Crystal Ball .21

A new year is upon us; and while that may facially seem like a good thing, the continued uncertainty has people anxious.  I feel challenged to consider what issues, concerns, and hot topics are likely to rise the surface in the next twelve months.  With the pandemic still at the top of the news queue most of the time, and with many people still working from home, if they are working at all, picking the possible hot-button issues is no easy task. The trick, if there is one, is to narrow down the range of probable outcomes – in this case, to things that were begun and not finished.  What follows are my predictions for those industries regulated by public utility commissions – and the Pennsylvania Public Utility Commission (“PaPUC”) in particular.

With a new administration taking the reins of government in Washington and the  President’s party set to control both the House of Representatives and the Senate for at least the next two years, there can be no doubt that the direction of federal energy policy is going to change.  At a high level that means a shift to less reliance on fossil fuels and greater emphasis on renewables.  While this trend shift is nothing new, many expect it to accelerate during Joe Biden’s Presidency. 

In the past several years, the Federal Energy Regulatory Commission (“FERC”) has made it easier for small scale generation and storage projects to interconnect with the grid, and with distribution systems, depending on the service to be provided: i.e., voltage support, reserves, etc.  At the same time, PJM, at FERC’s behest, has made things more difficult - its Minimum Offer Price Rule (“MOPR”) has complicated the ability of projects that might participate in state mandated renewable portfolio programs to participate in capacity markets and also receive revenue from renewables credits.  How that quandary shakes out remains to be seen.  But in PJM at least, it seems likely that we will see small scale renewable energy projects continue to participate in Renewable Portfolio Standard(“RPS”) programs that may include net metering, and larger scale projects that forgo the RPS revenue in favor of participating in what are typically the more lucrative capacity markets.  There are a number of appeals pending on the MOPR orders that hopefully will be resolved soon.

Storage also is likely to come to the fore in 2021.  The PaPUC issued a request for comments late last year, seeking industry feedback on the use of electricity storage resources to enhance distribution system resiliency and reliability.  Unfortunately, the focus is on utility-provided storage that would be included in utility rate base, rather than considering that others in the market are already providing economic solutions that can enhance resilience, and provide additional benefits, without saddling ratepayers with substantial increased costs that may outlive the usefulness of today’s technology.  While the PaPUC’s singular focus on distribution systems is a disappointment, there are multiple extant avenues for firms to bring storage to bear; to support renewables, or to support the grid by providing FERC regulated ancillary services.  The future clearly has a place for more storage.  Moreover, storage in the future may not mean solely batteries.  Other technologies – pumped storage for instance – have received renewed attention recently and may be a more environmentally friendly means of providing a large-scale storage solution in the proper application. In any event, storage has a bright future.

From a purely Pennsylvania perspective, I hope we finally see the passage of a community solar statute.[1]  Many other states in our region have had such programs for years, and they appear to be quite successful at democratizing access to the benefits of ownership of a renewable energy project.  In Pennsylvania’s last legislative session, two bills were introduced in the General Assembly to bring these same benefits to Pennsylvanians, but they went nowhere, presumably due to opposition from utilities that grouse about the burdens of administering the Alternative Energy Portfolio Standards Act.[2]

I think we can also look forward to the General Assembly moving the bill that was introduced last legislative session as SB 1365.  This bill was introduced by Senator Phillips-Hill, along with its sibling, HB 2555 that was introduced by Representative Metzgar. These bills address some of the significant and more controversial competitive issues that remain on the PaPUC’s plate after all these years, including supplier consolidated billing, removing the subsidies to default service that are hidden in distribution rates, and allowing customers to enroll with suppliers wherever they may be.  These have proven to be thorny issues.  For example, utilities are intent on retaining their present monopoly over the ability to communicate with customers via their energy bill and the customer relationship that goes along with that power.[3]  Suppliers have long recognized that such a relationship is vital for them to be able to continue to participate in competitive markets.[4]  It seems fairly certain that these bills will be back on the General Assembly’s calendar for the coming session, and while the outcome is uncertain, it is clear that Pennsylvania’s energy markets will not see sustainable competition until these issues are fairly addressed.

One critical and often overlooked aspect of last session’s SB 1365 is that it includes provisions that seek to ramp-up compliance efforts.  It has not gone without notice that yet again,  what appears to be a small group of competitive energy suppliers have been flouting the law and engaging in illegal and market-damaging customer engagement efforts.  It seems that no one in the Commonwealth is safe from the “this is an apology from your electric utility” scam calls or their close kindred.  These types of calls clearly violate the existing PaPUC regulations, and also violate the newly passed anti-robo-call provisions of the Telemarketer Registration Act.[5] One of the centerpiece provisions of SB 1365 was to require suppliers to annually go through training and to certify that they understand the laws that apply to their behavior and to agree to abide by those laws.  The PUC also is likely to take up the issue of telemarketing and may seek to push the envelope with even more restrictive requirements for energy telemarketers, perhaps expanding the requirement that suppliers not confuse customers as to the origin of a call, not mis-identify themselves as representing the utility, and possibly creating a more complete list of actions that it considers illegal.  It appears that the bad conduct of a handful of marketers could inspire such changes, which will make life more complex – i.e., more difficult and more expensive – for all marketers regardless of their conduct; and that would be unfortunate.  Tracking down and prosecuting the offenders, however, is not easy because the offender typically hangs up when challenged. The only way to find out which suppliers are behind this scam is to agree to the switch the scammer is proposing and then file a formal complaint against the new supplier once the switch occurs and its identity is revealed. But that is a path few are willing to go down. Let’s hope we can come up with tools to abate the efforts of these bad actors without harming the majority of suppliers that follow the rules.

