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PowerForward Ratemaking and Regulation  day one recap

By John Ryan

COLUMBUS, OH (March 6, 2018) - After two successful phases in 2017, PowerForward Phase 3 kicked off today with the goal of “pairing innovation with the lives of customers,” as stated by Public Utilities Commission of Ohio (PUCO) Chairman Asim Z. Haque during opening remarks. The theme for this week’s presentations and the presentations that start on March 20 is “Ratemaking and Regulation.”

Unlike the first two phases of PowerForward, the focus of phase 3 is defining the regulatory framework that can usher Ohio towards a modern grid.

The morning began with a panel of senior leaders in companies with three very different perspectives. Despite coming from divergent pockets of the energy industry, their common theme was the importance of focusing on customers’ desires. David Owens, a former executive vice president of the Edison Electric Institute (a trade association representing investor-owned utilities) spoke about the need for a holistic approach to grid modernization, and advocated for new ways of navigating traditional schools of thought.

 

David Owens
David Owens

Owens highlighted the changing needs and expectations of electric customers. Current regulatory models tend to take “one size fits all” perspective when it comes to individual rate classes.  However, rate classes contain customers with wide ranging demands. A standard residential rate class includes baby boomers and millennials, each of whom will demand very different things from the electric grid over the next several years. Flexibility in ratemaking could allow customers better access to the services they seek.

Oracle Utilities’ Senior Vice President and General Manager, Rodger Smith, spoke about the need to keep up with the pace of technological advancement.  This rapid growth creates choices for energy consumers and drives customer desires for instant access to technology the same way it’s offered in other industries.

According to Smith, all of the extras that come with the modern grid requires data.  This starts with installing advanced metering infrastructure, commonly referred to as smart meters.  However, the meter alone isn’t enough.  “When you have a smart meter, it doesn’t make sense to be on a dumb rate.”  Data beyond merely the number of kilowatt hours used per month can drive innovative products and innovated rate designs that will enhance the customer experience.

Sayun Sukduang, President and CEO of ENGIE Resources, focused his presentation on the industry’s need to move away from technical jargon. From ENGIE’s perspective, customers want “light, climate control and device functionality.” Reframing the issues is one way to engage customers without overwhelming, which can be difficult in an industry filled with terms of art.

Mr. Sukduang went on to argue that new infrastructure does not need to be the solution to every increase in demand.  This was best described through metaphor.  In the city of Houston, there is a highway with 26 lanes.  However, during rush hour, drivers are still forced to drop their speed due to traffic.  This could easily be solved by building a 100 lane highway, but not practical. This is similar to increases in demand for electricity.  Small changes in technology can decrease energy consumption and reduce the need to build new power plants. 

The second panel featured a discussion with speakers from each of Ohio’s four investor-owned electric distribution utilities.  Representatives from AEP, AES (parent to Dayton Power & Light), FirstEnergy, and Duke Energy presented information about the current state of the electric grid as well as the methodologies for load forecasting and distribution planning. Panelists shared some of the challenges faced by engineers when accounting for electricity being pushed onto the grid by distributed energy resources (“DERs”) such as rooftop solar panels. 

The panel shared a few of the engineering issues that arise from a wider adoption of DERs.  The current electric distribution system was not designed to handle a two-way flow of electricity from these resources on the grid.  This creates certain challenges to voltage.  However, these issues are mitigated by the fact that DERs have not been widely adopted in Ohio in the way that they have in other states, like Hawaii.

In response to questions posed by commissioners, the panelists outlined several responsibilities that utilities will always need to prioritize.  AEP’s Tom Kirkpatrick mentioned that “blocking and tackling is important.”  This includes a robust outage management system as well as regular system inspections and vegatation management.  However, Ohio’s utiltiy companies stressed that they would like to continue to expand their portfolio of innovative products and services.  Duke’s Lee Mazzocchi summarized this by saying “we want to be more than just a wires company.”

Commissioner Tom Johnson, Chief Analyst Howard Petricoff, Chairman Asim Haque, Vice-chair Beth Trombold
ltr: Commissioner Tom Johnson, Chief Analyst Howard Petricoff, Chairman Asim Haque, Vice-chair Beth Trombold

The afternoon began with a panel on integrating distributed resources into distribution system planning.  Curt Volkmann, President of New Energy Advisors, advocated that “Ohio is on the threshold of some very significant growth in [DERs].”  He also advocated for the creation of a working group in order to dive into the details of distribution system planning and to find a place for distributed resources in that process.  He further highlighted potential next steps and encouraged the PUCO to set firm timelines to meet its goals.

Jeff Smith from the Electric Power Research Institute spoke about the value of DERs in reducing losses, delaying the need for costly infrastructure upgrades, and improving the quality of power in the grid, but also admitted that DERs can be a detriment to each of these things.  However, the problems created by DERs can easily be avoided if their implementation is done so strategically and as part of a distribution planning process.

The panel closed with a presentation form Samir Succar, Senior Manager, ICF Consultants. He focused on the value proposition of integrating DERs, the impact on customers, and the potentially changing utility role in distribution planning in the future.  When it comes to the utilities’ role, he advocated for expanding the current focus of utility distribution planning beyond reliability, safety, security and resilience to include a few considerations dealing with DER integration. The recommendations stem from a change in focusing on outcomes instead of potential inputs and additions to traditional utility infrastructure.

The final panel featured two national consultants and a DER investor in Northwest Ohio. Alan Cooke from the Pacific Northwest National Laboratory highlighted the importance of increased transparency in the distribution planning process.  When the process becomes more transparent, new stakeholders can become involved and new alternatives to traditional grid solutions will follow.  Inclusiveness will open the door to allow all customers to participate in the energy industry.

One Energy’s Jereme Kent spoke to similar issues.  His business model allows industrial customers to enter into 20 year, fixed-price contracts due to windmills built on the customers’ premises.  However, a lack of transparency with utility information systems and the rigid nature of industry standards keeps the company from offering different services.

The panel discussion closed with a presentation from Aaron Snyder Director of Grid Technology Consulting with EnerNex.  He stressed the importance preparing for unknowns in distribution planning and on gathering as much data as possible to eliminate those unknowns.  

That’s a wrap for the day!

Thank you to everyone that attended or tuned in to day one of PowerForward Phase 3.

We will be back tomorrow starting at 9 a.m. (EST). The day two agenda and live webcast are posted on the PUCO website.