Category: Environmental Defense

By Liz Delaney

President Trump’s regulatory freeze that halted four rules designed to promote greater energy efficiency appears to be just the first salvo in an ongoing plan to roll back environmental protections and slash environmental budgets. While that is obviously foolish from an environmental perspective, it is also problematic from an economic/job creation standpoint.

As program director of EDF Climate Corps, I have daily insight into how businesses are accelerating the transition to a clean energy economy while hiring the next generation of talented, motivated leaders – which is a good thing, because they’re needed.

Our new report, Now Hiring: The Growth of America’s Clean Energy & Sustainability Jobs, underscores this trend. As the economy becomes more sustainable and energy efficient, a new market for clean energy and sustainability jobs is created. This market is large, growing and intrinsically local. Even better, these jobs span across economic sectors, including renewable energy, energy efficiency and other green goods and services, like local and state government, transportation and corporations.

The report revealed three key trends as sustainability jobs continue to grow across the country:

1. Sustainability jobs represent a large and growing portion of the U.S. workforce across multiple sectors.

This isn’t a small, niche workforce. In fact, it’s outpacing the rest of the U.S. economy in growth and job creation. Solar employment opportunities alone are currently growing at a rate 12 times faster than the rest of the U.S. economy. And, they are generating more jobs per dollar invested–more than double the jobs created from investing in fossil fuels. Sustainability now collectively represents an estimated 4-4.5 million jobs in the U.S., spanning energy efficiency and renewable energy, to waste reduction and environmental education.

2. Due to the on-site nature of many renewable and energy efficiency jobs, these jobs cannot be outsourced, and can pay above average wages.

 These aren’t just any jobs; they are well-paying, local opportunities that bolster our domestic economy. Most renewable and energy efficiency jobs can be found in small businesses, requiring on-site installation, maintenance and construction, making them local by nature. And, many pay higher than average wages. For example, energy efficiency jobs pay almost $5,000 above the national median, providing rewarding employment options to all Americans–even those without college or advanced degrees.

---

Keeping America great through a thriving clean energy and sustainability jobs market
Click To Tweet

---

3. Clean energy and sustainability jobs are present in every state in America.

The entire country has benefitted from the boom in clean energy and sustainability jobs, which has employed workers in every state. Energy efficiency alone provides 2.2 million jobs, spreading out across the nation.

Continuing the Momentum

So how do we continue this momentum? Investments in clean energy and sustainability pay off in the long run and foster a stronger economy—that equals more jobs and a cleaner future. This is why businesses are increasing their investments in sustainability. A recent survey found that three quarters of firms now have dedicated sustainability budgets, and even more have hired additional sustainability staff. But that doesn’t surprise me. Corporate America understands that prosperity and a low-carbon economy go hand-in-hand, and should continue to support investment in this area.

Policy makers at the local, state and federal level must also recognize the positive economic impacts of this new job class and support the policies and programs that encourage growth and investment in renewable energy, energy efficiency, green transportation and more. Efforts to roll back or weaken environmental and energy policies will negatively impact current and future U.S. jobs, while slowing clean energy innovation.

If the question is how to help both the environment and the economy, we don’t have to search for the answer: it’s already here. America is transitioning to a clean energy future—we can’t afford to stand in its way.

---

Additional Reading:

Will the new President flunk the climate business test?

China is going all-in on clean energy while the U.S. waffles. How is that making America great again?

---

Follow Liz Delaney on Twitter, @lizdelaneylobo

---

 

Read more

By Jamie Fine

California’s three major utilities – Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) – have proposed plans to move Californians to electricity prices that vary with the time of day. Time-of-use pricing, or TOU, is critical to aligning our energy use with times when clean, cheap electricity powered by sunshine and wind is already available. TOU works because electricity is cheap when it can be powered by renewable resources and more expensive during times of peak (high) energy demand. As with any shopping, knowing prices empowers people to choose wisely to save money.

