The power industry is ever-changing – whether through technology, regulations, or market mechanisms.
On a recent visit to Omaha, Sue Kelly, President and CEO of the American Public Power Association (APPA), discussed some of the bigger issues facing public power and its customers.
APPA is preparing for their Legislative Rally in Washington, D.C. at the end of February. Each year, nearly 600 Association members – policy-makers like city council and utility board members – gather to learn about “hot issues,” Kelly said.
“There is talk of doing an infrastructure bill. And the question is, how will that roll out? Will there be any opportunities for us in terms of financing tools?
“We use municipal bonds as our primary financing tool. There might be some other opportunities for us, or some ability to kind of clean up some of the tax provisions applicable to municipal bonds, as part of that … improve the financing of infrastructure.”
Kelly explained how their work in D.C. benefits the customers of public utilities like OPPD.
“We’re going to need to make a lot of new investments in technology,” she said. “For example, smart meters, more distributed generation, more ability to have two-way sensors on our system. That all takes investment. And the question is, at what rate will we be able to borrow to make those investments?
“We want to make sure we maintain reasonable of rates as we go through this transition. That’s really important. We want to have the best array of products and services available, and to stay on the cutting edge of technology with our members. But we need to do so in a way that’s affordable.”
APPA is also watching environmental regulations.
“There’s been a major change in focus between this administration and the last one,” Kelly said. “Our views haven’t really changed on it that much. We, as a general matter, support reasonable environmental regulation.”
She added, “We like to see, where possible, more local decision-making, state and local decision-making, as to how that will roll out and how that will be done.”
Wholesale energy markets
Another area of focus for the Association, Kelly said, will be wholesale energy markets.
SPP members buy and sell wholesale electricity as needed through the Integrated Marketplace, collectively saving about $500 million a year.
“Actually, in this region of the country, we think the markets generally work pretty well,” Kelly said.
“But there are other areas of the country, primarily in the east, where there are issues with how those markets are run.”
Renewables continue to be a growing portion of utility energy portfolios.
“I think one of the things that’s really changing is the technology applicable to renewable energy,” Kelly said. “And we’re seeing a lot more developments at what we call the grid edge. In other words, it’s not central station power, but more distributed generation – a lot of it renewable – at the edge of the grid.
Energy storage is another big issue.
“We have members that are experimenting with storage to kind of help smooth out renewables. Fast-ramping small natural gas units that would, in some ways, displace larger coal-fired units.We have lots of members who are looking at those. That’s just kind of an evolution.”
She said one thing changing is the availability of tax incentives for renewables.
“For a number of years, some renewables have enjoyed very substantial tax advantages, and some of those are now phasing out. On the other hand, the costs of the technologies are going down. So, I’m not sure they need those advantages to be competitive anymore.”
Public vs. retail power
Nebraska is the only all public power state.
“I think there’s a lot of interest in our business model, no question about that. But at any time, we see activity on both sides. We see communities that are interested in municipalities taking over their electric utility. Sometimes, we see it the other way.”
Investor-owned utility Pacific Gas & Electric recently filed for bankruptcy. Rumors about the filing included the utility becoming publicly owned.
The association’s job, Kelly said, is to provide information on the business model, how it works for more than 2,000 utilities across the country, and offer to be a resource.
Service from public power brings great benefits to customers, Kelly said.
“Because we are owned by the customer, we don’t have a separate class of shareholders that we have to satisfy. We can afford to look past the next quarterly earnings call and think about what are the investments that are best for our customers,” she said.
“I think we’re well-suited to balance what I call the three-legged stool – reliability, affordability and environmental stewardship. I think we have better abilitiy to balance those things because we’re not constantly under pressure to produce dividends for a separate class of shareholder.
Kelly said public power utilities have a big job in today’s rapidly-evolving energy landscape.
“We need to sieze this moment and figure out the best way to integrate these new technologies, new sources of power, and new demand-side tools that we can use to reduce our power usage.
“And we need to figure out how to incorporate those things to serve our customers better, to reduce our carbon footprint. We must do all of this in a way that is responsible, does not diminish reliability and does not increase rates. That’s our mission and our challenge right now.”