Public Utility Regulation – The Basics

May 31, 2018

            Vermonters are increasingly concerned about climate change. Anxiety about energy consumption, ridge top wind farms and large solar arrays is becoming more prevalent. The sale of Renewable Energy Credits (RECs) and the expansion of the Addison County natural gas pipeline have caused considerable consternation. A good place to start would be to ask, “What sort of an energy mix do we have in Vermont and how is it regulated?”

 

            Utility regulation in Vermont began in 1855 with the appointment of the state’s first Railroad Commissioner. Electric company regulation began in in New York in 1882 with Thomas Edison’s first commercial electric company when he was granted a franchise to use public rights of way for transmission poles and wires. In 1908 Vermont’s Public Service Commission was created by an act of the legislature. It replaced the Railroad Commissioners and was given jurisdiction over gas, electric, telegraph, telephone and express companies. Jurisdiction includes services, rates, discrimination, operations, and capitalization. In 1981 the functions of that commission were split in two. Energy and telecommunications planning as well as advocacy became the responsibility of the Department of Public Service while utility regulation and rule making became the responsibility of the Public Utilities Commission (PUC). Until 2017 the PUC was known as the Public Service Board, causing frequent confusion when casual observers often mistook the Board for the Department and vice-versa.

 

            Currently most of the energy consumed in Vermont is imported and much of that is fossil fuel based, including gasoline, diesel and home heating fuel, propane and natural gas. Most homegrown energy, on the other hand, is renewable and includes solar, wind, some hydro, methane (cow power) and bio-mass (wood). The state renewable energy goal (55% renewable energy by 2017) has been met, but the new goal of 90% renewable energy by 2050 will require considerable effort to achieve.

 

            Energy regulation in Vermont is handled jointly by Department of Public Service and the Public Utilities Commission. However their roles are very different. To add to the confusion, some energy is regulated while other types are not. The distinction is between energy that is market driven and is not regulated and that which has a de facto monopoly on the other. Monopolies are regulated to assure the public that their products are properly priced and that consumers are treated fairly.

 

            The Public Service Department is an agency within the executive branch charged with representing the public interest in matters regarding energy, telecommunications, water and wastewater. It also promotes energy efficiency and provides long range planning for the state’s energy and telecommunications needs.  The mission of the Department is to serve all citizens of Vermont through public advocacy, planning, programs, and other actions that meet the public need for least cost, environmentally sound, efficient, reliable, secure, sustainable, and safe energy, telecommunications, and to regulate utility systems in the state for the short and long term. The Department advocates for the public interest in cases before federal regulatory agencies, federal and state courts and the PUC. Such cases include Certificates of Public Good (CPGs) that regulated utilities are required to obtain when siting or expanding telecommunications or energy facilities.

 

            The Public Utilities Commission, on the other hand, is a quasi-judicial body of three members that operates much like a court. It is the adjudicator of utility rates, facility siting and CPGs. Its mission is to ensure the provision of high quality public utility services in Vermont at minimum reasonable costs, consistent with the long-term public good of the state. The Board strives to achieve this mission by providing an independent, fair and efficient means of resolving public utility disputes; and by guiding the development of state utility policies and rules for public services to best serve the long-term interest of Vermont and its residents. Its responsibilities include overall financial management of Vermont's public utilities: electric, gas, telecommunications and private water companies. The Commission also reviews the environmental and economic impacts of proposals to purchase energy supply or build new energy facilities; monitors the safety of hydroelectric dams; evaluates the financial aspects of nuclear plant decommissioning and radioactive waste storage; reviews rates paid to independent power producers; and oversees the statewide Energy Efficiency Utility Program.

 

PUC Decisions

            Renewable energy advocates and pipeline infrastructure opponents have expressed frustration with many recent decisions of the PUC. What is important to remember is that the PUC is a quasi-judicial that operates much like a court. While no one should argue that the Commission is completely devoid of politics, decisions are rendered according to the law and the rules they have before them. Further, the PUC is a creation of the Legislature and is empowered to conduct business as state statutes allow. One way to change the way the Commission makes decision would be to change the laws and rules under which it operates. One recent example of a recent change is the 2017 legislation directing the Commission to revise the net-metering subsidies. That was done to assure that the utilities address both renewable goals and the cost perspective of consumers.  It is clear that Vermonter must remain vigilant and dedicated if we are to reach our eventual goal of 90% renewable by 2050. That will require the legislature, the Governor, the PSD, the PUC and the public to work together if we are reach that goal.

 

Vermont’s Current Energy mix

Fossil fuel consumption - from U.S. DOE EIA Updated April 2018

Distillate No 1 and No 2 fuel oil: 216,501,000 gallons

Gasoline: 311,200,000 gallons

Propane: 110,544,000 gallons

Natural gas: 88,999,225 gallons

TOTAL FOSSIL GALLONS: 727,264,225

 

Electrical energy consumption by source (GMP)

Large Hydro (Hydro Quebec): 34.7%

Market Purchases from NE grid: 27.4%

Nuclear (contracts from other states): 13.8%

Existing VT Hydro: 5.6%

Wind*: 8.2%

Hydro*: 4.9%

Wood*: 2.6%

Solar*: 2.1%

Methane*: 0.3%

Oil & Natural Gas: 0.4%

* indicates no RECs sold – these sources combined total 18.1%


Renewable energy mix (not the same as consumption above)

Hydro Quebec 34.7%

Instate Hydro 4.9%

Wind 8.2%

Large scale solar 2.6%

Residential solar .52%

 

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