Advocating for a distributed, democratized clean energy transition involves a never-ending series of legal and regulatory battles.

For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Mariel Nanasi, executive director of New Energy Economy. They discuss New Energy Economy’s efforts before lawmakers, regulators, and courts to protect consumers from the nefarious plans of New Mexico’s investor-owned utilities.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Episode Transcript

Mariel Nanasi: It’s a sad situation because that’s what we see. It’s not only that they’re the single greatest cause of climate disruption, and it’s not only that there’s so much income inequality as a result of the energy domination of these fossil fuel interests, but they also undermine democracy. And they have so much money that they can literally buy legislators. John Farrell: Trying to defend the public interest in an electricity system run by for-profit monopoly companies can be like a game of whack-a-mole. No one knows this metaphor better than Marielle Nanasi, executive director of New Energy Economy. When we spoke in March of 2024, we discussed the numerous ways she has had to intervene to protect New Mexicans from the predatory actions of its largest electric company PNM, including from a merger with multinational company Avangrid, and in the utility’s own words, was to establish a beachhead in the state. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance. And this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. Mariel, welcome back to Local Energy Rules. Mariel Nanasi: Thank you so much for having me. John Farrell: I wanted to start off just by asking you, because I’ve been asking this of all my guests and didn’t get a chance to the first time you were on, about how did you get into this work? How did you become this leader of New Energy Economy and investing so much of yourself and your life in fighting monopoly utility power? Mariel Nanasi: Well, it was sort of organic, I will say. First I thought, well, all we have to do is tell the utility, hey, you got to switch to solar. And they would because it makes sense because we have the sun Zia on our flag in New Mexico and it’s cheaper and why wouldn’t they want that? And that led me down the rabbit hole of what has been my life for the last 15 years and realized that in fact the monopolies, the monopoly utilities, they don’t hate solar because of any ideological reasons. They hate solar because it works and it’s contrary to the capitalist model. And in the monopoly model, as you and your listeners probably know, the way they make money is by spending more money and getting what’s called an ROE – return on equity when they spend more money. So when they spend more money, they get an average of 10% guarantee on top of that.

So we did a deposition of the general manager of the San Juan coal plant, one of the dirtiest coal plants that was operational for so long until we finally closed it in 2022. And he said, look, we had two budgets. There was an operations and maintenance budget where they don’t make that ROE and there’s another budget. It’s a capital budget. And for that they make this essentially a 10% ROE. At the time it was 9.575% for PNM. So we were encouraged by senior management to move as many things from our O&M operations and maintenance budget to the capital budget. In fact, there’s a person whose job, whose sole job at the utility is to do that, is to figure out ways to move projects, move any kinds of things that they’re trying to fix. And so he says, let me just give you an example.

He says, you have a car and you have to put in oil twice a year and that costs you 30 bucks each time, but if you don’t do it, your engine dies in five years, it dies. It’s like kaput, it won’t work because you have failed to take care of it because you failed to do your due diligence to keep it running. But he says, but the utilities love that because they don’t make any ROE on the oil that you have to put in, that $30 twice a year. But when that engine breaks, oh boy, do their eyes start glistening, right? We have to spend $5,000 for a new engine and not only do we have to spend $5,000, but then we get a 10% return on that. And guess what? We’re not going to just pay it in a year or two. We’re going to act like a bank and we are going to depreciate it over 40 years. So that whole time of depreciation, we get to keep on getting from rate payers that ROE, that 10%. And if you look at their investment presentations that they make, all of the utilities are the same. They have a whole bar just for the ROE that alone – and sometimes it’s more money from rate payers in that bar of depreciation than even the actual energy that is produced. That’s what a crazy utility electric system we have. They are bankers and that’s how they treat this situation.

John Farrell: Mariel, I’m so glad you started with this story because when the kind of context for this episode for me was watching you, witnessing, hearing stories of you essentially playing whack-a-mole with these utility proposals that are all centered around this idea of how do we make more money and squeeze more money out of the system. So I think you laying the groundwork for how they’re motivated to do this and how crazy it is, is really helpful for understanding then all the different examples that I’m interested in having you talk about. So let’s see if we can pivot to one of them here. You were just talking about the San Juan coal plant, so it closed in 2022. You settled the case with the utility PNM about getting refunds for rate payers. Can you talk about why you needed to get a refund? What were they doing after this plant had closed that they were still collecting money and why did you have to fight them to get it back? Mariel Nanasi: I just want to first say I’m so proud of this. First of all, I’ve never settled anything with PNM ever, and this is the first settlement in October, 2023. And what happened was under the ETA, the Energy Transition Act, the deal was when they closed the plant, they were going to issue these securitized bonds. And we were supposedly, because solar is so much cheaper than coal, even with the securitized bonds of them getting a hundred percent of their undepreciated investments, which is another crazy concept, they were going to close, they did close the plant and they said, we owe them after 50 years of a coal plant running, we still owe them allegedly $357 million. How could that be? It can only be because they kept on reinvesting in these capital projects and then longing the depreciation schedule so much that there was still $350 million that we owe them. The plant probably didn’t even cost that as much to begin with 50 years ago and we still owe them that. So that’s a crazy thing.

But anyway, I opposed that. I said we shouldn’t get that money, but the ETA was passed and said, oh, by some liberal organizations, they said, okay, yeah, neoliberal organizations said, oh yeah, we’re going to give PNM everything. They want all their profit, we’re going to give it to them just so that they’ll close the coal plant. They closed the coal plan in 2022 and they’re supposed to issue these bonds and they didn’t do it. And so we and other organizations filed a motion for rule to show cause against them and we won and we won in front of the hearing examiners then in front of the commission and then it was pending in front of the Supreme Court and PNM was like, Hey, we want to issue those bonds now two years later.

And what happened was is that Wall Street said there’s a Supreme Court appeal pending and it’s a cloud hanging over, so we’re not going to issue bonds while this is happening. So then PNM came to us and said, hey, we want to settle this Supreme Court appeal. And I was like, okay, well if you want to do that, you will pay us a hundred percent of what you stole from us, which was a refund that they were supposed to give us starting at the day of closure. And they hadn’t done that. And we won. We won 115 million refund. I think it’s the largest refund ever, maybe certainly in New Mexico history, but maybe in US history, $10 a month average residential rate payers received from PNM and it’s still ongoing right now. That’s significant.

John Farrell: I want to just touch a little bit for people who are maybe not super familiar with the whole idea of securitization. There’s an article linked to on ILSR’S website that kind of explains this process, but the idea was like you said, the utility’s capital is costly, right? They earn this 10% return on it. So you say essentially like, well, we’ll pay you all that undepreciated value in that plant and that was in that Energy Transition Act, but you’re forced to refinance it basically with public bonds at a lower interest rate. So it’ll save everybody money. You’ll get a hundred percent of the money you want, but at least rate payers will be better off because you’ll have closed this dirty plant and you’ll have refinanced it for cheap. But they sat on it for two years and didn’t bother to refinance it, still collecting on your rate payers. Right? Mariel Nanasi: And the thing was that some of the organizations that supported the ETA, the Energy Transition Act, they said, oh, it’s going to result in customer savings. I said, no, it won’t. And they said, oh, yes it will. It will because of what you just said, because instead of paying a nearly 10% return at that time, we think we can get bonds for two to 3%. Well, that’s not the case anymore. And so one of the other things that we won in this settlement, just so you know, this is pretty important. Bond rates just a couple of months ago were like 6%. So that wasn’t going to save them much at all, and it wouldn’t have amounted to any savings. And one of the things that we settled for was not only that they had to do a refund, but a cap on the bonds that rate payers had to pay up to 5.5%. And so they did get bonds, PNM did get bonds, and some of them were lower than that, but some of them were more than that and shareholders had to pay that, not rate payers. So even though some of their bonds were at a 6% or more than that, only rate payers were capped at paying 5.5% of that. So that’s another good win. John Farrell: I love how, one of the things I respect so much about your work, Mariel, and why I wanted to have you on is to help people understand that the range of the fights that you have to have to get the clean energy future that we want is extraordinary. It’s not just about can you build this power plant or not, or do you close this power plant? It’s about how much of the value of that power plant will the utility still recover? At what rate will the customers have to continue to pay for it? How many times will you have to go to court to force them to do what you’ve already agreed that they will do? I mean, I think to me it helps illustrate for people who have heard broadly that this monopoly utility model is problematic. It helps people understand you just have to fight and you fight and you fight so many times in order to get just one simple thing like closing a plant and making sure that rate payers are done paying for it years and years and years of investments for just that. Mariel Nanasi: Years and years and years, years and years and years. So you’re so right. And perseverance is part of this whole package of being an activist and that, and the thing is, is that it’s hard work, but perseverance is critical. It’s critical because yeah, they write their own laws, they write their own orders and then they don’t even follow ’em. And then you have to go into court, like you said, or go into the regulatory arena and get them to just do what they said that they were going to do. It’s outrageous. It’s outrageous. And mostly they’re thieves. And the thing is that you have to keep calling them out on it. And it’s definitely frustrating, but sometimes you win and then it’s really fun. John Farrell: So let’s talk about another one of your wins. We got a little taste of this. You came on a really awesome convening that we did virtually about energy democracy with Seth Berry, who was involved in a campaign in Maine. I think Jean Su, who has done some antitrust work on utilities, was also on that. So that was on, we rebroadcast that on episode 154 of Local Energy Rules. But you talked about this merger between Avangrid, which coincidentally was the same utility conglomerate that owned the utility in Maine that Seth Berry was fighting, and the utility that you’re often at loggerheads with here PNM. You talked about, I’m just going to touch real quick on a few things that you mentioned about the thing. So you talked about the fact that essentially Avangrid and their parent company, Iberdrola, saw this as a beachhead, if you will, to getting access to captive customers in the United States, that there was going to be huge financial rewards for executives compared to what the customers were likely to get. And that also that they were basically, even though they were in this negotiation and trying to prove to the commission there that they were worth allowing this merger to happen, were in the middle of disconnecting a whole bunch of people in the middle of Covid. So just a little bit of context there. Feel free to add more in terms of what was at stake with this merger, but then please feel free to talk about how did you set up to fight this? Mariel Nanasi: It was Avangrid’s to lose, and they did. And they did because they couldn’t overcome their own track record of outages and unreliability, diminished service quality, more than 65 million in penalties, violations, failure to abide commission rules and laws in other places, but also here, here. And I’ve never seen this, by the way, a $10,000 fine was meted against them for discovery violations here during this case. Then the risk of subsidization of non-utility activities, which is what you were referring to about the beachhead, and that literally was the word, and that I had to look that up. That came out of the mouth of the then CEO of Iberdrola. And basically the question to him in cross-examination was, why are you coming to New Mexico? And he said, well, we want to establish a beachhead. And when you look up, that’s a military term about where they’re going to land and then from which they’re going to attack.

And that’s what they were going to do. They were going to bulldoze New Mexico for their own profit. And that’s what they have done everywhere else that they have been. And sometimes, I mean that literally bulldoze, like they did in Maine, bulldoze a pristine forest to have a transmission line, not for the benefit of Maine, but for the benefit of their sale of electricity to Massachusetts, which was not going to help Mainers and literally went through this pristine forest and bulldoze them. And so I just want to tell you a little trick, not trick, but I put a picture in a brief, I’ve never done that before, but I put a picture of the bulldozed forest in Maine in my closing brief in that case, and I was like, basically, do you want this here? Because that’s what you’re going to get. That is what you’re going to get. And they didn’t object because it was an actual picture of what they had done in Maine and hey, it was just another way of arguing. And seeing is believing. And that was a pretty heavy picture of a bulldozed pristine forest.

But they wanted to come here and use the monopoly power to extract renewables. And they’re not opposed to nuclear and gas either. So actually they have more nuclear and gas than they have renewables. They were going to do that and send the profits – It’s bad enough that PNM sends the profit to Wall Street, but they wanted to send it to Spain. And I was like, no, no, no, no. And really it was a whole lesson learning when we fought them, and I said this on that webinar, reporters were like, Mariel, everybody is falling and giving in and taking their Christmas tree ornament gift that Avangrid is promising them, you’re going to lose. They have the money and you’re going to lose.

And I said, well, I’m going to just speak the truth and I’m going to put that out there and I’m going to hope that the commission does care about the public interest and care about New Mexico’s future. And we won, and then we won in the Supreme Court. And that happened on January 3rd, 2024. And a great way to usher in this new year, probably the biggest victory of my life, 8 billion merger. And it took a lot of energy. I probably have never worked so hard. I worked 10, 12 hours a day every single day for about 10 months straight every single day, every weekend, every day I worked. And it was a huge effort. I have a great team and we also did a lot of work on the ground and in educating people about how bad of a company this company is and how immoral they are. And look, we won.

John Farrell: I wanted to ask you a question about that because one of the things that I think about a lot is that the premise of our monopoly utility system was utilities will be protected from competition and we will rate regulate them in the public interest. So the idea behind a public service commission or a public utilities commission is that those folks are elected are appointed with the job of doing essentially what you were doing. So I guess one thing I’m kind of curious about is you clearly got a public interest outcome. The evidence that you presented caused the commission and then the court to agree with you that this was not in the public interest. Did you ever get paid for that? I mean, I know some states have intervener compensation where you can get reimbursed for your costs, but people can’t see you shaking your head. We’ve got video, we’re not recording that part. So you didn’t get paid for this and you basically did the work that the commission is supposed to do on its own, which seems to be a pretty common story unfortunately, when it comes to getting the public interest out of this monopoly system. Mariel Nanasi: Yeah, I think that you raise a really important question, and that is the capture. The capture by the utilities, by the monopolies of their regulators. We see it here and we hear about it all over the United States, and usually the public interest standard is so basically you could just walk all over it and it doesn’t really mean anything, doesn’t hold any water. And we just lucked out with a really good hearing examiner, one who was courageous, one who cared about New Mexico more than he cared about his own career. I mean, plus we did do a great job and gave him tons of facts. I mean, this didn’t come out of nowhere, right? But still, the odds were totally against us. There’s been no merger that has ever been denied before. It was a big mountain to climb, and we also had an excellent commission. And so unfortunately now it’s not an elected position, it’s an appointed position.

But we just won something last week and also on the public interest standard, and that was the gas company, a different monopoly, but one that’s supposed to be regulated, also was proposing a discretionary project, liquified natural gas facility that was going to be sited right outside of Albuquerque. And we thought this was a crazy idea and we organized it like crazy. So our first thing was having a meeting in a local library. I’d never even been to the library before, but we had 60 community members show up, and that was really cool. We probably knew two people in the room. And then we followed up with a petition gathering that got 700 signatures to the gas company, and then we got a Bernalillo County resolution. So we met with the commissioners there who said on the Bernalillo County Commission, and explained to them how dangerous and risky this LNG plant was.

And then they held hearings and dozens more people from the community, people who had never ever done any activism in their lives, came out and it was recorded on television, television for an energy thing. So that was amazing too. And then a dozen local legislators from that area also wrote to the Public Regulation Commission, plus we cross examined the shit out of them and did a great job in the hearing. And it was rejected on March 14th. And we proved that it was not cost effective and that they hadn’t done an adequate alternatives analysis. But it takes a lot of effort. It takes a lot of effort. I mean, I’m telling you these stories and it’s fun to tell you, but the truth is that it takes a lot of time and you have to love digging because that’s what this is about. You love digging because they usually don’t do a good job, and they usually are arrogant and assume that no one will look into what they’ve done, which is mostly true.

And because of what you said, because, and a lot of PRC staff or regulatory staff, they’re overwhelmed. They don’t do hard investigations. It’s just sort of like bureaucratic and they don’t, we take a much more politically feisty position like we want to get justice and we want to win, and what is it going to take for us to win? So we go from winning backwards and figure out what are the things that we need to do to prove our case. And that’s what we keep on trying to do. And sometimes we’re lucky and we win.

John Farrell: We are going to take a short break. When we come back, I ask Mariel about the utilities ploy to change how their regulators were selected, the fight to enable community solar, and the battle to protect rate payers from imprudent investments in an aging coal plant. You are listening to a Local Energy Rules podcast with Mariel Nanasi, executive director of New Energy Economy in New Mexico.

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John Farrell: Mariel, you threw this off the cuff in talking about having a good commission for the decision about the merger, about how the commission used to be elected. And it’s not anymore. I feel like here is another whack-a-mole example of how the utility plays in this game. So can you talk about how that changed? Mariel Nanasi: Well, we had a great elected commission, and then Wall Street was complaining that the utilities weren’t going to be getting enough because we kept on winning. And so basically there was a whole effort to, which was a whole another disinformation or misinformation campaign to change the Constitution as a matter of fact, and have a vote. And Michelle Lujan Grisham was involved in this. So there was a PAC that PNM gave to, the PAC ran whole campaign that said, don’t you want a professional commission? And well, who would not want that, right? That’s such a dumb question. And everybody said, well, yeah, when they said, okay, well then vote number one, whatever it was, vote yes on constitutional amendment number one, sort of similar to the sort of scare tactics that happened in Maine, reversing it, which was to get rid of the monopoly utility and have public power.

Aren’t you so scared that they won’t be able to do it? It’s too complex. All this stuff, government doesn’t work. Whatever the themes are that they play with, and they have so much money, how much money did Avangrid and the other utility put into those campaigns? Tens of millions of dollars to 1 million that the nonprofit, I think, put into that campaign. And the same thing with this. They put in a million dollars to change the PRC from elected. Like, Hey, what are Democrats doing? Taking away your vote in 2020? What was it, 2020 I think it was. That was the year changed. So that’s what Democrats did, and PNM led the PAC, literally the PAC, political Action Committee to change. And now – but it was fun because I just want to tell you that the very beginning of this new elected commission, none of them were lawyers.

Not that lawyers are so great, but you need to have at least one on the commission. And they met with Avangrid behind closed doors, and we made a big deal, front page news, all the big papers. We totally went to town on outing them. So they knew that New Energy Economy was going to stand up and call them to task. And Avangrid lost a big thing in the Supreme Court, which is ultimately what led to them pulling out of their appeal and which is why we won. But the commission also learned something very important. The new appointed commission knew that they better follow the law because if they didn’t, New Energy Economy was going to out them for doing so, and that is what happened. And so that’s in some ways why we won the LNG fight. I mean, it’s not directly related, but we were definitely willing to do the work, make our case, and if you were not going to do the right thing, we’re going to appeal you. But it takes a lot to do that, and we don’t get paid. We have to fundraise on top of that. So it’s a big deal.

John Farrell: I want to ask you about community solar because here’s an example of something good that was passed by the legislature in order to support the expansion of solar. You kind of early on about PNM, that in some of your early work, you kind of thought, oh, utilities will look at solar and see the logic and they’ll be all for it. And it obviously has not been the case. So you’ve got a bill passed, you’re going to have to remind me what year it was, but in order to facilitate this idea of more dispersed ownership of solar, solar at small and medium scale was kind of all over the place in New Mexico. And it sounds like the utilities were not a fan. Mariel Nanasi: No, they weren’t a fan at all. And I mean, it took us, here we are in one of the sunniest states in the country, if not the world, and we passed Community Solar in 2021, and they blocked community solar legislation I think for about eight years. Every year we tried it, and then they even added provisions in the community solar law – that because they have so much money, this is another problem with monopoly utilities.

I need to digress for a second because this is a really important point that I think people should know about, and that is because they make so much money. So in New Mexico PNM alone, it’s not the only investor owned utility, but PNM makes about 210 million a year just pure profit. And that goes to their senior management and then to shareholders on Wall Street. But some of that money they use for lobbying. And in New Mexico, it’s like a cheap date. So $2,500, you can get a legislator to do pretty much what vote your favor basically. And so that’s really a sad situation, and it’s a sad situation because that’s what we see. It’s not only that they’re the single greatest cause of climate disruption, and it’s not only that there’s so much income inequality as a result of the energy domination of these fossil fuel interests, but they also undermine democracy and they have so much money that they can literally buy legislators. And we see that. I mean, this is not just, I think, I don’t know what the current number is, but at one point, I know it was something like for every US Congress person, there were 13 energy lobbyists. And so when you want to know why haven’t we done anything about climate disruption and have any real laws and rules and regulation that are enforced to stop them from the destruction of our planet, I mean, what could be more important than that? It’s because they buy people off.

And so we see that in New Mexico. That’s why it took them eight years, us eight years, people would just not vote for community solar or say, make up crazy ideas and then had no basis in reality. All we wanted to do is open the door just a tad on their monopoly utility domination. Really. We wanted to say, hey, instead of just rooftop solar, which they also fought for three years, finally we got the ability to do that. Hey, we want to have community solar. So for people who are renters or can’t put solar on their house, we want to get together and basically have rooftop solar, but sort of in mass with our friends and with our other partners and be able to have one system that serves us all and that we would get a credit on our bill for the subscription that we buy in community solar.

That’s what the basic premise is. And so we passed it in 2021. And what have the utilities done ever since? Delay, delay, delay, obstruct, obstruct, obstruct. We just won last week a case in the Supreme Court where they weren’t saying that the rules were unfair to them, but they said, oh, the commission, the good one violated our due process rights, all these important valuable legal principles, but had no bearing, none, zero. There was no basis, no legal basis for their appeal. And when we were preparing, I just will tell you, when we were preparing for oral argument, one of the lawyers said, well, how long is this going to take the Supreme Court to write their opinion? And I said, I think they’re going to rule that day. And they said, that day? They haven’t been doing that in any case, Mariel, that’s crazy. It’ll probably be somewhere between two and six months.

Well, guess what? That day, last Monday, they ruled. We argued in the morning and at four o’clock that afternoon, they ruled against the utilities and they said, we do not want to frustrate the implementation of the community solar program any longer. And the Supreme Court got it. The Supreme Court got it. And all we had to do is explain that this is what their plan was, and that essentially they were conspiring – all three of the investor owned utilities that’s, I’m going to name ’em, Southwest Public Service, El Paso Electric and PNM, were just throwing up these barriers so that the community solar program would be delayed. And now it’s three years later. We don’t have any community solar that has been started yet because of all these delays and hopefully now, but they still keep on threatening to… you were involved with me, John, in another case that was about implementation and what should the rules be? And they’re delaying it too.

So hopefully we will persist and get this program finally up and running. But the real thing is that they see community solar as a threat to their monopoly. And it is. And it is because community solar will be cheaper than their dirty energy production. And yeah, maybe solar developers are going to make some profit, but they’re not going to, nobody who works for a community solar development makes 9 million a year. And so there’s a lot of room for them to make profit and for us to pay less in electricity rates with community solar. And so then people are going to go, what? You’re paying a stable electric rate at that rate. Sometimes they say 10 to 25%, 25% cheaper than our current PNM rates. Why wouldn’t anybody choose that? They would. And that’s the real threat of community solar. It’s good for people’s checkbook, pocketbook, whatever, however you want to say that. It’s cheaper, it’s less costly, and it’s good for the planet. And by the way, you’re doing it in community, in community with others who believe in the same principles and values as you do. So that’s what the threat is about.

John Farrell: We’re going to run out of time before we can cover all of the things that you’ve had to fight against. And frankly, almost all these are just in the last five years, and I know your career has been longer than that. I do want to ask you about the four corners coal plant and the bad investments because it kind of ties back to that energy transition act, this idea of like, well, if you’d retire the bad stuff, then you’re going to get paid for it. I think what’s fascinating here is that you really tried to dig into this idea about prudency. I want to bring up that term just to help people understand, but the key then, one of the cornerstones of this idea of utility utilities being regulated is the idea that the public regulators overseeing them evaluate whether or not the money they’re spending to make a profit on was actually spent well or not. And in this case, it was not spent well, and you’ve been fighting to convince the commission to say so because it would mean that they’re not allowed then to collect from rate payers on those investments. So could you talk a little bit about what has been going on there and maybe how it relates to that 2019 law and what you’ve been able to accomplish? Mariel Nanasi: Thank you. This is one of the most, I was talking about perseverance. We’ve been fighting this for seven years and it ain’t over. So I just want to say that prudence is like, were you responsible? Were you responsible when you invested in whatever investment acquisition that you made? And the basic premise under utility laws, if a utility invests prudently, then they get to get cost recovery. And what does that mean? That means that we have to pay them back. We have to compensate them for the prudent investment that they make. That’s the general idea. And so it’s like when you make a decision about what you want for lunch, do I want soup or a salad? Obviously with something like that, it’s just a feeling, but you weigh it, even that and that you just do it in your head and then you make your decision.

And as you become an adult, my favorite word is discernment. And hopefully we have discernment as we get older. And what does that really mean? That means we weigh our options. And what that means is, is that when we’re buying something that’s not just lunch but is a car or a house, we start to compare it with other options, right? Consider our alternatives. That’s basically what discernment is. And in fact, that’s baked into the law. And we solidified that in 2019 when we won a Supreme Court case that says that it was for another thing, another PNM investment in other resources. It was actually Palo Verde Nuclear generating resources. We won in front of the Supreme Court. First we won in front of the hearing examiner, then we won in front of the commission, a bad commission. Then we won in front of the Supreme Court.

All three levels said that PNM, that it was a fundamental flaw for PNM to fail to consider the alternatives when investing resources and that they were in fact imprudent. And if they are prudent, rate payers, that’s us, customers should be held harmless for the imprudent actions of utility management. This is the gold standard of utility law. It’s the a plus. And so PNM back in 2013, over 10 years ago, invested in the Four Corners coal plant. But think about 2013 and 2014, that time period in 2012, everywhere in the United States, coal plants were closing. So this was not like, oh, some anomaly. Everyone was, that was what was on the minds. Why? Because one of the good things that Obama did was he passed the Clean Power Plan and basically it said, hey, you are either going to put on expensive pollution controls or you’re going to come up with alternatives.

So, but PNM, they didn’t do an analysis of what it would cost to have alternatives, which at that time would’ve been solar and gas, frankly, not solar and batteries like now. But at that time, solar and gas was going to be cheaper than reinvesting in this climate altering coal plant that it was also really poor performing and tons of other bad stuff about it, which I don’t have time to go into. But again, they thought, no one’s going to pay attention. No one’s going to look into why we did what we did. And we did. And I said to them, this is a good thing. If you want to think about, and I did this in the LNG case too, by the way. I said, give me all your emails, PNM, between you and your board of directors and also your senior management, by the way, about why you invested in this four corners plant.

And then they gave me 4,000 pages of emails and documents. Well, that’s a lot. And I went through them and I found the needle in that haystack. And what it said was, hey, we have the San Juan generating station just 10 miles away, and we don’t want to cause a distraction. That’s a quote. We don’t want to cause a distraction with the PRC. And so let’s just re-up in Four Corners because we want to continue with our, which they’re the operator of their coal plant, the San Juan generating station. Well, that’s not a legal reason. That is not, is it cost effective for rate payers that there’s no basis for that. That’s their own self-interest. And I found that out. And that came out, and we just won in January of 2024 of finally a ruling that PNM was imprudent when it invested in four corners.

And what did I tell you before? Rate payers were supposed to be held harmless. So that means any harm from that bad investment, our rates should have been lowered because of it. But in fact, no, this commission, this commission, and I’m appealing it, this commission ruled, okay, well, we’re going to only give you a 32% disallowance. We found that the harm was $240 million, but we’re only going to make rate payers be free of 84 million of that and rate payers, you’re going to be stuck with the rest of it. And I don’t think that’s fair. And so we filed an appeal just a couple of days ago and we’re going to say, Hey, Supreme Court, you ruled that rate payers are supposed to be held harmless for the imprudent actions of utility management. Make them pay for it, not us.

John Farrell: I think one of the things that I admire the most about the work that you’ve done is this ability to really, you get into these legal proceedings and you get discovery, which for people who aren’t living in the legal world, means you get to look at documents, request documents from the utility, and then of course you read through them. I mean, you just talked about going through 4,000 pages. Do you have any advice for organizations that do this kind of intervention about should you be getting an attorney and should you be appealing more things and should you be looking for documents? Because it feels to me that at the heart of a lot of your victories is this willingness to go in and really fight to the bitter end, if you will, but in a way that is really fact-based. You’re just out there seeking for what is the evidence here about whether utility did things according to the law, according to the best practice, and you just keep finding that they don’t. Mariel Nanasi: They don’t. And I just will just say, I think the answer, the simple answer is yes. And I just want to say a very quick example. Just like we found that four corners, they invested in it for their own reasons, and it had nothing to do with what was cost effective, which is the standard for investment for rate payers just found that out in the LNG case. So the LNG case that we just won, they were telling rate payers, okay, well, this plan is going to cost $3 more a month. Well, I asked the same question, the same question in discovery to the gas company, and I said, we want all your communication with your parent company, which happens, this one happens to be a foreign corporation in Canada called Amira. And what did it say? It said, we want to build this LNG plant to increase our revenues, and we want to nearly double our what’s called rate base, which is what we all pay, all the customers pay together. That’s called rate base.

So the conglomerate of us, and what they said is right now, New Mexico gas rate payers pay $800 million to the gas company, all of us together. And in four years, they expected to raise rate base to 1.23 billion. And they said that the primary reason for that increase, this is their words, the primary increase was a result of the LNG facility that they proposed. So that went completely against their $3 a month. Oh, it’s just a little $3 a month thing. Don’t worry about it. And then when we confronted them and put that into evidence, that is one of the reasons, one, that we proved that it was not cost effective, and then essentially that they lied to customers when they were talking among themselves to their parent about and bragging how much money they going to make for their shareholders. Oh, that’s where the real juice is. That’s where the facts are.

And so that’s to your point about going in. Yeah, I think that it’s lawyers for the people though, not just lawyers, but lawyers for the people who are willing to do the work and get the discovery and ask the tough questions about, because for them, it’s all about how much money they want to make, and they don’t give a shit about the climate, and they don’t give a shit about poor people, and it’s heartbreaking. And so you have to keep raising these issues. This is what’s at stake for us.

John Farrell: Well, Mariel, it is always a pleasure to talk to you and to hear about the amazing work that you’re doing. So thank you again for joining me on this podcast and talking about the great work that you’re doing, and for people who want some inspiration about ways to fight the utilities, check out New Energy Economy in New Mexico and Mariel’s work and her wonderful community of practice with folks down there, they are really leading on holding utilities accountable in a way that the rest of us should follow. Mariel Nanasi: Thank you, John. Thank you so much for all your work. John Farrell: Thank you so much for listening to this episode of Local Energy Rules with Mariel Nanasi, executive director of New Energy Economy. On the show page, look for a link to New Energy Economy’s website to learn about their activist DNA aimed at fighting fossil fuel and nuclear power extraction, and sharing a vision of community-based energy solutions. We’ll also have links to Mariel’s prior appearances on Local Energy Rules, including a rebroadcast of our Democratizing Power Event on episode 154, Mariel’s discussion of the problems with state carbon free policies in episode 72, and our discussions of a public power campaign in Santa Fe to try to tap the Saudi Arabia of solar on episodes 39 and 14. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew  Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

 

Protecting Customers from Expensive Coal and Gas

The investor-owned utility model incentivizes capital expenditures, such as investments in power plants, because this spending has a guaranteed return on equity. By digging through thousands of utility executive emails, Nanasi caught Public Service Company of New Mexico (PNM) red-handed — the utility had invested in the Four Corners coal plant out of self-interest and it was not a prudent investment for the company’s captive customers.

The truth is that it takes a lot of time and you have to love digging, because that’s what this is about. You love digging because they usually don’t do a good job, and they usually are arrogant and assume that no one will look into what they’ve done.

In a separate case before the New Mexico Supreme Court, New Energy Economy and its consumer advocate allies won a $115 million refund from PNM. The utility had failed to issue low-interest securitized bonds for the San Juan Generating Station, resulting in “illegal windfall profits at the expense of New Mexican families.” PNM customers will receive an average of 10 dollars per month as part of the settlement.

Defeating a Massive Utility Merger

When international conglomerates Avangrid and Iberdrola tried to merge with PNM, Nanasi and New Energy Economy stepped in to fight the merger. They gathered support from New Mexicans and demonstrated why the merger was not in the public interest. The Public Regulation Commission found that the risks in merging the companies outweighed the benefits to ratepayers, but Avangrid and Iberdrola appealed this decision to the New Mexico Supreme Court.

On January 2, 2024, Avangrid announced that it had dropped its plans for the merger and withdrew its appeal. Nanasi describes blocking this eight billion dollar merger as one of the biggest victories of her career.

It was Avangrid’s to lose, and they did. They [lost] because they couldn’t overcome their own track record of outages and unreliability, diminished service quality… They were going to bulldoze New Mexico for their own profit. That’s what they have done everywhere else that they have been.

Thwarting the Utility Conspiracy to Delay Community Solar

The New Mexico legislature enabled community solar in 2021, but the program has yet to get off of the ground. Nanasi explains how utilities, which view distributed solar as a threat to their profits, have opposed the bill from the start.

Most recently, the state’s three investor-owned utilities appealed to the New Mexico Supreme Court to vacate the community solar rules. New Energy Economy and other distributed solar advocates argued that the utilities had no legal grounds for their appeal. In March, the Court agreed with the advocates, issuing a same-day decision ordering the implementation of community solar without further delay.

What is it going to take for us to win? We go from winning backwards and figure out what are the things that we need to do to prove our case. And that’s what we keep on trying to do. And sometimes we’re lucky and we win.

Episode Notes

See these resources for more behind the story:

• Explore the New Energy Economy website.
• Listen to the Local Energy Rules rebroadcast of ILSR’s Democratizing Power event.
• Learn more about Nanasi’s work from her previous interviews on the Local Energy Rules podcast: episode 72, episode 39, and episode 14.
• Learn more about power plant securitization.

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country using ILSR’s interactive Community Power Map.

This is the 209th episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update.

Featured Photo Credit: iStock

A community-owned clean energy project has a lot more to offer than just electricity.

For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Christina Hollenback, CEO of Justice Capital, and Joseph McNeil, CEO of SAGE Development Authority. They discuss how SAGE Development Authority has created a model for community-led wind development and why community ownership is so important to the Standing Rock Sioux Tribe.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Episode Transcript

Joseph McNeil: We’re willing to work with anybody else about what we’ve done, how we’ve done it, because it’s not something that we’re trying to sell. This is a gift and more frontline communities need to be moving into this space so that we can change the outlook and at least what we expect from energy systems that are developer centric, business centric, profit driven, back getting to a place where communities are standing first in that space instead of investors. John Farrell: Smack in the middle of the Dakotas on the border between north and south, the SAGE Development Authority of the Standing Rock Sioux Tribe is working on Anpetu Wi wind project, whose name means first rays of the morning sun. Unlike most large renewable energy projects on tribal lands, this project will purposefully align tribal values of sovereignty, no harm to the environment or areas of cultural significance, and it will provide financial resources to support long-term development for the tribe. The key is ownership, and in November, 2023, my two guests, Joseph McNeil, CEO of SAGE Development Authority for the Standing Rock Sioux Tribe, and Christina Hollenbeck, CEO of Justice Capital, explained how they’ve structured the project to maximize the benefits and control for the Standing Rock Tribe. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. Joseph and Christina, welcome to Local Energy Rules. Christina Hollenback: Thanks. Joseph McNeil: Thank you. Great to be here. John Farrell: So I love to start off my podcast just kind of asking how people got into the work that they’re doing now. So maybe if I could start with you, Christina, and just ask kind of what motivated you to get into doing clean energy development? Why work on the capital stack, as some people like to call it, for clean energy? Christina Hollenback: I started out in a really, I guess I reverse engineered my position, which was as a water protector, as someone who believed deeply in community sovereignty and community ownership and really trusted and believed in frontline communities all over the world to lead the just transition, I realized there’s a huge gap and the gap was actually structuring those deals, both the social capital as well as the very legalese economic structures that extractive industries have really perfected, right? But there wasn’t an entity to be a stop gap and support frontline communities to structure those deals, structure the capital stack in a way that would honor their vision, their values, the equity that they have in those projects and ensure that community governance and community benefit were core to those structures. And so that’s where Justice Capital founded and now as we both convene investors to be able to operate and partner with community partners like SAGE, it’s always an honor and then working with folks like SAGE to help them structure and raise the capital that they need to be able to win. John Farrell: Wonderful, thank you, Christina. And Joseph, what motivated you to get into clean energy development? Why are you helping develop a 235 megawatt wind project? Joseph McNeil: It goes back for myself looking at turbines, going up all around the reservation in North and South Dakota back in the early 2000s and asking my brother, why aren’t we doing that here? Because he was the chairman of the Tribe at that time. And he said, well, that’s a good question. Let’s explore that. How do we do that? Then it got me involved in tribal politics and then soon thereafter we had some money to write a grant for an RFP and then discover for ourselves what the developer scenario looked like and it looked like a land lease deal. That was it, that at that time we decided it wasn’t really going to be the route we were going to do. There needs to be more for us that we can build our own capacity so we can be self-sufficient and that’s the goal is to bring electric energy, renewable energy to our people that costs less because we deal with some extreme forced dependency issues that are over almost two centuries old.