New research from Lawrence Berkeley National Lab estimates TOU rates could collectively save customers up to $700 million annually by 2025 by getting the most out of our solar and wind resources. They find that absent TOU rates, we will waste up to 12 percent of existing renewable generation capacity, and solutions like TOU can reduce this waste by six-fold. We at Environmental Defense Fund (EDF) estimate that if this clean electricity were instead provided by natural gas power plants, it would generate 8 million additional tons of greenhouse gas pollution each year. Burning gas when we could instead rely on clean energy would dramatically impede the 11 million tons per year of greenhouse gases we need to eliminate from our economy to reach California’s 2050 environmental goals.

Testing TOU

The three big utilities are half-way through “opt-in” pilot programs that test these new rates. They’ve just submitted plans to the California Public Utilities Commission to test automatically switching some people to TOU in 2018, leading up to a complete roll out in 2019. TOU rates will work for most customers right away, reducing their bills and providing new opportunities to save money. Further, people can always opt out of the program. 

However, the utility plans present an unnecessarily high risk of raising people’s bills during summer months, the reasons for which are explained below. To address this, the utilities will provide bill protection to everyone during their first year on TOU pricing ‒ guaranteeing no one will spend more than they would have if they had stayed on their old rate. Nevertheless, the plans must be designed to give customers actionable ways – not just measurements and band-aides – to manage potentially high summertime bills that could result if people don’t know how to switch the times they use electricity.

---

Like Clockwork: California Utilities Should Embrace Clean Energy Solutions when Testing Time-of-Use…
Click To Tweet

---

EDF is pushing the utilities to prevent these problems by testing clean energy tools, like demand response and storage, along with customer education that can ensure comfort and affordability. The good news is that LNBL’s research and other studies indicate by moving California to time-based electricity rates we’ll reap significant economic and environmental rewards.

Ensuring a smooth transition to TOU rates

Looking closely at PG&E’s plan, we see that most people in hotter areas of the state would see their bills rise by at least $10 per month in summer months if they aren’t able to shift or reduce their energy use. Proven steps, like replacing old light bulbs with LEDs or cutting “energy vampires” (devices that pull electricity even when not in use or turned off), will save people money around the clock. Slight changes to use electricity when it’s cheapest, like precooling during sunny afternoons and running the dishwasher at off-peak times, will also help keep bills low.

While cautionary, this information also suggests there’s an opportunity to lower bills for everybody. PG&E’s analysis shows most people won’t see a big change in their annual electricity costs: 59 percent of low-income households which currently receive bill discounts will see reduced yearly electricity costs and 40 percent will see increases of less than $5 per month. For people who pay non-discounted rates, the numbers are similar: 69 percent will have annual bills that increase by less than $5 per month, with 31 percent expected to see bill decreases.

So how does this all work? First, it’s important to recognize that the utilities won’t be making any extra profits from TOU rates. Second, as TOU rates encourage strategies to line up our energy demand with cheap, clean solar and wind, we can rely on these assets more. This lowers the overall costs of providing reliable electricity relative to the current system, bringing down costs over the long-term for everybody. Third, TOU rates are part of a strategy to avoid the significant long-term costs of degrading our environment with harmful pollution from fossil fuels. And fourth, these rates will open new opportunities for market innovations that give Californians more control over their energy use. Utility estimates of bill impacts don’t include these benefits, but they should.

Helping TOU work for everyone

It’s critical that utilities test and implement strategies to help customers at risk of higher bills take advantage of new ways to manage their energy use. Put simply, the pilots should first test how to help people align their energy demand with times when solar power is abundant. They should then explore how to help all customers take advantage of clean energy solutions and become more flexible in their energy use. To further ensure TOU rates work for everyone, utilities and the California commission should do the following:

• Use data to identify people and places that need additional help. Utilities should find the Californians facing the largest potential adverse impacts when switched to TOU rates, such as those most dependent on air conditioning. They should also consider people who have old appliances, or live in older, less-efficient buildings, for example. SDG&E is proposing to do this in their plan with a robust customer segmentation strategy.
• Help customers find vendors for clean energy solutions. PG&E could offer TOU customers a link to their existing, very helpful website that makes it easy to share energy-use information with companies like rooftop solar installers and demand response providers.

