Regulators’ Meeting Opens with Focus on Infrastructure Conundrum

"We're at a very challenging time," said former Federal Energy Regulatory Commission (FERC) Commissioner Tony Clark at the annual meeting of the National Association of Regulatory Utility Commissioners (NARUC) on November 14. We have a "need for infrastructure, but it's more difficult to get it sited and built than ever before."

Clark's comment, which he shared in a conversation with NARUC President Travis Kavulla on Monday afternoon, echoed his opening comment at a pre-event breakfast panel on energy infrastructure. As the event for state public utility commissioners kicked off in La Quinta, Calif., Clark noted that the U.S. needs more infrastructure for generation, pipes, transmission, and distribution, but, he added, there's more opposition to that infrastructure than in the past. The Dakota Access pipeline in Clark's home state of North Dakota is a clear case in point. That pipeline project is to carry Bakken Formation crude oil to Illinois.

Dakota Access and Opposition to Infrastructure Projects

Clark, who served as commissioner and chairman of the North Dakota Public Service Commission (PSC) from 2001 until 2012 (including a stint as NARUC president), prior to serving as FERC commissioner for the next four years, introduced fellow North Dakota Commissioner and PSC Chairman Julie Fedorchak, who heads the pipeline siting, rail and consumer affairs portfolios. Fedorchak began by saying that the 1,172-mile pipeline is largely complete except for boring under the Missouri River.

Regarding the Standing Rock Sioux Tribe's objection to the Dakota Access project, which has led to ongoing protests involving other opponents as well, she noted that hundreds of people participated in the 13-month permitting process. Although they "opened the door" to the tribe during the proceedings, the tribe didn't respond. And although the pipeline route doesn't enter the tribe's reservation, the tribe now says it objects to the route on the grounds that it threatens the environment and would damage sites of cultural significance. The route was already altered 140 times to avoid and protect cultural resources, the commissioner noted.

Fedorchak said the route under the Missouri River would run 92 feet below the riverbed. In addition to having no contact with the water, the pipeline would include monitoring devices and shutoff valves. Nevertheless, she said, the concerns of the tribe are "very legitimate" and were things that were taken into consideration during the permitting process because they are required by state law.

The Dakota Access project isn't alone in facing opposition, and Clark asked the panel what lessons could be learned from that experience and others. Thomas D. Hutchins, PE, vice president of environmental, health, and safety for Kinder Morgan's natural gas business-who noted that transmission through a pipeline has been shown to be safer for the public and more environmentally protective than transportation via rail or truck-commented that tribes don't have to respond during a certain timeframe, so industry has to be more proactive in identifying the issues early.

Arshia Javaherian, senior legal counsel for Enbridge Energy, agreed that engaging early and often is necessary, but infrastructure development companies also have to be able to rely on the process of infrastructure siting and development. CenterPoint Energy's Brad Tutunjian, division vice president for regional gas operations, said success comes from being transparent.

Fedorchak said what has worked previously is public education about what the drivers of infrastructure projects are, including technology, regulations, and replacement needs. Making information accessible helps, too. She gave the example of changing legal notices (against the advice of their lawyers) to read like a display ad so that the public would read them and be encouraged to attend hearings. Additionally, encouraging infrastructure companies to work together and use utility corridors can help, she said.

Clark then asked how one predicts which projects will become a cause ci(C)libre, to which Enbridge's Javaherian replied that they have not had a project that has not been protested at the regulatory process and elsewhere in the past four to six years, so they expect it. Centerpoint, on the other hand, said Tutunjian, sees protests as the exception.

Kinder Morgan's Hutchins observed that any project close to a highly populated area will have opposition. Kinder Morgan has been working with organizations like the Environmental Defense Fund to identify and minimize methane emissions in order to proactively address project opposition. Aakash H. Chandarana, regional vice president of rates and regulatory affairs for Northern States Power Co.-Minnesota, noted that his parent company, Xcel Energy, leverages its community affairs group before starting an infrastructure project.

Presidential Election Effects on Infrastructure

When asked if potential policy changes at the federal level under the new Republican administration would affect infrastructure projects, Hutchins replied, with an obvious echo of candidate Donald Trump, that the changes are going to be "huge." He thinks there will be benefits because of the job market stimulation promised by Trump, but the opposition will be much more zealous, he added.

Chandarana doesn't see as much change ahead for Xcel, which has made a strong commitment to renewables, especially wind, and he said the election won't change that. Nor will markets change in the short term, he predicted.

Location and the Value of Distributed Energy Resources

The NARUC meeting is being held this year in La Quinta, where an abundance of sunshine underscored the importance of solar resources in Southern California. But solar and wind resources aren't just a hot issue on the West Coast.

In a Committee on Electricity session addressing location and the value of distributed energy resources (DER), Bruce Rogers, technical executive, Power Systems Analysis at the Electric Power Research Institute (EPRI), and Susan Tierney, senior advisor, Analysis Group Inc., discussed a study their two organizations conducted to examine the issue. It looked at Con Edison in New York and Southern California Edison and modeled actual systems to increase understanding of where DER can be located optimally to provide maximum system benefits.

They looked at mesh network (which enables two-way power flow) and flexible radial topologies (with one-way power flow plus flexibility). They considered peak hour, peak day, and even distribution planning timeframes, looking at where and how to use a portfolio of DER to meet increased forecast load. But the situation is even more complex when you consider issues of customer type and the availability of DER at a particular time to meet demand, so diversity of DER is important.