So we can’t continue to live like this and we do have the tools and toolbox per se to do this kind of work in a sovereign way. It’s just exercising and finding partners to help us to come to a place where we can really build something solid and institutional public power authority that breaks the mold. There’s no reason we should be dependent on anyone else’s energy, particularly with the wind that we have and what we learned from the first go around with developers, the RFP was that, and I say this to everyone that asks about the question I said, you wouldn’t go to Saudi Arabia, put up drills and say, Hey, I’m going to give you a great land lease deal on all that oil we’re going to pull out. We’re the Saudi Arabia of wind. Why do you think that we would want less? So in that instance really drove home the motivation to move forward and I’m happy that us as a Tribe and folks on council had looked at this in a real comprehensive way as a strategy.

John Farrell: So Joseph, could you describe a little bit for people who might not be familiar, where are the Standing Rock Sioux Lands located and to describe a little bit of this wind project? How big is it going to be? How many turbines? Joseph McNeil: Yeah, so if you take North Dakota and South Dakota, most people call them the Dakotas. We are smack in the center of both of those. We straddled in North Dakota side, south central and South Dakota side, north central about the size of Connecticut. And when you take a look at our wind capacity according to NREL, we’re in the high forties, high to mid forties as far as wind capacity goes. And what we’ve looked at as well as other tribal nations like to the south of the Cheyenne River, they’ve looked at doing wind as well, is how do we develop that into a way that’s going to be substantial as a commercial project? The goal is to do a project and then build renewable energy assets separate from that for our communities. But we’re looking at roughly 235 megawatts. We have the potential to generate between 4 to 500 megawatts in our current area. The only reason we’re at 235 is because of the restrictions on the KV line to sell our power commercially, which is a 345 KV line. Southwestern Power states and dictates how much power you can put on the line at that time. So this one project 235 megawatts, about 56 turbines, and we’re looking at a four and a half megawatt turbine. John Farrell: That’s great. Could you, Christina, talk a little bit about how Justice Capital is collaborating with SAGE development on the project? Christina Hollenback: Yeah, absolutely. So Justice Capital, you could think of us as an outsource chief investment officer or chief strategy officer to SAGE and Anpetu Wi being the first of many projects that SAGE is leading to lead the just transition and renewable energies in the region. Anpetu Wi is also our first project to support them on and so we support them on structuring the capital and engaging with different governmental agencies, et cetera, around ensuring that they have the terms and the conditions to make sure that they’re able to deploy their capital into the project in a way that also attracts investors and attracts others to come in on the project while not giving away ownership. And extractive ownership models are prevalent all over frontline communities, but certainly in tribal communities. And so we’ve structured SAGE’s support for Anpetu Wi in such a way that maintains SAGE’s values and maintains the benefit to the Tribe and the nation and her people and also maintains the vision and value of SAGE in terms of also their partnership and their ownership in the project as well. Joseph McNeil: So Christine brings up a good point here that I did bring up was that the name of the project is called Anpetu Wi, and in our language Anpetu is day and Wi is the son. So together that means the first raise of the morning sun and it was well thought of one of the elders who used to work in reservation resource before he passed and he thought about this project in a way that is revelatory, that is bringing about a new day is like the prayer of a new day for us to move forward and that’s what we do traditionally, is we’ll go out pray when the sun arises for guidance and strength new day. So Anpetu Wi is the name of the project, 235 megawatts. Thanks Christina. John Farrell: Yeah, that’s wonderful. Now both of you have talked about this idea about ownership and both in the structure of the capital but also in terms of, you mentioned Joseph that some of the early offers that you had to do wind development on Standing Rock lands were really just like a land lease structure. So maybe there would’ve been a private developer who comes in, they own all the turbines, they own all the electricity and they would’ve essentially just rented some of your property in order to host those turbines. Can you talk about why ownership is so important here in terms of both the financial value but maybe in terms of as well as Christina mentioned some of these alignment with values for the community? Joseph McNeil: I think for us when we look at increasing our ownership stake in the project, initially it was spending the riskier dollar upfront proving the feasibility and pre-development. That’s doing the met tower readings, getting met towers up and we currently have five up, we’ve just relocated two of ’em to another area so we can expand and increase our net capacity factor. And land control cultural studies, environmental studies that runs the gamut from aquatic studies to avian studies and then gets into U.S. fish and wildlife, those types of things, but also the transmission studies. So that’s that real riskier dollar that increases our ability to invest into our project. And let’s say we spend 10 million on that, that could be valued up to 30, $35 million because it’s the riskier dollar upfront. So based on the NREL studies and what we’ve known for, it seemed to be a good, I don’t want to say a good bet, but it was really good money well spent in this space and that was meant to be our ownership.

Now as IRA rolls out, there’s an ability to have a direct loan for tribes now in place of ITC or PTC funds those tribes could not play into previously because we couldn’t get tax benefits. So in this place it creates much more value for us to increase our ownership stake by using government funds and low interest loan to buy into our own project to a greater degree. That means 20 to 25 years of real revenue coming into us so that we could rebuild our infrastructure, our schools, housing, home mortgages, provide financial institutions for our people to invest in the entrepreneurship, have entrepreneurship built into our educational system K through 12, and then afterwards into college so that we can rebuild our workforce and then start other industries here at Standing Rock that make sense.

Hemp is something that I look at and say there is a market for the future. We can make paper out of that or cardboard out of that. That’s an industry that’s long lasting can provide jobs for generations. And water and hydrogen, we just sit on the Rosa River here. There’s a lot of opportunity there for renewable agriculture growth and then for we always say the buffalo has always been our lifeblood and still is, but to put some money in reinvesting into that to create larger herds so that we can take care of our people and to also revitalize our culture through interpretive center, cultural museum that provides an ability for us to tell our own story, to tell our own history and repatriate our items that have been out in Smithsonian and Harvard and other places that have taken basically from us so that we can get these things back and tell our own history through our own voices. Not a western lens, but a Lakota lens in our own homelands to talk about our relationship with the earth and that spiritual connection that we have as people, more ancestors to our children yet to come.

There’s a connection and a story to be told there, not just for us, but I think for most of the world. We’re all indigenous to a place around the world — where you come from John, your ancestors come from across the sea over in Europe somewhere. There’s a connection spiritually to you to those lands mean something. So we all have a connection to the earth and we all need to seek that commonality so we can understand and live together generations to come. So for me it’s multifaceted to how this can be beneficial far beyond what we’re doing by simply putting up a wind farm.

Christina Hollenback: I think when we look at traditional models of development, they are always extractive to frontline communities and as Joe was mentioning, here’s a land lease deal, here’s a percent, right, on this deal, rather than shared prosperity, shared ownership, even when there’s real value that SAGE is bringing to the table, being in relationship to the permitting and taxing authority for the project, having 2.5 million acres of land. So if one location for that turbine is not the right location, we got some other land that we might be able to put the other turbine on. So there’s real opportunities that working with tribal nations offer, but the relationship has always been extractive. It has never valued those opportunities that nations offer and it’s to be very frank, not just devalued, it’s extracted from the value that they bring to the table.

And so I think really what this is ushering in is a more community centered paradigm of development and ownership where it’s not to say that developers aren’t also going to get paid for their work. It’s not to say that investors are not going to get paid back for investing in the project, it’s just saying that you’re not going to do so to extract from in this case the Standing Rock Sioux Tribe. In other cases, as this type of model could be replicated in other places, another nation or another frontline community, it’s saying that actually we can do this in a way that creates shared prosperity, that creates real ownership for the nation and that frontline community that the developers and investors are partnering with. And we can do so in a way that doesn’t mean that anyone is excluded any further from the shared prosperity that can come through.

John Farrell: One of the things we’d love to talk about, and Christina you just touched on this, it’s really helpful, is that idea of the land. So Joseph, could you talk a little bit about, there was an initial plan for like here’s where the turbines are going to go, but you have a mix of different types of land that are available to you and to the tribe. Could you talk about just one of the things I found fascinating in our conversation that sort of led to us doing this interview was how you had to work through all those different things and how you respected cultural issues and community issues about the land that a developer would either steamroll over – an outside developer – or that they would find it as a big roadblock. And that’s when you talked about the investment that you’re putting up front here is that you’re finding a respectful way to deal with all those things. So could you talk a little bit about when you identified the land that you were going to use for the turbines and how you’ve accommodated some of these different cultural and environmental issues? Joseph McNeil: Sure, thank you for that question. When we first came into the project looking at the maximized wind capacity that we had was up on the hilltops in an area west of Fort Yates. We sit right along the river on a North Dakota side of Standing Rock called the Porcupine Hills. And the original project was designed to sit there roughly 26, 27 turbines were going to be located there of the 56 some odd turbines. And in the configuration and as we went through the process, we went through micro siting with our THPO, tribal historic preservation officers who do our cultural work and we cleared all of the sites, but as we come to doing it phase by phase is that okay, now we have to design the roads and now we have to design the interconnection lines, collection lines, then it was going to be too much. Then we realized at that point, THBO realized at that point, and said this is going to disturb the cultural feel and possibly some sites because we practice strict avoidance, not mitigation, we won’t move anything, we won’t come so close, we’re going to strictly avoid things.

So we had to move it and it proved out to be a good thing because just this spring when the long year bat study came through, they were flying all through that area anyway, so one way or another those turbines were going to get off the hill and those were 26 turbines that we had to move and I said, well that’s fine. We can be like water, just find the next available place to move to. And aquatic studies and features became an issue in that space. So we moved again. We’ve done significant shifting of the project as we’re going through these phases over the last few years. Our ability to look at more tribal land is one of the benefits that we have.

There are a couple of different types of tribal land which are in trust. One is land that’s owned by the Tribe and other is land that’s owned by tribal members. And then there’s the third kind which is actually there’s two other kinds land that’s simple fee status, which is around the country, people own, it’s private property. And then the government also owns or the state owns land that it can either hold in trust or fee status. So those are the three major types that we deal with tribal allotted and then fee land. And so we shifted and we moved looking at tribal land first allotted land thereafter and then fee land because back in 1887 – before 1887, we had all of the land, but the Dawes act in 1887 said that we’re going to the federal government to break up tribal lands by partitioning into them into individual parts. Checker boarding the land gave us a real difficult way to go after that so we couldn’t have a large land base bases we had previously to aggregate resources on.

So that’s where the fee land comes into play and we just go by the regular practices that a developer does in the fee land places and then we had to create with the Bureau of Indian Affairs wind energy evaluation leases to do met towers and then wind solar resource leases that would act as land option leases and fee simple for tribal lands and allotted lands. So we had to create those documents in that space to help the Bureau of Indian Affairs and DOI facilitate leasing of those lands moving forward and those things that they existed for solar down south, but they didn’t exist for wind up north. As far as Bureau of Indian Affairs goes, and I say BIA because that’s the agency that regulates our lands within our borders. We’re still in trust. We still have to report to an agency that could say yes or no. That’s some of the tough stuff that we’ve always had to deal with since colonization. And this is again going back to us being sovereign and expressing that ability to do so. We have to play the game and do it well.

One of the important things that I like to say about this project is that we don’t want to be a unique unicorn even though we are using the spear of that unicorn to push through places where it hasn’t gone before, but we are just a simple boring project that is one, investible, safe and it’s got great wind capacity just like any other project does. And our interconnection queue study is moving right on along. We’re more than halfway through, so it’s proving itself over and over again for the last few years. And I think when I hear from other developers that have been in this space for certain projects for 10 years, we’re four years in roughly three to four years in of activity and we’re talking to developers in about being a partner instead of just buying the project out. And it’s resonating because they see a way forward not just with this as a new thing, a partnership, but with other tribal nations where there hasn’t been development because everything’s been built around tribes, all the transmission. And now we’re looking at where do we get more energy from tribes.

John Farrell: I just love the way that you’ve talked through this in terms of there are components of the typical project development process which you’re taking on as a way of securing more ownership, like figuring out where the turbines are going to be located, doing the wind studies, doing the cultural studies, doing the environmental assessment. And what I love about it is that it’s very much a genuine analysis of is this going to work for us, for our community and not just can we get here? How close can we get, how many feet? I think as one of you said, it’s not about mitigation, it’s just about avoiding those problems, but also to appreciate too that you have additional layers, right? Like a private developer who’s looking to just using fee land doesn’t have to go to the BIA and work with them on what are the procedures. So you don’t want to be a unicorn, but you do have some unique things and yet here you are going through that work on behalf of potential project partners to make it easier for investors. I just think it’s worth noting that you are not only facing up to some of these challenges that might be unique to your project, but you’re also addressing them proactively in a way that hopefully also lays the ground for future projects. So now if there’s a project maybe in another tribal lands in the Dakotas or in the upper Midwest, you’ll have covered some of the ground about how does this work in a way that they could follow. Joseph McNeil: True and talking about how we’re facing these challenges, in one aspect on fee land, we are going to have to deal with the North Dakota PSC. That’s where we don’t want to be anything special. We want to be a normal everyday project moving through its way. And then on the trust land side for the tribe, we had to work with Standing Rock Sioux Tribe to create a utilities code that stands and holds water just like any state code would for renewable energy development and wind energy. It has all of the same components and heightened components for community safety, species safety and cultural safety. So those are the things that are more elevated in our code. It gives our nation as Standing Rock the ability to stand toe to toe with the state and come into agreement instead of be superseded by a law, by the state, to say that they have control of all energy projects within their boundaries. Because we exist before their boundaries, but we needed to make sure that we had law to stand toe to toe. So we’re going to have to go into compact. Now how many of the developers have to deal with compacts? But these are the things that we’re ironing out beforehand as we move into the project. John Farrell: I just want to touch on that. I find this both just fascinating to learn about, but I think important for people to understand in terms of the challenges you face around regulation and sovereignty. So here you have the standard state regulatory body that regulates electricity development, the Public Service Commission in North Dakota on typical private property. Their rules apply for how you site energy resources and permit energy resources and what you’re saying, what I hear you saying is those rules could have applied on tribal lands, but if you want to be able to exercise your own sovereignty, your own decision-making around that, you basically created your own code similar to that regulatory code through the public Service commission that regulates that itself. So it’s an additional piece of regulatory infrastructure you have to create, but it’s essential for having the meaningful sense of control and ownership that you want because without it, you’re just, you’re going to be subservient to whatever that commission has set up for the rules. Joseph McNeil: Correct. And it was something where we took this, oh geez, I forget how much that code cost. It wasn’t cheap. And explain it to our council, which wasn’t a great leap at all for them to understand and for us to understand, and our communities to understand – not just council, but our communities to understand, that we are moving in a space where we’re increasing our ability to be sovereign and that’s the whole name of the game we move into. Eventually when the revenue starts coming in where we’re building distributed energy systems adjacent to communities and SAGE is now becoming a public power authority that is creating energy and billing our people at a lower rate. And that’s the whole goal of this, is to use the revenue to build systems so that our people can afford energy at a lower rate and still have a successful business.

Then these laws that we created serve multiple layers of regulatory authority for us to exist and govern ourselves. So this creating these institutions that has been critical for us to move into this space and we’re willing to work with anybody else about what we’ve done, how we’ve done it, because it’s not something that we’re trying to sell. This is a gift and more frontline communities need to be moving into this space so that we can change the outlook and at least what we expect from energy systems that are developer centric, business centric, profit driven, back, getting to a place where communities are standing first in that space instead of investors.

John Farrell: We’re going to take a short break. When we come back, I ask Joseph and Christina about how they’ve put together the financing for the project, the challenges of interconnection, and how we could change policy to make subsequent tribal and community energy projects more viable. You’re listening to a local Energy Rules podcast with Joseph McNeil, CEO of the SAGE Development Authority for the Standing Rock Sioux Tribe, and Christina Hollenbeck, CEO of Justice Capital.

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John Farrell: You’ve touched a little bit on how did you get the money together to do the pre-development for this project, and I was hoping to go into that in a little more detail to understand kind of what money, what capital did the Tribe itself have available? Is, you have money coming from philanthropic sources, is there, you mentioned federal, the Inflation Reduction Act IRA, that there’s maybe some money there that can help. How are you putting that together and maybe if you could help us understand how much of that is unique to the Standing Rock Sioux Tribe and maybe how much of that is stuff that might be available to other tribal communities that are trying to do this kind of community owned project development? Joseph McNeil: Remember the Dakota Access Pipeline? That for us was a natural thing to do. That for us was part of our DNA, standing for the water and protection of the water primarily. Because that pipeline was less than a mile from my wife’s hometown and where our kids play and where we get our water, but our relationship to the water and our relationship to the earth means something great. And during that time, we had a lot of folks who come through and ask what can they do? A lot of foundations came through while we were already writing grants to do pre-development work in this space. Our current chairwoman, Janet Alkire was working in that area for land operations and energy development and the then chairman Dave Archambault was getting folks coming through and asking about what they could donate to it. And so he said, let’s put some of this money to this project because he knew those were real potential there. And we want to thank ’em for that because it’s still moving forward.

So that’s philanthropy and they’ve been greatly helpful in us being able to hire the best in class partners in that space. We brought on UL, which used to be AWS Truepower out of Boston, which does a lot of wind energy design, power plant design in the Dakotas and around the country. We had other great consultant that came from GE and Tennessee Valley. We were able to bring in best of class. So when we were able to say that these are our folks that we have working with us, people understood, oh great, then we know what you’re talking about is true. So other foundations are able to come on and say, okay, we can see these other foundations that started working with us and we want to be helpful as well. We’re able to bring in with Christina and working with Justice Capital and then also other partners that we have with Baker Tilly to continue to write foundational grants and then also federal grants.

Christina’s work with Justice Capital has a mix between the two foundational philanthropic partners and federal partners and then our folks at Baker Tilly have brought a lot of grants that work, a lot of tribes in that space to help us achieve federal grants. Like we got the tribal economic development capacity building grant, energy capacity building grant, which is like $475,000 to help us put into pre-development capacity building for SAGE. It’s just been a great relationship as we look at that space, but it’s never an easy thing because we’re still putting money into the project, into us working on our pre-development part of this.

And then also the need for us to be in the space as far as interconnection is a developer-centric thing itself, category itself. Developers that have large balance sheets could absorb a doubling in price of studies where we had to be responsive in 15 days of developer could said, I’ll just put a chunk of change down there and that’ll hold my spot in queue. We did all the pre-development work outside of that land control, environmental studies, et cetera, with cash. But it’s been working with those foundational philanthropic partners to be able to be that flexible to do that. And that’s not an easy thing and that’s where working with folks that understand that space and have relationship therein has been a great benefit for us to help us move stage by stage. And I think Christina can pick up the ball on that.

John Farrell: Yeah, I’d love to hear some from you, Christina, and then come and circle back to that question about interconnection and whatnot. That is I think something a lot of people in the clean energy sector are talking about right now and understand the project. But yeah, Christina, please if there’s more you could talk about with this, that’d be lovely. Christina Hollenback: So yeah, just building on what Joe already shared, one of the things that I think a lot of folks forget in this work and sometimes even foundations forget it, is that really the grant making dollars are only 5% of their money. The 95% of their money is invested into projects and funds and different offerings all across the world to be very frank. And so what we made sure was based on the values and the vision that SAGE had already outlined, they were clear that they wanted to retain ownership, make sure that they were no harm, not low harm, right? There was a very clear vision that was outlined by the nation and by SAGE. So our ability to kind of filter investors through that and then as we partner with investors, not just talking about grant dollars, but talking about program related investments, right? Talking about the full breadth of capital that they have at their fingertips, which could range from grants or recoverable grants to PRIs and or if they’re not a foundation, maybe it’s a low cost catalytic debt that values the impact along with the financial return.

And then ultimately as we move in construction finance, we’ll need more market rate returns. But I think the way that this is structured, which is totally different, is that rather than thinking about some low cost debt or some grants to cap off a project, it’s saying, what if we right size the grants and the catalytic capital to the earliest stages of this, what will become a cash producing asset, to be able to ensure that SAGE and the Tribe maintain ownership and governance over the project to ensure their values can be infused through the project in perpetuity. So I think that the engagement with investors is really, really key and just can’t emphasize enough that this is built off of the no DAPL movement. I mean, there’s just, people know Standing Rock because of the movement that was led by young people on the front lines. And rather than there just being a philanthropic thread to pull for those folks that want to support what happens in the wake of no DAPL, it’s actually saying don’t just open up 5% of your portfolio, open up a hundred percent, because there’s a place for every different type of capital, every different source of capital has a place to be able to finance and support SAGE’s work and specifically with Anpetu Wi as one of those many projects in Sage’s ecosystem. And so I think in many ways it turns upside down the traditional capital structuring model, et cetera, to ensure once again that it’s aligned with the vision and values of SAGE and of Standing Rock and of the Lakota people.

John Farrell: Thanks, Christina. I really just, I’m glad that you put emphasis to that and mentioned it twice about the advantage of those dollars coming up front to support pre-development and the values of the project around ownership and the long-term benefits. I think that’s been such a struggle. Christina Hollenback: Can I just be real specific there, John? In the end, it would be almost negligible in terms of the returns if we structured that at the end when we structure that at the beginning, for every dollar invested in SAGE at this stage into the impact. We project it will return $10 in community wealth building for SAGE and for the tribe. So what is negligible at the end is absolutely paramount at the beginning and now positions SAGE to become the lead investor in all of their future projects, which means they will not have to dilute their ownership in every future project. They will not have to give up their governance and ownership and be beholden to other outside capital desires and needs in every future project that SAGE does. So no pun intended, it is literally the wind in the sails for every other project in the ecosystem that SAGE has in development of which there’s many to really position the Standing Rock Zoo Tribe and the nation to be a regional leader in clean energy production and resiliency. John Farrell: That’s amazing. I want to talk about one specific area of impact that this early investment is having around interconnection. So people who are following clean energy generally have probably seen some stories about like, oh, interconnection is a big issue right now, especially with transmission. All of our big grids are very congested. So as Joseph, as you talked about early on your project, like many others, needs permission to connect to the transmission lines to sell its power on the electric grid. Can you talk a little bit about what’s involved in that specifically? So for people who are maybe not spending day to day doing this kind of development work, but then also how it’s been important to have – you referenced this briefly – about sometimes you have to have money on fairly short notice to hold your place in line to get on the grid, and that’s where some of this early investment has been so crucial. Joseph McNeil: Just as an example, when we first applied our application was $2,000 per megawatt. That was $470,000. Some of the folks that we had partnering with us at the time were like, great, we can help you out with that. And then with 20 days notice, roughly a month’s notice, we had 20 days to respond to a “true up” they called it of what the application studies were going to look like. So they wanted the initial applicants to put another $2,000 up. So we needed $470,000 within 20 days, and then it just doubled everything. The cost of everything doubled. So as we’re looking at the ability to do that, it was really important for us to have these kind of partners who were understanding and willing to listen to what does this dynamic that interconnection and developers have in this space and why are the costs doubling?

So as we dug down into this discussion, we talked to other attorneys who work in the space with SPP and MISO, in the area, they’re able to be able to have us have conversations with some other folks to discuss our ability to be in this space and be flexible in this space without harm to others. There’s a lot involved in all of these discussions, but for us to take this circumstance to foundations and or grant makers or impact investors that were working or looking at our project, it was kind of vital for us to say, hey, community hasn’t existed part in this part ever. I think that we’re the only commercial community project in this space at this magnitude of 235 megawatts. So for us to be reflexive and responsive in that took a lot of running, really, really did.

But we have a solid project. It always goes back to the simple bones of this. We have roughly 45 to 50% wind capacity in the area that we’re looking at doing, and our studies show us being in that space. And so that’s why we moved two out into a say newer area just adjacent to it so that we can increase that capacity a little bit because it just means more back to us so that we can utilize for community growth. But back to interconnection, it’s no joke from the larger cadre of folks and developers who operate in this space of interconnecting large power onto 345 kvs.

Also, how that tariff affects distribution on a local basis for smaller DERs to exist in community, all come through state regulated or translated commissions and bodies that vary state by state. So you don’t know what you’re going to get state by state and limit the ability to produce for your community. So on North Dakota side for Standing Rock, you can build a solar system that is roughly 10 kilowatt hours per house, and then after that it goes to the per rate, which is the avoided cost of power, the cost of coal, which is like 2 cents, and you can’t finance a project on that. So as we look at the system from top to bottom, it’s not built for communities to participate in. And as we look at more communities getting involved in this space, this is really the cutting edge of this and how do we get our voice heard to the legislatures and to the FERC in general to start looking at how they’re issuing a tariff and how states are translating that tariff to protect particularly communities coming up into this.

So if they’re putting money out saying, yeah, we’re going to do all this solar, you can do everything you want to. It feels like the biggest bonfire. It’s not a gaslight, it’s a gas bonfire, and they’re not just gaslighting us with this thing. It’s like, how do you get it done? And I think that that’s kind of the challenge that more I talk to people in the industry that are understanding what we’re doing. They’re like, how do you get it done? And we don’t have a magic pill to it. We’re just talk with folks all through throughout the value chain there, all throughout the regulatory chain about the uniqueness of our project and what it means to our people, and that resonates no matter where you go.

John Farrell: I’d love to ask you in wrapping up about what folks who are working in this space, a lot of us do policy advocacy, some at the national level, some at the state level, some even at the local level. Some of us have relationships with foundations. As you were talking about Christina, they’re using just such a small fraction of their resources oftentimes. What should people be paying attention to? If you are someone who cares about this idea of equity in addressing climate change, who likes to see communities really get meaningful benefits and have meaningful say over clean energy development, what are things that we should be thinking about or trying to do in our advocacy work around clean energy and climate? I’ll go to you first, Christina. Christina Hollenback: Yeah, I think there’s a couple of areas. One is I think when we’re looking at the brass tacks around IRA implementation, which I think there’s a lot of policy and advocacy conversations, including folks like SAGE is really vital because what’s really happening is that, as Joe has said, SAGE is just setting precedent at every, I mean literally just moving the goal line across every single benchmark around this and IRA really opened up the opportunity for community ownership. But in the brass tacks, the rest of those infrastructures around FERC and other entities are still developer oriented. They’re still assuming a big developer is going to come in, own the project, do what they do. And so for us to take advantage of IRA, take advantage of the opportunities that this administration has put before us, really thinking about how as we’re making those fixes, how does it actually operationally get addressed? That’s one area on the policy side that I think is really key. And we’ll be having a memo that’s released early next year that we’d love for folks to take a look at for folks to amplify, et cetera around some of those brass tacks fixes that are really needed.

I think the other thing for those that are working with foundations or family offices or who are trying to deploy their capital in a way that is in alignment with what is sustainable, right, and good in the earth, but also what also is going to be the leadership of this just transition, which is indigenous communities all over the world, I think really looking at how are you assessing what risk looks like in this moment? So we’ve had conversations with some foundations, some investors that are like, well, it’s too risky at this stage. Well, the risk of inaction has to be calculated at this point when we’re also talking about climate change. The risk of inaction, the risk of this not going through is huge. And so I think that as we’re thinking about with foundations and other investors, what does it look like to be supporting frontline community led solutions? It means that you have to ensure that the grant dollars for them to have the technical assistance and support that they need to be successful is there and is right sized to the appropriate stage of development.

And then it’s also that we have to look at the full breadth of capital. We have to look at the full spectrum of capital and put it all to use towards the same vision and values that SAGE has outlined and that SAGE is a steward of because SAGE has been, SAGE has been, I won’t say appointed, but it is the trusted steward for these projects by the Lakota people and by Standing Rock. And so how do we as investors, how do we as foundations fall in line with that trust and how do we get skin in the game to actually own some of that risk so that the risk is not solely born once again by frontline indigenous communities as it has been in perpetuity, during colonization? So yeah, those are the two things that I would say are really game changers in terms of next steps. And then also just learn with us, rock with us every step of the way. SAGE is blazing trails. There’s a lot of awesome things about that. There’s a lot of challenging things about that. But one thing that comes from that is that we’re always learning. We’re always getting better, and we welcome partnership to get us there. So it’s an honor to walk with Joe and with SAGE and with the Standing Rock Sioux Tribe and the Lakota Nation, and glad to have others walk with us in a good way so that we can see more of these projects grow all over Turtle Island.

John Farrell: And maybe the way I would ask this question of you, Joseph, is how can you make other projects that might follow in your footsteps and more boring, as you put it, and less novel and less groundbreaking? How can we make this simpler and more normal? Joseph McNeil: I think about the ability for us to find financial resources in such a little period of time and discuss how we are acting as a developer in this space instead of a developer. We looked at so many other ways. We said, geez, we wish there was a pool of money for tribes to pull out from. And I think as we take a look at what’s being offered out there and these loans, et cetera, direct loan, direct pay, I mean, these are all fantastic tools out there, but a lot of tribes and frontline communities that can aggregate their resources to do energy development need pre-development dollars. And if there’s an study that says in this area, this is a potential, maybe that’s all you need to qualify for a development pool of funds to get your pre-development work done, because otherwise you’re relying solely on a developer and them spending their money on developing your asset, and then it puts you back in that same position of having a developer-centric project. Then you’re end up leasing your land or having very small pittance and revenue derivatives from that project for 20, 25 years.

What they told us in the beginning, John, was that, okay, after 20 years, these turbines are yours. That’s great. Boy, we’re going to have how many years of revenue that’s all ours after that? Maybe five. Oh, that’s not so great. And then, then we have to make sure that we have enough money to tear these things down or refit them. So the cost benefit wasn’t really there because all the money would’ve been gone to refit the turbines. So you’re playing a long distance time game of duration, game of poker there and hoping for the best. But if there’s a pool of funds out there that can help communities do this upfront, then you know what your value is upfront. If that’s a loan, that’s even better because then those communities can own that asset and use it as their chips to start off in this game with like we did.

So everything that we’re doing, we’re happily willing to hand it over, help with other folks, and this is all around relationships as well. So folks that we’ve talked to, happily introduced them to folks that we talk to so that more people can do the same thing because we need this to be normalized. It needs to be normal that a developer isn’t the only one that can do this, and then the two developers out there, communities where it’s going to be moving forward, everything else is used up. What else is there? There’s congestions, there’s all of this out there, and tribal lands are, at least within this country and in this continent, one of the last places, best places to develop renewable energy assets from who else to partner with and think about it and being partners because it’s not just your investors. How much money do you need to make? My God, it’s just kind of awesome when you think about all the amount of money that’s going out there, what people are bringing, geez, our kids are going to inherit this and hopefully learn along the way that we got to do this together. That’s my whole thing about being good partners and finding good partners. When we started having a developer discussion, it was really about that partnership and it weaned away pretty quickly a lot of those developers who were interested in being partners all with the community.

John Farrell: Well, Joseph and Christina, thank you so much for joining me to talk about this amazing wind project and an amazing model for community ownership for tribal nations. I’m eagerly following along in the development of this project, but also very interested to see how you’re going to be able to help change and make this kind of development more boring and typical for so many others to come. Joseph McNeil: We appreciate it. Christina Hollenback: That would be awesome. Joseph McNeil: I appreciate the opportunity to with your audience and welcome any queries and questions to us as folks have them. John Farrell: Thank you so much for listening to this episode of Local Energy Rules with Joseph McNeil, CEO of SAGE Development Authority for the Standing Rock Sioux Tribe, and Christina Hollenbeck, CEO of Justice Capital. On the show page, look for links to more information about the project and about Justice Capital, whose purpose is to support financial structures that avoid extractive energy development. Also look for ILSR’S recent Report Advantage Local, which documents the social and economic benefits of community clean energy ownership, as well as a couple of older podcasts about community wind projects that were developed many years ago. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschback. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

 

A New Day for Wind Farm Development

SAGE Development Authority, the first Native owned public power company, was created by the Standing Rock Sioux Tribe to secure energy independence, protect the environment, and promote equitable economic growth. SAGE works on many initiatives, but in particular, has been developing the 235 megawatt Anpetu Wi Wind Farm.

Hollenback and McNeil each emphasize the importance of owning the wind farm, rather than leasing land to an outside developer. By owning the project, the Standing Rock Sioux Tribe will collect all of the revenue — estimated to double Standing Rock’s annual revenue — and can reinvest it in the community.

That means 20 to 25 years of real revenue coming into us so that we could rebuild our infrastructure, our schools, housing, home mortgages, provide financial institutions for our people to invest in entrepreneurship… for me it’s multifaceted to how this can be beneficial far beyond what we’re doing by simply putting up a wind farm.

— Joseph McNeil

Owning the land and the development process has allowed for extra care and flexibility in project siting. SAGE has a practice of strictly avoiding harm, explains McNeil, rather than mitigating it after the fact.

Securing Financing Without Sacrificing Self-Determination

Hollenback describes Justice Capital as an outsourced chief investment officer to SAGE. It supports SAGE by attracting investors and serving as the intermediary with government agencies — while staying true to SAGE’s values and maintaining the Tribe’s vision.

What this is ushering in is a more community centered paradigm of development and ownership, where it’s not to say that developers aren’t also going to get paid for their work. It’s not to say that investors are not going to get paid back for investing in the project. It’s just saying that you’re not going to do so to extract from, in this case, the Standing Rock Sioux Tribe.

— Christina Hollenback

While the federal Inflation Reduction Act includes some provisions that make it easier for Tribal communities to develop clean energy projects, McNeil describes many challenges that have come up in pre-development — a stage less likely to be covered by grants or loans. It also takes a lot of money to participate in the interconnection process. Still, SAGE has been raising funds through every available channel and the project’s interconnection study is underway.

We don’t want to be a unique unicorn… We are just a simple boring project that is one, investible, safe, and it’s got great wind capacity just like any other project does.

— Joseph McNeil

Episode Notes

See these resources for more behind the story:

• Find news and updates on the Anpetu Wi Wind Farm.
• Learn more about Justice Capital and how it has partnered with SAGE.
• Read ILSR’s report Advantage Local, which documents the social and economic benefits of community clean energy ownership.
• Listen to episode 4 and episode 7 of the Local Energy Rules podcast, which cover community wind projects.

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country using ILSR’s interactive Community Power Map.

This is the 208th episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update.

Featured Photo Credit: iStock

DTE Energy is not meeting Ann Arbor’s needs for reliable, renewable electricity. Could a municipal takeover be the answer to residents’ pleas?

For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Gregory Woodring, the president and founder of Ann Arbor for Public Power. They discuss the ways that investor-owned utility DTE Energy has failed Ann Arbor customers and how the city could take over and provide better service.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Episode Transcript

Greg Woodring: It’s an annoying issue that really the biggest hurdle towards public power for most communities is not anything to do with running the utility, or financing the acquisition, or anything like that, is just the legal battle with the utility that’s going to try to rake ’em over the coal as much as possible. John Farrell: The original utility franchise contract covered just 26 light bulbs, but over the years, state law has locked Ann Arbor, Michigan into an increasingly costly relationship with DTE – its electric utility monopoly and the state’s largest investor owned utility. The utility has put the health and safety of its residents at risk during extreme weather and being stuck with DTE means the city is likely not to hit its urgent 2030 renewable energy goals. Joining me in March, 2024, Gregory Woodring, president and founder of Ann Arbor for Public Power, explains the alternative and how the city has been moving closer to taking over the electric grid for its own good. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system.

