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Statement:
July 20, 2009 |
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Chairman Wellinghoff's statement on NARUC summer meetings
international presentation on “A Shared Energy Vision for
“President
Butler, fellow members of the Association, and NARUC meeting attendees: Good
morning. Thank you for inviting me to this discussion on “A Shared Energy
Vision for
Vision
Well, we have come here to talk about a shared vision.
And I have a vision of our energy future that I want to share with you this
morning.
It is a vision for a future:
- Where clean, affordable, and
reliable energy are the everyday norm. And maybe we regulators have all
retired!
- Where energy efficiency,
demand response, micro-generation, combined heat and power and other
distributed resources are the first source of energy services for most
consumers. And those distributed resources are fully supplemented with
competitive procurement of large-scale wind, solar, hydro, geothermal and other renewable resources rounding out a
significant share of our total energy resource mix for
- And where customers have
robust and transparent interaction and control of the energy resources and
services they use and rely on for their energy needs.
But
to achieve this vision, the electric power industry and the natural gas
industry will need to work together with their customers and their regulators
to begin planning and operating in ways that differ significantly from the ways
of the past.
Historically, the main industry goal was to plan for reliable energy services
at least cost. We called this “Least-Cost Utility Planning” back in 1983 when I
wrote one of the first comprehensive utility planning statutes as
But times have changed radically in those 26 years. Now, the main driver must
be smart planning for environmentally sustainable energy services that provide
customer choice—as well as reliable service—at the least total economic and
societal cost. Former externalities such as carbon and heat emissions must now
be internalized as costs in the equation.
One way (and I pause to assure you there are potentially many others) to
achieve this vision is to tailor our countries’ legislation and regulations to
rely on robust competitive markets that can fully account for and incorporate
the societal costs of sustaining our global environment. Such carefully
structured market forces will guide which supply and demand options need to be
developed for a sustainable future. But market forces cannot prevail to shape
this future unless legislators and regulators act decisively and cooperatively
to put the structure in place to achieve this vision.
Cooperation
And cooperation among governments and regulators is essential to achieve this
vision. The Commission will continue to work together with our energy partners
and neighbors in
One good example of this cooperation among our three nations is in the area of
reliability.
Regulators in our three countries approve and enforce reliability standards
that apply in the Eastern,
A second example of our cooperative efforts is that senior staff
of all three North American agencies meet three times a year to discuss
regulatory developments and exchange views on best policies and practices.
One outcome of these meetings has been Memoranda of Understanding between the
Similarly,
We must build, strengthen, and enhance our current efforts to work together to
implement continuing Congressional and the state legislative initiatives in
energy policy. The NARUC-FERC Demand Response Collaborative and the NARUC-FERC
Smart Grid Collaborative are both outstanding examples of our state/federal cooperative
efforts.
There is much to do together to achieve this vision.
Renewable
Energy and Transmission
First, on the supply side: we must cooperate in the joint development of
renewable energy resources and a smart and reliable transmission system to
deliver those resources to our load centers.
President Obama has stated that the country that harnesses the power of clean,
renewable energy will lead the 21st century.
And the President also stated that we will soon lay down thousands of miles of
power lines to carry new clean energy to cities and towns across this country.
That certainly will happen. But we need to do that in a smart and efficient
way.
I believe that we need a national policy commitment to develop the transmission
infrastructure necessary to bring renewable energy from remote areas where it
is produced most efficiently into our large metropolitan areas where most of
the power is consumed.
This commitment can only be realized if the planning of our nation’s
transmission systems is focused on this challenge.
Renewable energy resources must be integrated into the transmission system in a
manner consistent with the reliable operation of the grid. And from the
perspective of reliability, even renewable resources closer to loads, such as
wind offshore on the Atlantic shelf, will require substantial transmission
upgrades to reliably integrate that resource into the Eastern grid.
I believe, and I have told Congress, that some additional federal transmission
planning, siting and cost allocation authority would
help to achieve both federal and state renewable energy goals.
I want you to know that I could support appropriate limitations on any such
additional federal authority:
- If it could be limited to a
backstop for state planning and siting
authority—to be used only if regional or state processes do not facilitate
achieving national or other states’ renewable goals;
- If it could be limited to
transmission that is primarily for shipping renewable energy, again to
satisfy national or other states’ renewable goals;
- If it could recognize the
primacy of state and regional cost allocation agreements for such
transmission projects; and
- If it could acknowledge that
states that receive no benefits from such projects should not be allocated
a portion of such project costs.
