Regulatory Involvement andRegulatory Involvement and Facilitation of Competition
By: Richard Moore, Chief of Staff to Chairman Clayton &
Natelle Dietrich Director of Utility OperationsNatelle Dietrich, Director of Utility Operations
Missouri Public Service CommissionP.O. Box 360
J ff Cit MO 65102Jefferson City, MO [email protected]@psc.mo.gov
www.psc.mo.gov
1June 2010
Energy Regulation: F d l R ibilitiFederal Responsibilities
Federal Energy Regulatory Commission (FERC):
• regulates the interstate transmission of electricityy
• licenses hydropower projects
2
Regulatory Structure –T thi t R bTwo things to Remember
1. Electric Utilities are regulated at both State and Federal Levels: FERC regulates wholesale sales and interstate transmission services; States regulate everything else.
2. Two regulatory models exist: “Organized Markets” and “Vertical Integration”
3
Changes Brought by Industry RestructuringIndustry Restructuring
44
Source: ISO-NE
St t d F d l J i di tiState and Federal JurisdictionAuthority Generation Transmission Distribution Retail Customer y
Interface
Federal Wholesale salesAncillary
services
Rates, terms, conditions for wholesale and
b dl d t il
Not applicable Not applicable
Merger authority
No authority over facilities
unbundled retail interstate transmission
Transmission reliability rulesreliability rules
Siting in national interest corridors (1 year after filing)
State - Rate-based Rates terms Retail rates BillingState -traditionally regulated
Rate based facilities
Adequacy of generation
Reserve
Rates, terms, conditions of bundled retail transmission or purely intrastate
Retail ratesTermsConditionsService qualityOutage mgmt
BillingCollectionDisconnection
policyMetering
55NARUC New Commissioners Training – Electricity Issues
March 11, 2008
Reserve margins
Siting
transmission Siting
Outage mgmt.Outage indicesPortfolio
standards
MeteringDemand-side
management.21
Source: NRRI, Electric Tutorial, 2006.
State and Federal Jurisdiction continuedJurisdiction continued
Authority Generation Transmission Distribution Retail Customer Interface
State -restructured
Siting SitingUnless purely
Same authority as
Same authority as traditionally p y
intrastate, all transmission is unbundled, and so is under FERC authority
traditionally regulated states, plus:
Standard offer service
regulated states
offer service ( provider of last resort)
Regional Transmission
Not applicable Operational authority over transmission in a regionM i t f h t t li bilitTransmission
Organizations (Authority only over transmission
Maintenance of short term reliabilityAdministration of own tariff and pricing systemManagement of congestionPlan and coordinate transmission upgrades and additions
66NARUC New Commissioners Training – Electricity Issues
March 11, 2008 22
– delegated from FERC)
Market monitoringOperate computerized site for sharing available capacityContract for a supplier of last resort for ancillary services Address parallel path flow issues
Source: NRRI, Electric Tutorial, 2006.
St t f R t il C titiStatus of Retail Competition
I th U S thIn the U.S., there was considerable interest in competition during the late 1990s. A combination of
t h thevents such as the “meltdown” in California and the perception by consumers that the b fit f t il h ibenefits of retail choice are small seemed to have limited the interest in retail competition among th t t th t h ’tthose states that haven’t already enacted retail competition
7
RTOs in the United StatesRTOs in the United States
8Resource: FERC Map, Updated August, 2009
U.S. Electric Power Industry Net Generation (J 2010)(January 2010)
9Source: U.S. Energy Information Administration Independent Statistics and Analysis. Electric Power Monthly. April 2010 Edition. www.eia.doe.gov/cneaf/electricity/epm/epm_sum.html
State Regulatory AuthorityAuthority
State public service commissionsRetail rates
I t diti l t t i t tIn traditional states: revenue requirement, cost allocation, and rate design for each customer class
In restructured states: provider of last resort or standard offer service rates for non-choice
tcustomers
1010
Source: NRRI, Development & Evolution of Electric Deregulation, March 2008
Average Retail Price of El t i it 2008Electricity – 2008
11Source: U.S. Energy Information Administration Independent Statistics and Analysis. Average Industrial Price of Electricity by State. www.eia.doe.gov/cneaf/electricity/epa/fig7p7.html
Average Change in Retail Price f El t i it of Electricity
1212Source: EIA, Electric Power Monthly, February 2009
Renewable Portfolio Standards b St tby State
MN: 25% by 2025ME: 30% by 200010% by 2017 - new RE
VT: (1) RE meets any increase in retail sales by 2012;
WI: requirement varies by utility; 10% by 2015 goal
(Xcel: 30% by 2020)y
MT: 15% by 2015
retail sales by 2012;(2) 20% RE & CHP by 2017
☼ NH: 23.8% in 2025
OR: 25% by 2025 (large utilities)5% 10% b 2025 ( ll tiliti )
ND: 10% by 2015☼ MA: 15% by 2020
+ 1% annual increase(Class I Renewables)
*WA: 15% by 2020
CT: 23% by 2020IA: 105 MW
☼ *NV: 20% by 2015
RI: 16% by 2020
☼ NY: 24% by 2013
5% - 10% by 2025 (smaller utilities)
SD: 10% by 2015
*UT: 20% by 2025
☼ OH: 25%** by 2025
*MI: 10% + 1,100 MW by 2015
☼ PA: 18%** by 2020
☼ NJ: 22.5% by 2021
☼ AZ: 15% by 2025
CA: 20% by 2010 ☼ CO: 20% by 2020 (IOUs)*10% by 2020 (co-ops & large munis)
IL: 25% by 2025
☼ MD: 20% by 2022
☼ *DE: 20% by 2019☼ NC: 12.5% by 2021 (IOUs)
10% by 2018 (co-ops & munis)
☼ MO: 15% by 2021
Source:
