A study conducted by the Union of Concerned Scientists and applauded by the Nuclear Energy Institute claimed that 21 of 60 nuclear plants in the United States are at risk of early retirement largely due to inadequate rates of return and lower pricing of other competing generation types. To combat early retirements, many states are establishing nuclear subsidy programs to compensate financially challenged nuclear plants for the environmental attributes of
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On October 17, Senate Vice President Larry Seilhamer and Minority Leader Eduardo Bhatia introduced Senate Bill 1121, The Puerto Rico Energy Public Policy Act, which would bring widespread change to the state’s electric utility industry. The most notable provision of SB1121 is the elimination of monopoly status for the island’s electric utility, Puerto Rico Electric Power Authority (PREPA). PREPA is a government run agency that is responsible for the generation, transmission, and distribution of electricity for the vast majority of Puerto Rico’s population. The utility, which is currently $9 billion in debt, filed for bankruptcy in 2017 and is in the midst of a multi-year effort to rebuild the island’s electric grid which was severely damaged last year by Hurricanes Irma and Maria.
Late last month, the Missouri Public Service Commission (MPSC) and Kansas Corporation Commission (KCC) approved the $15 billion stock-for-stock merger of Missouri-based Westar Energy and Kansas-based Great Plains Energy, parent company of Kansas City Power and Light (KCP&L). As a condition of the merger, these two companies will operate under a new holding company that will be named Evergy, Inc. The approvals of the KCC and MPSC were the two final hurdles to the deal as FERC approved the merger earlier this year and the shareholders of each company voted in favor of the combination in November 2017.
Rate freezes, arrangements where utilities are prohibited from filing rate cases, have been commonly used nationwide since the 1990s. As of January 2018, rate freezes or rate case moratoriums are in place across 27 jurisdictions, impacting 37 electric and 31 gas utilities. While these arrangements have overwhelmingly originated from past rate cases and are intended to benefit consumers, some adverse consequences can also result from such arrangements.
On February 15, 2018, the Federal Energy Regulatory Commission (FERC) unanimously approved Order 841, which is designed to remove barriers for the participation of energy storage resources in wholesale markets.
Less than two weeks into his first term, New Jersey Governor Phil Murphy signed Executive Order 7, instructing the New Jersey Department of Environmental Protection (NJDEP) and Board of Public Utilities to begin the process of reentering the state into the Regional Greenhouse Gas Initiative (RGGI). The order also directed the NJDEP to create a framework for allocating proceeds from RGGI auctions in the state and overturned a decision by the previous administration that resulted in the 2012 departure of the state from RGGI.
Given recent significant challenges to the economics of the nuclear generation industry, it makes sense that development of new nuclear generation is extremely limited. However, that does not mean that utilities are not keeping their options open for future nuclear development. Combined Operating Licenses (COLs) issued by the NRC provide power companies the option to defer potential nuclear plant development into the future. The COLs provide an “option value” to utilities as they make bets on the future energy market.
Last month, Department of Energy (DOE) Secretary Rick Perry directed his department to conduct a 60-day study to “explore critical issues central to protecting the long-term reliability of the electric grid.” Specifically, the study is aimed at the impact on the grid from the recent wave of closures/retirements of baseload resources (over the past five years, 44.3 GWs of coal and 4.6 GWs of nuclear baseload generation capacity has been retired). The memo cites unnamed “grid experts” that are concerned “about the erosion of critical baseload resources,” “the manner in which baseload power is dispatched and compensated,” and “the diminishing diversity of our nation’s electric generation mix, and what it could mean for baseload power and grid resilience.”
Late last month, President Trump signed an Executive Order (EO) directing all executive departments and agencies to “immediately review existing regulations that potentially burden the development or use of domestically produced energy resources and appropriately suspend, revise, or rescind those that unduly burden the development of domestic energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law.” The EO goes on to further define “domestic energy resources” as oil, natural gas, coal, and nuclear energy resources.
Earlier this month, the Illinois Commerce Commission (ICC) approved a proposal from Commonwealth Edison (ComEd) that will allow the utility to share anonymous customer energy usage data it collects through its installed smart meters. ComEd will be one of the first utilities in the country given the authority to make its usage data available to researchers, energy management specialists, and other companies in the energy space to enable them to develop new products and services to benefit ComEd customers. According to Val Jensen, Senior Vice President of Customer Operations at ComEd, “One of the great benefits of smart meter technology is the availability of data that will enable a growing sector of energy tech companies to design new products and pricing programs that will help customers save money and meet the growing interest for more choice and personalized services.”
Cloud computing’s myriad advantages, including reduced costs, more frequent updates, and greater flexibility/mobility, are part of the reason why Software as a Service (SaaS) solutions are experiencing rapid growth in many industries. However, for most regulated utilities, the current regulatory/accounting treatment of investments in cloud-based computing solutions discourages their deployment. Unlike in-house software solutions that are typically classified as capital investments and eligible for inclusion in rate base, cloud-based computing is typically considered an operating expense. Given the disparate accounting treatment, there is an incentive for a utility to select an in-house software solution that may be more costly and less beneficial for the customer, simply because it can be included in rate base.
Operating a utility, whether it be electric, gas, or water, is one of the most capital-intensive businesses in the world. One of the primary mechanisms used by utilities to raise capital is the issuance of debt. But issuing debt does not come without risk, and in the United States, there are three primary credit-rating agencies (Standard and Poor’s (S&P), Fitch Ratings, and Moody’s) that are responsible for assessing a utility’s ability to service its debts. These agencies issue credit ratings, and in general, the better the utility’s credit rating, the lower the cost the utility must pay for issuing debt, reducing its cost of capital.
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