Utilities have these types of solutions on their radars. PG&E’s Director of Regulatory Relations, Sidney Dietz, said in a recent meeting with Commission staff, “Customers should be given a price signal that supports newer technologies like storage.” However, utilities are not acting on these words in the regulatory proceedings where it could make a real difference.

TOU pricing, if implemented with the right set of supports, has enormous potential to help us get the most out of our renewables, with the least cost, while offering Californians a way to save money. Our utilities should be taking the necessary steps to ensure TOU works for all.

Read more

By Rory Christian

“What happened to oil in the late 1970s?” was a question assigned to me in elementary school to discuss with family over the Christmas holiday break. At the time, this question seemed innocent enough, and I didn’t know how my family would react about what I soon learned to be two oil embargos. Turns out when I brought it up one night, extended family members held a broad spectrum of views on the issue, and the question led to one of the most heated dinner arguments I can recall – until this year, at least.  This holiday, family discussions focused on the presidential election. Fierce conversation ensued on standout topics. But, to my dismay, energy and the environment were just an afterthought.

While it is clear that these topics did not play a decisive role in the election, 2017 will nevertheless bring a new set of challenges for energy and environmental policy and elevate the conversation to a higher level. Progress we’ve made in the past few years, including environmental protections and the continuity of agencies that support them, are at risk of being undercut by the new administration, and policies that will protect future generations are at peril.  At the federal level, the fight to stop climate change looks bleak.

As Environmental Defense Fund recently noted in California, Illinois, Maryland, and Ohio, clear and deliberate leadership at the state and local levels will become even more important to advance clean energy goals. Fortunately, New York’s history of advancing favorable environmental policies have resulted in valuable lessons that can be adapted and implemented in other states to increase economic development, create jobs, decrease pollution, and improve the quality of life of people throughout the country.

New York steps up

In the last three years, New York State has made efforts to advance a wide array of policies to improve the environment under the banner of Reforming the Energy Vision (REV), an initiative to change how electric utilities and consumers interact to accelerate the adoption of clean energy technologies and services in the state. As a result, environmental outcomes are now a key consideration when utilities make investments; private companies will have access to information needed to develop innovative products and services; and customers will have new tools to better manage their energy, lower their bills, and have a positive impact on the environment.

---

States’ Environmental Commitments Are Key to Nation’s Clean Energy Future
Click To Tweet

---

New York City’s determination to achieve a clean energy future continues unabated: Through a series of local laws, the use of No. 6 heating oil – a major pollutant – has been completely phased out, and by 2030, No. 4 oil – a slightly cleaner alternative – will face a similar fate.  Mayor Bill de Blasio’s One NYC plan outlines a path for reducing carbon emissions, eliminating waste sent to landfills, and a variety of other efforts. The New York City Council recently passed three new laws expanding energy efficiency in buildings, adding to its stellar standing as one of the nation’s most sustainable cities. And much more is anticipated in 2017, as the City increasingly draws power from renewable sources.

One nation

Maintaining New York’s and other regional efforts will be essential to address the effects of climate change in years to come.  Should we backslide on our commitments, our children will look back on this time in horror and astonishment at how the U.S. squandered an opportunity to address the clear dangers posed to their generation.  Only through decisive action can we secure a healthy environment for generations to come, and that time is now.

Nationally, forward-thinking clean energy policies may be on the verge of stalling, but states will continue to fight for a clean energy future. In this, New York is not alone.  California  passed a series of bills imposing caps on greenhouse gas emissions to reduce pollution, and Illinois passed the Future Energy Jobs Bill that will add well-paying local jobs, while expanding the state’s already successful energy efficiency programs. Ohio vetoed a freeze on clean energy standards because it would hurt the local economy, and Maryland is exploring clean energy options. These states have drawn a line in the sand reaffirming their commitments to an economy and environment that benefit from clean energy, and more states throughout the country need to follow this trend.