Gregory, welcome to Local Energy Rules.

Greg Woodring: Thank you so much. Glad to be here. John Farrell: So I was hoping you could start off by sharing what motivated you to start this campaign. Do you have a background in clean energy or climate work or working in utilities? What is it that got you into this public power effort? Greg Woodring: Yeah. No, I don’t have much of a personal background in energy. Prior to Ann Arbor for Public Power, I came to this, I was organizing with the Huron Valley Democratic Socialists at the time and I was honestly rather new to organizing, but I had gotten interested in doing my part and getting involved and some of the major issues that I saw that I wanted to get involved were around one, the climate that seems like the most existential threat, relatively young person, was younger back then. So that was pretty concerning for me. And at the same time, I feel like we have this massive problem where our society just feels like it’s getting more and more inequitable. Our income equality is out of control and the structures of our society seem to be constantly corrupted by these large corporate influences.

And so being in that environment, we were actually looking at, Ann Arbor had just about that time they were actually considering passing their 2030 carbon neutrality goal, the A two zero plan. And that was really exciting. It was really ambitious goal and we were really excited to sign on as a collaborator to that and look into it. But as we looked more and more into the plan, well the goals were great and very ambitious, we were not as convinced that they had a solid pathway to pursue it. And as we dug into it more and more we came to realize that public power was an option available to us. And so that spun into a few meetings looking into it and things like that.

And then the pandemic hit and things got a little bit chaotic, but I had reached out to one of our current advisory board members and big supporters, state senator Jeff Irwin who came to us with a big old binder full of information from past times where people in Ann Arbor had looked into this and was very supportive from the get-go. And so that led us to pulling together a coalition of a lot of different organizations, Ann Arbor Indivisible, the Graduate Students Union, Sunrise Movement, various other organizations in the Ann Arbor area. And we just started meeting and talking about this and eventually we came to realize that yes, this is an actual way that we can reach our climate goals. And on top of that, we were really pleased to discover that when you look across the state and across the country, public power utilities simply are paying less for more reliable power. And throughout the last few years we never really expected DTE service to degrade so quickly, but we have been experiencing many, many multiple week outages per year. So that’s only put more and more fire behind our campaign to both directly tackle the climate crisis through public power, but also start to address some of the symptoms of the climate crisis, which is increasingly unreliable power in addition to the general issues that investor-owned utilities have with exploiting their customers for profit and not reinvesting those profits into their infrastructure.

John Farrell: When you were asked why you were helping lead this pursuit of public power, you were quoted in a news story then mentioning, and you’ve kind of covered this already, about Michigan’s other city owned utilities, that they have lower rates and better reliability in large part because they’re not paying 14% of their bill costs towards shareholder profits. Is there more you’d like to add to that about kind of the motivation? You’ve covered it pretty thoroughly here I think in terms of your motivation to start the campaign, but is there anything else that you’d like to add that you think is a really important thing for people to understand about why public power? Greg Woodring: Yeah, absolutely. I mean, I think that at the heart of it, when you really get down to looking at our energy system, it’s hard to not come away with the impression that our current system is rather kleptocratic. We are in a situation where we have these state enforced monopoly utilities that are taking a profit margin off the top and giving us lower quality service as a result. I mean, even if you are going to accept the normal capitalist market based argument for private ownership where competition is going to lead to higher quality of service, so even though you’re giving out a profit margin, you’re actually going to end up with a more competitive product that falls apart when you have a state enforced monopoly, right? Instead what we have is a situation where DTE or other investor owned utilities across the country are supposed to be regulated by our public service commission, the Michigan Public Service Commission and the legislature, and instead DTE has been taking their massive profit margin and reinvesting that into lobbying our politics.

 

Greg Woodring: They lobby for all sorts of negative policies statewide in Michigan and beyond. There actually was a really interesting report about how DTE was even funding anti-climate legislation in California. And so you’ve got DTE here taking this huge profit margin, not investing it into our infrastructure and instead spending it to manipulate our politics so that they can be less regulated so that there will be less push towards clean energy. And even things like anti-democratic laws that were being supported by Republicans or in our state were being funded by some of these DTE shadow groups, the 501c4s that they’ve set up to funnel some of their money through.

So you’ve got that aspect of it and then you also have the fact that it’s just an inefficient system when you really break down the fundamentals of it. Public power utility is more efficient at running an energy utility than an investor-owned utility. And this is kind of getting into the weeds, but I think your audience probably is adept enough to be able to understand this point, but money’s cheaper for a public power utility, right? They are financing 100% with municipal debt rather than an investor-owned utility that is financing all of their projects with about a 50 50 debt to equity split. I mean, DTE’s corporate debt’s pretty low as far as corporate debt goes. A utility, however, it’s not going to compete with Ann Arbor’s incredible credit rating that they have as a city. Municipal debt’s just about as cheap as you can get unless you’re a state or a federal government. And on top of that, DTE stock, their equity is extremely expensive. They’re guaranteeing a 9.8% return on equity.

So when you take that into account, you’re also realizing that okay, every single thing a public power utility is doing is cheaper. They’re not paying out these huge salaries and executive bonuses, they’re not lobbying, they’re not marketing or they’re not taking a profit margin. And so all of these cost benefits then turn into both lower rates and higher reliability. And you see this all across the state and across the country. How is it that these utilities are able to charge less rates for considerably a lot higher reliability? Well, it’s because it’s just a more efficient system. It’s not like they’re some utopia. It’s not like they have the best government in the world. Their roads are just as bad as Ann Arbor’s, however, the structure of the utility is more efficient.

John Farrell: That’s great. I really appreciate your comprehensive outline of all of the different pieces there. I think you laid it out very nicely. I want to get specific about Ann Arbor’s goals and as well as about the feasibility of public power. So the city did a feasibility study for its a hundred percent renewable energy goal by 2030 that was published last year. I assume this is a little bit after the carbon neutrality goal. Can you talk a little bit about what was in that study and to this question that you raised about do you think whether the city could meet that goal without a city owned utility? I’ve been thinking about this for a long time because I actually did an entire podcast series called Voices of 100% where we talked to city leaders in places that made these a hundred percent commitments. And we kind of asked them this question, well, you don’t own the utility. How are you going to get them to be helpful? And they didn’t always have a good answer. So I guess I’m kind of curious, did the city have an answer in that study and did it really outline the expected costs and benefits of the city taking over the electric service if in fact public power was one of the solutions that they saw? Greg Woodring: Yeah, happy to get into that. So that study that you’re referencing came after over two years of advocacy from us. That was kind of our first thing that we were really pushing for, and the city did include proper feasibility study in that, but it was couched within this larger study that they called a hundred percent Renewable Energy Options analysis. And long story short, the study ultimately concluded that they didn’t think it was feasible for the city to fully municipalize by 2030. This is a point that we kind of contend. I mean you can see an argument for maybe it would take longer than six years. I don’t think that they provided very good evidence for that. They quoted a study that came out of Washington D.C. but within that study there was multiple examples of cities that managed to do it quicker than six years.

So that is an element, and so they essentially didn’t consider municipalization as an option for the one hundred percent options analysis. However, they did mention that there are some long-term benefits to municipalization and that if we could stand up a muni, then it would be a pathway to a hundred percent renewable. So instead, they were forced to provide another option for the city to reach a hundred percent renewable. Part of it was enroll in these programs that DTE offers to they call My Green Power, and essentially it’s an energy offset program that DTE offers where you’re able to buy renewable energy credits to say that their power is coming back green, and that covered around 50% of the power if the city enrolled in those types of programs at their maximum level.

The next 10% comes from very interesting sort of thing that’s come out of some of our early discussions with the city, which is the sustainable energy utility. Now, the sustainable energy utility, some of your listeners might be aware of this term because there are sustainable energy utilities that exist at state levels across the country. However, they’re pretty different than what the city of Ann Arbor is actually proposing here, or the sustainable energy utility the city of Ann Arbor is proposing would essentially be a competing utility and they would set up a utility structure, however, they would not necessarily acquire DTS infrastructure. And instead what they would do is they’d use that to get around some of the solar caps that DTE puts on us so that they could install more behind the meter solar, things like this. And then they also believe that they might be able to say, end up some limited amount of infrastructure to build out microgrids between neighbors to allow for some amount of sharing of power. That’s generally something that Ann Arbor for public power supports.

However, we don’t feel like it’s satisfactory itself because as the report suggests, it’s only projected to be able to supply about 10% of Ann Arbor’s total energy demand by 2030, and then you still have about 40% of their power that’s unaccounted for. And so what the report recommended was that they buy renewable energy credits off the national market, which was estimated at eight to $20 million. In our opinion, that’s not really a satisfactory solution or plan to reach a hundred percent renewable energy. Renewable energy credits are dubious best in many cases, and in our opinion, we really need to retire the coal or gas or carbon emitting electrical generation that we’re actually consuming rather than simply trying to offset it by something like a renewable energy credit, or the city of Ann Arbor has been also proposing things called virtual power purchase agreements, which are a bit more of a complicated form of renewable energy credit essentially. That is kind of where the energy options analysis landed.

And then also they did the full municipalization feasibility study as well. We really pushed to make sure that that was included as a separate portion of the study that came back with a range of potential costs. It did give us some good info, but it didn’t land on a real solid number. It did estimate that the cost of DTE’s infrastructure would likely be around $200 million, and that was pretty solid. However, it gave a very wide range for legal compensation that would be needed to give to DTE. So things like stranded assets are going concern, they report estimated somewhere between 80 and $800 million an obligation to DTE.

Now, in our opinion, and we’ve done some legal work on this, and I believe that probably by the time this podcast episode comes out, we’ll put this out publicly, but we don’t believe those high-end estimates are realistic. Our legal counsel has done some looking into it and we think that there was some bad assumptions made. However, ultimately the number that is going to inform the city on DTE’s infrastructure is going to be coming in a phase two feasibility studies. So that’s essentially a valuation of DTE’s assets and would be used as essentially exhibit A in a legal case for the acquisition. And I’m actually pleased I can announce this on your podcast right now, but last night we found out that the Ann Arbor budget for 2024 includes $1 million for a phase two feasibility study. So hopefully we’ll be getting a much more solid number on the actual cost of acquisition there. However, it did show even with that wide range that well in the low end estimate costs are projected day one to go down by 10% and the high end estimate they actually estimate costs would go up by 36%. But even in the high end estimate after 20 years, the numbers go back to parity because you are paying off that debt, right? So it’s an investment. It’s possible that our electrical rates in the short term could go up, they could go down. However, in the long term, our rates will almost certainly be lower than DTE’s.

John Farrell: Two things I wanted to follow up on. One is I thought I had read somewhere when I was looking into, I think I was reading about the sustainable energy utility proposal that the city came up with, and I had thought at the time that the public power campaign had been retired or whatnot, but there was some a hundred year old court case in Michigan and people talked about it as like DTE basically has a perpetual franchise or monopoly in Ann Arbor or in any city. And I’m kind of curious, has that been resolved? And it’s clear that yes, Ann Arbor, like many other cities, does retain the right to serve itself with electricity. Greg Woodring: Yeah, so that was actually one of the very early stumbling blocks for our campaign and in my opinion, misunderstanding around that law is a large part of why there hasn’t been much movement in Michigan over the last a hundred years to municipalize, but we were a little bit too stubborn to give up, so we managed to push through on that and get a little bit of clarity. So what you’re referring to is the Foote Act. So back in 1905, early electrification days, there was a lot of different energy provider, private energy providers out there in the state, and nearly every municipality in Michigan had some form of franchise agreement with an electrical provider. And the issue that the state legislature was finding was that these were all written very differently and they all had different terms. It was very difficult for them to regulate. So there was this push from the legislature to standardize these electrical franchise agreements at the state level. So the state essentially rewrote it. They forced the cities to sign it, and then it just so happened that Foote, the Bill’s author, also served on the board of a company called Consumers Energy. John Farrell: Oh, interesting. Greg Woodring: Interesting. And when they rewrote these contracts, they just so happened to forget to include an expiration date on them. And so all of these cities were now suddenly forced into these contracts, which the utilities were happy to sign, that gave them perpetual franchise agreements throughout the entire state. Basically, there’s a few regions of the state that don’t have them, and those are areas that weren’t electrified at the time, but Michigan’s one of the older states, so a lot of Michigan was electrified at that time. There was a huge public outcry at the time, 1907, there was a constitutional amendment passed in the state of Michigan that capped franchise agreements at 30 years maximum. However, the utility sued, went to the Supreme Court of Michigan and the Michigan Supreme Court found that, well, that applies to all future franchise agreements. It does not apply to existing ones and that they can’t force the utilities unilaterally to agree to a change in this contract, which is very frustrating and it feels a bit hypocritical because they just forced these changes. But I guess because the state had dominion over the cities, but they didn’t have dominion over the utility, that’s kind of how it worked out.

What that practically means for Ann Arbor is that DTE does have an exclusive franchise in Ann Arbor service territory. No other electric utility can service it other than the city itself. So the city doesn’t need a franchise agreement to service its own territory, right. The city is able to service its own territory inherently, however, they could not expand beyond the borders of Ann Arbor without working on some sort of deal with DTE, which doesn’t seem terribly likely because then you would be infringing on DTE service territory. So that is essentially the catch, which is annoying. A lot of the surrounding county would love to be under a public power utility as well, and we’d love to be able to facilitate that, but it looks like you probably would have to fight these fights out municipality by municipality. So currently the way we see it is Ann Arbor is a very well positioned city to take on this fight. It has a fairly progressive voting base. It certainly has the resources to do so. We’re hoping to prove out the process here and then hope to expand it to other municipalities after a success in Ann Arbor.

John Farrell: I don’t want to go too much more in the weeds, but I guess one of the last things I just want to say about this is it’s interesting that the supreme court sided with the utilities kind of like, oh, you can’t retroactively rewrite contracts. In Minnesota, just a few weeks ago, our Public Utilities Commission retroactively rewrote contracts for community solar providers in order to reduce the costs, the perceived costs. And so even though there seems to be a very strong principle in general about not doing retroactive contract writing in law or in regulation, it happens when the parties involved don’t have as much political power as the utilities. Greg Woodring: Yes, I think that that’s probably true. I mean, it would be fantastic if some activist lawyers wanted to take on the Foote Act. Every lawyer I’ve talked to seems to believe that it’s pretty well entrenched. It’s been tried a lot of times, people have tried to get rid of it many times in Michigan, and there’s been multiple cases about whether these contracts are inheritable and the courts have repeatedly ruled that they are, which is why all those multiple utilities, actually Ann Arbor, this tiny little electric utility was servicing 26 electric light bulbs. That was the original franchise agreement for the city of Ann Arbor. It’s been bought out by three different companies now, and now it’s owned by DTE. Right. And that gives them that franchise agreement over all of Ann Arbor, when at the time it was just meant as a supplemental a few extra street lights. John Farrell: That’s amazing. It’s 36 light bulbs, you said? Greg Woodring: 26. Yeah. John Farrell: 26 light bulbs. Unbelievable.

We’re going to take a short break. When we come back, I ask Gregory whether the aging grid means lower acquisition costs if Ann Arbor takes over, ask what successes they’ve had so far, and how public power can address historical disparities in energy burden and in exposure to environmental harms. You’re listening to a Local Energy Rules podcast with Gregory Woodring, president and founder of Ann Arbor for Public Power.

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John Farrell: So I wanted to go back then to, you talked about the feasibility study, looking at this range of costs for acquiring the infrastructure or particularly the range of costs that are like legal costs and stranded assets and whatnot. I guess a couple of different questions from that. So you noted in a video interview that you did late last year, and we’ll link to this on the show page, that DTE’s grid is aging. So I’m kind of curious if you feel like that was captured well in the city’s initial valuation of their assets. And then I guess I’ll have a follow-up question, but just want to start there in terms of do you think that it really accurately took into account the fact that the grid is aging and in need of upgrades? Greg Woodring: On the engineering side? I know that I did read their methodology for doing it. It seemed sound enough to me as a non-technical type of person, but I think we’ll get a lot greater clarity towards that out of the phase two study, which will be a much more boots on the ground. There was just a bit of a survey of infrastructure and they essentially projected a range of deprecation on the infrastructure to be able to figure out how old the infrastructure really is. And actually the state is currently doing an audit of DTE for reliability, which also might provide some amount of insight into just how out of date their infrastructure is, which hopefully that will help inform any future studies that we need to do on that.

As far as the infrastructure costs, it seems like there was at least an effort to put towards estimating that, I don’t feel qualified to really speculate on how well that was done. On the legal side, it is a little bit much to really go into some of the issues, but essentially the legal costs on the high end were projecting us paying out 20 years of DTE’s revenue for the city of Ann Arbor, which is not very well justified. The report claims that the IRP planning window was 20 years, it’s not correct, it’s five years. All of these different things also that we shouldn’t be paying the entire of revenue. We should really only be paying the difference between wholesale and retail for the energy distribution costs because that’s ultimately really the only thing that DTE is losing as if they can’t distribute it to Ann Arbor customers, then they potentially would have to sell it on the market.

And even that is not taking into account the fact that DTE is planning to retire a great deal of generation. And so DTE is probably not going to have excess energy. In fact, it just means that DTE has to build up less new generation as they’re planning to phase out coal, which they’ve been forced to do by 2032 and are primarily replacing with gas, unfortunately, despite all their claims that they suddenly are going to make gas clean. I think that there was definitely some issues on the legal side of the study, but as far as the infrastructure side, I think we’ll get a lot more clarity out of the phase two study. But I’m not technical enough to really speculate too much beyond that.

John Farrell: It’s interesting. I did a podcast interview with Scott Hempling a number of years ago, who’s been a utility lawyer for many, many years and has served as an administrative law judge. He wrote a great book about utility mergers in which he noted, and I thought this was interesting for the purposes of public power, that when utilities do their reporting about the valuation of their assets, there’s a very standardized way that they have to calculate the book value, right? It’s like the initial cost and then there’s some depreciation on a straight line basis. But when utilities sell their assets in a merger or when they are asked to sell their assets in a public power campaign, they mark them up. And I’ve always thought of that as a particularly perverse thing that we allow them to take essentially a public asset that has often been paid off and to basically mark it up for profit when it comes to especially this issue of public power where a city is saying, your service is terrible, we want to take it over from you, and they’re somehow allowed to get a windfall profit on the assets at that time, even though they’ve been doing a terrible job. I don’t know, it just blows my mind. Greg Woodring: Yeah, I absolutely agree. I think that there probably could be some help that Federal Energy Regulatory Commission and others do towards helping to enforce that utilities are a little bit more honest about the value of their assets, things like this. So I hope that maybe some movement could be done on that. And from what I also understand of a lot of public power acquisition cases, a lot of times the cities ultimately just end up deciding to give the utility a bit extra money just to get out of court. Because I talked to Randy Knight from Winter Park before and he’s like, we don’t really believe we should have had to pay any stranded costs, but we paid some of them just to be able to settle the deal. So it’s an annoying issue that really the biggest hurdle towards public power for most communities is not anything to do with running the utility or financing the acquisition or anything like that. It’s just the legal battle with the utility that’s going to try to rake ’em over the coals as much as possible John Farrell: For more information on this see Boulder, Colorado. Greg Woodring: Absolutely. John Farrell: So Greg, you’ve been pushing for public power since at least 2020, and I guess it sounds like maybe even a little bit before that. What would you describe as some of the accomplishments of the campaign so far and what’s coming up next? Greg Woodring: Yeah, so I think that the biggest accomplishment really is getting the phase one feasibility study funded. In the past, I think that that was a pretty big step for us that we’ve been organizing around for several years. I think also we’ve really dramatically shifted the narrative in Michigan around power in general. I think that electrical outages are something that a lot of people just see as the weather. I think that it’s pretty easy for people to just be annoyed by it, but ultimately it’s just something that you get over with and you deal with and then you move on. But I think that we’ve done a really good job at pointing out that, hey, it actually isn’t normal for us to be losing power for a week or more multiple times per a year, and it’s not normal for us.

Last year, February time, I was out of power for nine days after an ice storm and a whole bunch of southeast Michigan was. And when you look at that and then you look just a few miles to our north from Ann Arbor, Chelsea, Michigan had almost no outages and all of their outages were fixed within a day. Lansing also had about a hundred outages total, and all of them were fixed within a day. And when you point out that there’s these huge discrepancies between the type level of service that we’re getting from DTE and the level of service that others who have public power are enjoying first, it strengthens the argument for public power, but also strengthens all of the other energy justice arguments that have been taking place across the state that, hey, actually we are receiving much worse service than we should be able to reasonably expect. And there are good examples of utilities that can do this well. So I think that that’s been a big win for us just in that type of public education angle.

As far as the next steps on the campaign, while I did actually just mention that we got a huge bit of a victory last night, which was that the city of Ann Arbor is allocating the funds to do the phase two feasibility study and plan to take the next steps on municipalization and actually staff recommendations for next steps after the phase one feasibility came out a few weeks ago, the mayor of Ann Arbor made some very friendly comments and city council, and essentially the staff recommendations came out that argue for pursuing the sustainable energy utility, which I mentioned earlier, and then continuing the process for municipalization, which is exactly how we’ve been saying we think the city should pursue this because there is a huge advantage to the SEU, which is that it can stand up before the acquisition battle is finished.

Nobody really knows how long the acquisition battle will finish. Some areas are able to do it in a year. Some areas Boulder, Colorado took 10 years and we’re hopeful that that’s not going to happen to us, but it is worth acknowledging. So let’s get started with what we can do now and then continue that fight alongside of it. And so I believe that there is going to be a question put on the ballot in November that would set up the structure for the sustainable energy utility, which ultimately would be the same structure. I’m assuming that there isn’t any problems that come up, that turns into the full municipal electric utility. So I think that there’s a good chance that we’ll be throwing in and supporting that campaign if it does come up. And as long as there is some amount of assurances that it would be friendly to turning into a full municipal utility when the time comes.

John Farrell: That’s great to hear. Could you talk a little bit about how public power can help address some of the disproportionate health and financial risks of communities of color or indigenous communities? Are there folks from those communities involved in this campaign? Greg Woodring: Yeah, absolutely. Ann Arbor is a rather privileged city, it’s true to say, but there are a decent amount of lower income and people of color still within Ann Arbor and DTE is a for-profit company. They are in fact one of the more predatory companies in this angle. They’re one of the only investor-owned utilities in the Midwest – there was actually a really good report by Energy and Policy Institute on this – that actually sell debts to collectors that will garnish wages. And there have been serious deaths and health effects where people are not able to afford their medicine because their wages are being garnished by DTE. They also do electrical shutoffs in dangerous conditions. It was actually just a few weeks ago, a 70-year-old man in Ann Arbor who his house burned down. He was using propane to heat his house because his gas and electricity had been shut off.

Yeah, it is a very callous way that DTE runs through utility by comparison, with a public power utility, you can build in certain amount of equity angles, you can have programs that allow people to keep their power on even if they’re not able to pay. And in particular, our intention with this is to be moving towards clean power. DTE’s Energy generation is primarily in lower income black and brown neighborhoods throughout southeast Michigan. This is a major issue that the Michigan Environmental Justice Coalition fights on, which we are strong allies with. And Magic is also another nonprofit, Mikhail Goodman, the executive director of Magic that works on energy justice issues in Detroit area, is on our advisory board. Desiree Simmons, who does a lot of energy justice work and surrounding town Ypsilanti, is also on our advisory board. So we do take the energy justice angle very seriously. I think that is core to our campaign, and we’re lucky to have some really great activists that work on these issues that are close advisors to us.

John Farrell: I know that you haven’t rolled out a ballot initiative yet necessarily on municipalization, which is where the fire usually gets drawn from utility companies. But are you facing opposition so far on this exploration of a municipal utility from anybody other than the utility, out of curiosity, and what are some of the issues that people are concerned about? Greg Woodring: I mean, obviously utility has been oppositional, but there hasn’t been a lot of direct spending, like you’ve mentioned, just because we haven’t really started the ballot initiative yet, but there has been some hesitation within elements of the city. I think a lot of it is about just the scale of the challenge of municipalizing. There’s this certain feeling of are we going to spend all of this time and energy and money on this campaign that ultimately isn’t going to turn out, that DT could defeat things like this? And that’s an understandable concern. I think that that’s a concern that it’s our obligation as a campaign to try to put at ease by showing that we’re serious, that we’re going to continue to work on this and that we’re setting up for a campaign that could win. And I think that we’re making progress on starting to assuage those fears. I think the movement that we’ve seen in the last couple months from the city goes to show that I think the city is really starting to move on this issue and starting to believe that this could be possible, which is really inspiring to us and exactly, I think, where we need to be getting. John Farrell: So speaking of that uncertain outcome, most of the public power campaigns in the past decade or two have not ended with a public power takeover even against some utilities, like in Maine most recently, with an absolute terrible record of both high bills and poor service. What is it that gives you hope that Ann Arbor can be different and can be successful? Greg Woodring: Yeah, I mean, that’s a fair question. First I’ll say that I don’t think that you get anywhere without trying. Maine fought a great campaign, but ultimately wasn’t successful. However, there was some good things that came out of it. They also passed on that same ballot, a proposal that bans foreign owned companies from spending on their elections, which just so happens in Maine, that their utilities are foreign owned. And I know that there is certainly some amount of desire to run this again, and I think that you will see another campaign come out of Maine, and I’m very hopeful that they’re going to be successful there. But yeah, it is a really tough campaign. It takes a very serious effort to be able to do this. You need to have a city that is taking this seriously, that is well staffed, that is going to be able to do its due diligence, that that has good legal advice and is not going to be making mistakes that lead to excess litigation.

And you also need a strong community grassroots effort and a population that’s willing to do it. I think that Ann Arbor is a prime place for a campaign like this. Ann Arbor is a city that very much likes to pride itself on its progressiveness, it’s home to University of Michigan, which the students for the Democratic Society were founded out. There’s a strong spirit of social progress within Ann Arbor that I think helps motivate our campaign. And on top of that, we are really experiencing a utility in decline. I mean, maybe not financially, but certainly in terms of their infrastructure. When we started this campaign, we could not have believed that DTE’s service quality was going to deteriorate so quickly. DTE already wasn’t a very reliable utility when this campaign started. However, the last few years have really gotten bad. By some metrics I’ve seen that were DTE is the second worst utility in terms of reliability in the country, and we’re also paying about 21% above the national average for electrical bills.

So I think that the fundamentals of why you would want to municipalize are very much in our favor. We’ve got a strong climate commitment along with the population of people that are very climate focused, that just recently last year voted to raise their taxes by a total of $7 million a year just to spend on climate. And this is an area where we can allow a city to take action on climate that ultimately is actually going to financially benefit a city by ultimately lowering costs, at least in the long run. And on top of that, something just needs to be done. I think that there really is a strong feeling within Ann Arbor that level of reliability that we’re seeing from DTE is unacceptable, that we cannot continue to be living like this. And there really isn’t a legal option for us, especially because of that franchise agreement deal, where we’re not allowed to get off DTE unless DTE sells us. Municipalization is the only real option. We have to increase our reliability. And so I think that even the people who have are kind of skeptical of our ability to succeed at this, at the city’s ability to run a utility, things like that, I think they’re coming around to the feeling of, well, we’ve got to at least do something and this is an actual plan that can provide us better reliability.

John Farrell: In your experience working on this, Gregory, what advice would you have you developed that you might give to other folks who are competing for public power across the country? Greg Woodring: I would say that there have been more times that I can count that I thought we were facing problems that there was no way that we would overcome them, that these were intractable problems that were going to kill the campaign, and for some reason we decided to keep going. And every single one of those times we ended up pushing past those problems and continuing to find progress. So I would just say that you need to be tenacious in a campaign like this, and you need to be a little bit stubborn and maybe a little bit foolhardy because this is a very difficult thing. It doesn’t happen very often, and there’s a reason for that. It’s really, really difficult. So if you want to be successful at this, then you just need to be willing to keep trying.

And I would also say don’t let anybody else set your pace. You need to make sure that you are willing to go in this for the long run and that you are going to take all the steps that you need to take to make this successful. Don’t let people slow you down, not unnecessarily. Push for things to go as quickly as they can, but at the same time, you really need to just buckle in and accept that this is a multi-year process. It’s probably a decade of your life that you’re putting in towards this, and maybe you’re not going to be through all of it, but someone’s going to have to, and you’re going to need to be prepared to pass the torch if that’s the case, because it’s a hard fight. But in my opinion, as someone who has already spent a little over four years of my life on this and plans to spend a considerable amount more, it’s worth it.

This is one of the few ways that I’ve seen, at least that I feel, like it can really tangibly affect the climate crisis. I think that this is, climate crisis is one of those things where it just feels so much bigger than us all the time. So many people have all of this type of climate anxiety, this worry and this feeling of helplessness. And I was one of those people. I was someone that felt like this is this existential threat that there’s nothing I can do about. And well, I still believe it’s an existential threat. I don’t feel like it’s something I can’t do anything about anymore. And I sleep a lot sounder because of it. So if that sounds like you, I would recommend looking into something like this and starting this fight because it’s really the only way that I’ve ever found to make those feelings go away is to start doing something about it.

John Farrell: Well, Gregory, thanks so much for taking the time. I really appreciate it. I’m excited to share the story of your work, and it’s real inspiration for those of us who have dabbled in this ourselves. I was 10 years ago in Minneapolis working on a municipalization fight that took an interesting turn and is still developing interesting results. So I really appreciate and can understand the value of the work that you’re doing. Greg Woodring: Thank you so much, John, and I really appreciate the work that you do. Institute of Local Self-Reliance is a fantastic organization that I much appreciate. John Farrell: Thank you so much for listening to this episode of Local Energy Rules with Gregory Woodring, president and founder of Ann Arbor for Public Power. On the show page, look for links to the video interviews with Gregory about the Ann Arbor effort and the website of Ann Arbor for Public Power. We’ll also share links to ILSR’s Voices of 100% podcast series that explored how cities with ambitious clean energy goals could achieve them, as well as ILSR’s Public Power Podcast series, a six episode deep dive into public power campaigns, their hopes, their limitations, and their achievements. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

Ann Arbor is Trapped in a Bad Contract

Thanks to Michigan’s Foote Act of 1905, Ann Arbor has been locked into a franchise agreement with its investor-owned utility for more than a century. While the law prevents Ann Arbor from renegotiating its contract or finding a new electricity provider, the city could still provide electricity service to its own territory. Ann Arbor for Public Power is a coalition advocating for the city to do just that.

DTE Energy, Ann Arbor’s incumbent electric utility, provides unreliable service at a premium. Woodring describes how a publicly-owned utility could better serve Ann Arbor, since it would have access to low-rate financing and no profit motive. A public utility would also stay out of local and national politics.

How is it that [public] utilities are able to charge less rates for considerably a lot higher reliability? Well, it’s because it’s just a more efficient system. It’s not like they’re some utopia. It’s not like they have the best government in the world. Their roads are just as bad as Ann Arbor’s. However, the structure of the utility is more efficient.

Something’s Got to Give to Achieve Ann Arbor’s Goals

Ann Arbor has a goal for community-wide carbon neutrality by 2030, but Woodring is skeptical of any pathway to this goal with DTE as the local electricity provider. Right now, the city’s plans include participating in a carbon offset program and potentially launching a sustainable energy utility. A municipal utility, counters Woodring, could more concretely reduce emissions and increase reliability.

Ann Arbor has completed a phase one municipalization feasibility study. Woodring believes the acquisition costs are reasonable, but the estimated legal costs are overblown. A phase two feasibility study, which Ann Arbor has allocated the funds to run, could hone in on the cost of municipalization.

There really is a strong feeling within Ann Arbor that the level of reliability that we’re seeing from DTE is unacceptable… Municipalization is the only real option. We have to increase our reliability.

Episode Notes

See these resources for more behind the story:

• Watch a video interview with Gregory about the Ann Arbor effort and explore the website of Ann Arbor for Public Power.
• Listen to episodes from ILSR’s Voices of 100% podcast series, which explores how cities with ambitious clean energy goals plan to achieve them.
• Listen to a six-part special series of Local Energy Rules: The Promise and Peril of Publicly-Owned Power.

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country using ILSR’s interactive Community Power Map.

This is the 207th episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update. 

Featured Photo Credit: iStock

Local solar offers relief from exorbitant electric rates, but San Diego may need a different utility business model to see dramatic savings.

For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Dorrie Bruggemann and Bill Powers, Campaign Coordinator and Campaign Chair of the Power San Diego ballot initiative. They discuss how a publicly-owned electric utility would be more supportive of distributed solar, offer lower rates thanks to that solar, and what it will take to bring the municipalization decision to San Diego voters.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Episode Transcript

Bill Powers: Those highest rates in the country that we’re paying have a big element of transmission and even distribution, but not distribution in the city, such that we can focus on solar to lower rates. And so our whole mantra is lower rates and how are we going to lower rates? We’re going to lower rates by maximizing solar and battery storage in the city. Not because it’s a feel good thing, even though it is, but because that is the most effective way for us to lower rates. So our whole mantra is Lower rates. Lower rates. Dorrie Bruggemann: Yeah. So it’s really a win-win win because as it turns out, focusing on a very logical and sensible clean solution to our energy needs, which is local rooftop solar, is also the more affordable way of powering our city for our rate payers. John Farrell: Why rent the grid when you can buy? That’s the appeal of Power San Diego ballot initiative campaign, asking residents to join them in addressing some of the highest electric rates in the country. In this episode, recorded in March, 2024, Bill Powers and Dorrie Bruggemann, campaign chair and campaign coordinator with Power San Diego ballot initiative, discuss the growing popularity of the campaign to change ownership of the electric grid in San Diego. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance. And this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. Dorrie and Bill, welcome to Local Energy Rules. Bill Powers: Thank you, John. Dorrie Bruggemann: Thank you. Glad to be here. John Farrell: Well starting with you Dorrie. One thing I love to ask my guests is how did they get to what it is that they’re doing now – that is, the exciting thing that we’re talking about on the podcast. So Dorrie, could you talk a little bit about what motivated you to join in on this campaign Power San Diego? Or do you have a background in clean energy or climate work or politics? What is it that got you here? Dorrie Bruggemann: I would say the main thing that got me here at this moment in time was definitely some serendipity. I have experience in campaigning. I’ve worked on a couple campaign cycles as a field organizer, as a coordinator. But prior to this role, I had actually been working for a couple of years in tech for a tech company, and I had that position because I needed some stability in my life. After working in the 2020 campaign cycle, I got a little burnt out. I got a job that was stable, but I always knew that that was something that was going to be temporary. I knew that I wanted to find a job full-time in advocacy once I got my feet underneath me a little bit. So as 2024 loomed closer, I started looking at campaign jobs more and more. I knew I wanted to be engaged to some degree with a campaign, with something that was important to me. And environmentalism is a cause that is near and dear to my heart.

A lot of my free time here, since I’ve been living in San Diego, I’ve spent volunteering more in the urban planning, transportation sector of advocacy. But I was very lucky that I was told about this campaign and I was not a public power advocate. I didn’t know a lot about the energy space and about public power, but I was educated by people who I trusted and people who I respected with their environmental work. And I saw this opportunity and I wanted to jump in. It seems like a great cause and I’ve been very lucky to have learned a lot about public power since then. So it’s definitely a cause that I now care a lot about myself as well.

John Farrell: That’s great. I love the idea that you slew the political dragons in 2020 and were like, you know what? I want a bigger challenge. Let’s take on a monopoly utility this time. Dorrie Bruggemann: Yep. John Farrell: Maybe you wouldn’t describe it that way, but that’s the way I picture it.

Bill, tell me a little bit about how you got here to be working on this public power campaign.

Bill Powers: Well, going back 25 years, we had a major energy crisis here in California in 2000, 2001. And frankly at the time or just before that, I thought the So-called public utilities were like the fire department, the investor-owned utilities. And that was a wake-up call for me and I was working for myself. I’m a professional engineer, Powers Systems, working independent consultant and realized that I’m probably one of the few people who has enough freedom of movement to engage in this as an activist and working with nonprofits who often are right on the money with common sense and understanding what’s happening, but don’t have the resumes to be effective before the utilities commission or in a courtroom, that type of thing. And I saw that as added value I could provide to the process working with nonprofits in communities.