A one time-critical issue that has been getting more press lately, most of which is long-overdue, is the effort to deploy broadband internet to un-served and under-served areas of this country.  Pennsylvania has many rural areas, with connectivity infrastructure from a bygone era, where internet reliability and speeds are inadequate to support our modern world of online learning and rural household and business data consumption. The problem, as we all know, is that the last mile[6], and often the middle mile[7] in very remote areas, are simply too capital intensive to allow serving those areas to be profitable over any reasonable time horizon. That is about to change.  On December 7, 2020, the FCC announced the results of the Rural Digital Opportunity Fund Phase I Auction that will award $9.2 billion in support dollars to 180 bidders that will allow the providers to deploy broadband to 5.2 million homes across the country over the next 10 years.[8]  The support is derived from the universal service surcharges that land-line telephone customers pay.  The better news is that $368 million of that money will be put to work in rural places in Pennsylvania! This level of support will be a substantial aid in ensuring that the digital divide no longer prevents rural kids from going to school online during a pandemic, or a rural business from having a workable website.  With the supports being allocated in the auction, and the efforts of other community organizations in the Commonwealth the have put rural broadband deployment at the top of their agendas,[9] this problem can be eliminated.  A number of localities are seeking whatever funding is available to allow them to deploy solutions in the first quarter of 2021 that will provide broadband access to the most citizens possible.  These efforts are timely, if not overdue, in light of a pandemic that has forced millions of Pennsylvania students, from kindergarten to college, to do school remotely.

Finally, I would be remiss if I did not mention the impact that COVID-19 has had on the PaPUC and the utilities it regulates.  In response to Pa Governor Wolf’s Emergency Proclamation that was initially issued March 6, 2020, the PaPUC took several actions that have had serious repercussions for the industries it regulates.  First, on March 16, 2020, the PaPUC suspended the ability of Electric Generation Suppliers and Natural Gas Suppliers to market to customers door-to-door.[10]  Despite a number of attempts and repeat attempts, the PaPUC held firm and has to date not allowed door-to-door marketing to return.  It seems likely that at some point in the coming year the PaPUC will change direction on the issue.  The PaPUC also issued an order that banned electric, gas, water, sewer and steam utilities from terminating customers for non-payment.[11]  The moratorium was the subject of a number of animated discussions at PaPUC public meetings and was finally lifted on November 9, 2020.[12] For customers whose annual household income is at or below 300% of the federal poverty level, the moratorium continues, as these are considered “protected customers” who are not subject to shut-off in the winter; or from  November 30 to April 1.[13]  As part of the emergency order and the Order lifting the moratorium, the PaPUC recognized that utilities could be facing extraordinary non-recurring expenses related to COVID-19 and required them to record these expenses as a regulatory asset.  The Commission has yet to announce how it would expect utilities to recover these expenses (i.e., in a rate case or some other manner) and that issue almost certainly will be on the agenda for 2021.

Remembering the old curse, “may you live in interesting times,” I hesitate to suggest that any of my predictions will come to pass, because something more urgent and/or important can always lurk behind the next news cycle.  I do feel confident, however, that eventually these issues will be decided.  Time will tell.

[1] https://www.hmslegal.com/easyblog/entry/community-solar-inching-its-way-to-pennsylvania.html

[2] 73 P.S. § 1648.1, et seq.

[3] https://www.puc.pa.gov/docket/C-2019-3013805

[4] https://www.hmslegal.com/easyblog/entry/why-the-skeptics-are-wrong-about-supplier-consolidated-billing.html

[5] https://www.hmslegal.com/easyblog/entry/revamp-of-telemarketer-act-cuts-into-robo-calls-but-falls-short-of-needed-changes.html

[6] https://en.wikipedia.org/wiki/Last_mile

[7] https://en.wikipedia.org/wiki/Middle_mile

[8] https://www.fcc.gov/document/fcc-auction-bring-broadband-over-10-million-rural-americans

[9] https://sapdc.org/2020/11/07/sapdc-announces-broadband-study-kick-off-meetings/

[10] https://www.puc.pa.gov/pcdocs/1658467.pdf

[11] https://www.puc.pa.gov/pcdocs/1658422.pdf

[12] https://www.puc.pa.gov/pcdocs/1682379.doc

[13] The 300% level specified in the PaPUC’s October 13, 2020 Order at Docket M-2020-3019244, differs from the requirements listed at 14 Pa. C.S. § 1406(e)(1), which sets a 250% of federal poverty level threshold for electric and gas utilities subject to the ordinary winter termination restrictions.  Moreover, this restriction would appear to apply to all utility shutoffs, including water, sewer and steam.