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IECA Slams House Subcommittee’s Proposed FERC Cost Recovery Plans

How should the costs of US energy security and resiliency be recovered? Not by raising rates to utility customers, the Washington, DC-based Industrial Energy Consumers of America (IECA) argued in a letter to the US House Subcommittee on Energy and Power on July 22.

In that correspondence, the manufacturing trade group asked legislators to eliminate two provisions to their bipartisan energy bill that would authorize creation of a Federal Energy Regulatory Commission (FERC) cost recovery mechanism for electric utility expenses related to infrastructure security and resiliency-related technologies.

“This is a federal mandate that is duplicative and unnecessary, and would open the door to cost recovery abuse and increases in electric rates,” wrote IECA President Paul Cicio. “The provisions attempt to solve a problem that does not exist. States have full and sufficient authority and decision making to determine whether costs are prudent and just and reasonable for cost recovery.”

Due to become effective on October 15, the new federal policies would “[avoid] state scrutiny, yet the state consumer is still going to pay for the higher costs,” Cicio protested.

Specifically, the IECA has made formal objections to the cost recovery measures outlined under

  • Section 215A, Critical Electric Infrastructure Security, which would go into effect when the US President identifies a grid security emergency –thereby authorizing the Secretary of Energy to issue “such orders for emergency measures as are necessary … to protect or restore the reliability” of critical electric infrastructure; and
  • Section 1107, State Coverage and Consideration of Public Utility Regulatory Policies Act (PURPA) Standards for Electric Utilities, which mandates that each electric utility should develop a plan to use resiliency related technology – such as advanced grid technologies, distributed generation, microgrids, energy storage, and advanced energy analytics – to improve the resilience of electric infrastructure, mitigate power outages, and maintain the flow of power to critical agencies during “current and future threats.”

With reference to the grid security provisions above, the legislation would authorize owners and operators of critical electric infrastructure that have incurred substantial costs to comply with emergency measures that “cannot reasonably be recovered through regulated rates or market prices “to recover such costs.”

Under the resiliency scenario, the regulators have stipulated that each state regulatory authority “shall consider confirming … that each such electric utility is authorized to recover the costs of the electric utility … relating to the procurement, deployment, or use of advanced energy … technology.”

The IECA letter – addressed to Chairman Ed Whitfield (R-Kentucky) and Ranking Member Bobby Rush (D-Illinois) – further notes that “the fundamental underlying issues of ‘cost-causation’ and ‘the beneficiary pays’ principle are ignored [by these provisions]. The language of Section 215 would allow costs incurred to serve retail customers to be recovered from wholesale and transmission customers.”

While the recipients of the correspondence have not responded yet, more meetings on the Clean Power Plan were scheduled for this week – including a roundtable discussion hosted by the Energy and Power Subcommittee on “EPA’s Proposed Ozone Rule: Potential Impacts on Manufacturing and Jobs,” expected to take place on July 28 in the Rayburn Building.

Meanwhile, a study by the Cambridge, Massachusetts-based consulting firm Synapse Energy Economics, released on July 23, claims that the high levels of clean energy and widespread energy efficiency programs that would be encouraged by the Clean Power Plan compliance pathway would “save money for a majority of households” in the continental United States.

The research analysis – part of a series of briefs by Synapse on the impacts of EPA’s proposed Clean Power Plan – shows that households participating in state-sponsored efficiency programs can save an average of $35 on their monthly bills in 2030. Even non-participants will save money in 16 states, according to the consultants.

Synapse modeled a path to compliance with the Clean Power Plan and compared the difference in consumers’ bills to a business-as-usual scenario in which no new investments are made – finding that the Environmental Protection Agency’s original plan would save consumers $41 billion nationwide in 2030, compared to business-as-usual, while reducing carbon dioxide emissions dramatically.

And another report, just released by the Georgia Tech School of Public Policy, predicts that if the United States does not implement the Clean Power Plan, the average electric bill will rise 9 percent over the next 15 years.

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