And fast forward, I think you and I met 10 or 12 years ago in California when it was a community choice aggregation conference in San Francisco. You had that wonderful opening slide of a hammer and sickle on a eastern European sedan to give a visual to all of us of what an investor-owned utility was all about, private monopoly. And so that one of the best images I’ve ever seen, John, so congratulations. But we were fighting for community choice aggregation, I know we’ll talk about it a little bit in this podcast, as maybe the holy grail. Maybe if we can get supply, then we can say we want rooftop or we want all these things that we think we should do and we’ll talk more about that. But community choice aggregation really hasn’t lived up to its promise out here in California. So I’ve been constantly engaged in pushing back not only on our local utility, San Diego Gas and Electric, other California investor-owned utilities, other investor-owned utilities in their holding companies around the country.

And yes, I agree with you a hundred percent. It’s basically the same story everywhere. And the same co-opted entities that are ostensibly regulating and looking out for the public are not doing it effectively. And so fast forward to last summer, it’s called exhausting your administrative remedies. I’ve done everything I can think of to try and change the bow of the boat with how the investor-owned utility is handling its infrastructure projects, rooftop solar. And I don’t think I’ve moved the bow of the boat much in all of those interventions. And so we have been talking for years out here about we have the fundamental right to provide utility services to our residents. We do have a public utility for water and wastewater. We don’t for electric, we don’t for gas, but we have a model here in town.

We also essentially, this relationship with our investor-owned utility San Diego Gas and Electric, not that different between you and your plumber, it’s a contractor. It’s just in a very elaborate contracting relationship, but it’s a contractor. And also in our city charter, we have the right to terminate that relationship at any time if we see it to be in the welfare of the residents to do so. And so at least last summer, paying the highest rates in the country, our utility has been relentlessly attacking rooftop solar for potential new owners. And it is now relentlessly attacking existing owners of rooftop solar with proposal for graduated fixed fees that would selectively hit existing rooftop solar owners. And so last summer it was, you know what? This is the right time. Our community is fed up with the utility. The utility is working in full daylight on all of these efforts to undercut everything we care about here. And this is a unifying issue for our community. Democrats, independents, Republicans, and we get a big election coming up, so we’re going to have everybody out. So over lunch at a restaurant, several of us who have been energy activists for a long time said, let’s just do it. Let’s just go for it. And that’s how it started. And that was Midsummer last summer and it’s picked up momentum from there.

John Farrell: You have a great short video that I saw on the campaign’s website, We Are Power San Diego, that outlines one major reason that you’ve been interested in public power high electric bills. You’ve kind of alluded to the issue around rooftop solar. Are there other reasons that you feel like have really motivated you or motivate people who hear about the campaign who are like, yeah, this is why I think this is a great idea? Dorrie Bruggemann: So I think that high rates is really what we’ve been putting forward with this campaign because it’s such a nonpartisan issue. It’s something that really every person on every end of the spectrum can relate to, especially here in San Diego, which is one of the highest cost of living cities in the country. I would say a lot of people who care about the environment who are environmental activists, including myself, are the ones who really get excited about this campaign, really want to support this campaign on that level. So I think that that’s definitely a big thing that pushes people forward. But I like to tell people that there’s really no angle that you cannot wrap somebody into this campaign and show them why public power applies to them, whether it’s economic justice, whether it’s, I even like to say even if you’re a hardcore capitalist, it’s about anti-monopoly. There are a lot of reasons why public power is important in our region and why doing something about the SDG&E monopoly is important. So those would be the ones that I would highlight. Bill Powers: Yeah, we actually assumed that our innate constituency would be existing rooftop solar owners, about 20% of the residential customers in San Diego have rooftop solar and we have a very high level of rooftop solar penetration. And to our chagrin, what we found is that this constituency that we intended to protect figured they were already protected. I got rooftop, I’m good. Good luck with your public power effort. No, no, no, you don’t understand. You’re about to get hit with this fixed charge that is specifically targeting you and you should care about this. But we have to talk to rooftop solar owners to let them know that no, you are not for now and forever forward free of the utility and the shenanigans that the utility can play. Dorrie Bruggemann: And I would also add that there’s also just a general justice and accountability and transparency angle to public power. The fact that we have these for-profit monopolies that have really infiltrated our government, our systems, they have a lot of money in the community, in various, various avenues. They’ve been very strategic with how they’ve allocated their power and built connections. So if you’re somebody who wants the government to be free of corporate interests, there’s a lot to say about public power and what it means to shift the balance in society towards public ownership and more power to the people and more transparency in our leaders. John Farrell: Can you talk a little bit about how on the costs, on the solar, on the corporate power, how does public power help solve these problems? Just to be really clear. Bill Powers: Well, in our particular case, what public power and what we’re specifically addressing in this ballot initiative is we want to take the electric distribution grid in the city public. Transmission, interconnection with our distribution grid will stay with the investor-owned utility SDG&E. But what that would do is it would make us basically an island nation and we would have a toll booth with those transmission and distribution substations, meaning whatever we generate on this side of those toll booths is our business. Everything we bring in over those transmission lines, we have to pay the toll, which is the transmission fees and numerous other fees that our California Public Utilities Commission puts on that power. We would not have to pay those anymore if we are a local public utility. So what does that mean here? We pay the highest transmission charges in the country, San Diego Gas and Electric specifically, those charges are actually greater than a one-off commercial rooftop solar array on a Walmart or on a Costco.

And so though it sounds counterintuitive and our focus is our focus is primarily on commercial rooftop and parking lot or ground mounted solar in the city, not unlike those community solar arrays that you talk so much about in Minnesota, that kind of scale and as well as supporting residential rooftop, but those highest rates in the country that we’re paying have a big element of transmission and even distribution, but not distribution in the city, such that we can focus on solar to lower rates. And so our whole mantra is lower rates and how are we going to lower rates? We’re going to lower rates by maximizing solar and battery storage in the city, not because it’s a feel-good thing even though it is, but because that is the most effective way for us to lower rates. So our whole mantra is lower rates, lower rates.

Dorrie Bruggemann: So it’s really a win-win win because as it turns out, focusing on a very logical and sensible clean solution to our energy needs, which is local rooftop solar, is also the more affordable way of powering our city for our rate payers. In order to focus on this, we have to have public power because we need to have a utility that prioritizes sensible, logical solutions and doesn’t prioritize instead their profits and their shareholder values. So in doing so, switching to public power, we’re getting the lower rates, we’re investing in local clean energy and we’re reducing the influence of a massive for-profit monopoly that has control over our city. John Farrell: Maybe just to drive the point home, I know I talk about this a lot in my writing and whatnot, can you just briefly talk about why it is that San Diego Gas and Electric doesn’t want to do this? So you’ve already made the point that this process or this focus on local solar would save a lot of money on this toll booth that you’re otherwise having to pay to bring electricity into the community. Why wouldn’t they want to do this if it’s a win-win? Bill Powers: As an entity that for a Century plus has gotten its revenue and its profit from building infrastructure, the problem, the conundrum for San Diego Gas and Electric and all the investor-owned utilities is if customers start empowering themselves and taking care of themselves, even if it’s diesel generators, we’re talking about rooftop solar, but anything that reduces the dependence of the customer on the utility reduces the potential for the utility to expand and grow its revenue base through its own infrastructure. And so there have been efforts around the country, the performance base rate making, hey, is there a way now that all the customers can generate their own power? Is there a way we can adapt this model so that the investor-owned utility had some incentive to support this common sense loved by customers approach?

And I think for the investor-owned utilities and holding companies, investors just like this bird in the hand is worth 10 in the bush. I mean, this is such a gravy train that we will never see a gravy train like this again, and we will defend it to the maximum extent in the right. This is an over the top gravy train, and I would expect this will be like the dinosaurs. There won’t be a negotiation where we sit around and intelligently talk about performance-based rate making and make that shift. This will be communities getting fed up that have the fundamental right to take this service back to the community as a public community-based operation. And they just do it.

Dorrie Bruggemann: To put it in the most simple words possible, local rooftop solar customers investing in their own rooftop solar, it doesn’t make SDG&E any money. It doesn’t make the for-profit utilities money. So they don’t like it and they fight it. John Farrell: I think that’s very clear. Let me talk about something else. A big issue, and you kind of alluded to this before, Dorrie, about some of the motivation that folks would have to care about public power. One of the big motivations we have in our clean energy transition is trying to address some of the disproportionate health and financial risks to indigenous communities, communities of color, folks who have often borne the heaviest penalty from the fossil fuel economy, having to live near gas pipelines and transfer stations and power plants. Are there members of these communities involved in the campaign? Is there some intentionality in this public power campaign thinking about how do we address the needs of those communities? Dorrie Bruggemann: So there are some folks involved with the campaign who belong to frontline communities, and for me coming into this campaign, it definitely has been a goal of mine to continue to do more in that regard. I say we have some folks involved and we do. I’d like to have more. And signature collection for this ballot initiative, it does represent an opportunity to reach out to more communities to extend a hand and provide some of that education on what is public power and what are we trying to do and bring those people in. So that is something that we certainly have on our minds in this campaign are working towards doing more and more. And I’d really like to see here in San Diego that coalition continue to grow and to build so that we can be elevating the voices of frontline communities. Bill Powers: As the primary author of the ballot initiative language, one tool that I have really been attracted to for years that the utilities have paid lip service to for years is on bill financing and on bill financing tied to the meter, not to the individual, which is what’s being pioneered out in Hawaii as a tool to get rooftop solar and battery storage on the homes of renters, the homes of people with poor credit, the homes of people that could really not aspire to own and operate systems like this ever is to build a tariff base so that you can legitimately say it’s equitable, that if you want it, there’s a way for you to get it in a way that works for you economically. So that’s actually something that we baked into the mission statement of the public utility. Dorrie Bruggemann: Yeah, and one thing about also our campaign is that there has been activism in San Diego for a while on this issue. There is, as you mentioned John, and our communications with the franchise renewal and the franchise fights, there has been an ebb and flow of coalitions and groups that have come together and fought in certain key moments. I think the key here is just continuing to recognize that every time we are doing that coalition building work that we’re keeping a very keen eye for, are we representing all of the communities that are here in San Diego? And making sure that that’s always something that we’re thinking about doing more of every time we’re doing any form of organizing. Bill Powers: Another comment on this is long before this ballot initiative launched, we were having meetings with the local credit unions about, hey, you’ve got these, we have some interesting programs for financing green upgrades in California, and the most active player are credit unions and the most active player is my credit union. And the office of my credit union is 30 feet from this window here. I mean, it’s my neighbor in this office area. And so I’ve had meetings with them saying, look, you invest almost exclusively in home loans and auto loans, but you also have this lead in this nascent program for funding green energy conversions for primarily lower and middle income folks, but it’s based on credit score, kind of a traditional credit review, but they’ve got billions and billions of dollars that they’re turning over every year collectively the credit unions in this city. And that’s the kind of economic clout that could do major conversions in neighborhoods that historically have had relatively little involvement in clean energy. And so we’ve had those discussions. They’re like, you set up the program we’re in. John Farrell: That’s great. I’m so glad you mentioned the on-bill financing. I just interviewed Matt Flaherty from Clean Energy Works. The term of art they’re using now is inclusive utility investments, but it was noteworthy that most of the leading utilities that have done that are cooperatives and other member owned institutions and not investor-owned utilities. But I’m really excited to hear that you’re thinking about that as part of this, because in that interview he talks about just how transformational it can be to reaching some of those folks who are otherwise not covered.

We are going to take a short break. When we come back, I ask my guests how public power addresses problems that community choice energy cannot, we talk about the key moment recently when a 50 year franchise agreement was dramatically shortened, and the nature of their campaign’s opposition. You’re listening to a Local Energy Rules podcast with Bill Powers and Dorrie Bruggemann with the Power San Diego ballot initiative campaign.

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John Farrell: You mentioned a little bit the community Choice Energy as part of the history of this work, and I remember, I think I interviewed someone who was part of the community choice effort in San Diego maybe 10 years ago who may still be involved in the work that you’re doing now about the effort. Can you talk a little bit about why that isn’t enough? I think you kind of alluded to that before about this transmission toll booth and maybe that’s it, but the idea behind community choice was of course cities could choose where the electrons came from, but they wouldn’t have to buy the poles and wires, which is usually what’s involved in municipalization and frankly is one of the most contentious points of it, where the utility will do a little Austin Powers or Dr. Evil thing with their finger and say, that grid will cost you $10 billion. And then the city will litigate back and say, actually it’s only a billion dollars or half a million dollars. And then of course there’s also the whole mythology of you have to buy the grid, but it’s like, yeah, but I’m also buying the customers who are going to be shopping for me. I dunno, the whole thing bothers me the way that we have the conversation about the cost of the grid.

So now that I’ve taken a nice detour, bring me back home. Why public power instead of just community choice? What is so important about having ownership of the grid system in the context of the goals around reducing energy bills and the other things that are motivating the campaign?

Bill Powers: Touching for a moment on community choice energy or aggregation. The concept has merit fundamentally, but the power in energy politics of this state, which is what I know best rests squarely with the utilities and their holding companies and even our editorial board at the paper of record here, San Diego Union Tribune, identifies the California Public Utilities Commission as the captured regulator captured by the investor-owned utilities. And the utilities, community choice energy, they have expertly ratcheted down its range of motion so that it’s essentially now just become, and this is my personal view, that community choice energy by and large across the state, they see their role as very limited to just looking to get big remote solar and wind capacity at a couple of dollars a megawatt hour less than what the investor-owned utility would have gotten for the same project so that they can come in and say, hey, the generation side of your bill, which is small, is going to be 1 or 2% less in cost than if it were the utility. And it’s still only a small part. So fractions of 1% savings by going with community choice energy over the utility.

And a lot of people say, well, really, I mean that’s all we’re getting out of all this drama about having this entity. And I’ll put that partly on the ability of the utilities to control the game and impose conditions on those community choice aggregators that make it very hard for them to do anything but status quo type work. But it’s also I think CCA myopic understanding of what their mission is, and if you just look at it as our mission is just to provide power supply at some incrementally lower rate than the utilities are providing. Okay, well what about the fact that if you’re buying New Mexico wind power and you’re a coastal Southern California CCA, or if you’re buying solar power in Arizona, how’s it going to get here If you sign a thousand megawatts of contracts, how does it get here? Somebody’s got to build a transmission line. Right. Do you think that may play into why the utility seemed quite comfortable with your role at this point? If all you’re doing is what they would’ve done anyway to facilitate multi-billion dollar transmission expansion, you’re welcome at the table.

And so I’ve also had conversations with them saying, since I was one of the promoters of this 10 years ago, what was our concept? We were clear about it that we would concentrate on massive build out of solar in the city. It doesn’t have to be rooftop, on residences or only that, but you can aggregate 10, a hundred, 500 kw or megawatt rooftops into huge projects just as big as those desert projects. And maybe they cost a penny more collectively than the desert project. That’s okay. That’s what we want. It’s not so much you knocking a percent or two off the power supply bill. It’s about implementing a vision that takes us in a different direction and that has not happened.

Dorrie Bruggemann: Yeah. One thing that we like to say when we’re talking about the difference between community choice energy and public power, obviously as you said John, it’s the ownership part of the equation is really the significant difference there. And I empathize and relate to what you’re saying that people, they worry a lot about that price tag with getting to the point of public ownership. So one analogy that we use a lot in the campaign is community choice energy here in San Diego, we’re effectively having to pay rents on our grid. We have to pay the owner for the rights to use the poles and the wires. And we all know, especially maybe some of the younger folks here that paying rent, paying rent is real drag and it really, really brings down your pocket books. So in contrast, ownership, paying a mortgage, is it something that still costs some money? Yes. But it’s something that allows you to invest in the community to invest in what we need here in San Diego versus paying rent to really an owner who’s just here to make money off of us. So that’s what I try to say to maybe change how people are thinking about that, but it’s a work in progress. John Farrell: One of the things I thought was interesting in looking at some of the history of the campaign in San Diego around clean energy and affordability and public power, it looked like there was sort of a key moment about two years ago when the city was voting on the renewal of its franchise agreement with the electric utility, San Diego Gas and Electric. Could you talk about, maybe give people a little preview of what does this franchise contract mean? What does it do? We have some information on our website, but I think in your own words, what does that contract mean? Can you talk about what happened with that vote and how it impacts the public power campaign? And then also I know that there was a fee attached to that and some revenue as part of that conversation. If you could delve into that once you’ve explained the basic concept there and how it might’ve interfaced with the public power effort. Bill Powers: Sure. This is about a three hour comment. John, do you have that time? I’ll shorten it. John Farrell: It’s okay. We will ask people at this point, please, on your podcast listening device, turn the speed up to three times. We’ll all sound like chipmunks, but we’ll get through it. Bill Powers: So our gas and electricity provider since the 1880s has been San Diego Gas and Electric. And so basically the 11th commandment was San Diego shall have San Diego Gas and Electric as its gas and electricity provider forever. And so the city signed a 50 year franchise agreement for gas and electricity with SDG&E in 1920. They again, in 1970, signed a 50 year agreement. Though you may recall, 1970 was a tumultuous year in the United States and there was a dog fight in this city in 1970 over the renewal of that franchise agreement. And the consultant to the city said, hey, but for very high interest rates at this time, you should go public power. That was 1970. So as we approached the 2020 year, those of us in energy in politics to the city said, we got to prepare for this. I mean, we should make sure that we have some kind of off ramp to public power. This is not working.

So I was part of a nonprofit effort to do a public power study. We contacted Boulder, Colorado, got a good consultant out in North Carolina, did a good study on public power. It said it’s a winner, especially distribution grid only. Great. We shopped that around to the city council, let everybody know, and just kind of built some anticipation as this became more of a political issue in the city. The city also commissioned a public power study. The consultant in that case said, look, public power is a winner for this city. And they gave us pricing on the grid, the assets, and said, you write the franchise agreement terms you want for electric, and if the bidders do not agree to exactly what you want, you go straight to public power. Interest rates are dirt cheap. This is the time to do it.

So that’s what we got from the consultant to the city. Then we had a change in administrations and we went from an R to a D, but it actually, as you know, doesn’t necessarily change anything. All depends on who was closest to whom. And so it actually got less favorable with that change for public power. And the new administration signed a very favorable agreement to San Diego Gas and Electric. However, there was a dog fight on the city council. We kind of had the votes briefly to stall that franchise and get a good public power off ramp, which is, let’s put some rigorous but doable requirements in the franchise agreement for clean energy, local rooftop power serving the underserved. We know this utility is going to trip over it. Sooner or later, they’re going to trip over a requirement. And let’s just say you trip over any requirement, we go straight to public power. That’s what the consultant was advising.

But that didn’t happen. I mean, SDG&E got basically a free pass. In fact, that’s one of the reasons why we have some strength going now on ballot initiatives. That happened very recently. That was only two to three years ago in that span. That was a marquee issue in this city in 2021. That was a big deal. Everybody remembers. And so we have somewhat educated populace about SDG&E basically getting its cake and getting to eat it too. And so there was a lot of public dissatisfaction with how that came down.

And so that’s really where we’re at. And you can see these relationships here now that we’d actually recommended to the city that the consultant that did the work in 2020 be rehired for yet another study. The third study that we’ve had in six years is mostly complete at this point. They did bring in that consultant, consultant has a good reputation, but it’s really what you do is dependent on what your client instructs you to do. There’s no reference in the new study that we’ve ever had prior public power study. We’re not looking at a distribution electric grid anymore. Now we’re looking at T&D. But what does T&D do? It involves a lot more actors and it greatly extends the review time. And so we’re in a position as a campaign to say, because now the utility is saying, well, let’s just wait. There are multiple phases to our municipalization study. Let’s circle back in 2025, we’ll have another chat. Then next phase will be done in 2040. We’ll circle back down, and I’m exaggerating when I say next phase in 2040, but you know what I mean. This is, I think, the analysis paralysis is what I call it. Is let’s throw the community a small bone. Let’s tell ’em we’re thinking about it and let’s just keep thinking about it until the cows come home.

And so what we’re saying is we’ve got plenty of studies, and unlike many communities, we pretty much know exactly what the assets cost. We know the different governmental structures we have available to us. We’ve chosen one. And just to underscore, and you can probably sense a little frustration in my voice this second phase, that first phase, which covered everything, finished in July of 2023, this next phase finishes in mid-summer 2025. What’s the primary happenings in that next phase? It’s consultations with the community. What should have happened before the first phase even started? Consultations with the community, consultations with the community choice aggregator. But the study says, we’ll just continue to take power from the community choice aggregator.

So what’s to consult? That’s what’s in the study. That’s what we’re assuming, but what are the bulk of the consultations? The consultant in the city will go out to get insights from San Diego Gas and Electric. The city will go out and get insights from the San Diego corporate electricians union, IBEW 465. Well, we’ve seen those insights at our meetings, which are hell no to any discussion of public power. And so it just gives you a sense of, insights when you’re talking about a hostile takeover, what insights do you anticipate getting from your opponent in the ring other than a knockout punch? And so just to give you the flavor of the politics, and Dorrie and I were just talking about this before the call, is that this could not have happened any other way, meaning the institutional players in the city have directly or indirectly some kind of tie with the investor-owned utility or its holding company. That makes inconvenient any significant discussion about a wholesale change out that the only way this could have gotten started is as grassroots. We’ve had enough initiative because if they’re too embedded, they’re too embedded in the political structure of the city to have been able to negotiate some kind of momentum to then get funding. And it just had to be, you know what, this is the moment and we’re not sure how we’re going to get it done, but this is the time to move.

John Farrell: I want to reference one thing really quick in this conversation about the money to buy the grid system. Dorrie, you made, I think, a really helpful top line reference to how you can talk about this with people. It’s the difference between renting and owning. One thing that’s really struck me about this from, we did a public power podcast series. I did six episodes about public power kind of campaigns that had been done, what people were trying to get out of it, what had happened with a lot of the campaigns and how they had played out. And almost every campaign did some sort of feasibility study. Almost every feasibility said, this is a good deal. You should do it. Because of course, the major difference between private ownership and public ownership is the profit margin that the private utility is taking that they’ll no longer be taking.

And so it’s like, how can you possibly do this and not save money knowing that you’re going to cut that profit margin in half or more in terms of interest rates and cost of capital? And it really comes down to this issue I discussed with Scott Hempling, who has a long history in doing utility law and regulation has been an administrative law judge in this issue. And I think he covered it in his book, but in a podcast where we talked about it, that it’s essentially the utility is taking this public asset, the distribution grid that we’ve all paid for. So we’re renters, but it’s paid off, right? Sure. They’re doing some upgrades to it. We basically own it or we would own it if it was any kind of justice in the structure of the system. And then they’re selling it to us at a premium. That’s the only possible way that we could not get a good deal here is if they’re somehow being able to profit off holding this monopoly ownership of a system that we gave them. So it’s like we gave it to them as part of their operation and now they’re going to sell it back to us at a premium, which is the only plausible way. It couldn’t be cheaper to operate the system. I don’t know. That just drives me crazy.

So I don’t know if you have anything you want to say to that, but just I keep thinking about that every time I talk with folks like you who are working on these public power campaigns, everybody gets hung up on the economics when the truth is the utility is just making a buck off something we gave them in order to sell it back to us at a price premium. It’s ludicrous.

Bill Powers: Stay angry, John. Dorrie Bruggemann: Yeah, I mean, they get to charge us. They get to charge us three times for the same thing. They charge us, especially in the case of SDG&E, when they charge rate payers to build these massive transmission lines from these far away solar farms in the desert. So they charge the rate payers to build the transmission line. They charge the rate payers for delivery of the energy on the transmission line. And then in the case of the delivery that’s happening within the city, the distribution, they’re also charging again if we want to own it ourselves. So they really get to charge for both the existing grid that’s been around for a long time and for new projects, they get to charge us several times over for the privilege to operate the electric grid. Bill Powers: It’s a motivator. John Farrell: Yeah, absolutely. This last question I have for you about who’s the opposition and what is their issue? I think we’ve probably nailed this down pretty well already, that the utility is not a fan. You also mentioned the IBEW and there is a long history of unions representing workers at utilities sometimes because they have to in their union contract and other times just because they see alignment in continuing their jobs, being in lockstep with utilities, private utilities, to oppose public power. Are there other folks that you’re finding maybe that are sort of surprising or not surprising, but big players in terms of opposition? And are there any particular ways that they’re going about it that is really complicating your work? Bill Powers: I might start on one issue for us is, and this was much more transparently done than I would’ve anticipated, but San Diego Gas and Electric has formed a solely by them funded political action committee who has one role, which is to stop our ballot initiative. And I didn’t check, I was meant to check before this call because they keep pumping money into it. Last I checked, they put $560,000 into it. And what they’re doing is the same game plan that they have used. So in this case, they are the sole funder, the officers of the PAC are senior executives at the utility, they claim that they’re a big coalition that unions community groups, but they’re the only funder. But when you talk about surprises, there really aren’t too many surprises. And this is one of the advantages of all the reporting that the commission requires is every year they have to report their charitable contributions.

So we can just look down this voluminous list and say, well, this entity that represents lower income people of color gets $25 or $30k a year from utility, and now they’re writing about the nuances of income graduated fixed charges. And so what we focus on is just calling out that you see these op-eds from groups, one member of an earlier coalition that is earlier iteration of a coalition fighting for fixed charges was Meals on Wheels, for example. It’s like, well, how, one might ask, does Meals on Wheels have the chops to opine on how these fixed charges work? And they get quite a bit of money from the utility. And so what we’re doing is what we’ve done in past campaigns. I mean, this really should just be required that if you’re writing op-eds that at least acknowledge you can talk about your degrees and the good works that your entity does, and you probably do do good work, but also acknowledge that you’re a recipient of significant contributions from the electric utility to be fair to the reader. So the reader doesn’t assume that remarkably, you just got up one morning and felt compelled to write an op-ed about fixed charges even though it has nothing to do with your trajectory.

John Farrell: I’m really struck by that. There’s some excellent work out there by Energy and Policy Institute and the NAACP about that insidious connection between the charitable contributions that utilities make and then political support they get from what would otherwise be very unexpected quarters. Bill Powers: Exactly. And one of the interesting things that we have learned in the course of this campaign is we have 501c3 foundations and funds that want to contribute to our ballot initiative, some of them operating through our biggest umbrella foundation in the city, but that biggest umbrella foundation in the city is the number one recipient of charitable donations from the electric utility. And so it becomes a gatekeeper in some ways for money that might otherwise flow to grassroots campaigns like this one but cannot due to that structure. And so I had mentioned earlier that it couldn’t have happened any other way and not to comment on our chances for success. I mean, this is an uphill battle, but it couldn’t have launched any other way because the utility has embedded itself so completely in our community that it had to be an outside grassroots issue.

And I must say that no matter how it shakes out, I think it’s just given the community of bigger vision of what’s possible. I mean, until this campaign launched, it was like, in fact, I got that from many people that, hey, good luck to you, but you just can’t take on the investor-owned utility. I mean, it’s just too big a fight. Like you said, your training wheels were earned in 2020, and now you’re ready for the real political combat which is trying to knock out the investor-owned utility, which is in part true because it’s remarkable to see these interlocking relationships and webs. And I must acknowledge many people in the community stepping up despite that, despite being caught to a degree in those webs and still showing the courage to support us. But I’m glad we’re doing this for our community.

In fact, can I read when we’re among the faithful, can I read you a statement we read at all of our presentations? Can you tell me who it came from?

John Farrell: Yes, please do. Bill Powers: I believe in municipal ownership of these electric monopolies because if you do not own them, they will in time own you. They will destroy your politics, corrupt your institutions, and finally destroy your liberties, quote from a book Power Struggle. Do you know who that was? John Farrell: Oh, I’m going to guess Franklin Roosevelt, but I’m not sure. Bill Powers: Close. Tom Johnson, mayor of Cleveland, Ohio 1901. And Tom could have said that yesterday and it would’ve been spot on. And so we’re trying to just frame this issue. What is this about? Fundamentally, it’s about kind of an insidious form of corruption of our whole social network here, and it happens to be electric power in this case, or gas and power, but it does, it impacts our politics. It impacts the legitimacy of our nonprofit institutions, everything. John Farrell: It’s really striking too because as a student of U.S. political science, there was a huge effort in the progressive reform era about a hundred years ago to get money and patronage out of the bureaucracy. And so that it wasn’t the case that you would win a municipal election and then you would just hire all your friends in the government. I mean, there’s sort of famous examples like the Chicago political machine or in Boston or in New York City where the whole concept of government was basically a place where I reward my friends. And it’s funny that as you talk about this, I’m sort of thinking like, well, that’s funny, but we let our electric utility do that through charitable contributions and through all these other ways of just basically buying friendships as the incumbent, which does make this effort to unseat them as you would in a political campaign, all that more difficult. What gives you hope about being able to win, knowing that you’re in an uphill fight, or what advice would you have for other folks who are trying to think about maybe undertaking a similar challenging effort? Dorrie Bruggemann: So I have to interject here before I answer your question with a personal comment here, because now it’s been a couple of times down this conversation that you guys have referenced my 2020 experience. I seem to be creating a pattern here because the campaign that I worked on in 2020 was a statewide proposition for undoing the property tax loophole of Prop 13. So I think I’m starting to create a little pattern here of myself, of taking on massive recessive propositions and initiatives for undoing mistakes of the past from a long time ago that some seriously money backed powers are extremely interested in maintaining. So that’s just a little insight I had just now thinking about this in this conversation. Bill Powers: Very interesting. John Farrell: Well, let me give Dorrie the chance to answer this question first. What gives you hope then, knowing that you have taken on some very challenging things and knowing how uphill this fight is? And then we’ll give Bill the last word. Dorrie Bruggemann: Yeah. So I would say for me, in my heart of hearts, I’m really an activist and a people power person, and I’m all about the strength of the community. And what drives me in these jobs is seeing just the power of organizing. And I think this is an issue that, especially what we were just talking about here when it comes to public power with all that we’re facing, this is where the power of organizing really comes into play. And it’s been really amazing to see what’s happening here in San Diego. I mean, it started not with this campaign, but with past efforts to organize lots of people coming together, people are angry at SDG&E and when people are told that we can actually do something, there is a solution, we don’t have to just be angry and feel helpless, people are so excited, they are so excited, and they want to get involved.

And we’re doing signature gathering with volunteers. We have paid signature gatherers in the area. People who do this for their income or for a side hustle, they want to carry our petition for free because when they have, they’re able to put forward, oh, I’ve got the Power San Diego petition. People are coming to them and they are approaching them and they want to sign. So what gives me hope is knowing that there is so much potential for massive organizing in this region. What we have seen with this campaign and how the work that we’ve done, whether we get on the ballot or not, whether it passes or not in the primaries, the way that elected hopefuls were talking about public power and really having to talk about it in a way that they would not have if we did not have this organizing over the past few years over the issue. So that’s what gives me hope is that to me, it’s inevitable. We want to make it happen as fast as we can because it needs to, because people are hurting now. But I just feel that SDG&E’s time is nigh. So it’s exciting to see, and that’s what gives me hope.

Bill Powers: I don’t know if I have a lot more to add to that other than to say that part of this for me was, it’s so easy to be disillusioned. It’s so easy to say you can’t fight the boss, or you can’t fight this monolithic thing. But that just the fact of taking the fight to them and making it a fight, making it a debate in the city that this isn’t a done deal. This isn’t forever, that if we want to make a change, we got to start somewhere. And it just makes what I’m doing seem more vital. I’m not just in yet another proceeding at the PUC trying to change the bow of the boat a half a degree. This is changing a lot more than that, and you even see it in that PAC to throw a half a million dollars or more at us because we actually wrote a very good ballot initiative. It will pass muster if the citizens vote us vote this in and it will work, and they know it, and so they’re trying to stop it. John Farrell: Sometimes I like calling what they do the cash cannon based on how much those utilities spend on these efforts in other places. Well, Bill and Dorrie, thanks so much for joining me to talk about your work in San Diego and frankly, the inspiration of going for something that is meaningful change. I mean, I think, Bill, the way that you put it is so important. It’s not just about little incremental degrees, but trying to ask for what you actually want and what might actually accomplish something meaningful in the world. And so I’m glad that you’re providing that inspiration for others. Bill Powers: Oh, thank you for giving us a chance to talk about it, John. Dorrie Bruggemann: Yeah, thank you, John. John Farrell: Thank you so much for listening to this episode of Local Energy Rules with Bill Powers and Dorrie Bruggemann with the Power San Diego ballot initiative. On the show page, look for links to the campaign website and the short video I mentioned, as well as a TV news segment covering a protest organized by the campaign against utilities high profits. Also on the show page, we’ll have links to related podcasts, including ILSR’s six-part Public Power podcast series, the interview about inclusive utility investment, and the work by NAACP and the Energy and Policy Institute showing how utilities buy political support with charitable contributions. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

The Power San Diego Ballot Initiative

Residents of San Diego pay some of the highest electric rates in the country. Meanwhile, the investor-owned utility charging these rates profits over a million dollars a day from San Diego alone. The Power San Diego ballot initiative is a campaign to fire San Diego Gas and Electric, take the distribution grid public, and serve San Diego affordable electricity through a publicly-owned utility.

As Bruggemann and Powers explain, a public utility could reduce rates by supporting solar generation within the city and cutting out costly power transmission charges. San Diego Gas and Electric opposes local solar because distributed generation cuts into its revenue base and utilities do not profit off of customer-owned generation facilities. The public utility would also support on-bill financing, adds Powers, which can help customers go solar with no upfront cost.

We have to have public power because we need to have a utility that prioritizes sensible, logical solutions and doesn’t prioritize their profits and their shareholder values… switching to public power, we’re getting the lower rates, we’re investing in local clean energy, and we’re reducing the influence of a massive for-profit monopoly that has control over our city.

— Dorrie Bruggemann

Campaign staff and volunteers are in the middle of a push to gather signatures and put public power on the ballot.

Why Community Choice Energy Wasn’t Enough

California is one of the nine states that allow community choice energy. Through community choice, local governments can aggregate together and form a community choice entity. The entity then assumes responsibility for electricity procurement, while the incumbent utility still owns the distribution system and bills customers on behalf of the entity.

Powers was once an advocate for community choice energy, but feels the concept has become too limited. While community choice entities are getting power at slightly lower rates than for-profit utilities, they are often procuring distant generation and driving transmission expansions. It’s also a matter of renting the grid versus owning it, explains Bruggemann.

Ownership, paying a mortgage, is it something that still costs some money? Yes. But it’s something that allows you to invest in the community, to invest in what we need here in San Diego, versus paying rent to an owner who’s just here to make money off of us.

— Dorrie Bruggemann

As Support Grows, So Does Utility Opposition

Although the city already has two recent municipalization feasibility studies, another one is underway — Powers describes this effort as “analysis paralysis” that is delaying what must necessarily be a “hostile takeover.” The utility’s ties to local electeds and community leaders increases the challenge of a municipalization campaign. San Diego Gas and Electric has also poured half a million dollars into a political action committee to stop the ballot initiative.

No matter how it shakes out, I think it’s just given the community a bigger vision of what’s possible… it’s remarkable to see these interlocking relationships and webs. And I must acknowledge many people in the community stepping up despite that, despite being caught to a degree in those webs, and still showing the courage to support us.

— Bill Powers

Episode Notes

See these resources for more behind the story:

• Explore the Power San Diego campaign website.
• Watch the news coverage of a Power San Diego demonstration outside of Sempra Energy headquarters.
• Listen to a six-part special series of Local Energy Rules: The Promise and Peril of Publicly-Owned Power.
• Listen to a Local Energy Rules interview with Matt Flaherty of Clean Energy Works on inclusive utility investment.
• Dig into research by the NAACP and the Energy and Policy Institute on how utilities use charitable giving to influence policies and regulations.

