Regulators of State Utilities can Make a Big Difference

Regulators of State Utilities can Make a Big Difference

By Energy CIO Insights | Wednesday, April 10, 2019

REGULATORS OF STATE UTILITIES CAN MAKE A BIG DIFFERENCEFor some electrical utilities, it was a conundrum that was a mix of active regulation, energy distribution, and environmental issues. Plunging solar power costs and growing climate change concerns are inspiring swelling ranks of the largest private and Fortune 500 companies pursuing not only aggressive sustainable renewable energy goals, but also cost-effectiveness and resilience. With this confluence, utilities face the frightening question of whether to invest substantially in green infrastructure to keep these large customers and risk controversial rate cases or watch helplessly as that caravan of large, rate-paying customer defects takes considerable revenue with it. Every added ton of greenhouse gas emissions to produce electricity from burning fossil fuels contributes to global warming. This carbon pollution has several adverse effects, both on the physical world as well as on global economic and social systems.

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To keep the lights on, utilities still rely heavily on coal, natural gas and nuclear energy. These companies rely in part on older technologies because these facilities are already being built and, to some extent, because of the cost of starting and shutting down power plants. What's more, until recently, fossil fuels were generally cheaper than other sources of energy. But when state regulators require utilities to influence the effects of burning fossil fuels, a large investment to get up and running a large-scale wind or solar operation becomes a better deal. And also because making electricity from cleaner sources of energy has steadily become cheaper, climate cost factoring could help accelerate the process of phasing out climate-changing fossil fuels.

Some utilities voluntarily include in their balance sheets a line item that estimates their monetary impact on the climate. Others are taking this route because of the increasing number of state electricity regulators making it compulsory. Other states are also beginning to make bold proposals for reducing their emissions. In places where it was an afterthought, many newly elected governors are making climate change a centerpiece of state policy. An increasing number of states have put in place policies that compensate for the costs of climate distortion caused by the pollution they generate. In Colorado and Nevada, utilities need to predict how much carbon pollution their generation of electricity yields and include this information in the plans that they submit to state regulators.

The business of electricity is changing rapidly. When market forces make solar and wind not only a better deal than coal but also more affordable than natural gas, we get those state regulators might not matter so much. Meanwhile, while the economy is transitioning to the point where greenhouse gas pollution is no longer generated, it is believed that regulators of state utilities can make a big difference.

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