NARUC 2017: A little less climate and a lot more infrastructure

Donald Trump's election has shifted state regulators' focus from carbon regulation to pipelines

What a difference a year makes.

At the beginning of 2016, the focus of the winter meeting of the National Association of Regulatory Utility Commissioners was squarely on carbon regulations.

The Supreme Court had put a stay on the Clean Power Plan, the Obama administration's signature power sector climate rule, just weeks before the death of conservative Justice Antonin Scalia threw the legal calculus on regulation’s future into limbo.

Bewildered regulators and staffers wondered what the events would mean for state compliance planning and the trend toward decarbonization at the utilities they oversee.

“It's a double whammy,”  Then-NARUC President Travis Kavulla told Utility Dive during an interview last year. “If it had just been the stay that would have been one thing, but the passing of Antonin Scalia complicates matters.”

A vicious election battle was also taking place as Republicans and Democrats duked it out for primary wins. The ultimate winner would help set the course for the future of the utility sector. Almost no one expected it to be reality TV star Donald Trump.

Now, after a rancorous election, utility regulators and industry officials have been scrambling to adapt to the new policy environment.

In November, just days after the election, attendees at the fall NARUC meeting were loathe to speculate on what Trump’s win would mean for energy policy, other than a friendlier atmosphere for fossil fuels.

A few months later, NARUC’s annual winter meeting built on many of those themes, as speakers emphasized natural gas and other infrastructure investment. The Clean Power Plan, still tied up in court, was mentioned little beyond speculation on its demise.

“I’m hearing a buzz about infrastructure in this town,” newly-elected NARUC president and Pennsylvania regulator Robert Powelson told the crowd assembled at NARUC’s General Session on Tuesday.  

That buzz comes from Trump’s promise to incentivize $1 trillion in infrastructure spending, a cornerstone of his presidential bid. Some observers said a federal infrastructure plan could pull bipartisan support in what was a bitterly partisan election cycle. But a divide was apparent in what types of infrastructure they want to boost. While renewable energy interests have pinned hopes that the investment will speed up transmission line buildout and recognize the job benefits of clean energy, many speakers at NARUC zeroed in on gas and water distribution as target areas for investment.

All eyes on gas

Natural gas’ rise to dominance in the power sector is not new news. Combining hydraulic fracturing with horizontal drilling brought a flood of domestic natural gas into the market, pushing down prices and edging out normally reliant baseload resources such as coal and nuclear.

Saddled with unprofitable coal and nuclear fleets — and environmental regulations like the Mercury and Air Toxic Standards rule and Regional Haze rule — utilities started switching to natural gas as a cleaner source of energy.

“We do believe that natural gas is the answer to a clean energy future in the coming decades,” Pierce Norton, CEO of ONEGas and board chairman of American Gas Alliance, told the audience Monday.

But switching to natural gas plants requires an improved distribution system to get the resource to markets, said speakers at NARUC. In a discussion with industry officials on improving gas supply, Powelson recounted the 2014 Polar Vortex, when winter weather took significant gas pipeline capacity offline in the Midwest, spiking prices for generators and consumers. 

"12.3 million customers in the New England states were facing paying $70/mmBTU to $90/mmBTU for gas at the gate," Powelson said. "I'm not a gas pipeline engineer, [but] we need to get gas to markets."

A number of pipelines are already under construction to link Midwestern shale fields to demand centers in the East, and Powelson said NARUC would push federal lawmakers to include gas transport and other energy infrastructure in spending plans. 

“The infrastructure piece is something we’re ideally positioned as we’re coming through a presidential transition period,” Powelson told Utility Dive in an interview. “And look, if there’s a trillion dollar infrastructure bill out there, one of the things NARUC is advocating for is: let’s not forget energy infrastructure.”

Which projects take priority and how to finance them is something that regulators—and politicians—hope Trump will address soon.

Trump’s yuge infrastructure plan

There’s much speculation on Trump’s looming infrastructure plan.

“It’s no surprise to me that Donald Trump is for infrastructure,” said Rep. Bill Shuster (R-PA), who heads the House Transportation and Infrastructure Committee. “The man is a builder.”

After a spending boom during the Great Depression and post-World War II, infrastructure investment has declined since the 1970s. Cities and rural areas struggle to maintain infrastructure projects such as roads and pipelines for both water and gas.

For the power sector, Exelon CEO Chris Crane estimated utilities spent $100 billion on infrastructure and security. The Edison Electric Institute, a trade group for investor-owned utilities, said utilities spent $52 billion on transmission and distribution infrastructure last year.

A draft report released by McClatchy listed a series of projects that the Trump administration allegedly prioritized in their infrastructure plan.

Among those are seven for the electric sector including the Sierra Madre and Chokecherry wind farms in Wyoming; the Atlantic Coast pipeline project and the TransWest Express Transmission lines, which would deliver renewable energy to Nevada and Arizona from Wyoming.

But it’s unclear whether that is a finalized list or if a draft or was submitted to congressional lawmakers. Many of those projects are already underway or experienced delays due to the permitting process.

Those projects are clearly expensive, and new projects will likely need funding from the private sector in addition to the federal government, officials said, though all agreed Washington has a central role.

“Infrastructure is the backbone of the economy,” said Shuster. “And infrastructure was a role of the federal government … not to do it all, but central to all governments.”

In Trump’s 100-Day Action Plan, released at the start of his administration, White House officials said they would push for a revenue neutral law that would leverage private-public partnerships and private investments “through tax incentives to spur $1 trillion in infrastructure investment over ten years.”

Public-private partnerships

At the heart of the infrastructure discussion is how to finance the buildout, particularly of natural gas pipelines. At the conference, some speakers called for public-private partnerships.

P3s are a long-term relationship between private and public sectors, typically seen in transportation and infrastructure projects. As part of the agreement, the private entity takes on part of the construction and financial costs of the project, alleviating some of the strain from public funding. While a popular option, it’s not a panacea.

“Public-private partnerships are key to infrastructure spending,” Shuster told the crowd at NARUC. “But they are not a silver bullet. They are a big tool in the toolbox.”

Other options include lowering corporate tax rates and streamline taxpayer funding, Shuster added. But the first priorities are repealing Obamacare and restructuring the U.S. tax code. Another pressing issue is nominating and confirming Commissioners for the Federal Energy Regulatory Commission, which only has two sitting commissioners after Chairman Norman Bay resigned earlier this month. His departure left FERC without a quorum, delaying decisions about pipeline projects and market reforms.

But while Congress plows through potentially acrimonious hearings to reform the tax code, roll back Obamacare, and find new FERC commissioners, Powelson is optimistic that the push for new infrastructure funding will forge ahead.

“Why not allow private capital compete for those projects...why not have a bill that has public-private partnerships,” Powelson. “This is the kind of conversation we want to have."

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Filed Under: Generation Transmission & Distribution Solar & Renewables Regulation & Policy
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