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country using ILSR’s interactive Community Power Map.

This is the 206th episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update. 

Featured Photo Credit: iStock

An April election could make an Arizona utility accountable to all of its customers.

For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Charlie Fisher, Executive Director of Arizonans for a Clean Economy. They discuss the upcoming Salt River Project election and how clean energy advocates could flip the public utility’s board and reverse anti-solar and anti-democratic policies.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Episode Transcript

Charlie Fisher: Our mission as an organization is to make that a reality. To make Arizona a national leader in solar, but also in wind, and geothermal, and EVs, and storage technology. We have all of the ingredients. And changing the makeup of this SRP board is one of the first steps in realizing that. John Farrell: If you think a publicly owned utility means a paragon of openness and democracy, you might be surprised to hear of the Salt River Project, where the mantra is one acre for one vote. In an upcoming election, clean energy advocates have the opportunity to flip the SRP board and potentially reverse several years of policy blocking the use of solar energy in the U.S. state that has 330 sunny days per year. Joining me in March, 2024, Charlie Fisher, executive director with Arizonans for a Clean Economy, discussed the organizing effort around this utility board election and its implications for Arizona Electric customers. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system.

Welcome to Local Energy Rules. I just want to start off by asking you what got you into clean energy work? How did you land with this organization or how did you even get started in the climate and clean energy space?

Charlie Fisher: Thank you so much, John, for inviting me on. I’m really excited to talk to you. So I first got interested in clean energy as a freshman in college. Actually, my first week during freshman orientation had the opportunity to hear Bill McKibben, who I’m sure you’re familiar with, a fairly famous advocate, author, professor, and he gave remarks to our class about sort of the subversive nature of the influence wielded by extractive industries and even on our liberal arts campus, what percentage of our endowment was either held in fossil fuel stocks or controlled by fossil fuel interests, and how did that kind of permeate to decisions that we didn’t even see or think about? And so that sort of set me down the path of really designing a lot of my bachelor’s degree around clean energy and communications and advocacy work. I am very excited after it’s been about almost 12 years now of doing different things in Arizona, but really, really excited to be at Arizonans for a Clean Economy and focus on these critical issues. John Farrell: So I’ve talked to some folks previously on this podcast, but also many of our friends and allies who have worked in Arizona over the years, and it’s sometimes been a challenging state for clean energy work. The investor-owned utilities, for example, have put a lot of money into the election of their own regulators on the Arizona Corporation Commission, but there have also been some tangles with publicly owned utilities. So we want to talk a little bit today about the Salt River Project. Could you just kind of introduce us to this public utility, explain how it’s organized, how is it a public entity, and also maybe preview what’s happening soon that its customers should be aware of? Charlie Fisher: There has been no shortage of shenanigans pulled by some of the investor-owned utilities here. Salt River Project is a different beast altogether. So they are a public power company here in Arizona, so they’re technically a political subdivision of the state, which means that they’re not regulated for the vast majority of things by the Arizona Corporation Commission, which is our public utility regulator here in Arizona. And so the Salt River project has been around really since statehood, before statehood. And the original deal was that early 20th century land-owners, landholders, most of the agricultural interests put up their property as collateral so that the federal government would come in and build the Roosevelt Dam, which played a huge role in the development of the Phoenix metro area and building of the Central Arizona project and our local canal systems here.

In a hundred plus years since then, SRP has grown into a massive utility provider and they provide both water and electric power to Arizona families and businesses largely here in Maricopa County, the Phoenix, Phoenix metropolitan area, and have become almost as big as our largest investor-owned utility and I believe the largest public power company in the country. And so what started as this incredibly important and sort of selfless act by early settlers here in the valley has now become an incredibly powerful utility company with very, very little oversight or accountability. And so yeah, we’ve been getting involved to try to raise awareness about how people can make their voices heard and the leadership decisions.

John Farrell: So you have an election coming up for the board of directors, the governing body of this entity. When is this election and who can vote in it? Charlie Fisher: Yes, like I mentioned, the SRP is not regulated by the Arizona Corporation Commission. Instead, they are regulated by a series of governing boards and it’s a little convoluted, so bear with me. You have the district, which is the power side of SRP, and then you have the association, which is the water side. They each have their own board. One is called the board of the directors, one is called the Board of Presidents. And then under those boards you have council. And so they work closely with each other and there’s a lot of overlap between board members and council members. You can be both, but essentially the boards set rates for utility and water for rate payers, and they are required to approve any large infrastructure investments, building new power plants, building substations, building large transmission lines, the hardware of the grid that keeps the lights on and keeps things moving.

On the council side, they do more of the internal governance piece. They set rules, they set bylaws, they establish the processes by which the board and the broader utility has to function and operate. The frustrating thing about this is only landowners are eligible to vote in SRP elections. As you can imagine, not everyone who pays for SRP electricity or water owns their property. About 700,000 people, in fact, who are SRP ratepayers rent, which means they are off the bat completely ineligible and voiceless in the direction the priorities and the decisions of their utility company.

John Farrell: SRP doesn’t really have a great history of energy leadership, although it’s hardly alone among Arizona utilities, which is kind of crazy since you’re basically ground zero for awesome and inexpensive solar energy in the U.S. But SRP has also had some other issues. They were successfully sued for antitrust violations when they slapped high fees on solar customers. The utility recently censured its own board members for expressing opposition to a controversial gas power plant expansion. And on that particular issue, I spoke with Autumn Johnson in episode 174.

Could you just talk about when is this election, how soon do people need to act in order to have a voice? And what do you see as being at stake in this election?

Charlie Fisher: Great questions, and I’m going to take the most important one first, which is election day is April 2nd. And folks are able to either deliver their early ballot or vote in person at the SRP administrative building up until 7:00 PM on Tuesday, April 2nd. So that is just around the corner. Another really important date here, if you are a Maricopa County homeowner, landowner, you are able to request that they mail you your ballot online up until March 22nd. So we’ve got another week and a half or so where they’ll actually just send you your ballot in the mail and you can fill it out and put it back in the mail. So those are some of the key dates here in terms of the opportunity. This is what is so motivating and energizing for me. A group of folks, you just mentioned them who are clean energy advocates, understood this opportunity much earlier I’ll admit than we did here at Arizonans for a Clean Economy and started with shoestring budgets filing to become candidates for SRP district board and council positions, and then just did grassroots organizing work, created some basic literature and went and talked to their neighbors and their friends, and talked to folks in the community about existing policies and have had incredible success over the last four or six years.

On the district board side, that’s a 14 member body and every two years, seven of the 14 seats are up. So a full half of the body. Over the last two elections, clean energy advocates have picked up five seats on the district board, and there are currently six clean energy advocates running in this April’s election. So if we’re successful and we elect three of those candidates and hold one of the seats that we currently have, we will have immediately changed the majority of the board from one that is very tied to the status quo, to one that is very forward looking and very much prioritizing advocating for rate payers and really pushing management to invest in clean energy and to make it more affordable and more accessible to everybody in their service territory. And just in terms of recent history, it is funny because not that long ago, before 2015, SRP was seen as one of the most solar friendly utilities in Arizona, and that all changed in early 2015 when they repealed their net metering program, added additional demand charges and fees and obstacles to adopting rooftop solar, which shortly thereafter was replicated by the Arizona Corporation Commission and implemented by all investor owned utilities.

So if we’re successful, we pick up three additional seats in April, it’s sort of hard to overstate the change and the improvement, dramatic improvement that we’ll see and hopefully see in SRPs policies towards solar customers. And that’s both, that’s utility scale, that’s community solar, and that’s distributed rooftop solar. Our position is that we should be leading the country in all three areas, and that SRP has a big role to play in that.

John Farrell: We’re going to take a short break. When we come back, I ask Charlie about what’s at stake in this election and we explore the controversial one acre one vote rule for SRP participants. You’re listening to a Local Energy Rules podcast with Charlie Fisher, Executive Director with Arizonans for a Clean Economy.

Hey, thanks for listening to Local Energy Rules. If you’ve made it this far, you’re obviously a fan and we could use your help for just two minutes. As you’ve probably noticed, we don’t have any corporate sponsors or ads for any of our podcasts. The reason is that our mission at ILSR is to reinvigorate democracy by decentralizing economic power. Instead, we rely on you, our listeners. Your donations not only underwrite this podcast, but also help us produce all of the research and resources that we make available on our website and all of the technical assistance we provide to grassroots organizations. Every year ILSR’s small staff helps hundreds of communities challenge monopoly power directly and rebuild their local economies. So please take a minute and go to ilsr.org and click on the donate button. And if making a donation isn’t something you can do, please consider helping us in other ways. You can help other folks find this podcast by telling them about it, or by giving it a review on iTunes, Stitcher, or wherever you get your podcasts. The more ratings from listeners like you, the more folks can find this podcast and ILSR’s other podcasts, Community Broadband Bits and Building Local Power. Thanks again for listening. Now, back to the program.

John Farrell: So it’s amazing where you are. It would be one thing you were just getting started and had to flip the entire 14 member board, but here the results of this election could really change the direction of the utility. But that being said, this utility has some truly bizarre eligibility requirements for participation. Can you talk about how that works? Charlie Fisher: Yeah. This is one of the really, one of the most ludicrous pieces, and so I believe I already mentioned, but only landowners are eligible to begin with. The voting territory map for SRP also contains sort of strange splotches where people who live in those areas are only eligible to vote for either the district or the association. And then there are also areas that are ineligible entirely. You can be a landowner, you can be in SRP territory, and you are still ineligible just because of the way that this map is drawn. And there’s very little explanation as to how they came up with these areas. On top of that, for the division based seats, so the way that the district is structured, there are 10 territory specific seats like a congressional or a legislative district, and then there are four at large seats that are elected territory wide.

For the division seats, it’s an acreage based vote, which means, for example, my family, we have a 0.3 acre property in central Phoenix, which means my wife and I each get 0.15 votes in the SRP district board election on April 2nd. John, if you happen to live near me in Maricopa County, and you had 500 acres, frankly, even if you didn’t live there, you still lived in Minnesota but had 500 acres in Maricopa County, you would get 500 votes. And so it is as antiquated a system of representative democracy as I can think of, and certainly needs reform in addition to some of the policies that are currently in place.

John Farrell: I can imagine that one impact of the way that votes are allocated or voting power is allocated is that it exacerbates existing racial or socioeconomic disparities because if you’re wealthier, if you’re white, you’re probably more likely to be able to own land, which gives you more votes. Has that been something that you’ve thought about, talked about at all in terms of how this voting system works? Charlie Fisher: It’s absolutely something that we, along with several other partner organizations here that are focused on raising awareness about this election and increasing participation, have thought a lot about, and you’re exactly right in a system structured this way, intentionally or not, what you’re doing is saying to the rate payers who are – we have a closed utility system here, if that’s the right language, right? Folks are captive. We have monopoly utilities. You don’t get a choice in your provider. That only the most well off of their rate payers should have the right to have an influence on the utilities priorities, decisions, investments. And that absolutely inevitably means that’s going to reflect some of the disparities that you talked about, whether that’s racial, it’s economic, geographic, all of those things are very much at play. And so historically, the folks that know about SRP elections and vote, which is less than 1% of those that are eligible, those people are very, very much tied to maintaining the current system. And so it has led to an SRP leadership structure that is not at all focused on really what’s best for the broad rate payer community and the broader Arizona community, but what’s best for the largest landowners and landholders. John Farrell: And the other thing I wanted to ask you about this is that you alluded to in its history that perhaps the reason for the voting structure was that the landowners were putting up their land as collateral to get the initial infrastructure built to allow for distribution of water and power. I’m imagining that that original infrastructure is all paid off by now. So doesn’t seem like there’s a rationale necessarily to keep this division when you have many, many other customers who are paying in through their bills all the time, and that people are paying for their own use based on their own usage at this point. So I guess one of the questions I just have is are there any candidates who are talking about changing the voting structure as part of their candidacy or the SRP board? Charlie Fisher: Yeah, there are. I agree with your assessment. I would imagine, without being one of the original landowners myself, that more than 100-year-old collateral has been well paid off by now. Yes, is the answer to your question. There is a team of folks, and actually they’re working together and their website if listeners are interested, is srpcleanenergy.org. And that’s very much one of the reasons that many of them have been motivated to run is the more that you understand about the way that this current system is structured, the more unfair and more obviously unfair it is. And so that slate of folks has said it is one of their priorities to change some of these rules and to change the system that SRP leadership and board members are elected so that we can really make sure that folks who are eligible, whether you own land or you just are an SRP rate payer, that you really do have a voice.

Because I mentioned it a little bit earlier, but although SRP is not regulated by the Corporation Commission, they very much follow each other’s lead. And so in 2015 when SRP repealed their net metering policy, it was just a year later that the Corporation Commission did it. And so from a broader impact perspective, if we have success and the candidates have success on April 2nd and are able to implement friendlier policies to clean energy, the likelihood that that will also impact the investor-owned utility space here is all but certain.

One fun fact, if I can, as an aside, I believe in the 1970s, the SRP election structure was litigated and upheld. I don’t believe that made it to the U.S. Supreme Court. I think it was just at the state superior court level, but it has been litigated. It’s been about 50 years. So I think maybe it’s time to get some attorneys to take a second look. But yes, it is highly unusual and certainly tilts the playing field in favor of large landowner interests.

John Farrell: So we’ve already talked about what people can do now they can request their ballot if they’re an SRP customer and they own land and can get that quickly or they can vote in person on April 2nd. Is there anything I didn’t ask you about, about what’s at stake here about the structure of the utility, about the kinds of things that candidates are hoping to do? I guess that would be one thing, and feel free to add on if there’s others that you’ve been thinking about. But what are some of these candidates running on? What is it that they’re talking about wanting to do differently? Maybe the election structure would be one piece of this. The governance obviously seems like a big deal here, but what do they hope to change in the way that the utility is run? Charlie Fisher: First and foremost is increasing the share of SRPs generation portfolio that comes from renewable energy, but we’re in Arizona, so solar is going to be the primary driver of that. SRP going from one of the friendliest, most pro solar utilities in the mid 2010s or early 2010s now is the least friendly, has invested the least amount of resources in solar energy. And so I know one of the first priorities of the Clean Energy Slate is to roll back some of these demand charges, Interconnection charges, many of the fees and additional costs that have been both retroactively and proactively imposed on folks who’ve invested tens of thousands of dollars in energy security and trying to reduce their own energy costs and be thoughtful. That very much is top of mind here in Arizona.

It sort of just boggles my mind. Coal was a huge part of our generation portfolio a decade ago, and thankfully that number decreases year after year and more coal power plants are scheduled to come offline. Instead of replacing that horrible, dirty, dirty, polluting energy with our single most abundant resource in Arizona, which is 330 days every year, sunshine, we’ve replaced it with natural gas and we have exactly zero natural gas here in Arizona. And so we have now put ourselves in this position where we buy huge quantities of natural gas, mostly from Texas and other southern states, transported hundreds of miles across New Mexico, across beautiful parts of the southwest, to Arizona where we burn it here and pollute our air and damage the lungs of our kids and family members, and then are also completely subject to the wildly fluctuating prices of the natural gas market.

So at a time when the number one concern of Arizonans is rising energy costs and also energy independence and energy security, it makes absolutely no sense for 40% of our energy to come from natural gas when we could power the entire country with the sunshine that hits the ground in Arizona every single day. Our mission as an organization is to make that a reality, to make Arizona a national leader in solar, but also in wind, and geothermal, and EVs, and storage technology. We have all of the ingredients and changing the makeup of this SRP board is one of the first steps in realizing that.

John Farrell: Well, Charlie, thanks so much for coming on, and on such short notice too, to talk about the SRP elections and the implications for Arizona. I think you paint a very compelling vision that people are going to be interested in following what happens. I wish the clean energy advocates in Arizona the best on April 2nd and hope that it does lead to some change. It would be lovely to see a utility in Arizona and in the sunny Southwest be a real leader in pursuing clean solar energy. Charlie Fisher: Absolutely. No, thank you so much, John. And I would be remiss if I didn’t quickly mention folks can also learn more about the SRP structure and the candidates that we are supporting at azce.org/srp. But thank you so much for the time and the opportunity and for focusing on this very obscure, but very, very important election here in Arizona. John Farrell: My pleasure. And we will have the link that you just mentioned and other links to related resources that we mentioned during the interview on the show page for the podcast as well. So Charlie, thanks again. Great to talk to you. Charlie Fisher: Thank you. John Farrell: Thank you so much for listening to this episode of Local Energy Rules with Charlie Fisher, executive director with Arizonans for a Clean Economy. On the show page, look for a link to their website about the SRP election azce.org/srp, as well as links to two previous Local Energy Rules episodes about this public utility that has a struggle to match its public interest: Episode 174 with Autumn Johnson, which touches on the secrecy and hidden decision-making characteristic of the utility. And episode 136 with Jean Su about the landmark antitrust case against the utility’s anti-solar rates. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

 

Arizona Utility Ruins its Solar Reputation

The Salt River Project (SRP) is a public utility and a subdivision of the state of Arizona — though in many ways it behaves more like an investor-owned utility. Like other public utilities, it is not subject to state regulation, and is instead overseen by an elected board. The Salt River Project serves both water and electricity to customers in the Phoenix metropolitan area.

What started as this incredibly important and sort of selfless act by early settlers here in the valley has now become an incredibly powerful utility company with very, very little oversight or accountability.

SRP was once considered a very solar-friendly utility, says Fisher, but lost that reputation when it repealed net metering in 2015 (a decision that got the utility sued for anti-competitive behavior).

The Push to Elect a Pro-Clean Energy Board

Half of the Salt River Project board is up for election on April second, however, only landowners can vote in SRP elections. This frustrating rule silences the 700,000 renters who pay for SRP service, says Fisher. The four at-large board seat elections are also based on acreage, meaning landowners are given voting power in proportion to how much land they own.

It has led to an SRP leadership structure that is not at all focused on really what’s best for the broad rate payer community and the broader Arizona community, but what’s best for the largest landowners and landholders.

Despite these unfair rules, Fisher hopes that clean energy advocates can pick up a few more seats on the SRP board and make some proactive changes. Arizona has incredible solar potential — ILSR predicts the state could generate a third of its electricity needs from rooftop solar alone. Plus, a group of SRP board and council candidates are running on the platform to give all customers a vote in future elections.

Episode Notes

See these resources for more behind the story:

• Check out Arizonans for a Clean Economy’s work on the Salt River Project election.
• Learn more about how Salt River Project punished dissenting board members in episode 174 of Local Energy Rules.
• Learn more about the lawsuit against Salt River Project’s attacks on rooftop solar in episode 152 of Local Energy Rules.

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country, using ILSR’s interactive Community Power Map.

This is the 205th episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update. 

Featured Photo Credit: iStock

Technology is outpacing laws and regulations in the energy industry, too.

For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Michael Murray, President of Mission:data Coalition. Murray explains the many capabilities of smart meters, his critique of a Rhode Island utility proposal to expand advanced metering, and how state and federal regulators can establish best practices for fairness and data access.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Episode Transcript

Michael Murray: I think a lot of utilities are in that position. For 15 years now, they’ve successfully deployed smart meters all across the country, air quotes around successfully. I think so often they’ve given short shrift to the consumer benefits. But there’s a playbook for investor-owned utilities to follow. And now I think they’re at the point where the technology has advanced that it’s raising much more serious questions that they just weren’t prepared to answer. John Farrell: In the next six years, U.S. electric utilities will deploy 55 million computers on homes and businesses. These sophisticated smart meters will unlock a remarkable amount of data that consumers and entrepreneurs could use to reduce electric bills and support electrification in particular through home energy efficiency programs supported by the Inflation Reduction Act. But the promise can only be fulfilled if the platform remains open. Michael Murray, president of Mission:data Coalition, joined me in February, 2024 to discuss a proposed smart meter deployment in Rhode Island that’s threatened to install a permanent private gatekeeper between customers and their data, and to talk about how we can overcome this common problem everywhere smart meters are being deployed. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. Michael, welcome back to Local Energy Rules. Michael Murray: Thank you, John. It’s a pleasure to be here. John Farrell: So I want to start with this. I don’t think I asked you this question when you were on the first time, but am enjoying asking this question to folks who are on the podcast, which is what got you into doing smart meters and utility data and customer data. It seems like a very specific niche. How did you get there? Michael Murray: It is. So I started the company with some friends from college and a professor. And so I was young and idealistic and somewhat naive and thought, hey, let’s do an energy management software company right out of college. And as the company was developing, it was sort of the height of the hype cycle for smart meters across the U.S. So in the late two thousands, a number of utilities were starting to invest in advanced meters. And my company, which was called Lucid, we wanted information from meters to just do some basic analytics. Our customers were school districts and colleges and universities, and we used to install submeters in these buildings to get the data that now utilities were saying was going to be much more available as a result of these investments. So we were happy by the prospect of not having to install meters in buildings and just use the utilities infrastructure for that purpose. And as soon as we asked some of the utilities, where’s your automated programming or API for access to this information? Then that’s when they gave us these puzzled looks and said, well, we can’t really give that information to you. There’d be cybersecurity problems. This is not the intended use. We really just wanted to send you bills more accurately. And that was that I saw this yawning gap between what the potential and the vision was that utilities were telling regulators and the public on one hand, and then on the other hand what the reality was, which is it didn’t really meaningfully change anything for the energy management industry. And so one thing led to another and the Mission:data Coalition was put together about 10 years ago with some of my colleagues in the industry who were facing very similar problems. So whether they were in the residential energy management or rooftop solar industry or a commercial and industrial demand response, they all had this common problem of how do you access the information about the customer that is uniquely and exclusively developed by the utility, like the meter electric usage data, and more importantly, how do you access that in a way that is really inexpensive on a per unit basis? And that’s where if you have over 3000 electric utilities in the US and they all do it differently. And so I just realized, hey, there really needs to be an organization that’s focused on this challenge because I didn’t see many other people working on it at the time. John Farrell: That’s great. Thanks for sharing that. It’s so funny, this thought came to my mind as you were describing how utilities were saying, oh, we will put in these smart meters and you’ll get access to the data that you’ve previously had to put in your own submeter to get, it’s almost like as they put in these smart meters, which are really sophisticated computers, in some cases it’s like using an iPhone, but just for the call quality, right? Michael Murray: Right. John Farrell: I’m just going to make a better phone call with this. That’s it. We’re going to bill you more accurately. What a sad, sad story. Michael Murray: Exactly. And that’s where the wheels started coming off for me is utilities have interests that are similar to but different from the consumer’s interest. And so when it served the utilities, I think they were happy to deploy the technology and tell the regulators what they wanted to hear. But when it came to delivering on the direct customer side of the benefits for energy management for insights into what they’re doing for access to third party competitive market of energy management services, that’s where the utilities clammed up and said, actually, we’re not really interested in providing any help in that department. John Farrell: So I was really interested to have you on because you and I exchanged an email about investor owned utility PPL out in Rhode Island that was going to do a no bid contract on their smart meter deployment in Rhode Island, which you described as giving the vendor a quote, “toll booth authority,” which has started ringing bells for me because of course we have a report called Amazon’s Toll Booth that has looked at the same issue of a company that controls a platform or marketplace and uses that to hinder competition and that this no bid vendor contract would give them a lot of control over the state’s energy policy for the next 20 years. So I was hoping that you could, first, you’ve already kind of alluded to this, these smart meters are going to give a lot more data or can provide a lot more data than the meters that proceeded them. So can you talk a little bit about what it is that they could do? What is the combination of the technology, the hardware and the meter and the software able to provide if we have access to it? Michael Murray: So back to the question of consumer benefits that I mentioned before. The biggest change with these new generation of smart meters is that they come with a computer on board and they also have Wi-Fi connectivity. And so those are the two fundamental changes that are different from meters even five or seven years ago. And on the Wi-Fi side, that presents some big opportunities but also some challenges from a competition perspective.

The opportunity is that you could have real time electric usage on the order of once every second broadcast to either devices in your home that could then intelligently use that and reduce your peak demand usage. Or if you’re on time of use rates, that could help be aware of your total consumption and reduce it during those peak hours. But you could also send that information up to a cloud-based service that could tie in with other devices. So those smart home ecosystem for example. Or maybe you have a rooftop solar — and you’ve done several shows on net metering and the claw backs of net metering that are occurring. This real-time information would help customers with rooftop solar self-consume more of their power and basically get more return on investment from their existing solar assets. So there’s a number of different values that a consumer would experience just by having real-time information. So not just the bill at the end of the month, but every second what’s happening. Some customers, maybe energy nerds like you and me, we would look at that information pretty frequently and we’d be really curious what is using what. Most customers probably want a service to just help them manage it. They don’t want to pay that much attention while they’re living their daily lives. Nothing wrong with that, but this gives the devices and competitive market access to that information to at least make decisions and potentially provide notifications like text messages on your cell phone saying, hey, your usage went up. If you do something about this right now, you can save $10, something like that.

On the computing side, this is where the phone analogy really comes into play. So we’ve talked about smart meters, to be brutally honest, I think smart meters were really quite dumb up until very recently. And so these new version, and there’s several major meter manufacturers out there making this new technology. They claim that it has reached cost parity with the older version and there’s an app store on the meter. And so you could load or the utility could load apps that serve different functions. Some of those could be just for the utilities benefit. So looking at safety issues. So there’s something called a broken neutral detection. So if your neutral line has an issue that could potentially result in its safety problem, they could detect that, it can scan the voltage. So if you have power quality problems, it can analyze that and send alerts back to the utility.

So those are in the utility management camp, but there’s also benefits for consumers and there’s a technology that’s been around for about 40 years called disaggregation. And this is looking at the patterns of usage for a whole home at a very high level of frequency, a high level of granularity. And through some statistical analysis you can estimate what is using power within the home. So for example, you could say, oh, approximately 5% of your usage is your water heater, 25% of your usage is your air conditioner. And so that device level identification and quantification of that load is something that these new smart meters are capable of doing. And importantly it can do it at zero marginal cost, so zero cost to the consumer.

So these are really transformative changes in the industry. And what PPL had proposed with their Rhode Island subsidiary was to deploy about 700,000 of these meters over a few years. This was a $289 million project. And certainly what was concerning to me was this no bid contract that they had proposed.

John Farrell: It’s so interesting. I just want to dwell for a second longer on the capabilities because thinking about when you talk about energy nerds, we’re also sort of maybe forecasting a little bit the capabilities. So I have a home energy monitor on my electrical panel made by a company called Emporia. And so it doesn’t use, I didn’t have a smart meter at the time, but it links up inside the electrical panel and it can tell me how much are all these circuits using on fairly small time increments and whatever. It doesn’t have this disaggregation capability. It can’t tell me what is each device using. I can buy a device specific or plug specific thing that also works with it, but I had to pay a couple hundred bucks out of my own pocket. I had to install it myself, I had to set it up, I needed to recognize it wasn’t going to track everything in my house. That was a lot of work. And for me, it was partly about trying to identify things that were maybe using more electricity than I expected, which is helpful, but also because I’m thinking about, oh, I might want to install a heat pump if my furnace dies, which it actually is in the process of doing right now, and I don’t know if I have enough capacity on my electrical panel to do that. Another thing that could be answered.

So the idea that the utility is going to pay for this meter that can serve purposes on their end and pay for itself, but also would offer services like that to me is very exciting. So the idea of, I’m really interested to dig into that how this no bid contract could have impacted that ability to get to this. So why don’t you talk about you filed testimony in response to this proposal by PPL opposing the direction that they were going. Could you talk about some of the key elements that were in your critique and what you were hoping they would do instead?

Michael Murray: It was very concerning this possibility of basically delegating the state’s energy policy authority to a private entity. And the way that this would work is under the company’s proposal, was that all of the details about how customer data were going to be accessible or useful to customers, what types of information would be available, what Wi-Fi devices would be allowed and which ones would be prohibited from connecting to the meter. All of these major foundational questions from my perspective, were in the company’s proposal kicked to a working group.

So Rhode Island Energy, which is the PPL subsidiary, said, these are important questions, we will address them, but we’re only going to address them in a working group that we will convene after the commission has given us approval and rate recovery for the deployment. And to me, that really felt like an obligation of the public utility commission’s responsibility because there was no requirement for the working group to have consensus. There was no regulatory review of the working group’s findings. We were basically being asked to accept the company on good faith and no promises beyond good faith they would listen to different stakeholders or desires and comments, then they would have unilateral authority to decide whether to act on any of those recommendations.

And when you add in a no bid contract with a metering vendor, it gets more complicated because the way that these large enterprise contracts are executed is there’s a clear scope of work in the beginning, tens of millions of dollars would go into it. I think it’s a four year project timeframe, something like that. And if there’s a change order in the middle of the contract period, that vendor, regardless of who it is, has a lot of authority. The bargaining power really shifts to that vendor to say, oh, it looks like my client here. The utility wants to do something a little bit different. Well, the alternative is for them to rip out all the meters that we’ve already helped them put into place, and that’s going to be really expensive. So I can effectively name my price on additions or changes to the contract. And there’s ways of mitigating some of those effects with a well-written contract. But nevertheless, uncertainty. Changes midstream always go to benefit that incumbent vendor.

And so one of the issues that I raised to the commission was what happens if the state’s energy policy or climate policy changes such that let’s say there’s an EV charging program that the Rhode Island Public Utilities Commission wants to see enabled, but that the metering vendor, let’s say has a competitive spat with certain EV charging companies. And that conflict between those businesses ends up disadvantaging rate payers because you’re in the middle of a contract, the contract’s already been signed, it would be very difficult to change it or replace it. And I said, the state of Rhode Island may discover much to their dismay that maybe there’s smart thermostat programs or EV charging programs that they’re now unable to access because they’ve been locked into a 20 year contract. And so that’s what I meant by this delegation of policymaking authority. We really, just as a matter of monopoly regulation, we really shouldn’t be in the habit of delegating these things to companies that the regulator needs to retain the ability to on fair and reasonable terms, have the utility byproducts and services that meet the stated policy objectives.

John Farrell: I think you mentioned this in your comments, but about what some of the implications were, for example, for the implementation of the Inflation Reduction Act around this decision, like if the commission had gone ahead and just rubber stamped what the utility had proposed? I think you’ve kind of touched on this already, right? You mentioned EV charging programs, smart thermostat programs, but the Inflation Reduction Act is pouring money into clean energy investment. Where might there have been some dissonance there between would’ve could have come out of this contract and getting the dollars out the door to support clean energy deployment? Michael Murray: One of the biggest opportunities with the IRA, which I don’t think gets talked about very much, is not the tax credits but the home energy rebate program that’s referred to as HOMES. It’s a sort of gobbledygook acronym. It’s contrasted with HEEHRA, which is the electrification rebate program. And HOMES under the IRA is 4.3 billion for measured energy savings in homes. And the state of Rhode Island was getting 30 or 32 million under that program. The US Department of Energy is just now starting to send the money to the states. So this is why people haven’t heard about it because it hasn’t really come to their state yet, but it will soon.

And this is potentially really transformational. We’re talking about 2 to $8,000 per home to fund efficiency improvements. And to prove those improvements, in order to get the rebate, you have to have your energy usage data. And it’s importantly, this is both electric and gas and if you have delivered fuels like propane fuel oil, things like that, which is pretty common in the northeast, you need all that information to demonstrate the reduction. And what was concerning to me about Rhode Island Energy’s proposal was that they really hadn’t thought about that, about how the implementing the IRA HOMES and their Office of Energy Resources, which is the state agency that’s going to be receiving and administering the funding, how they would actually interact with it and use it. And one example is natural gas data. So although this was an electric application for spending on the electric side, we had recommended that the state require Rhode Island Energy to include natural gas usage data. And the argument was this is an absolute necessity if you want to administer these funds coming into the state. Your listeners may not know, but Rhode Island actually has one of the most aggressive climate laws in the country with a very aggressive decarbonization target in 2045. And so this opportunity really can’t be missed.

And so the idea that waiting for a working group one, two or three years from now to then consider the question of, well should natural gas be included, that just was not going to sit well and not comport with the aggressive climate policy of the state. And so that was an example of I think that there’s several others too involving exactly what types of information. For example, if you’re using under the IRA, there’s something called a BPI 2,400 that’s standard from the Building Performance Institute for tracking for basically doing a modeled calibration of energy usage in a home so that you can see how much energy you’d save as a result of some intervention and you need to have in order to pass that standard. A lot of meter readings need to have both, whether it’s an actual meter read or whether it was estimated. So estimated meter readings do happen and that can negatively affect your ability to get a rebate through the IRA. And so again, Rhode Island energy could just decide not to include that actual versus estimated attribute of energy usage and that would throw the administration of this program into chaos.

So those are just some of the examples that made me very uneasy about shifting a lot of this responsibility into a working group.

John Farrell: So one thing I’m really curious about, and this of course comes from my bias of working a lot on solar where we see a very clear utility opposition to solar, very rationally rooted in the way that utilities often make money. So I’m just curious if you could speculate maybe about why you think the utility proposed this approach in the first place and whether or not there’s some particular financial or other advantage to the utility having a gatekeeper at the smart meter? Michael Murray: In this case, it’s always hard for me to speculate on motivation, but I think the pattern that I’ve seen with other utilities, we work in about 10 or 12 states every year, is that the utility wants to give sort of the minimum amount of lip service to consumer benefits with as little accountability as possible while focusing on the capital expenditure and the operational efficiencies that really benefit their bottom line. And as you say, that’s a rational economically speaking approach. And what I think was concerning was twofold. One, shifting some really key questions to a subsequent working group with basically no power and after all the financial decisions had already been made.

That was obviously concerning, but it was also pretty clear that the company hadn’t really thought about any of these big questions. So the fact that there are computers inside the meter, the fact that there was Wi-Fi, I don’t think they’d really wrestled with that role and what that means for them as a sort of digital platform monopoly in addition to just being a wires and poles monopoly. And so I think they were genuinely curious and hadn’t heard opposition of the type that I was putting forward. And I think a lot of utilities are in that position. For 15 years now, they’ve successfully deployed smart meters all across the country, air quotes around successfully. I think so often they’ve given short shrift to the consumer benefits, but there’s a playbook for investor and utilities to follow. And now I think they’re at the point where the technology has advanced that it’s raising much more serious questions that they just weren’t prepared to answer.

To some extent, I’m happy to provide some education both to the utility and to the regulator in this type of context, but this is a nationwide issue. According to our calculations, there will be over 55 million of these new meters with Wi-Fi and computers on board deployed across the country by 2030, many of which with federal funding as a result of the IIJA, which is the Infrastructure Investment and Jobs Act. These are key questions just as we’re asking questions about app stores with Google and Apple. We also need to be thinking about Monopoly questions on our electric.

John Farrell: We are going to take a short break. When we come back, I ask Michael what the Rhode Island Commission decided to do. We examined what other states are doing and I asked Michael what he’d do if he had a magic wand to create the best possible data access policies. You’re listening to a Local Energy Rules podcast with Michael Murray, president of Mission:data Coalition.

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John Farrell: Having now made people wait for 20 minutes, what did the Rhode Island Commission ultimately decide in this case? Were you surprised? Do you feel like they got it right? Do you feel like their decision was an exception to what usually happens? How did it turn out? Michael Murray: They got many things right. It is not a perfect decision. What they got right is they allowed the smart meters to go forward, but there is a requirement that two months after the smart meters start to be deployed, the company has to present a plan for the commission’s approval that’s comprehensively addressing number one, how historical usage data is going to be accessible to customers. So this includes the green button connect technology for exchanging historical usage data. They have to address the natural gas question that I mentioned before. On the Wi-Fi side, they have to provide technical specifications and requirements for what types of devices are allowed to connect.

So this is an opportunity for transparency. Those who’ve worked in this home area network industry as it’s often called, are familiar with the term bring your own device or BYOD. And that’s the idea that I shouldn’t have to get pre-approval or only receive a Wi-Fi device that has been approved or certified somehow by the utility. And so the utility has to provide a plan about this bring your own device functionality, which is a very positive step forward.

