The Future of Electricity
The modern Public Service Commissioner
What’s the future of electric rates? Are industrial emissions warming the planet? What will we pay for environmental regulation? We tossed these hot potatoes to the chair of the Kentucky Public Service Commission for some high-level answers
In the five years I’ve written this column, I’ve sorted through a lot of pie-in-the-sky predictions to figure out the most realistic future of electricity.
As part of that research, I regularly get asked three questions by everyone from farmers and school teachers to business owners and scientists.
Kentuckians want to know:
• Will coal continue to power our economy and our electricity generating systems?
• Will new environmental rules mean that I will still have reliable, safe electric service around the clock wherever I live?
• What will my electricity cost in the future?
For answers to those three questions, I visited with Mark David Goss, chairman of the Kentucky Public Service Commission in Frankfort.
Goss’ job and background make his views of special interest to electric utility customers in Kentucky. The commission he chairs regulates rates and services for many of the electric, telephone, natural gas, and water district utilities in the state.
Goss also chairs a national subcommittee on clean coal technology—an especially visible post in these days of worldwide focus on reducing coal’s effect on the environment.
And finally, Goss is a native of Harlan County, a notably coal-rich part of the state. That becomes significant because Kentucky’s reliance on coal-fired power plants is among the reasons the state has some of the lowest electric rates in the nation.
The value of coal
In fact, coal generates about 91 percent of the electricity in Kentucky. And that can produce some emotional responses elsewhere in the nation.
“If you talk to Westerners or Northeasterners, they would tell you that coal is essentially a four-letter word, and it would tickle them to death if another lump of coal was never mined and never burned,” says Goss. “That, in my estimation, is completely unrealistic, considering all the legacy coal plants that we have, the amount of coal we have in this country, and that coal is so reasonable from a cost standpoint compared to other forms of generation.”
Goss adds, “If you talk to Southerners and Midwesterners, they believe coal is a good thing for all the reasons that I just articulated.”
Goss sees the challenge for himself, and other heads of state regulatory commissions, is to further discussion among all parties to discover the best way to keep coal as a viable source of fuel to generate electricity.
An experienced lawyer with an eye for detail, Goss works to learn all he can about every aspect of electricity from economics to technology, within Kentucky and throughout the United States. He is a member of the Electricity Committee of the National Association of Regulatory Utility Commissions. He was recently chosen to head its national Subcommittee on Clean Coal Technology.
“The purpose of this new subcommittee is to explore and educate the commissioners of the other 49 states about some of the details of clean coal technology and carbon capture technologies,” Goss says.
Members come from both coal and non-coal states, and meetings often include representatives of the electric utility industry as well as the environmental community.
Global climate issues
“What I’m trying to do,” Goss says, “is make sure that every stakeholder has a say in what our committee ultimately presents to NARUC as a whole. Our subcommittee is developing a primer, which is essentially Clean Coal Technology 101, that other commissioners can use.”
Goss’ involvement in the national association matches his belief that utility issues reach beyond state borders.
Historically, a public service commission’s main task seemed to be a mere “thumbs up or thumbs down” vote on specific utility projects and rate changes. Goss says that’s begun to change.
“We no longer live on an island,” he says. “The (electric power line) grid is so interrelated now it is a national grid. Power is so interstate on the wholesale and retail side, what happens in Virginia can have a profound effect on Kentucky. And what happens in Kentucky can have a profound impact on Indiana. I think my role has changed from being strictly a decision maker, to one who continues to make decisions but who also has to engage more in policy discussions than before.”
Among those policies public service commissions will become involved with is the widespread interest in the impact humans have on natural cycles everywhere on the planet, and the reports from scientists who are investigating climate change.
In other words, are modern industrial emissions causing global warming?
Goss responds, “I do not intend to comment on the science that’s out there because I’m not a scientist. I do not know if human activity and the emitting of carbon dioxide by automobiles and power plants is causing the planet to warm. All we know is what scientists tell us—and there are scientists who say that it does, and scientists who say that it doesn’t.