It is encouraging to live in a state – Trump’s very own backyard – where the environmental threats we all face are recognized. EDF will work even harder to continue advocating for policies and concrete actions that will benefit our environment and country’s well-being.

Read more

By Pam Kiely

(This post was co-authored by EDF Associate Charlie Jiang)

2016 was a big year for progress in the U.S. power sector. Renewable energy sources provided 16.9 percent of the country’s electricity in the first half of 2016, up from 13.7 percent for all of 2015. The country’s first offshore wind farm opened off the coast of Rhode Island. Most importantly, carbon emissions from the power sector are projected to continue to decline and hit levels not seen since 1992.

Strong leadership by forward-thinking governors, policymakers, and power company executives who recognize the imperative of lower-carbon generation and the promise of clean energy, powerful market forces intensifying the push to lower-carbon resources, and the critical federal regulatory overlay of the Clean Power Plan — which has made clear that unlimited carbon pollution is a thing of the past — have all combined to deepen a trend towards cleaner electricity production at this dynamic moment in time.

Even with any possible political maneuverings in Washington, D.C. to reverse clean energy and climate progress, it is clear that the transition to a low-carbon future is well under way.

States and power companies are surging ahead — and given the favorable economics of clean energy and the urgent need to reduce climate-destabilizing pollution it would be foolish to turn back.

• More than 21 gigawatts of wind and solar power (utility-scale and rooftop) is projected to have been installed in 2016, accounting for 68 percent of new U.S. capacity additions. That’s according to analyses by FERC, SNL Energy, EIA, and SEIA/GTM Research.
• Some of the country’s oldest and least efficient power plants were scheduled to close in 2016, transitioning 5.3 gigawatts of capacity, in no small part due to increasingly favorable economics for low-carbon generation.
• Employment in the solar and wind industries increased 21 percent in 2015 (the most recent data available) to reach 209,000 jobs — surpassing those in oil and gas extraction — and 88,000 jobs, respectively.

Together, these trends indicate the U.S. power sector is well-positioned to continue to reduce carbon pollution at a significant pace. And because of the favorable economics for low-carbon generation and the urgent need to protect against climate risks, hundreds of major corporations are on record supporting the Clean Power Plan and the achievement of emission reduction targets.

Power sector carbon emissions declined to 21 percent below 2005 levels in 2015, and are expected to drop again in 2016, meaning the power sector is already two-thirds of the way towards meeting its 2030 pollution reduction goals under the Clean Power Plan.

Notably, this de-carbonization of the electric sector has proceeded while the U.S economy has grown. In addition, recent analysis by the Brookings Institution shows that as of 2014, at least 33 individual states have also decoupled their economic growth from carbon pollution — continuing to grow their gross domestic product while significantly slowing their rate of greenhouse gas emissions.

Heading into 2017, companies from coast to coast are well-positioned to secure ongoing reductions in carbon emissions from their fleets – thereby helping the United States to achieve international commitments under the Paris Agreement, delivering greater value to ratepayers and shareholders and ensuring state policy objectives will be realized or municipal greenhouse gas targets met, and solidifying their ability to meet declining emissions limits in accordance with a federal regulatory framework.

Even the vast majority of litigating states can comply with Clean Power Plan goals by optimizing the carbon pollution benefits from planned investments and compliance with existing state policies. The Clean Power Plan is crucial to ensuring that states and companies take advantage of the opportunity to optimize their decisions in the near-term, so they can in fact achieve these reasonable protections from carbon pollution.

The shift to a lower-carbon future isn’t expected to change, as power companies recognize the benefits of moving in this direction despite changing political winds in Washington.