TX: 5,880 MW by 2015
☼ AZ: 15% by 2025
HI: 20% by 2020
☼ DC: 20% by 2020
*VA: 12% by 2022
☼ DE: 20% by 2019
☼ NM: 20% by 2020 (IOUs)10% by 2020 (co-ops)
www.dsireusa.org, March 2009
1313
TX: 5,880 MW by 2015HI: 20% by 2020
Solar hot water eligible☼ Minimum solar or customer-sited RE requirement* Increased credit for solar or customer-sited RE** Incl. separate tier of non-renewable “alternative” energy resources
State Goal – 5 states
State RPS – 28 states
Basis and Goals of Competition*Basis and Goals of Competition (*Adapted from Pierce Atwood law firm presentation)
System where market forces make economic decisions, instead of regulators or central planners
• Attract Private Investment• Increase Economic Efficiency• Improve Service & ReliabilityImprove Service & Reliability• Lower Prices
P t C t Ch i14
• Promote Customer Choice
Expectations of Strategic Investors*Strategic Investors
(*Adapted from Pierce Atwood law firm presentation)
• Commercial Infrastructure (economic, regulatory, financial, legal)
• Predictable Rules• Open & Transparent Decision-Making by Regulator
(independence, public participation, objective, written decisions appeal process)decisions, appeal process)
• Non-Discrimination (Liability, Taxes, Profit Repatriation)• Absence of Corruption or other Market Distortions• Free Capital Flows• Rules of Law/Justice System• Adequate and Predictable Risk Management
15
• Adequate and Predictable Risk Management
Regulatory Competencies*Regulatory Competencies (*Adapted from Pierce Atwood law firm presentation)
Competition changes nature of regulation, but does not eliminate need for regulation• Traditional structure (monopoly) emphasizes price• Traditional structure (monopoly) emphasizes price
setting, rate design, engineering, resource planning• Competition focuses on market oversight, levelCompetition focuses on market oversight, level
playing field, market power, information• Coordination among national regulators and/or
anti-monopoly offices critical to avoid anti-competitive behavior
16
Benefits of Cross-border & International Trade*& International Trade
(*Adapted from Pierce Atwood law firm presentation)
• Improved efficiencies
F l di i• Fuel diversity
N i id t k• Non-coincident peaks
• Greater system stability• Greater system stability
17
Electricity – Implementation of E P li A d EEnergy Policy Act and Energy Independence and Security Act
Four big sets of issuesReliabilityyInfrastructure/Smart GridT i i A /Wh l lTransmission Access/Wholesale Competition
18Energy Efficiency
I f t tInfrastructure
Transmission SitingEnergy Policy Act – Backstop Siting AuthorityDepartment of Energy Congestion Study and NationalDepartment of Energy Congestion Study and National Interest Corridor DesignationFERC Backstop AuthorityPending Legislation
Transmission Investment IncentivesTransmission Investment IncentivesEnergy Policy Act – Transmission Investment IncentivesFERC Rulemaking on Pricing Incentives
19
P bli Utiliti R l t P li i A tPublic Utilities Regulatory Policies Act
Energy Policy Act and Energy Independence Security ActEnergy Policy Act -- State implementation of 5 new standards:
1 N i1. Net metering2. Fuel Diversity3. Generation Efficiency3. Generation Efficiency4. Smart Metering5. Interconnection
20
Public Utilities Regulatory Policies Act ( ti d)(continued)
Energy Independence and Security Act – State Implementation of 3 new standards, plus 1
1. Integrated Resource Planning2. Rate Design – “Decoupling”3. Smart Grid
PLUS1. Combined Heat and Power Incentives
21
FERC O d 888 d 890FERC Orders 888 and 890
I l i f i i liImplementation of open access transmission policy to support development of competitive wholesale power marketsp
Non-discriminatory access principle is critical
National Association of Regulatory Utility Commissioners supported OrderCommissioners supported Order
Order 890 issued in 2007 to update Order 888
22
U b dliUnbundling
P li i l d b S l i l dPolicy implemented by State legislatures and commissions to disaggregate generation from deliveryy
Two Models – “Functional” unbundling (G and T are separate but under common ownership); andare separate but under common ownership); and “Structural” unbundling (G and T placed in separate corporations)
Creation of affiliate interest issues – precursor of more systematic market monitoring
23
more systematic market monitoring
Thi d P t AThird Party Access
I l i f i i l f di i i iImplementation of principle of non-discrimination
Public Utilities Regulatory Policies Act initiativePublic Utilities Regulatory Policies Act initiative followed by Energy Policy Act 1992
State role on interconnection; net metering
24
G l f P i ti tiGoals of Privatization
I P d i bj i f i i iI. Process – determines objectives of privatizationII. Procedures – IPO, Tender, Combination of shareholders
and financial investorsIII. Goals
Economic ProfitMaximize income to state from disposal of companies, p p ,typically IPO or price tender, regulatory policies metSocial Benefits & IssuesImprovement in security and quality of supplyImprovement in security and quality of supply, enhancement of competition, may often lead to price increases for households in developing countries
25
Any Questions?
By: Richard Moore, Chief of Staff to Chairman Clayton &
Natelle Dietrich, Director of Utility Operationsy p
Missouri Public Service CommissionP.O. Box 360
Jefferson City MO 65102Jefferson City, MO [email protected]@psc.mo.gov
www.psc.mo.gov
26June 2010