“What I do know,” Goss continues, “is that the reality in Washington is that there are enough individuals in a position of authority, and there are enough decision makers that believe there is a connection, that I think we have to assume that there will be climate change legislation of some kind enacted by Congress in the next two to three years. And I do not think we can wait until that legislation is passed to start thinking about these issues.”
Goss says it’s too soon to predict exactly what those new laws might be. One hint might come from some states and localities trying a concept involving a “renewable portfolio standard.” That idea says a certain percentage of an area’s power generation must come from renewable energy sources.
The costs of energy
Developing renewable and clean coal technologies, then putting them into action, takes time. And money. What if some sort of tax is imposed on the amount of carbon an entity emits? What if there’s a requirement to capture carbon emissions and store them? Who’s going to pay for these changes?
Goss points out that while technologies like capturing and storing carbon emissions on new power plants have been worked out on paper, some of the practical issues have not been resolved. How to retrofit existing plants remains a serious problem. What would these new techniques cost to build and install? And if carbon is captured, how and where to store it presents another set of issues.
“There are safety issues involved with high-pressure carbon dioxide being injected into the ground for storage,” Goss says. “There are also potential liability issues. If it’s stored on your property, then the cap pops and this stuff comes up, is it your responsibility or the utility that put it there?”
Getting involved in policy discussions, asking hard questions, and sharing the answers with his fellow commissioners around the country gives Goss a unique perspective.
“Here in Kentucky,” Goss says, “we are seeing a build-out of more infrastructure, including transmission lines, distribution lines, and generating facilities, more than we’ve seen in a number of years. We’re seeing a lot of small businesses and commercial facilities being constructed in the rural parts of the state that require more distribution of electricity.”
This summer, Goss attended a meeting in New York that included Wall Street analysts, investment bankers, and utility commissioners from other states. The analysts see demand for more electric utility infrastructure in many states, similar to what is already happening in Kentucky.
Goss says, “They estimate that in this country from this point forward, approximately $50 billion in capital expenditures will be needed each year during the next 10 years.”
That’s to keep up with the present growth rate, and to replace or improve old existing electric utility infrastructure. Add in the potential costs of complying with any new legislation regarding environmental issues, plus a strong economy, and the situation is set up for what Goss calls a “perfect storm.”
Somebody is going to have to make some hard choices, deciding how to spread the dollars around to do all the things that electricity users expect.
Setting priorities through carefully thought-out policy, both at the state level and nationally, will require a lot of give-and-take among groups with distinctly different viewpoints. The auto industry, steel, cement, and even oil refineries also contribute an assortment of emissions.
“To single out electricity generation would be patently unfair,” says Goss. “I can’t imagine that Congress would permit that to happen.”
Goss says, “There’s a new day with regard to the provision of electricity. Depending on what is done in Washington by Congress and others regarding environmental legislation, and this massive infrastructure build-out, there is some possibility that all of us in Kentucky might see higher rates in the future. This is not just Kentucky specifically, it’s everybody’s rates. I don’t want to leave the impression that costs are going to go up tomorrow or next week or even next year. I’m talking about a 10- to 25-year time frame here.”
That may seem far in the future, but there’s a lot to be done right now.
“Because of this new day,” Goss continues, “we all have to consider our usage patterns. In my mind, energy efficiency is a renewable source. It’s been referred to as a fuel source just the same as coal or nuclear or natural gas.”
Being careful about energy use, starting now, could mean that not as many new generating facilities—using whatever fuel source—would need to be built. That could save money for everybody over the long term.
WHAT IS THE KENTUCKY PUBLIC SERVICE COMMISSION?
Employing more than 100 people, the PSC works to ensure that Kentuckians have reliable service from public utilities providing electricity, water, and telephone service.
• holds hearings and approves or disapproves changes to rates
• monitors meter accuracy
• watches the financial integrity of utility companies
• investigates consumer complaints
For information on hearings and other activities, visit the PSC’s Internet site at www.psc.ky.gov.
That site includes a page with details on Chair Mark David Goss’ background, when you use the Search box and type in Mark David Goss.
Next month: Research recommendations on energy efficiency