For example, shortly after the November election, a number of executive from historically coal-intensive companies convincingly reaffirmed their commitment to de-carbonization:

• No matter who occupies the White House, “[coal is] not coming back,” said American Electric Power CEO Nick Akins. “We’re moving to a cleaner-energy economy and we’re still getting pressure from investors to reduce carbon emissions. I don’t see that changing.”
• “It can’t just be, ‘We’re going to get rid of these regulations, and you guys can party until the next administration comes,’” Cloud Peak Energy Vice President Richard Reavey said. “There are serious global concerns about climate emissions. We have to recognize that’s a political reality and work within that framework.”
• “Markets are driving a lot of the behavior,” said Tom Williams, a spokesman for Duke Energy. “[W]e’ll continue to move toward a lower carbon energy mix.”
• “We’ve always had a point of view at Southern that there’s a reasonable trajectory in which to move the portfolio of the United States to a lower carbon future,” said Southern Company CEO Tom Fanning. “There’s a way to transition the fleet now.” In a later interview, Fanning added: “It’s clear that the courts have given the EPA the right to deal with carbon in a certain way.”
• “Regardless of the outcome of the election,” said Frank Prager, Xcel Energy’s Vice President of Policy and Federal Affairs, “Xcel Energy will continue pursuing energy and environmental strategies that appeal to policymakers across the political spectrum because we are focused on renewable and other infrastructure projects that will reduce carbon dioxide emissions without increasing prices or sacrificing reliability.”

Acting on these commitments, many power companies are continuing to expand their renewable investments while phasing out high-carbon generation, putting them in a solid position to comply with robust carbon pollution regulations.

Here are a few recent highlights just from the last months:

• At the end of December, Florida Power & Light (FPL) showed strong leadership when announcing plans to shut down the recently-acquired 250-megawatt Cedar Bay coal plant at the end of the year. “I’m very proud of our employees for proposing this innovative approach that’s environmentally beneficial and saves customers millions of dollars,” said CEO Eric Silagy. FPL plans to replace the retired power with natural gas and solar — the company added 224 megawatts of solar capacity in 2016. FPL also noted that their system is now “cleaner today than the 2030 carbon emissions rate goal for Florida outlined by the Clean Power Plan,” while average residential bills are about 30 percent lower than the national average.
• On December 30, Southern Company announced an agreement with Renewable Energy Systems America to develop 3,000 megawatts of renewable energy scheduled to come online between 2018 and 2020. The agreement comes as Southern Company continued to boost its renewable portfolio with the acquisition of 300 megawatts of wind power in late December, bringing its total to more than 4,000 megawatts of renewable generation added or announced since 2012.
• Duke Energy acquired its first solar project in Colorado on December 8. The purchase advances Duke’s goal of owning more than 6,000 megawatts of renewable energy projects by 2020.

After the election, a number of power companies reiterated their commitment to reducing air pollution and meeting their obligations under the federal Clean Air Act by transitioning aging coal plants.

• PNM Resources spokesman Pahl Shipley said the company has no change in plans for retiring two units at a New Mexico plant, totaling 837 megawatts of capacity, in 2017. PNM will replace the retired capacity with solar and nuclear power.
• The Tennessee Valley Authority is moving forward with plans to retire two coal plants in 2017, as well as a third in 2018.
• Colorado-based electric cooperative Tri-State Generation will move forward with plans to retire its 100-megawatt Nucla coal plant and Unit 1 of the Craig coal plant. “We are moving forward with retirement activities and developing a transition plan for the employees and communities,” said Tri-State spokesman Lee Boughey after the election.

These announcements follow one of the biggest clean energy leadership stories of 2016 – commitments by two midcontinent utilities, Xcel Energy and Berkshire Hathaway Energy, to go big on cost-effective investments in new wind resources.

• This past year, Minnesota regulators approved a plan for Xcel Energy to construct as much as 1,800 megawatts of new wind power and 1,400 megawatts of solar in the state by 2030. Xcel also received approval to build a 600 megawatt wind farm in Colorado.
• Berkshire subsidiary MidAmerican Energy secured approval to construct a massive 2,000 megawatt wind farm in Iowa that will be the “largest wind energy project in US history.” Said CEO Bill Fehrman: “Our customers want more renewable energy, and we couldn’t agree more.”