The study showed that when DER is tightly situated near the distribution violation (overloaded transformer), it is cost-effective, but more than two times the DER capacity was needed to meet the transformer overload.

For Con Edison, which doesn't generate its own power, they found that DER would cost 20% to five times more than adding distribution equipment to meet load growth.

The bottom line, Rogers said, is that it's "hard to generalize" about DER value. We still need planning processes and both detailed engineering studies and grid modernization.

Tierney began by saying that DER "are going gangbusters around the country." Although their study's focus was on the distribution utility, there are also societal, generation, and transmission dimensions to DER use, and new methods for capturing the value proposition of DER are evolving. One alternative she mentioned was that utilities consider entering into long-term contracts for the delivery of DER services.

The study's key conclusions included:

• "Comprehensive, objective, and transparent methods are required for consistent and sensible results.
• It takes a portfolio of DER to meet system and customer needs and defer traditional assets cost-effectively.
• It is hard to generalize the net benefits of DER as an alternative to conventional grid investments.
• Time and locational impacts are key determinants in valuing DER."

When asked if there are "Don'ts" for addressing DER, Tierney replied that one of the biggest is, "Don't assume this is a simple problem." For example, as other studies have shown, though benefit/cost studies on the value of solar often assume that one size fits all and that there is potential value, sometimes there are costs to adding solar DER.

Using Demand Response to Address Infrastructure Challenges

The largest challenge to Southern California's energy infrastructure in recent history was the enormous methane leak from the October 2015 Aliso Canyon natural gas storage facility. The loss of that facility strained the supply of fuel for both end users of natural gas and for gas-fired generation over a large portion of the state.

Catherine Sandoval, a commissioner on the state Public Utilities Commission, talked about how California has addressed the loss of that facility. Measures to lower demand, in order to lower the amount of gas required for generation, have included expansion of the energy efficiency (EE) program for low-income customers, reprioritizing the existing EE program, accelerating the deployment of energy storage, and an "auto demand response" program that includes an air conditioner cycling program. They also deployed fax alerts for highest demand days.

What they found most interesting, Sandoval said, was that participants in the demand response and "flex alert" programs were not the affluent white customers that many have assumed are the most active in such programs. Instead, it was "mostly black and brown people" who responded, she said. That means utilities need to ensure that their outreach for demand response programs reach all communities, in their languages, to get the most buy-in.

Additionally, developing residential neighborhoods on top of gas storage facilities is not a good idea, she observed wryly. Sandoval herself once lived on top of a natural gas storage field that was closed in 2000.

Tony Clark Reflects on Two Decades of Public Service

The Monday afternoon general session included a conversation between current NARUC President Kavulla and a former president of the organization, Clark (Figure). Kavulla began by asking Clark what's changed the most since he began as a regulator. Clark's answer: "It has gotten harder," and there is, he said, an "unravelling of the regulatory consensus." Beyond ensuring access to safe, reliable, affordable energy, regulators are now being asked to preserve jobs in power generation and the tax base in areas where power plants may be threatened with shutdown when competitive markets render them uneconomic.

Former Federal Energy Regulatory Commission and former Montana state commissioner Tony Clark talked about his career in the regulatory world with National Association of Regulatory Commissioners President Travis Kavulla at the organization's annual meeting on November 14, 2016. Source: POWER/Gail Reitenbach

When asked if the regulator's job has become more partisan, Clark was silent for several seconds and then responded that that may be the case with the electricity sector, but in general, regulatory commissions are more insulated from politics than many agencies. There's no Democrat or Republican way to keep the lights on, he said, and that's one reason FERC is respected.

Kavulla observed that Clark has been "pretty critical" of the Obama administration's process of evaluating infrastructure projects like the Keystone XL pipeline and wondered if the slow movement on such decisions would change with the new administration. Clark admitted he has been frustrated with the process addressing such projects, including the Dakota Access pipeline, where 60% to 70% of the project is constructed, he said, but then the administration calls for a review of everything that's already been decided, which amounts to "second-guessing the process."

Clark thinks that under a Trump administration, regulators and states will probably have more time for state implementation plans and waivers to the Clean Power Plan. There may be more focus at FERC on reliability going forward, rather than on environmentally related issues, but he's not expecting huge ("Yuge") changes.

There could be significant change, however, in the fate of the Yucca Mountain project given that Nevada Democrat and long-time Yucca opponent Harry Reid will leave the Senate in January. That on-again/off-again planned storage facility for spent nuclear fuel could now have "a fighting chance," Clark opined.

When asked what his legacy as a regulator is, Clark downplayed the notion and said he just wanted to make the best decisions based on the information available. He added that all energy systems and sources require some infrastructure change, and getting projects developed is harder than ever before. Asked what might break that logjam, he suggested that only an energy crisis, which he doesn't welcome, might do so.

Asked for his thoughts on the ratemaking process, Clark said it could be worth looking at performance-based ratemaking, but the challenge in energy is that it's still a commodity, as compared with telecom. It's "not clear yet what the killer app is in the energy industry," he said. If you have grid-scale storage and onsite storage, that seems like the potential "major shift."

Clark announced via press release and in person on Monday that he will be joining Wilkinson Barker Knauer LLP as senior advisor on January 3, 2017, and will split his time between the firm's Washington, D.C., and Denver, Colo., offices.

-Gail Reitenbach, PhD, editor (@GailReit, @POWERmagazine)

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