And the third item that I thought was a win was the commission required them to provide a plan for the terms and conditions between the app store operator and a software developers who might write apps for the meter and the terms and conditions. It maybe sounds pretty boring. Lots of people agree to terms and conditions when they use websites today, but the terms are really important because this is the interface between a monopoly and a competitive marketplace. And so for example, if the meter vendor, which is also invested in electric vehicle charging programs and smart thermostats, if they had terms and conditions that were unfair or coercive, things like you’re not allowed to connect your home EV charger over Wi-Fi to the meter because that would disadvantage our product. That would be an example of an unfair term. And so the commission required the utility to put forth a plan for how they’re going to address these fair, open, non-discriminatory terms with software developers. So I thought that was really positive.

On the negative side, they did punt a lot of these issues. They didn’t rule on the merits of many of them. They just said we’re going to have a separate proceeding in the future to consider all of these details. So we’ll have a second bite at the apple, if you will, on those. But at least there’s a roadmap, there’s a table of contents that the commission wants the utility to fill. In the last point on a sort of disappointment, was the commission approved to move forward with this no bid contract. And I’m definitely disappointed by that given number one, the rapid technological development in the space. I think it’s reasonable to do RFP, but also it’s just as a public entity. Yes, there are inefficiencies associated with doing a request proposal, but if you’re spending public money, I just think it feels wrong when you don’t do that. I don’t think you’re doing right by rate payers, but the commission reasoned that PPLs other investments with this metering vendor from Pennsylvania and Kentucky warranted basically an extension of that contract and they felt that that was at a low enough price that an RFP was not necessary.

John Farrell: Interesting. So the broader utility PPL has subsidiaries that operate in other states that already have contracts with this vendor? Michael Murray: That’s right. And this is for multi-state utilities with holding companies. This is pretty typical. So the larger jurisdictions, like in the case of National Grid at New York and Massachusetts, those are the larger jurisdictions. Those were the ones that carry really the bulk of the cost for this infrastructure. And then the smaller jurisdictions are often sort of forced along to follow. And the argument there, some of which is legitimate, is that it’s just easier to extend some of the software at back office infrastructure for a few hundred thousand customers in Rhode Island than it is to start over with a new business process and new backend software and databases and things like that. Again, I think the efficiency argument can be made, but my view was why not do an RFP and see for yourself if in fact it is more efficient to use the incumbent vendor? If so, great, then everyone will feel good about making that decision. But not even requesting the information from other bidders just felt like a fatal flaw to me. John Farrell: It’s kind of interesting too because my perception of those holding companies and their subsidiaries is that their operations are largely separate. Xcel Energy, which serves me in Minnesota, has subsidiary in Colorado and in New Mexico and in Minnesota. And when we’ve asked about whether or not they can do things that are going on in the other state in our state or vice versa, the story is usually like, well, those are separate entities. So it’s funny to me that they’re like, oh yeah, because we work with this vendor somewhere else. I’m like, yeah, you do. But generally speaking, your infrastructure is pretty distinct by state because the regulatory oversight is by state. So there’s not actually a lot of working together. I mean, I suppose you can call up the engineer that works for the company in Colorado and be like, how did you implement this? But it’s funny to me to hear it characterized that way. To be fair, I’m not looking under the hood here, but my perception is that they’re really not that connected in a way that would allow for those kinds of efficiencies to be captured. Michael Murray: And I see utilities all over the map on that question. Theoretically, the reason that these states allowed the holding companies to acquire the jurisdiction electric utilities in other states was that back office efficiencies would result in rate decreases or at least lowered revenue requirements. That at least was part of the pitch that was being made. We saw that with Exelon, with Xcel, with many other utilities, and I think some utilities do have a shared back office infrastructure and they use that quite well as I think they should. But then there’s others, particularly ones that have acquired entities recently where it’s going to take many years to get those systems integrated. So I would say you’re touching on an important topic and especially when it comes to merger review, this is something that should be carefully looked at. The per seat cost of extending PPLs contracts from Pennsylvania and Kentucky to about 600,000 customers in Rhode Island is it should be relatively small. You’re not starting from scratch. And that’s something that just I think needs more scrutiny in general. John Farrell: Well, for people who are interested in diving in on merger stuff, I did have Scott Hempling who wrote a book on utility mergers issues on the podcast back in episode 109, and he gave a full chapter in verse on how in general those efficiencies that are supposed to come from mergers don’t generally accrue benefits to customers. Michael Murray: I’m shocked. John Farrell: There’s lots of shocked expressions all around on this podcast right now. Let me pivot a little bit. So we’ve talked a lot about this case in Rhode Island. I’m curious if you have found that other states are trying to address this issue of data access and smart meters, and especially as it relates to IRA programs like HOMES? Michael Murray: Yeah, there’s a really exciting development in New England, which is a Northeast regional data hub. And one of the problems for smaller jurisdictions is that it takes a lot of effort for distributed energy resources companies like solar installers, heat pump installers, et cetera, to write software that interfaces with a given utility. And so if you have 10 or 15 utilities in a certain area, it’s 10 to 15 times the work for getting that software to ingest the customer data and provide products and services. It’s much easier if the utilities bond together and then there’s one place you can go to access this information as opposed to 10 or 15. So we’ve made some progress on that front.

New Hampshire actually has some enabling legislation and the commission approved in 2022 a settlement agreement, which I was a part of, and which calls for a statewide repository. So there’s three electric and gas utilities and there will be one point of entry essentially for the secure and permission based exchange of billing data, account information, usage data. So that’s great and that’s going to really help their administration of the IRA funding.

Where we’ve been leveraging federal funds most recently is we filed a preliminary application called a concept paper to the U.S. Department of Energy under their GRIP program. This is a grid resilience and innovation partnerships, and we’ve pitched a regional approach. So there would be utilities from Massachusetts, Connecticut, and potentially Maine all involved in this effort. And that also happens to overlap with the ISO New England footprint. So if there are aggregations of DERs participating in wholesale markets, they’d have a much easier time moving from jurisdiction to jurisdiction across state lines. So there’s a lot of efficiencies to be gained there and potentially lower power prices on the wholesale market for consumers. So that’s really positive.

We’re still in the sort of early application phase on that, but it is a trend to combine these utilities data systems into one place. And New York has actually made a big effort on that called the Integrated Energy Data Resource, the IEDR, and that’s going live. It has gone live with several features last year, the permission based exchange of individual customer usage data that is going online I think this month. So there’s a lot happening in the Northeast on this topic, and it’s going to be really exciting for the heat pump installers of the world, the installation providers to really make the most efficient use of the IRA funding.

John Farrell: I mean, there’s a lot of funding as we mentioned, and we’ve talked about the IRA specifically. Is there anything else that you feel like the federal government can do to help unlock customer data access? For example, there’s a petition that ILSR has been involved in to the Federal Trade Commission, which oversees a lot of issues of competition. And in these cases we’re talking about competitive markets already that can be supplied data is there, the Energy Information Administration collects a lot of data from utilities. I don’t know, are there other things that you’re thinking about where the federal government could take action to be helpful? Michael Murray: Yeah, that’s a great question. There’s so many things that the federal government could be doing much better on this topic. The first one that you mentioned is EIA. And they are in a position to develop a machine readable database of all of the different rate structures across the country. And that would have tremendous benefits for these energy efficiency service providers because rate complexity is a real monster issue. And with 3000 plus utilities, they each have maybe a dozen different types of rates. There’s just no way a human is going to be able in a scalable way, provide somewhat if analyses for customers. So that would be one thing I certainly appreciate seeing.

The FTC petition that you mentioned, there’s a lot that antitrust enforcers can and should be doing on the app store issues with advanced meters that I mentioned. If you think that Google or Apple have some antitrust liability around their app stores, the Epic games lawsuit, which just had a jury verdict, that’s certainly material here. Well, I think the problem is 10 times worse for the smart meters because I can at least choose what type of phone I want to use, but I don’t have any choice about what meter is on the side of my house. And so if there is a violation of antitrust laws, I think that’s very ripe for exploration.

And the last point has to do with the Department of Energy grants. They’re giving a lot of money to utilities for grid resilience. These are very important necessary improvements to the power grid that we need. And one of the requirements from the Department of Energy is that data needs to be provided to customers per green button Connect, and it also needs to be available, in their phrasing, on an “open non-discriminatory real-time basis.” And the question before the department right now is are they going to enforce those requirements? The first round of grants has been awarded to about 34 utilities. This is a billion dollars of taxpayer money going to fund these utility projects. Many of those projects are very important and useful, but is the federal government going to require open non-discriminatory access to the information that’s generated by these meters? That remains to be seen.

I did send some initial inquiries to some utilities asking what their plans were for Green Button Connect after being granted these awards. And I received some initially very puzzled responses like we’re not sure what you’re talking about. Our project doesn’t seem to involve that requirement. So there seems to be some fumbling around here.

And I’d really like to see a more assertive stance from the Department of Energy, just like the U.S. government does with regard to broadband funding, where the government says, we’ll fund fiber, but it needs to be an open network for the life of the investment. And same thing here, if we’re going to fund metering and resiliency improvements with utilities, those improvements should be on an open access basis. So that’s something where the rules are already written. The question is the Department of Energy actually going to enforce it and put it in their contracts?

John Farrell: That’s great. Those are two really helpful and meaty things that folks can follow up on if they’re interested. I just have a couple questions that I’ve not – realizing that we’re running up on time here. On your prior appearance on Local Energy Rules episode 155, you talked broadly about how data access was kind of a larger issue around monopoly power. We don’t have time obviously to rehash that entire episode, but I dunno if you want to give people a quick preview of that digital platform monopoly report that Mission:data put out a couple of years ago? And I’m also just curious too, as you do that, if there are disparities in this issue of data access around race or income that folks should be thinking about, is there an equity perspective here as well as a monopoly issue? Michael Murray: So on the race and equity question, there have been lawsuits from various community groups against utilities for targeting them. So for example, collecting information on their energy usage habits and then selectively some communities information would get sent to law enforcement for investigation versus others. At least these are allegations that we’ve seen made in the past. I am very concerned that that potential only rises with the computers that are onboard the meters. So the potential for more invasive information is very real, that the detail of where using power in your house could be transformational for energy management and for decarbonization, and we’re very excited by that. But if it’s sent willy nilly to law enforcement agencies without getting a court order, without a warrant, that’s deeply problematic. And so we are very supportive of customer privacy and putting customers in control of this. Having some sort of back door in which law enforcement accesses utility records I think should concern everybody. And that’s something that we strongly oppose.

And moreover, this is something we should get in front of because we don’t want lawsuits about very legitimate grievances standing in the way of taking advantage of the energy management capabilities that are here that could really save money on people’s bills in a very tangible way.

As for the digital platform issue, I’ll just say that it is very similar to other digital platforms. So when there is a gatekeeping power, we start to see some of the same behaviors. So there could be discriminatory terms and conditions. There’s a lot of ability for surveillance to occur so of a competitive nature. So if the platform operator sees a successful app on their platform and they say, Hey, that’s actually doing really well, why don’t we copy that? Why don’t we mimic that with our own offering and then make it very difficult for this company who’s young and innovative and invested the time and effort in maybe a riskier project has a much harder time being successful. So those are sort of inevitable incentives that arise with any digital platform and electric utilities are not immune to that.

John Farrell: If you could wave a magic wand, what is the structure or the rules that you would want to put around the system that collects and customer energy use data, whether or not it’s the ideal? If you have an example of someone you think it really is doing this right, who is that? Where could people look to understand how this could really be done the best possible way? Michael Murray: I think the regional approaches to data accessibility and data portability make a lot of sense. So that’s still in its incipient stages in New York and New England, but as a practical matter, that seems to be the way of the future. It really unites red states and blue states. Texas was actually the first state to have this platform, the Smart Meter Texas platform, which was built 12 or 13 years ago to support their competitive market. I don’t think New York and Texas agree on just about anything politically, but now here we are 12 years later and they’re moving towards very similar information technology solutions for customer energy data. So that’s great.

And if I had a magic wand, I think I would really make sure that utility regulators know that part of their job, perhaps an equally important part of their job as setting rates, is ensuring that decisions that they make about the reach of utilities does not disadvantage these adjacent competitive markets. So in your previous podcast with Seth Handy on Rhode Island, which by the way I thought was excellent, he had some really great comments about the market and you had good discussion on antitrust issues. I don’t think regulators understand that. The federal courts have said that the federal government has very limited authority to enforce fair competition laws on government sanctioned monopolies, and some of that is very reasonable. But what that means is that if you’re a utility regulator, it is your job not just to focus on rates and prudence of costs, but you have to be thinking, is the utility entering an energy management offering going to hurt the competitive market?

Because a lot of companies in this space, if you were to take this issue to court and litigate, the federal courts are probably going to tell you, you can’t come to us. You have to go to the state PUC. They’re the ones who are in charge of settling this matter. And so this is just something that I don’t think most regulators think is their job, but the federal courts have made it clear it is their job. In fact, there’s no one else who’s going to do this, who’s charged with this responsibility in most places.

John Farrell: Well, Michael, thank you so much again for coming back to Local Energy Rules to get into the weeds on a particular proposal and help people understand how the newest generation of smart meters with these onboard computers and Wi-Fi have so much capability and also the danger of letting that be established in a way that gives too much gatekeeping power to the folks who are in charge of that platform. So yeah, thanks for your work on this and for coming back to talk about it. Michael Murray: It’s my pleasure. Thank you so much, John. John Farrell: Thank you so much for listening to this episode of Local Energy Rules with Michael Murray, president of Mission:data Coalition. On the show page, look for a link to Michael’s prior appearance on Local Energy Rules where he shared the coalition’s research on digital platform regulation, as well as his comments on the Rhode Island Smart Meter proposal. We’ll also have links to our podcast interview with Scott Hempling, episode 109, and the petition to the Federal Trade Commission asking for more scrutiny over monopoly utility behavior. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

 

Electric Utilities and Smart Meters

Utilities are installing millions of new advanced meters each year. In fact, most U.S. households now have ‘smart’ meters. Murray explains several features that make these meters smart, including their computer, Wi-Fi connectivity, and ability to perform disaggregation.

As Murray explained on episode 155 of the Local Energy Rules podcast, customer usage data has value to utilities, but also to the customers themselves. Using the information from their smart meter, customers on time-of-use rates can reduce their energy consumption during peak hours. Real-time information can also help those with rooftop solar manage their electricity use to increase the return on their solar investment.

Independent service providers can manage energy use for customers and help them save money through demand response or virtual power plants. The service providers, however, need access to their customers’ data.

When it came to delivering on the direct customer side of the benefits for energy management – for insights into what they’re doing, for access to a third party competitive market of energy management services – that’s where the utilities clammed up and said, actually, we’re not really interested in providing any help in that department.

Rhode Island Grapples with a Utility Proposal

Rhode Island Energy, a subsidiary of PPL Corporation, proposed to spend millions of dollars on advanced meters through a 20 year, no bid contract with a vendor. The utility asked the Rhode Island Public Utilities Commission to approve its proposal, including rate recovery for its spending and the creation of a working group to specify how data would be accessible.

Murray had concerns about leaving big questions to a working group. In his critique of the utility proposal, he recommends that the commission itself establishes principles for equal access and fair competition. He also warns the Commission that without streamlined data sharing, it may be hard for customers to receive federal HOMES rebates (from the $32 million Rhode Island allotment under the Inflation Reduction Act).

The utility wants to give the minimum amount of lip service to consumer benefits with as little accountability as possible while focusing on the capital expenditure and the operational efficiencies that really benefit their bottom line.

The Rhode Island Public Utilities Commission got many things right in its final decision, says Murray. The smart meters can go forward, but the company must file a detailed plan on data usage, Wi-Fi devices, and open terms, which the commission will review. He is disappointed that the Commission will not require a competitive process to find a metering vendor.

Best Practices for Utility Data Platforms

Nationwide, rulemakers are struggling to catch up to advanced meter technology. Murray describes where federal intervention would be useful, including machine-readable rate structure databases and antitrust enforcement of smart meter app stores.

The Department of Energy is also granting money to utilities to improve grid resilience. To receive funding, utilities must adhere to Green Button data standards, but Murray worries that the Department might not enforce open access.

This is a billion dollars of taxpayer money going to fund these utility projects. Many of those projects are very important and useful, but is the federal government going to require open, non-discriminatory access to the information that’s generated by these meters? That remains to be seen.

Episode Notes

See these resources for more behind the story:

• Listen to Michael Murray’s 2022 interview on Local Energy Rules.
• Read Michael Murray’s testimony on the Rhode Island smart meter proposal.
• Read ILSR’s report on Amazon’s monopoly tollbooth.
• Listen to a Local Energy Rules interview with Scott Hempling on consolidation and utility monopolies.
• Listen to a Local Energy Rules interview with Seth Handy on the anti-competitive tricks utility monopolies have tried in Rhode Island.
• Learn more about a petition to the Federal Trade Commission asking for more scrutiny over monopoly utility behavior.

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country, using ILSR’s interactive Community Power Map.

This is the 204th episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update.

Featured Photo Credit: AvailableLight via iStock

Coordinated grid services benefit virtually everyone — with the exception of utility shareholders.

For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Chris Rauscher, Head of Grid Services and Virtual Power Plants at Sunrun. Sunrun has partnered with utilities to reward their residential customers who dispatch electricity stored in batteries when the grid needs it. Rauscher explains the benefits of coordinating distributed energy resources, how residential solar and storage customers have saved their neighbors from blackouts, and why every utility could be offering a virtual power plant program.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Episode Transcript

Chris Rauscher: There is no reason why progressive utilities could not have started managing that on behalf of the customers years and years ago. I picture a utility that would manage all of that, walk you through your electrification journey that is super high friction, guarantee you savings from switching from liquid fuels to electricity. Let’s say they guarantee savings for five years, and then every month on your utility bill, sending you this huge diagram that says, John, you would’ve spent $700 total this month on energy if you hadn’t electrified, but you’re spending $500 this month instead. There’s no reason why the utilities cannot be doing that, and that’s a giant hole in the market. John Farrell: Last year in California, a group of 8,500 electric customers had their homes, solar panels, and batteries grouped together to provide energy for the electric grid operated by Pacific Gas and Electric, reducing costs for all of the utility customers and earning money for their trouble. This type of virtual power plant could similarly reduce electricity costs, provide clean electricity, and prepare the grid for electrification across the country. Joining me in February, 2024, Chris Rauscher, head of grid services and virtual power plants at Sunrun, shared where virtual power plants are already providing these services and why so many states have yet to tap this powerful resource. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. Chris, welcome to Local Energy Rules. Chris Rauscher: Thanks John, big fan of you and your work and all the good work that the Institute does and happy to be on with you on this important and exciting topic. John Farrell: Yeah, well, thanks so much for joining me. I wanted to just start off by asking you how did you get on a career path to working on virtual power plants and solar energy? What led you here? Chris Rauscher: Yeah, that’s a great question and things are always a straight line in hindsight, but at the time it never felt like a straight line. The short answer is that I was a staffer in the US Senate for the senator from Maine, Angus King, and I was working on the energy committee for him. He had a long history in energy from energy efficiency in the eighties to deregulation and then wind farm development. And so he didn’t want to do anything in the senate that had anything to do with what he had done previously so as to not even create an appearance of a conflict. So this was nearly 15 years ago now, I guess, and my job was to figure out what should he be a leader on and very quickly to me it became apparent that it was DERs, distributed energy resources. Behind the meter solar and batteries and EVs.

So I really started focusing on that as a staffer and created sort of leadership role for him then and helped him to write a bill maybe 12 years ago or so, 14 years ago called the Free Market Energy Act, which was a federal bill that would have put parameters around state level net metering fights and went from there to the industry. And then my tactic in this industry has always been to stay six months ahead of everyone else and then you’re kind of an expert because everything changes so quickly. And so that’s how I find myself running VPPs at Sunrun.

John Farrell: That’s amazing. Well, I want to start off when getting into virtual power plants, which we will use the term VPP throughout this podcast, so tune your ears now, but could you just describe for folks what a virtual power plant is and maybe an example of one that people could kind of wrap their heads around? Chris Rauscher: Sure. I mean there’s a debate about the term virtual power plant because as you said, there’s nothing virtual about them and they can do more than a power plant, and so we’ve tried on the term distributed power plants and had quite a bit of traction with that, but unfortunately it seems like virtual power plants are here to stay and I think in its most basic form, VPPs virtual power plants are tens of thousands of homes that have batteries like a Tesla Powerwall network together with software providing energy to the utility grid so that the utility does not have to get that same service from a centralized fossil power plant. And we have examples of virtual power plants that we’ve run all around the country, but I’ll hit two really quickly because sort of opposite ends of the spectrum and it’ll give you a good idea of what we’re doing today and what’s possible, and I think it’ll also reveal that there are no technological barriers to VPPs around the country today.

So just this past summer from August through the end of October, we ran a roughly 30 megawatt virtual power plant in contract with PG&E, the largest investor owned utility in the country in California, and that was about 8,500 customers with Sunrun solar and batteries. And every day for 90 days straight, we provided a two hour block of power to the utility at the end of the time of use peak period and the hour following it. This allowed the utility to help knock back their new net peak as it’s called, which is the new surge in demand on the electricity grid that happens when the time of use window peak period window ends. And really exciting about that, we went from contract to operation in about six months. You can’t build any other resource at that scale in California in six months. I don’t even know if you could build a new fossil peaker plant in California at all, even if you had a hundred years, given all the permitting and all of the siting issues and all of that.

Then we’re also running a VPP in Puerto Rico, a partnership with the utility operator there, Luma. Totally different use case. That VPP is intended to literally keep everyone’s lights on the island. The utility is very good at predicting demand, so usage on the grid but has a hard time predicting supply because the grid is pretty fragile there due to the hurricanes and then under investment over many decades. So oftentimes the utility will see supply starting to fall off. Maybe a generator is faltering and is going to go offline, and historically that meant that the utility would have to force rolling blackouts around the island to reduce demand and keep the grid energized and operational. This VPP instead calls on us to immediately push max power onto the grid as soon as possible to help the utility create a buffer and not force rolling blackouts. So you see perhaps the most rudimentary grid and operating room in our country, maybe even in our hemisphere, in Puerto Rico, plus the largest IOU, maybe the most sophisticated utility in our hemisphere, at least in our country, and we’re running VPPs in both, today. We’re not relying on utility software, we’re not relying on fancy utility meters or anything like that. This is all in-house with our own software and our own metering. Two ends of the spectrum. So that tells me we can run virtual power plants at scale anywhere in the country right now.

John Farrell: You referenced when you were talking about virtual power plants that they are not only like a distributed version in terms of having, as you said, the example I gave in California 8,500 customers providing similar services to a utility scale fossil power plant. You also kind of implied that there are things that they can do that a traditional power plant can’t do. Could you talk a little bit more about that? Chris Rauscher: Yeah, sure. So I already hit on the sort of development cycle time, so we can stand these up much quicker because we either already have these customer batteries in the utility territory or we’re quickly installing them, and of course there are no NIMBY issues with residential solar and batteries because by virtue of the fact that it’s residential, the host sites, the humans that live in those homes want the solar and batteries. So we don’t face any of those issues that utility scale resources do.

So in terms of the services that we can provide just on the hard utility services, there’s always some level of what’s called line loss. So when you generate power at great distances at a centralized fossil plant and then you transmit that power on the transmission system and then you step it down and voltage and then you distribute it on the distribution system, there’s line losses let’s say on the order of 8%. So you’re losing 8% of power just getting it to homes. That’s number one.

Then number two, centralized plants of any kind cannot perform local distribution functions. So that big power plant that you see that you might drive by, that can’t help reduce the need to build a new transformer or poles and wires in your neighborhood, but residential solar and batteries can. In addition to that, there’s all sorts of customer level benefits. So our customers are still receiving backup power from the battery site in their homes. We never deplete the batteries down a certain percent so that customers always have backup power even if we’ve used the energy for a grid service event. Number two, we pay our customers for participating in virtual power plants. I never receive a check from my utility because they dispatch the fossil fuel power plant. Number three, virtual power plants tend to be cheaper, provide the service at a cheaper level, which means that we reduce costs for all of the rate payers on the utility system. So not just the person that has the solar batteries and is participating in the program, but also all other customers on the grid.

I’ll say number three and then I’ll stop there because I know this is a long answer, but number three, we’re selling a service, not an asset, which means the utility and or the wholesale market operator can sort of price this service. That’s very different from if a utility goes to the utility commission and says, Hey, let us spend, I don’t know, 10 billion on a nuclear power plant to build that asset and own it in perpetuity and then hopefully we’ll be able to have electricity generated from it. So very different when a utility procures a service and not an asset.

John Farrell: It’s interesting that you put it that way. I mean there’s so many tensions on the policy side of things. One of my first thoughts here as you were talking about all of these benefits is especially when you’re talking about the local distribution functions, you’re talking about the customers get some backup power. I’m thinking about PG&E customers who are being subjected to power shutoffs due to wildfires or attempted wildfire prevention, a backstop to maybe not having done the maintenance that the utility needed to do. There is this debate that’s been going on often driven by utilities because this distributed energy resource can compete with the stuff that they might want to build and own. As you pointed out about how valuable or not these local energy is. How are virtual power plants helping to change if in any way that conversation because of the way that they can provide services collectively and at scale? Chris Rauscher: I think you’re asking the right question there, and the answer would have been different 10 years ago in the era of flat power demand, but now we are seeing load serving entities recognize the electrified future and changing their projections for power demand out into the future. So I think we’re starting to reach some level of consensus that the way to combat climate change is to electrify everything and run everything on clean energy. So what that means is switching energy supply from liquid fuels to electricity, so moving from gasoline, propane, whatever it is to electricity, electricity to run your heating and cooling, to run your dryer, your car, all of that. So we’re probably going to see while Saul Griffith has modeled this out, that if we electrify the entire economy, we’ll see about a doubling of electricity consumption over a given year from today, and it’s only a doubling.

That’s fascinating, right, and the reason it’s only a doubling is because electric motors are so much more efficient than their internal combustion counterparts. So we’re going to double the kilowatt hour usage on the grid as we electrify. Saul Griffith has also modeled that if we put solar on the built environment in all available spaces, so every rooftop that’s a good candidate, carports, et cetera, we can meet about half of that double demand that we’re going to see in the future. So for me, this means a couple of things. One is that due to the lack of barriers that we see for residential solar and batteries that I mentioned earlier, we need to start there because obviously no regrets and we’re going to build out very quickly much of what we need to meet the demand on the grid, but then there’s also clearly an opportunity for utility scale resources and other clean energy resources.

So I don’t think we should be having a binary fight about this. However, if we double the kilowatt hour usage over the year on the grid and we also double the kilowatt demand on the grid in any hour, day, week, month, or year, if we double that demand, we’re going to have to build out the poles and wires 2x. We can’t do that. That is insanely expensive, and what will happen is it will actually increase electricity costs dramatically, thereby slowing down or stopping electrification. So how do we solve for that? Well, virtual power plants are actually the only way to solve for that. Flexible demand side solutions, smart charging of your car using your stationary battery to sort of modulate your demand. All of that together in concert is the only way that we can keep costs down as we increase the electricity demand on the grid.

John Farrell: It’s so funny too because I feel like so much of the conversation we end up having at the regulatory level or at the legislative level about solar right now is driven by this desire by some folks for a binary conversation of utility scale versus local solar. And that point you just made I think is so important for people to understand that the long view here, that the long range issue is actually not about where do we get the electricity generated, but how do we manage the demand in a way that our existing grid has the capacity to handle it. And for that really a utility scale power plant can’t do anything for you. Like you said, it’s not local, it’s not near where we use the power. It doesn’t have the capability to make those adjustments. Yeah, I wish the conversation was more about that.

It feels very much like we’re, as you said, kind of like in the 10 years ago conversation about whether or not rooftop solar or utility scale solar is cheaper, and I’ve done some analysis that suggests they’re about the same, depends a little bit on where you are, but very little of the analysis seems to be talking about this kind of future about managing the grid demand. Let me pivot a little bit though and just ask you about how do virtual power plants, obviously they can address issues like affordability because you just addressed this issue of grid infrastructure needs and being able to handle that. You talked about people who participate in a virtual power plant getting paid by the utility for the service that they’re providing, which is pretty awesome. How does it help with climate change, which is obviously one of the driving factors behind electrification and behind folks’ interest in clean energy?

Chris Rauscher: Yeah, it’s another great question there and it’s so funny. It’s something that we don’t really talk about climate change all that much in our industry right now because so much of this is about economics and resiliency and reliability, but of course combating climate change is really the underlying foundation of all of this. The way that virtual power plants help to combat climate change is actually pretty simple. The 8,500 customer batteries and customers that I mentioned in our PG&E program from this last year, every single one of those batteries was charged only by rooftop solar. And so basically what those batteries are doing is they’re storing solar power when there’s excess solar on the grid during the middle of the day and then they’re time shifting that solar to provide solar power back to the grid after the sun is down. And it’s really beautiful to think about that you’re basically increasing the amount of sun hours in the day and because energy is flowing from the battery in someone’s home, Tesla Powerwall or an LG cam or another brand of battery, because stored solar energy is flowing from the battery, let’s say 7:00 to 9:00 PM and that energy is being used by the people in the home and then the excess is being exported to the grid to one, probably two neighbor’s houses because there’s enough power flowing there.

That means that three different homes in that neighborhood are using stored solar power after dark just because one of those homes is participating in the virtual power plant. So the other side of that coin is those three homes are not creating demand for fossil fuel power plants at that time because their demand is being met by local resilient solar and batteries.

John Farrell: Another thing I hear a lot about lately in conversations about clean energy and frankly it’s unavoidable, is the talk about needing more transmission capacity as this major barrier to deploying clean energy. And I think particularly obviously we’re talking about utility scale because you don’t generally need a transmission line to put solar on your home. So I was hoping you could talk a little bit about how virtual power plants can help with this issue. You talked about the distribution capacity problem, which is going to be coming as we use more electric devices. Is there a way that virtual power plants help us with this issue of transmission capacity for the large scale stuff that folks know that we also need to get to our climate and clean energy goals? Chris Rauscher: Yeah, it’s such an interesting topic and the question is nearly moot. Let’s, let’s pick New England. Various states in New England have been trying to get large scale transmission built to deliver hydro power from hydro Quebec down towards the Boston Load Center. This has been going on for geez, 15 years or so, and first there was going to be a big line in Vermont, then there was going to be a big transmission line in Hampshire. Then there was going to be a big transmission line in Maine. I’m not saying that that transmission line shouldn’t be built somewhere to bring hydroelectricity from Quebec down into the Boston Load Center. What I am saying is that over those 15 years or so, no transmission line was built. We’re not getting that hydro Quebec power, but for those 15 years we’ve built out megawatts and megawatts and megawatts of solar and batteries in the Boston Load Center and the surrounding states.

So the question is almost moot because it’s like what is being built today and what is working today? Let’s double down on that first. Separately, we should have the conversation about transmission obviously, but again, not a binary thing. And let’s take the no regret step now that we have that we know it works. The other way to look at this is any demand that you reduce on the distribution system or on the transmission system means that that capacity is then freed up for some other service. So if your goal is to bring large scale renewable hydropower, well, I won’t say renewable because there’s debate about that. If your goal is to bring large scale hydropower from Hydro Quebec through the transmission system to the Boston Load Center, if more and more demand is being met locally, then that means there’s more available capacity on the existing lines or the new lines don’t need to be built out quite as big.

John Farrell: I had a great podcast with a Minnesota developer, Dan Juhl, who is talking about he pioneered the use of wind, solar and storage hybrids that he builds to be connected on the low voltage side of the substations. And he talked exactly about that too. So I think it’s really interesting for people to think about the fact that small scale power generation and storage is actually a way to expand transmission capacity. Maybe not as much as you get in building that power line, but the point being that sometimes you can’t get the power line built. It takes forever. So as you kind of alluded to this at the beginning about virtual power plants that really you have the technology to do this anywhere already. You have the software, you have the hardware, but I’m kind of curious what kind of rules or policies that states have around the electricity system help you take advantage of that, make it easier to do this, and where do those rules get in the way? Chris Rauscher: Sure, yeah. I mean I always come back to this that there is no sort of natural market for electricity or energy services in the US and that’s why we have monopolies and that’s why we have state granted monopoly franchises. Electricity is probably the most heavily regulated industry, perhaps only second to pharma, but I actually think that electricity is even more heavily regulated because as I said, there are no natural buyers and sellers of power in the utility system. There is when you’re talking about a Sunrun or another solar company selling directly to a customer. So what that means is that we can’t build and operate and sell virtual power plant services to a load serving entity to a utility outside of a regulatory framework that allows for that or creates that. And it’s no surprise that the wholesale tower markets and the vertically integrated utilities, the kind of whole ecosystem here has been developed for nearly a hundred years to orient completely around centralized power plants, initially coal and then starting maybe 30 years ago, reoriented around natural gas as the marginal resource on the system.

So what that means is the rules just simply do not exist and the markets don’t exist for virtual power plants to participate unless we go out there and create them. So you have very forward-looking progressive utilities like Green Mountain Power in Vermont that has been running virtual power plant programs, both utility owned as well as competitive ones, for nearly a decade now. And then we have partnerships with PG&E and others where we’ve gotten something across the finish line, but we are still looking towards the future of what does that partnership look like? And then you have places like Puerto Rico where they have no other option and they’re seeing that they need to rely on virtual power plant services today. But going to be honest with you, I’m based just outside of Portland, Maine, so we have a saying it’s still tough sledding and we have to fight these battles in the policy and regulatory spheres for some number of years to come, I think, in order to create these opportunities.

John Farrell: We’re going to take a short break. When we come back, I ask Chris to explain what the barrier is to deploying virtual power plants in most states where Sunrun has virtual power plants in operation and what the ideal policy would be to unleash virtual power plants across the country. You’re listening to a Local Energy Rules podcast with Chris Rauscher, head of grid services and virtual power plants at Sunrun.

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John Farrell: Minnesota is one of roughly 30 states where we have vertically integrated monopoly utilities. So there was no restructuring of the market 20 years ago as there was in other places, which means that Xcel Energy, which is my utility, they own the meter that’s on my house. They own all the wires, they go through the alley, they own the substation, they own the transmission line, they own the power plant, they own all of it, and that’s how they make their money is by building and owning those assets. Chris Rauscher: Sounds like a good business. John Farrell: It’s a great business for them and it’s very rewarding. They get a return on their capital expenditure of nine to 10%, which I’m very envious of as somebody who is able to invest a little bit of my salary in stocks and stuff. It’s pretty hard to find that kind of return frankly, but they get it virtually guaranteed. So I guess my question is to get into some of that policy stuff, you mentioned tough sledding, which it rained today in February in Minnesota. It’s very tough sledding both in terms of climate and in terms of policy. I don’t know if you want to talk a little bit about, there’s a natural aversion to this from utilities and maybe natural is not the right word, but there’s a very rational aversion to this. They make money by building infrastructure. You’re talking about how virtual power plants save everybody money by avoiding infrastructure expenses. Well, the utility is not so excited about that, that’s how they make their money. So how do we reconcile this issue of virtual power plants?

Distributed energy resources are very good for the grid and for people. They reduce costs, they address climate change, but utility business models make them very resistant to it. And as such, I don’t know if you want to talk a little bit about this, but there’s not a lot of places where you can do this, unfortunately, despite how valuable it could be for everybody who’s on the grid,

Chris Rauscher: The answer is pretty simple, change the business model. But as you and I know, that will take decades if it ever happens, but really that’s what needs to be done, right? You need to change how utilities make money and move to pure performance-based rate making as Hawaii is in the process of doing as well as other places. Chair Gillette in Connecticut at the Connecticut PURA obviously has been doing incredible work in this area to really change the incentives for the utility. I don’t know if you’ve interviewed her yet, but she might be a great guest. So that’s obviously the big answer that requires a shift and it’s probably going to happen on a glacial time period. I would imagine the sort of today answer is find where the incentives are already aligned and adapt that to virtual power plant programs. And the clearest example to me is the nearly clean sweep that we have in New England.