State regulators have not stayed on the sidelines, either. 2016 sustained progress as states moved forward with commonsense efforts to reduce emissions of harmful air pollutants. Even with promises to roll back critical clean air, climate, and clean energy progress coming out of Washington, D.C., states made clear after the election that they will not be slowed down by potential federal backsliding:

• On December 7, Illinois enacted a comprehensive new energy bill that will in part double the state’s energy efficiency portfolio and allow for 4,300 megawatts of new solar and wind power while providing for continued operation of zero-emission nuclear facilities, which will reduce the state’s carbon emissions 56 percent by 2030.
• On December 15, Michigan lawmakers approved a new bill to increase the state’s renewable portfolio standard to 15 percent by 2021, up from 10 percent. Republican Governor Rick Snyder touted the bill in a statement: “What we’re in is a huge transition in how we get our energy. We’ve got a lot of aging coal plants that are beyond their useful life, and it’s not worth investing in them anymore … We can transition to both natural gas and renewables and let the markets sort of define the balance between those two, so we’re moving away from an old energy source [where] we had to import all of this coal.”
• Also in December, Washington Governor Jay Inslee proposed the state adopt a first-of-its-kind carbon tax of $25 per metric ton of carbon pollution. The proposal supplements the state’s innovative Clean Air Rule, adopted in September, which caps carbon emissions from individual polluters.
• Nine states comprising the Regional Greenhouse Gas Initiative are engaged in a stakeholder process designed to establish new, more protective, standards for climate pollution.
• In Oregon, regulators are evaluating options for a market-based mechanism that could link to the California-Quebec carbon market, releasing a partial draft report on November 21.
• Governors such as Colorado’s John Hickenlooper continue to display strong leadership and a keen understanding of the imperative to move to a low-carbon future. After the election, Hickenlooper said he remains committed to fulfilling the goals of the Clean Power Plan, no matter what happens to the rule.
• In Pennsylvania, a spokesman for Governor Tom Wolf’s Department of Environmental Protection (DEP) noted that: “Pennsylvania’s carbon footprint has been shrinking rapidly due to market based decisions being made in the state’s electric generating sector … It is likely that this trend will continue.” He added that the DEP “will continue to seek ways to continue addressing climate change.”
• In California Governor Jerry Brown mounted a vigorous defense of California’s climate leadership and the role the state will continue to play in setting the stage for ongoing progress and defending the important progress of the last eight years. “We’ve got the scientists, we’ve got the lawyers and we’re ready to fight. We’re ready to defend,” he said.

The momentum that power companies and states have generated towards achieving a clean energy future is powerful and encouraging.

Looking to 2017 and beyond, federal and state policies will continue to provide certainty about the pace and depth of emissions reductions needed to address the threat of climate change. These policies will help companies plan clean energy investments in a way that maximizes benefits for consumers and facilitates optimal deployment of available resources.

The Clean Power Plan remains crucial to achieving these goals. Any disruption in the Clean Power Plan’s implementation could put long-overdue and readily achievable emission reductions at risk.

As we ring in the New Year, EDF will keep working with a diverse set of stakeholders across the country — including many state regulators and power companies — to defend these critical environmental safeguards. At the same time, we will work vigorously to ensure that we achieve the reductions in carbon pollution envisioned by the program.

Read more

By Dick Munson

Market forces and technology are increasingly making old, dirty power plants uneconomic, which creates an opportunity for clean energy progress and cleaner air. However, outdated rules and entrenched interests can complicate the path to a healthier energy economy, as evidenced by a new settlement in Ohio.

The Public Utilities Commission of Ohio (PUCO) recently approved an American Electric Power (AEP) settlement that contains both promising and discouraging components.

The PUCO decision forces AEP to reconsider its ownership of power-generating plants. Realizing old coal-fired units can no longer compete against newer natural-gas and renewable facilities in deregulated markets, AEP suggests it faces two options, one being to ask Ohio legislators to overturn the state’s deregulation law, allowing AEP to return to the less-risky days of guaranteed profits on any of its power plants.