I
hope you agree that this is a reasonable approach, and I welcome your views on
how we can cooperate to achieve the goal of optimizing the development of our
Nation’s most efficient and cost effective renewable resources.
Demand
Response and Energy Efficiency
Second, turning from energy supply to energy demand, we must cooperate and
collaborate in identifying and developing the opportunities for enhancing the
development and deployment of demand response and energy efficiency.
The potential for demand response and energy efficiency to reduce or reshape
our nation’s need for energy is enormous.
As one step toward realizing that potential, the Energy Independence and
Security Act of 2007 directs the Commission to complete a National Assessment
of Demand Response and a National Action Plan on Demand Response.
Our National Assessment of Demand Response was published just last month.
Congress directed us to assess the potential for each and every state.
I sent a copy of the Assessment to the chairman of every state commission. Over
the next two months, we plan to hold webinars with the state commissions so all
of you are fully briefed on the contents of this report. We discussed the
report extensively yesterday morning in the NARUC/FERC Demand Response
Collaborative.
Our Assessment finds peak electricity demand reductions across the country are
already 38 gigawatts. But the potential for demand
reductions goes as high as 188 gigawatts, or 20
percent of our peak load, with no demand response.
In other words, the nation could see almost five times as much demand response
as it has today and reduce our peak load and the need for expensive carbon and
heat emitting peaking plants significantly.
Let me emphasize that this number is not a recommendation or prediction by the
Commission, but the findings of a staff-led study of what’s achievable.
Congress also directed the Commission to develop an action plan for
implementing this demand response potential, which is due next June.
Our staff has been working with a broad group of interested persons to outline
that action plan, and we have received valuable advice from many state
commissions, as well as from participants in the NARUC-FERC Demand Response
Collaborative.
This fall, we expect to release a staff document on the scope of the Action
Plan and to hold a conference to pursue a consensus about what should be done.
The 188 gigawatt potential savings for demand
response does not count the additional energy and dollar savings that customers
can achieve with improved energy efficiency.
It is well known that consumers could save tremendous energy—and money—with
more efficient lighting, air conditioning, appliances and machinery.
But less well-known is the fact that the potential for efficiency improvements
within the electric power industry from distribution to transmission and
generation itself is large.
This may be a new topic for which state-federal cooperation might be very
fruitful.
Smart
Grid
Third, we must cooperate in bridging the technology gap to fully integrate
supply and demand resources with a smart grid.
The smart grid uses two-way communications technologies to enable supply and
demand sides of the electric business to co-optimize intelligently. Smart grid
technologies are not only advanced in and of themselves, but they are the means
for optimizing the deployment of other advanced technologies including
renewable resources and electric transportation.
For example:
- A Smart Grid can integrate wind
forecasts with load forecasts, with power line loading information and
other information to facilitate the reliable integration and delivery of
the maximum level of wind energy to load centers.
- When the wind dies down, a
Smart Grid can provide the signals for demand response to lower customer
demand instead of ramping up load following fossil generation. Similarly,
when wind or other variable generation comes back on the grid, it can
signal loads such as plug-in hybrid or electric vehicles to begin charging
to absorb those generation resources. And a Smart Grid can even enable a
plug-in hybrid car’s battery to provide and get paid for regulation
services while the battery is charging.
- Where state regulators allow
retail prices to vary with system conditions, the smart grid can enable
customers to lower their electric bills by setting appliances to run when
prices are lower or allow smart appliances to automatically sense prices
and decide when it is cheapest to operate.
The
smart grid might do some, none, or all of these things—but it has the
capability to do all these things and more. And whether that vision happens
depends on the policy choices made by utilities, consumers, and regulators.
The Commission, on its own initiative, adopted a Smart Grid Policy Statement a
few days ago.
Among other things, our Policy Statement presents an interim rate recovery
policy, which encourages utilities to invest in smart grid technologies and
provides for rate recovery without having to go through a full-blown rate case.
I urge my state regulatory colleagues to consider whether adopting a similar
rate policy to encourage early smart grid deployment is appropriate for your
commissions.
In closing, our nation – and our continent – face
unprecedented energy challenges.
We regulators of the electric and natural gas energy industries must work
together to make that vision for the future a reality.
Thank you all and I look forward to continuing to work with you on this vision.”
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