Citation:
Abstract:
The Year 2007 has brought new legislative and regulatory challenges for all states --- both regulated and restructured --- and some of these challenges are affecting resource evaluation processes, and corresponding resource decisions, for the ultimate load-serving entities. The 2 most challenging legislative and business issues today ---- layered on top of continuing discontent with competitive market design and competitive procurement --- are the looming debates over mandated Renewable Portfolio Standards and mandated CO2 emission reductions. These frenzied discussions have led some policymakers and activists to call for a moratorium on new coal plants and the retirement of existing ones, along with a dogmatic focus on renewables and energy efficiency as the primary sources for new power supply. So --- it’s not just the restructured states that are undergoing political upheaval and second-guessing with respect to how electricity is provided to customers.
Whether you reside in a vertically integrated, rate-regulated, and cost-of-service ratemaking jurisdiction, OR a "retail competition" state that is undergoing some type of transformation back to a more regulated service obligation and pricing regime, you are facing changes in the way that federal and state legislators, and various activist groups, expect you to manage your electric generation portfolio.
The premise of my remarks today, which is a conclusion that I have reached during the past several months, is that I'm not sure how much of a "competitive market" or even a self-directed future I see for any retail service provider ---- no matter what state you're in or what type of regulatory framework you have.
This new, unilateral focus on environmental issues is obscuring the laws of physics --- with respect to how the electricity grid works and what it takes to keep the lights on --- and the laws of economics --- with respect to what electricity costs, based on the fuel source used. My overall prediction is, if our hands are tied by the passage of very specific government-mandated generation portfolio standards, and laws that impose penalties on the consumption of specific fuels, we will be dealing with reliability problems in all states, a deviation from “least cost purchasing” standards in traditional states, and a significant reduction in market-driven resource decisions in restructured states.