However, a recent study by Ohio State University and Cleveland State University found that the competition enabled by deregulation allowed Ohio customers, businesses, and industries to save $15 billion on electricity over the past four years and is expected to save the same amount by 2020. If the state were to return to a regulated system, Ohioans could miss out on those billions of savings.

Decision breakdown

The good: AEP will decommission 1,500 megawatts (MW) of coal-fired capacity, as well as install 900 MW of solar and wind projects – enough to power almost 2,000 homes for a year. The order also requires AEP to develop a grid modernization plan and develop most of the solar projects within Ohio’s Appalachian region.

---

Recent AEP Decision in Ohio a Mixed Bag for Clean Energy
Click To Tweet

---

The not-so-good: The PUCO approved subsidies for AEP’s share of two uneconomic coal plants that are part of the Ohio Valley Electric Corporation (OVEC). Although the 440 MW covered by the order is less than a fifth of AEP’s initial bailout request – which Environmental Defense Fund (EDF) challenged and the Federal Energy Regulatory Commission blocked, it is still an unnecessary handout.

As the electricity sector evolves, EDF will work to clear the way for progress, challenging efforts like the PUCO’s coal plant bailout – while leaving the clean energy pieces intact.

Legacy costs

With this deal, AEP is trying to get money for its uneconomic power plants – even though it has already been compensated for them.

In 1999, Ohio decided to create a competitive retail electric market. The revised law recognized that, as a result of the transition to a competitive market, some utilities would have legacy costs, or the difference between the original cost of the power plants and the plants’ new market value. When the utilities purchased or built these plants, the utilities had a monopoly on generation service, assuring them of full cost recovery. But under a competitive structure, the utilities’ customers can choose to buy power from competitive suppliers at a lower price, so utilities may no longer be able to recover the plants’ costs. Therefore legacy costs, known as “transition charges”, represent the difference between the plants’ original cost and the plants’ fair market value at the time restructuring occurred. The utilities were given 10 years to recover their legacy costs through mandatory charges that all customers had to pay.

The PUCO’s order allows AEP to keep billing all customers in its distribution territory to cover the OVEC plants’ transition costs, even if the customers buy power from a different competitive supplier and despite that the 10-year window has expired. This is unlawful, and Ohio customers should not have to continue to pay for those plants.

AEP’s options

At a time when old coal-fired units can’t compete against newer natural-gas and renewable facilities in deregulated markets, the PUCO decision forces AEP to reconsider its role in Ohio.

AEP suggests that its first option is to simply sell its power plants and concentrate on being a distribution monopoly that would purchase its power from other generating utilities.

The second option is to ask Ohio legislators to end the state’s competitive energy market. This proposed alternative would return the Ohio electricity market to the days of guaranteed profits on any power plants, including AEP’s uneconomic coal-fired ones. According to SNL Energy, AEP’s chairman suggests such a profit guarantee – referred to below as “pricing signals” – would encourage the utility to invest in the state:

From an Ohio perspective, we really see a limitation for the ability for utilities like us, who are focused on long-term sustainability and the ability to invest for the long term, to have those pricing signals so that we can invest in new types of generation, whether it’s natural gas … [or] renewables in the state.”

But again, studies show that Ohio customers saved $15 billion on electricity in the deregulated market over the past four years. Similar billions of savings are expected by 2020, which Ohioans could lose out on under a re-regulated market.

The decision in Ohio reflects the challenges presented by the broader industry transition away from uneconomic coal plants. Although there were a few wins for clean energy, AEP should not have been granted subsidies for those outdated power plants, nor should it be allowed to re-regulate the state’s electricity market. EDF, among others, will work to ensure neither ultimately comes to pass, so Ohioans can enjoy a clean, thriving energy economy and environment.

Photo source: Wikimedia Commons/D Sharon Pruitt

Read more