So every state in New England has some version of a virtual power plant program generally called Connected Solutions. There are a lot of nuances here, but I’m just going to speak in broad strokes. Generally, Connected Solutions is run out of the energy efficiency budgets that the utilities have, the utilities get paid to administer those energy efficiency budgets. Then for the virtual power plant programs that are run through those energy efficiency budgets, we use those VPP programs in partnership with the utility to knock down a cost driver on the system that the utility is apathetic towards. It’s just a pure pass through from the wholesale market down to their customers so they don’t lose money when that cost driver goes down and they get paid money through the efficiency budgets to administer the programs. Obviously New England is part of a unified wholesale market, ISO New England, the cost driver that we’re knocking down is generally the cost of the capacity market, which is a pass through from the market through the utility to the customers.

But this can also work in vertically integrated places, even in Minnesota. Just figure out what the budget is there that the utilities are already recovering on to operate, likely the energy efficiency budget, and slot the virtual power plant programs in there and then just create a shared savings mechanism, right? So for every a hundred dollars that are created in savings, utility is able to pocket, I don’t know, let’s say eight to 10%, just like their guaranteed rate of return. The rest is then split between participating rate payers of virtual power plant participants and then the leftover savings are spread across the rate base, so everyone’s bills go down. It’s really not rocket science and those programs in New England, we’ve been running those in partnership with utilities for six or seven years now, year in, year out, tried and true. It’s proven. So I said earlier, there are no technological barriers to this, no technical barriers. There are also no business or program model barriers. The only barrier is putting those programs in place.

John Farrell: Chris, I’m curious. The southeast has been historically really challenging for third party anything. The monopoly utilities there have been very resistant. You see Florida Power and Light funding ballot initiatives to stop even rooftop solar, et cetera. Have you had any luck penetrating the market in the Southeast and if not, you talked about New England, California, Puerto Rico, are there other places around the country where you are successfully deploying virtual power plants, if not in the Southeast? Chris Rauscher: We had a limited virtual power plant pilot with Duke Energy in the Southeast a few years ago, and there are some folks at Duke at senior levels that really understand this stuff. And I think it’s a matter of changing the whole of the organization both for Duke but then for other utilities in the Southeast and thinking about the future a little differently than they thought about the past. And I think that’ll take some time, but we’re starting to see some progress in North Carolina and elsewhere. But in general, most of the virtual power plant action is happening in California, Puerto Rico, New England, and then to a lesser extent Hawaii, although they’ve really recently kind of gone off the rails in Hawaii. And then Texas. There’s been a lot of news recently about Texas and what I would say about Texas is the demand for virtual power plant services is absolutely there and the supply is being built every day, so deploying solar and batteries every day, but the programs are really not at a level of maturation yet where we can unlock the services from the virtual power plants. But I would say keep a close eye on Texas. I think that’s a place that’s really going to develop soon.

The other piece here is talked a lot about stationary batteries, Tesla Powerwalls, LG Chems, et cetera, being the backbone of virtual power plants. And that’s true today and I think that will be true out into the future. But increasingly we’re also seeing exciting stuff happening with electric vehicles both on the managed charging side, which I wouldn’t necessarily describe as a pure virtual, that’s really just demand response, but also increasingly on the bidirectional side, so electric vehicles that can push power from the vehicle to the home and to the grid. And of course Sunrun, we have a partnership with Ford on the F-150 Lightning and through that partnership we were the first to market with a true bi-directional electric vehicle offering in the U.S. which we unveiled I guess maybe two years ago now. And so I would say keep a very close eye on that space as well because I think you’re going to see an explosion of both bi-directional vehicle offerings as well as programs for bi-directional vehicles to form virtual power plants with those.

John Farrell: It’s really exciting to hear about. I did do a podcast interview with someone from the New Hampshire Electric Cooperative who had their deploying their first what they call transactive energy rate, and the idea was having seen that solar and batteries could provide this value, basically creating a tariff, creating a price that they would be willing to pay for it in order to more formalize that. It was interesting to see a co-op doing that too, where they’ve often been a little bit more closed as with other utilities. So I’m kind of excited to see how that turns out. Chris Rauscher: That was probably my good friend Dave Erickson, who’s now retired. John Farrell: His name came up. I ended up talking to Brian Callnan at the co-op, but I imagine Dave was involved in it. I wanted to ask you two more questions. One of them is just thinking about this as someone who is personally on the journey of electrification hoping going to get a heat pump sometime this year, is there something that you would recommend to a homeowner who is thinking about solar or storage or any of that kind of stuff, but maybe in a state where the programs aren’t there yet, right? There’s not going to be anybody coming up to me to offer me to participate in a virtual power plant yet in Minnesota, but should I be getting ready for that and is there something I need to be thinking about that will make me more ready for that as I make those investments? Chris Rauscher: On the electrification journey first, my wife and I have gone through that journey twice now with two different homes, the home we used to live in and the home that we live in now. And I can appreciate some of the pain points dealing with so many different contractors and trying to figure out what makes sense for your home. And we in our house now, geez, we probably have, I don’t know, maybe six heat pumps total between space heating, then our heat pump water heater, and I look at our enormous electricity bill, even though we have rooftop solar, we still have a large electricity bill because our roof simply isn’t big enough to provide for the demand for one electric vehicle plus a plugin hybrid, plus all electric heating and water heating and closed drying and all the other stuff. So for me, that’s a good news story. That means the utility is making more money and solar is also making more money. Then us as the customer, the consumer, our total energy spend on a monthly and yearly basis is lower than it was before we electrified. When we get that big utility bill in February, I call up a spreadsheet that I use to track all this and I show my wife and I say, but this is what it would’ve been if we had propane and home heating, oil and gasoline. So I can appreciate the journey you’re on. John Farrell: Yeah, I love that spreadsheet. I have something similar as well when we got an electric car and it is really interesting to go back and look at that, but then also to look at my electric bill and be like, wow, I no longer have the smiley face on my electric bill that says I use less than my neighbors. They have no way of telling that I’ve got all these electric things I’m plugging in. Chris Rauscher: Yeah, you might have to edit this out, but I have an app, a sense app that tracks my usage in real time and demand in real time, and I have fun turning on the induction stove, running the dryer heat pumps and having the cars plugged in to see how many kilowatts of demand I can hit. And I call it big demand energy, like horsepower, how many horsepower does that truck have? And it’s like how many kilowatts you pulling from the grid today? John Farrell: Oh my gosh, that is so funny. I was just looking at getting a heat pump. I also have one of those panel apps or whatever to see how much demand I’m pulling and was doing sort of back of the napkin math to figure out am I going to go over my panel rating by doing a heat pump if I look at all the coincident demand from the electric stove, the washer, the air conditioner, all that kind of stuff. So it’s fascinating to look at that. I love that I’m not the only person out there nerding out on that.

Let me ask you a serious question actually though. You mentioned Hawaii and then you said Hawaii had gone off the rails, and I was particularly interested because earlier in the podcast you had talked about Hawaii when we were talking about business models. Hawaii is like this one state that has made that full transition to performance incentives for the utility. The order first just came out a couple of years ago, so I know that it’s early yet. I was just curious if you could talk a little bit about what Sunrun’s experience has been in Hawaii and if that business model change is actually helping, or I guess what I’ve read, what I’ve read is that there was a particular program that was working really well and they decided to completely get rid of it around storage. So maybe it’s not working as well as we’d hoped.

Chris Rauscher: Yeah, I think Hawaii has always been called a postcard from the future, and I think that was maybe true in the past, but we should be saying that about Puerto Rico now because it’s another island in the U.S. that now is really taking leadership. And so first in Hawaii, obviously they moved away from any sort of net metering like tariff, which had impacts on the solar side. And then increasingly we deployed batteries, although the market is still not nearly what it was when there were healthy economics on the solar side and then some virtual power plant programs were created that had some early promise.

However, I think that a lot of the virtual power plant action in Hawaii has gotten overly complicated. You have all these competing dynamics there now between what value you get for electricity that’s exported to the grid outside of a virtual power plant program. Then what value you get if you are exporting during a virtual power plant program, then how is that value captured? Is that bill savings? Is that paid out to an aggregator or directly to a customer? Then there are heavy, heavy complexities around the software connections, right? What software, what type of protocol do you need to connect to a utility derms? Should you even need to connect to a utility software platform or can you do that in-house with an aggregator? What level of dispatch is required, how many calls? And then just at the end of the day taking out your calculator and looking at all of that and saying, is the customer better off if they participate in this virtual power plant program or are they not? And a lot of times the answer is they’re not better off, they’re just simply not better off. And so I think it’s just gotten a little overly complex in Hawaii, and I like to say complexity kills and simplicity sells, and that’s true both when it’s an aggregator providing virtual power plant services to a utility or that same aggregator trying to get customers to sign up for solar and storage and be in a virtual power plant program.

So I think it’s a high level answer, but the truth is it’s just gotten a little too complex and they’ve lost sight of where they’re trying to head.

John Farrell: I really appreciate that phrase, complexity kills and simplicity sells. I think about that a lot as we watched states wrestle with this idea of a value of solar tariff. I was involved in the creation of the one in Minnesota, and one of the things we were really insistent about was that it be predictable and that it be booked for 20 to 25 years so that someone can go out and say, I know how much money I’m going to make by providing this solar service or by building the solar project on my house, and therefore I can get financing for it. I can actually make a business out of it. And I remember at around the same time New York was developing their first version of what they call it, VDER – value of distributed energy resources. And it was like, well, there’s this thing and it can vary by this much on a monthly basis or a weekly basis, and then there’s this other component, but we’re going to revise that every year. And I was like, nobody’s ever going to do this. You have no idea how much you’re going to make. You might as well just go out and gamble. So I think those are very wise words. Chris Rauscher: New York could be such a promising market, but there are no residential virtual power plants outside of one that we are running right now with Orange and Rockland. There are no VPPs really in the state at all. And so that complexity really did sink the progress there in New York, but then also the more complex these things get, the harder they are to manage on behalf of the customer. And I think there are kind of two views on virtual power plant customer interactions. There’s one view which is that this should be gamified and customers should be excited to look at their battery app and see how much money they’re earning and all of that. I think that’s great for early adopters in California who have lots of money and time – not to put too fine a point on it, but that just simply does not work for most average middle class American families who are going about their busy daily lives and want cheaper power that’s clean and resilient.

And so our role at Sunrun as the aggregator, as the VPP provider, is to manage all of that complexity on the backend for the customers. They don’t even have to think about it. They just get a check at the end of the year for participating. And then manage all of that complexity for the utility so the utility doesn’t have to interact with 8,500 customers and respond to customer inquiries when their battery isn’t dispatching the way they thought it should or when the check didn’t come through the mail and the way they thought it would or whatever. So that’s our fundamental value proposition is managing that complexity from both sides to deliver that service to the utility and that value to the customer.

John Farrell: That’s great. Even as a nerdy person who looks at my energy app, I would be more than happy to have somebody else manage all of it, just thinking about the complexity that will be coming of both managing the demand within my own house to make sure my panel doesn’t get overwhelmed, but then thinking about multiple appliances or car chargers or whatever, that could all be interfacing at the same time. Nobody actually has time for that unless it’s their full-time job. Chris Rauscher: There is no reason why progressive utilities could not have started managing that on behalf of the customers years and years ago. I picture a utility that would manage all of that, walk you through your electrification journey that is super high friction, guarantee you savings from switching from liquid fuels to electricity. Let’s say they guarantee savings for five years, and then every month on your utility bill sending you this huge diagram that says, John, you would’ve spent $700 total this month on energy if you hadn’t electrified, but you’re spending $500 this month instead. There’s no reason why the utilities cannot be doing that, and that’s a giant hole in the market, John Farrell: No doubt. Getting back to market rules, my final question for you is, if you had a magic wand, is there one federal policy or state policy or utility business model change that you would want to just make universal? Is there one jurisdiction that does this really well already? And you’d be like, you know what? Maybe that’s not the ideal. Maybe you’d go further than that, but maybe you would just wave your wand and say whatever Puerto Rico does for VPPs, I’d want to see that everywhere. Chris Rauscher: That’s such an interesting question and I really, I’ve got to go back to Connected Solutions in New England. If we could wave our wand and copy and paste that program into every single state in the country, I think that we would be probably 90% of the way there in virtual power plants. Connected Solutions, as I mentioned before, aligns all of the incentives between the utilities, the aggregators and customers. And that single program incorporates not just stationary batteries, but also thermostats, electric vehicles, pretty much anything in the home that can provide flexible demand. So if I could just put that program in place everywhere in the country, I think we could stop talking about VPP so much and just start seeing more VPP action. John Farrell: What do you think makes that hard to do? You’ve said it aligns the incentives, right? In theory, everybody who’s part of this should be interested in it. Why do you think that’s not happening or why hasn’t it happened yet? Chris Rauscher: Who serves your electricity, again? John Farrell: Xcel Energy. Chris Rauscher: I challenge you to find three people at Xcel who work in different states and have the level of understanding of connected solutions that you might have. And so I think even if you have people at utilities who are really progressive, really want to do the right thing and really forward looking, the institutional inertia just is a big barrier. And the lack of understanding of what the landscape looks like is a huge barrier. John Farrell: Well, we’ll get there because people are going to hear about what is possible and they’re going to get excited about it. So I’m going to remain an optimist even if my own utility right now is not one that gives me optimism. Chris, thank you so much for joining me to talk about virtual power plants and all of the opportunities with them and the complexity of the policy and how they work. It’s been a real pleasure. Chris Rauscher: Thank you, John, and good luck on your electrification journey. I hope the sledding gets easier. John Farrell: Thank you so much for listening to this episode of Local Energy Rules with Chris Rauscher, head of grid services and virtual power plants at Sunrun. On the show page, look for links about Sunrun’s virtual power plant projects, as well as an overview of what makes a virtual power plant. We’ll also have links to some related podcasts, including my interview with Brian Callnan at the New Hampshire Electric Cooperative about transactive energy rates, and my interview with Dan Juhl about how wind solar hybrids can free upgrade capacity. We’ll also have a link to an interview by David Roberts on the Volts Podcast with Connecticut Regulator Marissa Gillette. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

 

Programming a More Affordable Clean Energy Transition

Virtual power plants are networks of distributed energy resources that, through software, provide coordinated grid services. Rauscher prefers the term distributed power plants, since their components are real and tangible. Participating residential solar and storage customers get paid to dispatch electric power in times of need. This service is price competitive with other forms of peak generation, so it reduces costs for all electricity customers.

There are many advantages to virtual power plants beyond their ability to alleviate grid stress. Distributed solar and storage systems generate power where it is used, thus eliminating line losses and some need for grid infrastructure buildout. As energy use electrifies and demand grows, the coordinated services of distributed solar and storage are the only way to keep costs down, says Rauscher.

Let’s take the no regrets step now – that we have, that we know works… if more and more demand is being met locally, then that means there’s more available capacity on the existing [transmission] lines, or the new lines don’t need to be built out quite as big.

Virtual Power Plants in Practice

Rauscher describes several virtual power plant programs, including examples in California, Puerto Rico, and Vermont. Rauscher says he would copy and paste New England’s ConnectedSolutions program in every U.S. state if he could.

There is an additional challenge to implementing energy efficiency, demand response, and virtual power plants in vertically integrated electricity markets. The utility incentive to build more and sell more is generally incompatible with customer ownership. In the long run, says Rauscher, we must realign utility incentives. Hawaii’s novel performance-based regulatory framework is one way to do this. As a more interim step, Rauscher suggests using existing energy efficiency mandates and budgets to implement distributed power plant programs.

There are no technological barriers to this… There are also no business or program model barriers. The only barrier is putting those programs in place.

Episode Notes

See these resources for more behind the story:

• Listen to another Local Energy Rules interview about virtual power plants featuring Cisco DeVries, CEO of OhmConnect.
• Listen to a Local Energy Rules interview about how hybrid solar and wind systems can circumvent transmission system concerns.
• Listen to a Local Energy Rules interview about New Hampshire Electric Cooperative’s Transactive Energy Rate pilot program.
• Listen to David Roberts’s interview of Connecticut regulator Marisa Gillette on the Volts podcast.
• Listen to a Local Energy Rules interview about Hawaii’s performance-based utility regulation.

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country, using ILSR’s interactive Community Power Map.

This is the 203rd episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update.

Featured Photo Credit: iStock

Monopoly utilities give distributed energy advocates little time to celebrate their victories.

For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Pouya Najmaie, Policy and Regulatory Director at Cooperative Energy Futures. They discuss the strengths and weaknesses of Minnesota’s community solar program, its many regulatory and legislative changes over the years, and how utility Xcel Energy has found a new way to try to suppress distributed generation.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Episode Transcript

Pouya Najmaie: We wouldn’t necessarily push to switch over to this new VOS and give us that rate instead of what we would like, which applicable retail rate. But we’ll take this average retail rate, but we like the VOS. We think it should be calculated. We want it around because it’s a good benchmark. It says, Hey, this is what the solar is actually worth. If you’re only getting paid less than that with the average retail rate or applicable retail rate, with the new VOS, then you’re actually saving money and it’s telling you what actually this program, the CSG program in this case is giving for savings to the rate payer, not what it is subsidizing but being subsidized by for the rate payer. So we want VOS around, but we’d rather stick to what you have to pay for your utility bill. John Farrell: What makes Community Solar succeed at spreading the financial benefits of the clean energy transition to everyone? Minnesota’s community solar program has been the nation’s largest for many years with half its capacity serving public or public interest institutions from local governments to hospitals. It serves 25,000 residential subscribers, many who are low income. It’s also under concerted attack by the state’s largest investor on utility, whose shareholders miss out on potential profits every time a community solar project takes the place of a utility owned solar array. Pouya Najmaie, policy and regulatory director with Cooperative Energy Futures, a cooperative solar developer whose customers are also member owners, joined me in January, 2024 to talk about the successes and the struggles to make community solar work for Minnesota. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. Welcome to Local Energy Rules. Pouya Najmaie: Thanks John. Pleasure being here. John Farrell: So before we get into the weeds of Minnesota’s community solar policy, which I definitely want to do, I’d love to just ask you how did you get into community solar work? How did you end up at Cooperative Energy Futures? How did this kind of work align with your life interests? Pouya Najmaie: So I’d say I think first I’ve always been sort of a progressive thinker, sort of outside of somewhat of the mainstream thinking, mainly because I was born in Iran and came here when I was four and this was in the late seventies, early eighties and basically the country was persona non grata with the US at the time. And so very early my bubble was busted as far as thinking about things in foreign policy and world issues in general in sort of a mainstream point of view. I saw the hypocrisy because when I first came here as a kid right before the revolution in 79, Iran was very tight with the U.S. and everybody loved Iranians and that changed literally overnight. So it sort of brought this out for me and as I went through high school and so forth, the same was the case where I just had an outside point of view.

And then in college I did environmental science and then for grad school environmental and science policy and so carried that with me and afterwards I probably would’ve never gotten into solar had I not run into Timothy DenHerder-Thomas, who is the general manager of the energy cooperative that I work for. And just his vision of thinking about energy so differently and the cooperative model I think is what brought me into this. And then of course solar is super interesting so I continued with it, but it really, it was that progressive version of the energy model that brought me in that Timothy sort of introduced to me and I’m grateful for that.

John Farrell: You’ve been around doing the solar work now for many years, maybe not all the way back though, to in 2013 when the state first passed the community solar law. I think in a way it was sort of a sleeper because there were other things on the agenda that year including the solar standard, which was mandating utilities to make some of their first investments in solar energy. So maybe you can’t answer this big picture question about did you expect it to be as successful as it was when it was initially adopted, but whether or not you want to address that question, I’m kind of curious, what do you think about the program made it work so well and grow so quickly in the first years after it launched? Pouya Najmaie: I didn’t really get involved until 2014, 15, so I didn’t have the expectations before it launched. Looking back, I’m still sort of surprised I would say as far as what do I think worked and made it work. Looking back on it now and all the changes that have happened, I would say the big thing is probably two things I can think of at the top of my head and that was the bill credit rate, which was good. It’s the ARR. So it was good for subscribers because it matched their utility bill and provided them with some energy burden relief. John Farrell: That’s the applicable retail rate is the ARR? Pouya Najmaie: Yes. So it matches what you pay for your own electricity bill, so therefore it can provide you relief from any rising rates. And also the ARR just in Minnesota, the applicable retail rate in Minnesota just happens to also be a pretty financeable rate. So it works for the economics of the solar garden. And then the program was also uncapped at first and I don’t know of any, there may be one or two or a few other states that have that, but most of the states that I know have capped programs and Minnesota’s was uncapped. So that really allowed the program to flourish in a big way towards the beginning. John Farrell: Could you talk a little bit about, you mentioned that we started off with the projects being financeable. It reminded me that actually that language is in the statute for the program that the compensation rate did the need to make sure that projects were financeable. I think that was one of the brilliant components of it. I don’t know who to attribute credit to for that language, but of course it required the commission to make sure that that compensation rate would result in community solar happening, which is lovely and something I think that was really key to giving the regulators the power to make it happen. I’m wondering if you could talk though about since its inception. So there was a fairly extended rulemaking process. I think the program finally launched about 18 months after the law took effect in the middle of 2013 maybe was it December, 2014 or early 2015. But there have been some changes over time. There was what we’ve called the residential adder, which was something that the commission added. There have been some other tweaks now to use the value of solar as compensation. So up till 2023 when the legislature took a hand, could you talk about some of the improvements that have been made in the program? Pouya Najmaie: So the first one that I remember was eliminating what they called co-location. This is where you could co-locate, I think it was up to five separate gardens next to each other, something like that. And so that created a situation in which you were just creating, it wasn’t so much smaller scale dg, but it was getting a little bit larger and I think it caused, especially in the areas in which these gardens were being built, some consternation as to that and just people, the thought was people were sort of gaming the system. So that was the first major one that I remember and that was pretty early on in the program. Maybe 2015. I’m not exactly sure the exact date on that one. John Farrell: Just to be clear though. So what happened there was instead of saying of allowing people to say like we’re going to put five or even 10 solar gardens all together and build ’em all at the same time, it said actually these are distinct projects and you need to have them as separate installations and not just act as though they’re one big solar array. Pouya Najmaie: Correct, yeah. After that, the next major one that I remember was the shift to the value of solar, which I believe didn’t actually start applying until 20, it was 18 or 19 that it actually started applying, but it was approved in 2016 to go ahead and start then. And when that happened or started being applied, the rate for the value of solar, which we can talk about the value of solar because in many ways it’s great and in other ways it’s imperfect. And at the time it was considerably lower, maybe 30, 35% lower than the applicable retail rate. And because of that and because of the statutory language in which you just referred to earlier, they needed to make these gardens, they decided, in my opinion quite wisely – by they, I mean the Public Utilities commission – decided quite wisely to do what they called a residential adder, which was one and a half cents per kilowatt hour for every subscription that was a residential subscription as opposed to a general service or small general service subscriber. So those are the major ones that I can remember. And then of course they eliminated the residential adder and didn’t apply it for 2023. So that was a change as well. And I think that was just basically done because they knew the program was sunsetting and not a whole lot of people would be taking advantage of 23 anyway and so forth. John Farrell: Maybe we’ll come back to the value of solar. I do want to flag, I do have another podcast, the entire subject of which was Minnesota’s value of solar calculation with Professor Gabe Chan a number of episodes ago. We’ll refer to it in the show notes if people are interested in looking at that, but we may come back and touch on that. But for now, let me just ask. So in the first five years or so of the community solar program, it deployed enough solar to power nearly a hundred thousand homes, really grew dramatically. I think it was almost 700 megawatts in the first five years. Since then, the additions of capacity have leveled off significantly. I think the program’s only grown maybe by another 150 megawatts in the last three to four years. Could you talk a little bit about what hasn’t been working now in terms of being able to see deployment of community solar in Minnesota? Pouya Najmaie: Several things really tamped down CSG development. The first thing that I could probably think of off the top of my head would be the switch to VOS in 2017, which we probably should get into maybe a little bit because some people will wonder why I am talking about a switch to VOS as being a negative thing when I also argue in other circumstances that VOS is really the value of the solar and that has to do with the imperfections of VOS and what it was like back then. John Farrell: Let’s jump into it a little bit. So in 2013 as part of the legislative package that approved this program, it approved this alternative to net metering tariff called the value of solar tariff, which we and I are both going to call VOS here any number of times. So just when you hear that, that’s what it is. And the idea was to calculate kind of the costs and benefits of distributed solar explicitly as opposed to sort of using just net metering and saying like, well, it’s kind of close to the value of solar, what people pay for the electricity on site. And so we’ve got solar on site and it’s roughly there. So it accounts for the avoided fuel costs for producing electricity in some other fashion, it takes into account avoided pollution including carbon dioxide and other pollutants, avoided capacity that the utility might otherwise have to build in terms of infrastructure, power lines, substations, all that kind of stuff.

And there’s a couple other components maybe, I don’t know if we have to get totally into the weeds, but yeah, talk a little bit about, so the value of solar was lower than the applicable retail rate as you mentioned, as much as a third. So that was a big deal and then the commission did the adder. Yeah. What more do you want to say about the value of solar? Obviously it was this attempt to calculate accurately where the value of solar was, but I guess there were not always agreement on whether or not it was calculated in the right way.

Pouya Najmaie: Yeah, the devil is always in the details on these kinds of things and the value of solar back then, and this has recently changed and I’ll get into that too or it recently is expected to change. It hasn’t quite yet, but the point is the value of solar has the components that you mentioned and without getting into some of the more complex nit pickier issues we had with the value of solar, I think the biggest issue we had with the value of solar that I could say right now that affected the value the most had to do with the avoided environmental cost stuff in particular, the component of that would be the social cost of carbon. And in Minnesota we had our own determination for what that social cost of carbon and it was quite low and the federal social cost of carbon was much higher than that.

So Minnesota had its own way of doing this and because of that in our opinion, it really reduced what the value of the value of solar, the VOS, overall should be. So although we love the concept of this because there is wrapped up in the VOS or the concept of the VOS very integral to it is the fact that there is no cross subsidy on anybody that is not participating in this program. So if you are not directly receiving the benefits from this solar, you’re still receiving all these other benefits that the VOS is then taking account to and then coming up with a value that actually this solar has to the grid and society and the other users that aren’t necessarily in the program. So we love the concept, devil was in the details because the details weren’t that great at the time and that specific one being the social cost of carbon, the state had its own value for that.

It was quite low at the time and made it unfinanceable. So that was the biggest problem for us as cooperative Energy Futures. We’re pretty generous, in other words, our profit margins aren’t as high as many developers because our owners are the people who get electricity. We’re a cooperative, so there’s no really use, they’re taking up a bunch of money on the front end when our profits go back to them anyway, so the idea was high energy savings. So when you do that kind of thing, it really makes it hard to pencil in a garden at nine and a half to 10 cents per kilowatt hour, which is right around what VOS was then versus the applicable retail rate, which was 13 point a half cents or so. Plus we also got this 2 cent adder by the way too during that period which has disappeared. So 15 and a half, 16 cents per kilowatt hour versus nine and a half to 10.

So it really made these gardens not financeable and I think it really hurt a lot of other people doing that too. If you notice the other crazy thing it did unintentionally I think, and this is why they added the residential adder to the VOS once they did that, not just for Financiability, but they wanted to encourage residential subscribership like this program, they wanted to lean it more towards residential subscribers, get more of them in there. But what VOS does is it does not distinguish class the rate classes like the applicable retail rate does. In other words, there is no residential class versus commercial class versus general class versus small general. There’s none of that. It’s one rate and because of that there is no incentive for a developer to go out and go after small residential subscribers, especially low income, but any small ones when you can go after, I think the rule was five large, you’ll just have to have five subscribers total.

So five large commercial subscribers that are credit worthy and it’s just done like that. So that was another issue with the VOS at the time. That was why the residential was added is because of that, to try to do that. But honestly looking at our economics, if you added that residential adder you’re up at about 11 and a half cents, that’s still not great at all compared to the 13 and a half to 15 that I was citing for the applicable retail rate. So we didn’t really do any gardens because of that. But there are also other reasons that don’t have to do with necessarily the bill credit rate. There’s this whole issue with interconnection within Minnesota and that is somewhat tied to how the program was developed, which we can get into one of those rules in a little bit. But there is this contiguous county rule and it basically created this situation in which the counties just outside of the metro major counties, the ex-urb counties got inundated, their substations got inundated with projects and they filled them up and there was long queues and waits and this caused not only issues with anyone being able to actually put in a CSG in an area where they could actually find the subscribers to be in that CSG, but also with the image of solar in counties like Carver County and these counties where all of a sudden they were popping up everywhere inordinately right when they could have been spread out and that was causing issues with local townships and ordinance and it was causing some militancy against solar and understandably so by some of these communities.

In other words, not understandably so too because some of it was AstroTurf by larger organizations, networks and so forth. But anyway, point is that there was major problems with interconnection and the capacity available at substations. We can talk about how that hopefully is going to go away with the removal of this contiguous county rule at a certain point if you want. But that was another major thing is that whole try to hook up to substations and then there was equipment stuff.

John Farrell: Just to summarize what the contiguous county to make sure I got this the rule and the original law said that the subscribers had to either live in the same county as the solar community solar project or in an adjacent county, a contiguous county. So if I live in Hennepin County in the Twin Cities area, it’d have to be one of the neighboring counties like Carver County and it couldn’t be further away than that. So that was the pile on effect then is that the community solar developers wanted access to people who could subscribe households and businesses in the Twin Cities metropolitan area, but that meant they wanted to do all the projects pretty close by as well, which on the one hand was kind of a good thing in the sense of creating a geographical relationship between the subscribers and the projects. But because everybody decided to go out and do it in the exurbs and not as Cooperative Energy Futures has done in some cases actually inside the urban core, things got really stacked up. Pouya Najmaie: And then as far as I can tell right after it seems to have happened, there was a massive disruptions in supply chains. It just got really hard to get the necessary equipment, especially really complex and expensive stuff like switchgear. I had seen dates like two years out in order to get stuff like that and that’s very specialized and expensive equipment. So it’s not like you can mass produce, it’s hard to fix a supply chain like that. I would imagine it might eventually be done here, but that isn’t a short term thing. Those were the major things that came together to create this nasty brew in which right around 2017 18 gardens really slowed down. John Farrell: So last year in 2023, the Minnesota legislature came back and made a major revision to the program I think in the hopes of addressing some of these issues. Can you talk about what some of the major changes were and did it fix those issues that have slowed the program do you think? Pouya Najmaie: Yeah, so first of all, I could only speculate on whether it fixes it or not because the program hasn’t actually started yet. Some of the speculation will be a little more informed than others, but let’s go through what happened as far as the changes. I think one of the biggest things that we appreciated and pushed for was the change in the rate structure. So no longer went with VOS but instead went to what’s called the average retail rate, another ARR, but I’m just going to call this one average retail rate, which is very similar to the applicable retail rate in terms that it actually shadows or mirrors the rate that you pay for your own electricity, although the average retail rate is a little bit less than what you pay for your electricity, not by too much, but a little bit less like a cent or two per kilowatt hour.

So much better than the VOS. But importantly, unlike the VOS, which by the way the social cost of carbon has now changed because of the 2023 law, the 2040 bill that requires Minnesota to start using the federal social cost of carbon. Now the PUC still has to approve that to be applied to VOS, specifically value of solar, which the hearing is tomorrow by the way for that, I’ll be at that, but I’m really crossing my fingers that happens. I think that is what the law intended. But if you do that according to Gabe Chan in some analysis he did for the Department of Commerce, it’s like basically 20 cents per kilowatt hour, which is way, way higher than the applicable retail rate or the average retail rate or any of that. So the VOS has gotten better in our opinion as far as actually finding the value of what solar is.

We still necessarily as CEF wouldn’t push, and I’m speaking for Cooperative Energy Futures, not as the industry, we wouldn’t necessarily push to switch over to this new VOS and give us that rate instead of what we would like, which is applicable retail rate. But we’ll take this average retail rate and there’s a few reasons, but the biggest one is the VOS is set at a vintage year in which you receive it and then it just goes up by 2% every year. There’s a straight escalator as I mentioned, the average retail rate and the applicable retail rate mirror what you pay the retail rate, what you pay for your own electricity to the utility. So you will always be guaranteed that energy burden relief, but the retail rate, what you pay tends to go up three to 5% a year or something like that and that’ll quickly catch up with 2% a year and there’s no guarantee that it will always, through a 25 year contract, shield you from energy burden.

We like the VOS, we think it should be calculated. We want it around because it’s a good benchmark. It says, Hey, this is what the solar is actually worth. If you’re only getting paid less than that with the average retail rate or applicable retail rate with the new VOS, then you’re actually saving money And it’s telling you, it’s telling you what actually this program, the CSG program in this case is giving for savings to the rate payer, not what it is subsidizing but being subsidized by for the rate payer. So we want the VOS around, but we’d rather stick to what you have to pay for your utility bill. So anyway, that being said, that was the big tangent back to the new rate structure, it’s average retail rate, which is like I said, just a little bit below the applicable retail rate and mirrors the retail rate.

And so that was really happy. There’s different levels of it though sort of, so there’s percentages of it you get. But luckily for low to moderate income, what the legislature decided as what low to moderate income is, which is 150% the average median income or below, if you’re in that category you get all of that average retail rate, a hundred percent of it. And then there’s the sort of graduation for if you’re not in that category, if you’re over it, you get something like 70% of it of that average retail rate. And if you are a large commercial subscriber, you get something like 70% too. And I think you also though get the average retail rate, I believe it’s the full for public interest subscribers. So that’s a whole new category that was created and these sort of state government entity – schools, tribes, hospitals I think or nonprofits in general is what it is. And low income housing providers.

John Farrell: Which is pretty important since we just found out that the Department of Commerce filed in this regulatory proceeding, that’s like half the subscriptions at this point is in the program so far is these public interest subscribers. So because they’re trying to save money on electric bills for schools, for cities, for hospitals, et cetera, and that has a broad public benefit, so making sure that they can still participate and cut those energy bills is a pretty good deal. Pouya Najmaie: Yeah, it’s really interesting. It’s 55% of the entire program. It’s a little over half is just these public interest ones. So like schools, state governments and stuff and then the nonprofits and the hospitals and so forth. And the new program just happens to require 55% either LMI or those public interest ones. So I mean interesting lineup there. But yeah, that is the case and we were really happy to get that new category put into the program as well. So a lot more equity into what kind of rate structure to these subscribers. And then secondly, there was requirements for what kind of subscribers you have to have. And that’s what I kind of mentioned with the 55%. So those are basically there’s 30% of your garden is required to be this LMI category that I just mentioned. That’s 150% of AMI and below. And the idea of 150% is basically has to do with capturing that middle category of subscribers that are not necessarily low income, meaning like 80% or below AMI – average medium income, but don’t necessarily have 30 to $50,000 to spend on solar panels to put on the roof so that they can get the energy burden relief that someone who does do that.

And even though 150% of AMI in Hennepin County might seem kind of high, it is not very high at all in Winona or Fillmore County or some of these other counties and it basically costs the same for them to put up panels as anywhere in Hennepin County for the most part. So that’s kind of the reasoning behind that. And then the other major thing was we really like this one is that commerce is now taking over the administration of the program. There’s this bifurcation now where used to be Xcel would do the administration of the program that they hated and do the interconnection process, which you would expect because it is so-called their grid, right? Even though we paid for it. Now they’re splitting that up. Commerce does everything that has to do with getting into the program, qualifying, having the right percentage of certain types of subscribers. How do you verify that all the rules basically for actually being accepted into the program. Xcel, all they do is interconnection now and paying the bill credits and so there’s supposedly the separate portal that Xcel is supposed to have for that and then the separate portal that Commerce is doing and working on and I believe opening up February 2nd, hopefully crossing my fingers, it’ll still happen.

I’ll get back to how do I think that is going, but I’ll just go through really quick the other things then there’s consumer protections that are really good in this one to weed out some of the unscrupulous actors that come into every market that you have in general. And then now there’s instead of a one megawatt limit on the size of the solar garden – per garden, it is now five megawatts.

