they are and get their support.
However, he noted several reasons why public power has the advantage over investor-owned utilities in negotiating these challenges. As nonprofit entities, the utilities can aggressively pursue energy-efficiency strategies that are best for the customers without worrying about satisfying investors. Public power can also do 100-percent debt financing for building infrastructure.
Equally important are the utilities’ strong customer relationships. Compared with IOUs, customers are more likely to trust that their cooperatives will do the best thing for the consumers.
The tradition of service, reliability and financial integrity is one of public power’s greatest assets. “And that is why I am confident we can meet this mission,” Crisson concluded.