Showdown at the PSC: Inside the battles for Florida's energy future
Utilities and environmentalists are feuding about how to quantify solar and efficiency
Last month, Florida regulators terminated the state’s solar rebate program and rolled back its energy efficiency goals after a heated debate between utilities and renewables advocates.
Impacts of the two separate rulings could be radically different. The first could create a new solar industry in the state. The second could squelch efforts to bring more efficiency to utility customers.
Last July, the Public Service Commission reconsidered the goals of the Florida Energy Efficiency and Conservation Act (FEECA) in proceedings required by law every five years. It announced its decisions Nov. 25.
Commissioners largely decided in favor of Florida Power and Light (FPL), the state’s dominant electricity provider, and the other important utilities, Duke Energy Florida and Tampa Electric Company.
Interveners against their positions included Sierra Club, the Southern Alliance for Clean Energy (SACE), the Environmental Defense Fund and Florida’s Office of Public Counsel.
Solar moves ahead
Both utilities and interveners embraced the PSC’s solar ruling. They agreed the $2 per watt solar rebate program was flawed. In terminating it as of December 31, 2015, the commission set in motion a new process.
“They ordered a workshop to discuss how to effectively implement solar policy,” explained VoteSolar Florida Regional Manager Justin Hoysradt.
In response to 7,000 letters of support during the hearing, Commissioner Eduardo Balbis led the commission to unanimous approval of Florida’s “extremely important” existing net metering policy and “a workshop to thoroughly address the solar issues.”
The intent, Hoysradt said, is to complete the workshop “prior to the termination of the rebate program so the solar industry and other stakeholders would have a smooth transition to new policies.” Expanded third party ownership of solar, community solar, and virtual net metering are expected to be taken up.
“That is an adult conversation Florida hasn’t had in a long time,” Hoysradt said. “It is super-critical the workshop be what the commission described — transparent and open to the public and to all stakeholders to participate and provide input. I am cautiously optimistic that if it is, it should result in good solar policy.”
Several interveners agreed with the utilities’ contention the rebates were not cost-effective.
“The rebates were set too high and the utilities did not adjust them as the installed price of solar dropped,” Hoyradt explained. “The program could have been more cost-effective and benefitted more people if the utilities listened to stakeholder input. That is what this workshop is intended to correct.”
The energy efficiency feud
Despite some agreement on solar, exchanges between FPL and SACE during and after the energy efficiency proceedings made the Capulets and Montagues look like kissing cousins.
“We were amazed at how aggressive the utilities were in reducing their commitments to energy efficiency,” explained SACE Executive Director Stephen Smith. “It was a difficult and hostile proceeding because they had no interest in advancing meaningful goals.”
In its decision, the commission affirmed FPL’s Rate Impact Measure (RIM) cost-effectiveness test of energy efficiency. “This approach has served FPL's customers well for decades — FPL has achieved significant cumulative DSM savings while keeping electric rates low,” the regulators' decision reads.
The PSC also found the Total Resource Cost (TRC) test used in 2009 to set FPL's goals caused too great a ratepayer impact. “This recent history supports turning away from 2009's failed experiment and returning to the fundamental rate impact and resource need considerations that have supported this Commission's successful implementation of FEECA over decades,” regulators wrote.
Many expert interveners did not think the commission’s assessment was adequate. SACE experts Natalie Mims and George Cavros stressed the wider use of the TRC test across the U.S. and noted its use is supported by researchers at the U.S. Department of Energy’s Lawrence Berkeley National Laboratory.
The debate over methods
“The TRC is an improvement on the RIM, but it is still not necessarily right,” said Pace Energy and Climate Center Executive Director Karl Rabago who, as a former utility executive and Texas regulator, is a nationally-recognized expert witness.
“With RIM, which the utilities call the ‘no-losers’ test, and we always called the ‘hardly any winners’ test, you reject anything that moves the revenue requirement needle upwards in the short term, regardless of whether it helps in the mid or long term,” Rabago explained. “It says that only the user may invest in energy efficiency improvements that have upfront costs, and that other ratepayers can never enjoy the benefit of paying a little more on rates today to get rate savings in the future.”
TRC is particularly counter-productive for utilities, Rabago added, because it ends up reducing electricity sales.
“FPL claimed in this docket that all the cost-effective energy efficiency opportunities have been captured and more are not needed because their load demand is down,” Smith said. “In another docket, they say they need to build new gas plants and a pipeline and want ratepayers to pay for fracking.”
The utility, Smith added, “is an arrogant monopoly institution that has captured the PSC. It is arrogantly out of control and taking advantage of a broken system where there is not a functioning regulatory body to oversee them.”
“SACE was dissatisfied with our proposal but we didn’t think what they proposed was realistic and achievable at the rates we have now,” FPL Director of Public Affairs Mark Bubriski said. “We would love if the discussion inside the hearing room and outside the hearing room was based on facts and not sound bites and talking points.”
Is there a way forward?
But, Bubriski said, FPL would not be willing to participate in an energy efficiency workshop like the one proposed by the commission for solar. “This is actually exactly the purpose of the PSC’s DSM goals process,” he said. “We are always open to participating in a constructive discussion, but we are not sure that replicating the PSC’s extremely thorough process with some other format would make sense.”
Despite Hoysradt’s hopes for the solar workshop, Bubriski disdained such a forum for energy efficiency. “It’s great to talk philosophy, but a truly serious discussion requires the knowledge of how specific programs impact specific types of customers in an individual utility’s territory," he said. "This is what occurs in the PSC’s process.”
FPL also ruled out reconsideration of energy efficiency goals for Florida sooner than the statutorily-mandated five years. “The result of the analyses would actually be nearly the same if conducted in quicker succession,” according to Bubriski. Given the preparation time and the costs to ratepayers and taxpayers, he added, “It’s just not practical to conduct the formal goal-setting process more frequently.”
Bubriski had no other constructive suggestion to resolve the hostile atmosphere with SACE or move the debate over energy efficiency test methodologies forward. “We go behind closed doors and they pretend to be constructive and then they go out and bash us,” he said. “You can only be stabbed in the back so many times.”
Just before the Florida PSC affirmed FPL’s method for valuing energy efficiencies, Synapse Energy Economics released Benefit-Cost Analysis For Distributed Energy Resources. It reported that, far from being a settled question, “The benefit cost analysis techniques that have been used for many years for evaluating energy efficiency resources are undergoing change.”
Through the National Efficiency Screening Project, “energy efficiency experts have been working to improve the efficiency screening practices in several states,” the study reported. The RIM test should not be used, Synapse concluded, “because it suffers from several fundamental flaws.” And, it added, regulators in New York and other states have found the TRC test “is too narrowly defined and does not account for a sufficient range of benefits.”
Synapse recommended using a Societal Cost test as the primary basis for evaluation, with a Utility Cost test to supplement it. Both are tests that found no significant place in the Florida debate.
“The contested case approach has its merits, but when non-utility parties lose confidence in the fairness of the process, regulators can provide valuable leadership,” Rabago said. “Honest, open discussion in transparent workshop proceedings might help in Florida now.”