So how do I think they’re going to affect the program? Well, I can just say as far as the commerce thing, we’re super happy about that, but I can say Xcel Energy is doing their best to screw that up and to prevent commerce from standing up a program that is good. I don’t know if they’re going to be successful in that. Hopefully they won’t. We are really happy with the people at commerce. We think that they are not only super competent, but I think they understand the value of all forms of solar including the different types of DG as well. So residential, CSG, all the different stuff and the new DG program that’s going to be coming out, I think they really get it. And Xcel Energy, they’re just acting as rational actors, right? They’re, they’re like a machine whose object is to make money for their shareholders. It is not good for them to have generation that isn’t theirs on the grid.

So they’re acting as rational actors. Commerce is doing their best to stand up the program, they’re doing great webinars, they’re answering questions, they’ve been in touch with as far as I know anyone who wants to get hold of them and ask questions. So that’s been going good. Xcel would not have done that. They would take their time on all of that slow roll, any of that and I’m hoping Xcel won’t be able to muddle up things. They’re filing really terrible tar filings having to do with the program, adding all kinds of things that the PUC did not order for them to add. And so we are going through the process of that right now. So it is painful, but this is to be expected and we’re super happy though that is out of Xcel’s hands, the 30% LMI stuff, I mean I don’t see how that will be messed up.

I think this is great as long as Xcel doesn’t mess up paying bill credits and we have to keep on them about making sure this subscriber gets this versus this subscriber gets that. I think this is going to be great. I think the public interest, the new subscriber classification is going to be great. It’s going to keep anchor tenants meaning larger tenants that really stabilize a garden financially being public interest tenants and not tenants that even though the Cub foods may be good for the local economy and so forth, I don’t think it’s as much public interest involved as say a hospital or a school or something like that, a public interest subscriber. So I’m really happy with that. The five megawatt thing, I think a lot of subscribers are going to like that and I think that will make the program more successful, meaning more, we’ll definitely probably hit that a hundred megawatt limit because of this.

We’re not going to have to worry about probably, I’d hope, about meeting that because we don’t really get to roll over capacity to the next year. So we got to hit it if we want it. We only have a hundred megawatts for three years, the first three years. So I think that’s kind of a good thing. Although CEF tends to want to put load close to generation for a bunch of reasons, including one you mentioned, it’s very much people have more of a stake in their garden when it’s closer to them. And that’s sort of what we want to advocate for and get people to learn is to have more agency over their electricity, over their power in general.

John Farrell: We are going to take a short break when we come back. I ask Pouya, what is Xcel Energy’s latest strategy to hinder the community solar program? We discuss the crazy truth that community solar projects are underpaid, and Pouya offers his advice to community solar advocates across the country. You are listening to a Local Energy Rules podcast with Pouya Najmaie, policy and regulatory director with Cooperative Energy Futures.

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John Farrell: I want to pivot and ask you a couple other questions about the program here before we run out of time, one of ’em is just you mentioned Xcel, rationally has not really liked the community solar program. Could you talk about some of their latest proposals that would curtail the community solar program and what impact they might have on solar development? Pouya Najmaie: Before I get into the biggest one, which is that the applicable retail rate being proposed to switch to the value of solar rate retroactively for certain gardens that were developed during the period where we developed the most gardens, I’ll just touch once again, they are doing their best to gum up the works of the new program and if they get their way, I think they could probably make it so the first year of the program, the new program, nobody gets any real capacity and they will have wasted a hundred megawatts worth of what we could have put on the grid. I’m not saying I think that’ll happen. I think if they get their way, that’s what will happen. So there is that and they’re doing that through a bunch of different ways. So I won’t get into all those, but then the big thing here right now is this summer the commission asked Xcel to come up with a proposal to perhaps switch gardens that were built between 2014 and 16 that got this applicable retail rate, which is the vast majority of the 860ish megawatts that is on the grid right now.

They’d be retroactively switched meaning in their, what is this, seventh year, eighth year, whatever, ninth year, whatever math is right now, my brain is mush but retroactively go back there, change the rate for that from the applicable retail rate to the 2017 vintage VOS. So what it was in 2017, which is somewhere around nine and a half cents. And that proposal, which by the way CEF, Cooperative Energy Futures, the cooperative that I work for, all of the gardens we built are on that rate. We have eight of them, about 50ish percent of the people that are subscribed to this are low income. Many people of color. I mean this is the populations we focus on all getting energy burden relief from. This would all of a sudden if that switched be instead of saving money by signing up to a community solar garden, they would be paying extra money than what they would normally be paying for an electric bill.

With CEF, our cooperative, we’re not going to keep them in these contracts. We already have stipulations that gives them an out saying basically three months, give us three months notice you can get out of our contract. And I don’t think we’d do anything if they didn’t give us the three months notice. The idea is not to penalize the subscribers, the people who own the co-op. So naturally they’re going to leave. They’re not going to pay extra, at least most of them. And it’s going to be very hard to fill in those subscriptions. Basically with a premium costing product is what you’re doing. It could very well put all of those gardens underwater, not just for us, but for all the developers. Well either that or some developers may have some very ironclad contracts, but I have to think individual subscribers are just going to default on them. And I can’t see developers going after hundreds of subscribers for this.

So it would basically put all these gardens underwater. I think they’d be stranded assets, they’d foreclose, probably go over to the bank. Many companies would have to, including maybe CEF, just shut off that part of those LLCs and that part of the business and carry on. And that’s a lot of assets to be stranding on the grid. And then just as importantly, if not more importantly, is what it would do to the new program. And then DG as a whole in Minnesota, distributed generation as a whole in Minnesota, that market, if you think about it, it is really fueled by developers and financiers that come in and pay the capital cost for this stuff. And they do risk profiles for all of this. And if they see Minnesota’s rates are retroactively changed, especially after the PUC looked at this decision, this proposal to switch to VOS instead of doing the ARR rates in 2014 and they decided not to do that and they let the program go, they said, this is going to make it financeable.

They did that again in 2016 on September 6th and said once again, yeah, we’re going to switch to VOS, but not now. We’re going to switch to VOS in 2017 and only pay VOS from there on. Meaning for December 31st, 2016, they all can keep the applicable retail rate. Those kind of decisions gave financiers and developers some pretty reasonable expectations to keep a 25 year contract at the same rates that they agreed upon. If financiers look back on that, and they will, they’re doing risk profiles, and they see this stuff can be changed by the commission, therefore it can be changed in the future. I just don’t see them putting a lot of money into Minnesota’s DG market, which Xcel would love and the state of Minnesota would suffer because we have pretty lofty goals to get to by 2040 or along the way. I wouldn’t call it necessarily the most ambitious overall, but you got to work to get there.

We’re not going to get there unless we get all kinds of solar, in our opinion. So we need to get this on the grid fixed and this CSG stuff on the grid and this is not going to help this at all. And it’s also like we mentioned, the majority of the subscribers are like governments, schools, things like that, cities, metropolitan councils, these kinds of things. And several of them in the public comments mentioned that. And I remember Sauk Rapids being one specifically, we might not trust any government energy programs after this. If you do this to us, we’re going to lose in some cases, millions for some of these institutions. Why should we deal with this? Why should we trust you after this? All that? And then you think about subscribers too. Anyone wanting to sign up for this now the word’s going to get around that this happened and these people who signed up for it before all of a sudden got screwed out of their rates. So this is a huge deal. And so far the public, I think there’s well over 500 public comments in right now and I think there’s 60ish institutions that have written in all against this change.

John Farrell: So one of the things I want to just unpack here a little bit, you’ve done a great job of covering the substance of the situation here that the commission asked Xcel to look at what would happen if they retroactively reduced the contract rates for these community solar gardens. But the reason for it kind of goes back to Xcel’s longstanding communications attacks on the community solar program as being too expensive. People who live in California or other places which have seen solar under attack by utilities will understand that they basically are saying it’s too expensive, it’s all these subsidies, that kind of thing. And what’s interesting to me is that this comes back to that value of solar, that VOS that we were talking about earlier. If you look at the VOS compared to the ARR, the price that these solar gardens were getting, you say, oh, well it does look like they’re getting paid more than the value of solar. It is kind of a subsidy. It doesn’t mean you should go back and retroactively screw with contracts, but you could at least understand this argument that maybe we were paying more than we ought to have paid.

On the other hand, you just pointed out that this calculation about the cost of carbon, the social cost of carbon, which is really a way of pricing how much of an environmental and health impact we pay for a fossil fuel that it costs us, but that we don’t actually pay. So the social cost of carbon is meant to put into that value of solar price, an understanding of how much money we save on health and environmental costs by investing in solar. If we had that right, as Gabe Chan calculated, then the applicable retail rate is actually too low.

Pouya Najmaie: It’s like 5 cents per kilowatt hour too low. Yeah. John Farrell: Yeah, 5 cents too low. So this is what kind of blows my mind right now is that we’re in this situation where the commission is actively thinking about reneging on contracts to hundreds of developers, thousands of customers, putting low income folks in a situation of paying more for energy rather than saving on their bills, putting cities, libraries, schools, hospitals in this losing millions of dollars in investment as you said, why would they trust us? And yet it’s all based on a lie that the utility has advanced that somehow people are paying too much, which is a very self-serving lie because of course they want to make the investments in solar themselves that make profits for their shareholders. So I was going to ask you if there really was a premium for community solar, is there some action the state regulators could take, but based on where the value of solar ought to be, it sounds like we’re literally going backwards for no reason at all. Pouya Najmaie: The numbers that Xcel throws out is – Xcel’s numbers as far as how much is being subsidized and they get to manipulate them and compare it to whatever they want versus comparing it to say the value of solar or whatever else. And like you said, even comparing it to the value of solar, the question is which value of solar are we comparing it to? The imperfect last, the one that doesn’t keep take into consideration the federal social cost of carbon or the other one. Either way it’s much less, well obviously if you’re doing the federal one, it’s a savings, but if you do the old value of solar, it’s much less savings. Then Xcel is claiming, and the other thing is the main argument was this two-pronged related argument. The first one was the one you just mentioned, this costs too much and here’s why, because we could generate it electricity at a way cheaper price.

That false argument, because they’re measuring stick for generating electricity was wrong. The second one is, first of all, you are subsidizing. So they’re taking that as a grant, as a given, and then they’re saying, why are we subsidizing large commercial customers? And now we know because this information was private before and the Department of Commerce got information requests and information that the public can’t see from Xcel. Now we know all that whole argument is B S. It’s a completely false argument. So to the degree that you are subsidizing, let’s just give them that argument. There’s some amount of subsidy. If you were to do that and admit that, who are you subsidizing? Because these cities are like Minneapolis, St. Paul, St. Cloud, Bloomington, Winona Metropolitan Council, meaning the entire, I don’t know, seven county metro area, whatever that entails. The point is they might not be anyone in those areas, which in my just adding up a few, I’m thinking we’re at 2 million just right there and there’s only like 3.4 million Xcel accounts. So you got probably the vast majority of them right there indirectly receiving benefits from this program. So this cross subsidy argument that sort of flows from the fact that we’re even cross-subsidizing in the first place is a BS argument. There’s a whole lot of things you could just falsify down the line with this and then they build off of that.

John Farrell: If you had one piece of advice you could give folks who are working on community solar in another state, maybe trying to stand up a program or work on legislation or maybe interested in developing projects, what advice would you give them? Pouya Najmaie: Yeah, if I was to distill it down to one, I think the best thing I could say is build a strong coalition of advocates from all types for your whatever it is, DG, Community solar, build a strong community of advocates and work with the residential solar subscribers, work with your trade organizations, work with the CSG developers, work with nonprofits that work into this, work with groups that just advocate for DG in general that aren’t trade organizations, the nonprofits like Vote Solar and Solar United Neighbors and all these kind of build a really competent, wide diverse coalition of allies that you’re on the same page communicating, being honest with each other because the utility will swamp you at the legislation with a hundred, in Minnesota’s case, a hundred plus lobbyists and I don’t know how, what their team of lawyers looks like, but they will swamp you at the PUC and you’re going to need all the work. You’re getting all the help you can get and you’re going to need to divide it up and people like, it just happened today, are going to catch things that nobody else caught last moment. Say, Hey, I need you to submit this or help me submit this. Or who should submit this because stuff’s going on and what’s the best strategy and blah, blah, blah. You basically need to create a team because the utilities have a huge team. So that’s my best advice. I could give a bunch of other, but I’d say that is foundational because a whole lot of minds working at this in different ways yet on the same page is really the only way to fight large monopolies like this. John Farrell: Thank you so much for taking the time to chat about Minnesota’s program and for all of the effort and energy that you put into preserving this program in a very uphill battle. It’s appreciated so much. Pouya Najmaie: No, thank you, John. This was a pleasure. I had a lot of fun. John Farrell: Thank you so much for listening to this episode of Local Energy Rules with Pouya Najmaie, policy and regulatory director with Cooperative Energy Futures. On the show page, look for links to ILSR articles on Minnesota’s community solar program, including my published Star Tribune commentary, countering the utilities claims about the program. For more on the value of solar, check out Local Energy Rules episode 148 with Professor Gabriel Chan. For a walkthrough that illustrates how community solar and utility scale solar have similar costs for utility customers and how utilities hide the data, check out the article I wrote on ilsr.org called Utilities Aren’t Telling the Whole Truth About Solar Costs. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

 

Minnesota’s Community Solar Program Was An Early Leader

19 states and Washington D.C. have enabled community solar, a policy allowing many electric customers to subscribe to one solar array. Until recently, Minnesota led all other states in installed community solar capacity. Najmaie attributes Minnesota’s early success to two factors: the program was uncapped and it offered community solar subscribers a healthy bill credit rate (called the applicable retail rate).

The bill credit rate was then changed to the Value of Solar in 2016. This value, which Najmaie and Farrell refer to as “VOS,” attempted to incorporate the environmental and grid benefits of community solar. It was also paired with a credit adder for residential subscribers for several years. Still, the program failed to reach many residential and low-income residential customers. Without any meaningful incentive or carve out, developers (with one exception being Cooperative Energy Futures) had little reason to do the extra work of soliciting small subscriptions.

Recent Changes in Minnesota Policy

In 2023, Minnesota lawmakers made many changes to the state’s community solar program, several of which distributed solar advocates had been clamoring for.

First, the bill credit rate will now be something called the average retail rate. This rate mirrors what customers pay for electricity, explains Najmaie, and includes tiers for various customer classes. Community solar gardens can be sized up to five megawatts of generation capacity and the gardens do not need to be located near their subscribers.

The updated policy also has a 30 percent carveout for low- to moderate-income residential subscribers (defined as 150 percent of area median income). Lastly, the Minnesota Department of Commerce is taking over program administration, which Najmaie hopes will stem utility Xcel Energy’s efforts to thwart the program.

Xcel Energy, they’re just acting as rational actors, right? They’re like a machine whose object is to make money for their shareholders. It is not good for them to have generation that isn’t theirs on the grid.

Legislative Lobbying is Over, but Attacks on Community Solar Persist

While the new rules have yet to take effect, Xcel Energy has been trying to compromise the program by retroactively changing the bill credit rate for some of Minnesota’s earliest community solar projects.

All of Cooperative Energy Future’s projects receive the applicable retail rate in question, says Najmaie, and changing that rate to the lower 2017 Value of Solar would mean their low-income subscribers would pay a premium for electricity, rather than saving on their electric bills. The change would also be to the detriment of many cities and public institutions that are receiving the applicable retail rate. Najmaie says that there have been over 500 public comments on this issue before the Minnesota Public Utilities Commission.

You need to create a team because the utilities have a huge team… that is foundational because a whole lot of minds working at this in different ways, yet on the same page, is really the only way to fight large monopolies like this.

Episode Notes

See these resources for more behind the story:

• Read more about Minnesota’s community solar program.
• Read John Farrell’s Star Tribune commentary countering Xcel Energy’s claims about the community solar program.
• Listen to a Local Energy Rules podcast episode with Professor Gabriel Chan about the Value of Solar.
• See ILSR’s slideshow presentations that help explain why utilities aren’t telling the whole truth about solar costs.
• Listen to Local Energy Rules episodes from 2016 and 2018 covering the development of community solar projects by Cooperative Energy Futures.
• Learn about Minnesota’s clean energy standard and other energy policies passed in the 2023 legislative session.

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This is the 202nd episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

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Featured Photo Credit: Maria McCoy

Monopoly energy utilities have accrued vast service territories and extraordinary financial power — which they have used to purchase political power. At this point, state regulatory and legislative bodies can only do so much to rein them in.

In this episode from the Local Energy Rules archive, host John Farrell speaks with Howard Crystal and Liz Veazey. Crystal, Legal Director of the Energy Justice Program at the Center for Biological Diversity, and Veazey, Policy and Rural Energy Director at Solar United Neighbors, were two cosigners on a petition to the Federal Trade Commission, along with the Institute for Local Self-Reliance. Crystal and Veazey explain the petition and why electric utility practices require federal investigation. ILSR first published this interview in June of 2022.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Episode Transcript

Howard Crystal: The basic problem is that our monopoly utility system has these private companies that don’t make money off of the rooftop solar that you generate in your home. And you’re right in saying that when the system was set up, it was not contemplated that customers in their homes wouldn’t be allowed to provide their own electricity anymore. Then it was contemplated that they wouldn’t be allowed to put up insulation that might also reduce their reliance on the centralized power system. But now what we’re seeing around the country, and our petition highlights, a whole host of examples is utility companies abusing their monopoly power to continue to control the power system. John Farrell: Nearly 100 years ago, the Federal Trade Commission performed a multi-year investigation of monopoly investor-owned utility companies. Their findings of rampant anti-competitive and fraudulent behavior led to federal legislation to reign in the utilities. Much of this legislation was repealed in 2005, exacerbating already lax state and federal enforcement of rules to protect the public interest. When this episode originally aired in June 2022, Howard Crystal, Legal Director of the Energy Justice Program at the Center for Biological Diversity, and Liz Veazey, Policy and Rural Energy Director at Solar United Neighbors, discussed a recent petition to the Federal Trade Commission to investigate monopoly utility abuses. Since then, the reinvigorated commission under chair Lina Kahn has taken aim at corporate merger guidelines, Amazon’s abuse of sellers, Facebook’s buy and bury approach to its competitors, like Instagram, and the FTC is reportedly considering action against Apple. Could monopoly utilities be next, as gatekeepers to the electric grid? We think this episode is as timely now as it was 18 months ago. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a bi-weekly podcast sharing powerful stories about local, renewable energy.

Howard and Liz, welcome to Local Energy Rules.

Howard Crystal: Happy to be here. Liz Veazey: Yeah. Thanks for having us. John Farrell: Yeah. I’m so glad to have you both. I’d love to start this off by asking a little bit about, you know, why should we care about this petition? What is at stake? And I tried to cover that a little bit in the introduction, but why don’t I talk toss this to you first, Liz, and I’m just kind of curious, can you give some examples of what are the issues at stake with utility companies about their behavior, about how we pay our utility bills that makes this petition so important? Liz Veazey: Yeah, thanks John. There’s definitely a lot we could say on this. I would start by saying Solar United Neighbors, I think the biggest thing that we see is that electric investor owned utilities are really taking advantage of their monopoly power to squash the semi minimal competition from like rooftop solar and other distributed energy resources. And we know that rooftop solar and investments in energy efficiency and other distributed resource help lower peak energy demand and lower maintenance and upgrade costs and lead to a more efficient, localized energy system, which costs less and keeps more money in everybody’s pockets. So I think that’s a big one for us and we really see a need for someone to sort of step up and push back on these monopoly utilities who, you know, they already have monopolies, but they’re limiting this little bit of rooftop solar in any way they can. John Farrell: So just to take a step back for people who may not be familiar, most folks who live in urban areas get their electricity from a utility company that doesn’t have any competitors and that’s on purpose. Like the law grants them this monopoly over delivering electricity to us, but it’s not supposed to give them a monopoly over like any electricity at all, right? I’m supposed to be able to put solar panels on my rooftop. I’m supposed to be able to make changes to how I use electricity. Other people are allowed to get into and compete with them on a range of kinds of services related to electricity, but they’re not so excited about sharing, even though the those rights exist for other folks. Does that seem like an adequate description? Liz Veazey: Yeah, I think so. And you know, I didn’t say anything about who Solar United Neighbors is. So maybe I just add that in: we’re a national nonprofit organization. We help people go solar and then connect together and fight for their energy rights. So we started in like 2007 in DC. We now have 12 established state programs and we’re starting up three more right now. And those state programs really help people go solar through our solar co-ops or buying clubs and people get a good deal and go solar together. And then we work to organize solar homeowners and supporters to fight for good energy policies. And we also provide solar education and events and resources across all 50 states and beyond. And we’ve helped more than 6,800 homes and businesses go solar, bringing more than 57 megawatts of solar to the grid. So I guess I would just say that to say that, like, we have a lot of experience working with solar owners and fighting these utilities to try to protect fair credit rates for solar or all kinds of things. There’s, it’s hard. There’s a lot of fighting out there. <laugh> Howard Crystal: John, if I, I could also just jump in on your question. John Farrell: Yeah, please do. And then also give a little bit of background, obviously, Center for Biological Diversity really was kind the lead author on this petition and would love to hear a little bit more about the broader work that you do. Howard Crystal: Sure. All credit to Jean Su our Program Director, who really is the one who has led our work sort of looking at different federal agency opportunities to address the overarching problem of utility abuse of the monopoly power that they have, which is, you know, we, there are several agencies where we’ve been taking that issue. And our work at the Energy Justice Program is really to address both the decarbonization and energy justice related issues that are inherent in our utility monopoly system that we’ve had for a long time, that may have made sense a hundred years ago, but just does not make any more sense anymore, but we still have this, you know, legislative scheme around the country that gives monopoly power to these utility companies and they’re abusing that power. And that’s what this petition is really about. And there’s like sort of two central ways to that. I see sort of problem that we’re trying to address. And then I’ll talk about the abuses.

One is as it relates to decarbonization, which is of course so, so important. I mean, these monopoly companies are heavily invested in fossil fuels. So they, and they make decisions, unfortunately, the nature of our private company system that provides our essentially utility services, they’re acting on behalf of their shareholders, not really in the public interest, even though that’s supposed to be their charter. And so making decisions about how to make investments and how to charge customers, et cetera, they are driven by their bottom lines, which lead them to make decisions that prefer both centralized power and fossil fuels, which is most of the power they provide.

And that sort of brings us back to your question and point about rooftop solar and distributed solar. The basic problem is that our monopoly utility system has these private companies that don’t make money off of the rooftop solar that you generate in your home. And you’re right in saying that when the system was set up, it was not contemplated that customers in their homes wouldn’t be allowed to provide their own electricity anymore, that it was contemplated that they wouldn’t be allowed to put up insulation that might also reduce their reliance on the centralized power system. But now what we’re seeing around the country, and our petition highlights, a whole host of examples is utility companies abusing their monopoly power to continue to control the power system. And one of the forms that that takes of course is efforts to disincentivize and dissuade customers through all sorts of means both kind of legal, although problematic and, and not so legal so that customers are less likely to actually make those investments and are no longer getting the rewards from those investments in rooftop solar that we really think they should. They’re entitled to.

John Farrell: And you’ve got, I mean, numerous examples. The first thing I wanted just say really quick is to mention a recent report I just saw, you mentioned shareholders, the Roosevelt Institute just put out a report, I think in the past week about what they called shareholder primacy, which I thought was really interesting. I’ve sort of taken it for granted, like many people who work in this space that, oh, these utilities, they have shareholders, of course, they’re just gonna work for their benefit and ignoring the fact that like the monopoly that these utilities have was a public grant. And what the Roosevelt Institute report essentially says is we could say that utilities can’t send as much money to shareholders and that they ought to be reinvesting it in better things. I don’t think it really touches on necessarily issues of competition that are so central to this petition, but I thought it was really interesting, the timing of that report relative to this petition and the way that utilities continue to prioritize shareholders, you know.

Liz, I was hoping maybe you could talk about as a great example of this tension between utilities kind of abusing their monopoly power and dissuading their customers. Can you talk a little bit about what happened in Florida recently as I think a really powerful example of how this plays out?

Liz Veazey: Yeah, sure. I mean, that’s the example that comes to my mind when we start talking about this. So Florida Power and Light or FPL is the largest investor owned utility providing electricity in Florida and is owned by Next Era Energy, which some may say is misnomer based on some of their anti-solar work, but they have been working to fight solar in Florida for years. The first thing that I’m aware of is a ballot initiative in 2016, they spent millions and millions of dollars to sort of, they were trying to dupe Floridians basically into voting for this thing that they thought would support solar when it actually would just further entrench FPLs power and make it harder for people to go solar in Florida. So thankfully I think someone found a video of FPL executives talking about how the public was stupid and they were duping the public with this initiative and people were upset about that. And so it didn’t pass.

And then, you know, in more recent years, there have been attempts to push back net energy metering or net metering for solar, which provides solar owners or people who lease solar a fair credit for the solar energy that they put back on the grid and share with their neighbors. And there was a huge fight this year that we were very involved in in Florida. Starting with legislation that was introduced last November. It was written by FPL and the State Senator and the State Representative who introduced the bills both got large contributions from FPL right around the time that they introduced the legislation. So it really was bought and paid for and written by FPL and legislators we heard were given basically a mandate to pass it. And I guess to sort of summarize what happened, it passed both the House and the Senate, and then was vetoed by governor DeSantis, who vetoed it saying that he was standing up for consumers and trying to help fight inflation because the legislation basically gave FPL a blank check to add fees to solar customers.

And that came on top of a recent rate increase and minimum bill, which means that consumer, you know, rate payers instead of paying $10 a month or $5 a month fee plus whatever they use, they can’t lower their bill with energy efficiency or with solar below 25 or $30 a month. But people in Florida were upset. And I think that’s some, you know, part about the new rates, the higher rates and the minimum bills, and that sort of helped build discontent against that proposal. And, you know, we put up a huge, huge fight. Solar United Neighbors and many of our allies and partners in Florida and the solar industry in Florida, dozens of people spoke hearings, you know, who were probably at their jobs that we talked about, the $18 billion a year impact of the solar industry in Florida and 40,000 jobs that it supports in addition to helping provide, you know, more resiliency and local power, particularly when partnered with storage. The coalition drove thousands comments to legislators, but overall the legislature, the legislators, you know, some people stood up against it, but you know, they are, many of them are bought and paid for by FPL. And so the most we could get was some slight tweaks to the bill to make it a little bit less bad. And so instead of like immediately ending net metering, it got pushed back and then there was a bit of a glide path, but that’s, that was the best we could get through the legislature, but it was, was vetoed by the governor and he stood up, you know, for rate payers. Stood up to FPL and I think that was a really big victory to see governor DeSantis do that.

John Farrell: Howard, I wanna toss it over to you. And the example in Florida, I think is a really pointed one where FPL has had kind of these repeated abuses of its power and especially its political power. There’s obviously a lot more of examples that are baked into that petition. I was wondering if you could talk a little bit about why, why the federal trade commission, you know, these utilities are usually regulated at a state level. Maybe there’s a state regulatory commission. It might be called a public service commission or public utilities commission. We’ve got state legislators or state legislatures. If, so for example, in Florida, this, there was a bill that was written by the utility in this case, but you know, intended to change the rules for those energy utilities, what makes it worthwhile.. What makes it important that the federal trade commission take a look at this issue and, and to do it from that federal perspective? Howard Crystal: Well, John, the, the fact is that the current system is just not working and there are two reasons for that and I’ve got a dog barking in the background. So I apologize. John Farrell: <laugh> no, no worries. Howard Crystal: Two main reasons for that. One is utilities have grown in size and power. They’re often ultimately holding companies that are multi-state and it’s become increasingly difficult for one state, set of state regulators to control their activities. With the repeal of the public utility holdings act in 2005, which severely limited the ability for these companies to engage in these broader multi-state activities without repeal. Again, we’ve had this great consolidation and increase in market power, which is much more difficult for individual states to control. But the second reason is that the, as they’ve gained more power, they’ve gained more control and influence over those state regulators, right? So they’re active in elections and appointments to state regulatory commissions. We see a problematic amount of revolving door between commissions and utilities. And so that’s part of the reason why we decided it was appropriate to go to the federal trade commission, which has national jurisdiction over exactly the kinds of practices that we’ve raised concerns about to launch an investigation, which is what we’re asking for and to see both what’s going on in the industry, again, across state lines and then to consider what might be appropriate, both enforcement wise or legislative wise or otherwise to reign in these abuses. John Farrell: If I am not mistaken, Howard, there’s actually some precedent historically for this. You mentioned the public utility holding companies act that was repealed in 2005. That act as I understand it came out of a previous federal trade commission investigation of monopoly utility companies, right? I mean, are we, are we basically just repeating the same problem? Howard Crystal: Well, well you’re exactly right. I, I would, I would say what we wanna do is repeat the same, repeat a solution. It may not be exactly the same solution, but yes, in the 1920s, there was an enormous problem of consolidated power of utilities. At that time, one of the major fights was fighting public power because there was more of a question than there should be today about, whether the system that the utility system should be dominated by public power players or private companies. And to address the serious abuses that were occurring at that time, the FTC launched a multiyear investigation of the utility industry and the outgrowth of that investigation was this public utility holdings act, which severely constrained the ability of utilities to sort of grow in size and, and market power, et cetera. So again, the, our view is not that the repeal of PKA as it’s known is the only reason why we’re having these problems today. There’s a lot of other things going on in the system, especially competition that just did not exist 80 years ago, but it’s certainly a contributing factor. And it’s one of the reasons why we think both, you know, there’s precedent for the FTC to look into this and that there are probably remedies that the FTC can help come up with that will help address these problems. John Farrell: We’re going to take a short break. When we come back, we discuss what the petition asks of the federal trade commission and what the petitioners hope might come out of a commission investigation. You’re listening to a Local Energy Rules podcast with Howard Crystal, legal director of the Energy Justice Program at the Center for Biological Diversity and Liz Veazey, Policy and Rural Energy Director at Solar United Neighbors about a new petition asking the federal trade commission to investigate monopoly utility abuses.

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Liz Veazey: So I think in Florida, you know, there’s definitely more that I could say around this and FPL has been involved in and you know, this is legal to do, but maybe we would say sketchy or, you know, challenges the idea of a regulatory compact, but FPL has been involved in running ghost candidates. So someone with the same last name as say a climate champion, Javier Rodriguez had someone running against him who had the last name Rodriguez. And, you know, FPL was involved in setting up this candidate who siphoned off enough votes that the climate champion was not reelected. It was a, you know, it was a close vote, but the person lost because of that ghost candidate. FPL was involved in multiple cases of that and that sort of meddling in politics and making sure that people get elected that they control really leads to a reduction in any sort of regulation from the state legislature or the utility regulators, that would be the public service commission in Florida, who I think is appointed by the governor, but approved by the state legislature. John Farrell: So let’s talk a little bit about what the petition is asking of the federal trade commission. What are some of the things, and we’ve talked about a few examples. We’ve really covered a lot of ground on Florida Power and Light. What broadly are the things that the petition is asking the Federal Trade Commission to look into that we see? And I should add that the Institute for Local Self-Reliance is a co-signer on this petition. So I’m not just interviewing you out of happenstance. I think this is a really important issue and obviously we’ve signed onto it as well. I’m not sure which one of you wants to take this first, but what is this petition asking of the Federal Trade Commission? Howard Crystal: I’m happy to take a first stab at it. First I’d frame it this way is what we’re asking for is an investigation that FTC has the authority under 6B of the federal trade commission act to launch an investigation of an industry where it thinks there are issues under its jurisdiction that are worth exploring. So the first step, assuming the FTC takes up our request, would be for the FTC to issue subpoenas, request for documents and information to the utilities on various topics. And then in terms of what they would be asking about it sort of falls into two broad categories.

One is the anti-competitive practices of the utilities that are principally directed at market competition from, as we’ve talked about earlier, non-centralized power generators, right? We’ve solar companies, community solar projects, home solar, you know, individuals and homes who wanna install solar businesses who wanna install solar. There are a host of actions, some of which have been approved by commissions again, over which the companies have a lot of influence and some of which have nothing to do with the commissions. Like for example, taking an exceedingly long time to connect rooftop solar, or community solar project to the grid, all of which, you know, we want the commission to look into and ask questions about and explore those anti-competitive practices.

Then the other side is the, which ties in more to the kinds of examples Liz has been talking about, are sort of the deceptive acts that we think should be investigated. Some of them are not technically illegal, but they’re certainly problematic, especially coming from these companies that have this monopoly power, which is supposed to be an exchange for acting in the public interest. But the reality is that the way the system is set up, the companies have, you know, the amounts that they charge rate payers for electricity, et cetera, but they also have their profit that they’re entitled to get for the things that they build, which is part of the problem. Of course, cuz they constantly wanna build more things and those profits they can spend however they want. So if they wanna spend that those profits on electioneering, et cetera, they’re free to do that, but it becomes very problematic when they’re spending it in the kinds of ways Liz gave examples of and other ways that are really, you know, undermine the overall democratic process, you know, events, this kind of abusive power that we really want the FTC to look into.

John Farrell: Liz, are there particular things that you wanna highlight in the petition that you think are really important that the FTC address? Liz Veazey: I mean, I think Howard summed it up pretty well. And you know, for us it’s just about sort of the unfair competition and deceptive acts and like really leading to us paying more for our electricity system than we should and making it harder and more expensive and really discouraging people from going solar and you know, choosing to provide their own energy. And that’s really the direction we really need to go in that direction, right. To address climate change. And you know, there’s a lot we can do within equality and addressing that if we have more distributed, locally owned energy. So I think there’s huge potential to really, if the FTC can address some of our concern really help us better move in that direction. John Farrell: When you think about, you know, Howard outlined, I think really nicely that sort of the first step would be the FTC takes this petition and says yes, that we do think that this is, these are issues worthy of investigation. They then go out, start collecting documents and information from the utility companies, from utility commissions, maybe from private developers that compete with the utilities, consumer advocates, you can imagine kind of a wide range of folks. Let’s just imagine, you know, they, they do this investigation, they spent months, maybe even years gathering information, seeking testimony, et cetera. When it gets to the end of that, what are we hoping the federal trade commission does with that information? You know, are we hoping that there’s a new a 21st century public utilities holding company act? Is there, what seem like reasonable remedies that the federal trade commission might come out with after going through this investigation that we would see as addressing some of these problems that we’re posing in this petition? Howard Crystal: So I’ll take a first crack of that one. We suggested a couple of possibilities in the petition itself. The first of which is enforcement actions, right? I mean, what we, there are a number of things identified in the petition that we think are right for both, you know, civil and or even criminal <laugh> enforcement frankly. And one of the concerns we raise is because of the influence that the utilities currently have over state regulators and other state decision makers, it may be more appropriate for these to be looked at maybe by DOJ and maybe by the federal energy regulatory commission in the nature of enforcement, or there may be enforcement that the FTC itself it’s appropriate. So that’s sort of one category.

Another one going back to the inherent in your question is the legislative possibility. It may be that there are legislative improvements that can be made, not necessarily a return to PUCA, but maybe other proposals that the FTC could help develop over time. And maybe they would seek also seek some stakeholder input about that. And then, you know, another area in this we haven’t really touched on, this is one of the kind of issues or problems that that’s baked into all this is as part of these monopoly utilities, having this agreement with the states that allows them monopoly control over service territories. They therefore in general are often immune from antitrust laws. And a lot of the kinds of concerns that we’re raising really sound in antitrust, particularly as it relates to anti-competitive actions against rooftop solar, et cetera, there are some efforts being made. There’s a case pending right now against the Salt River Project, which I think you may have talked about in an earlier podcast, that’s addressing that state action immunity defense, but they’re kind of a unique quasi-public quasi private entity, the SRP, but there may also be legislative reforms that would help open up the utilities to more accountability from an antitrust standpoint. And that would potentially allow both government enforcers, but also frankly, private parties, including the, the companies and individuals who are being harmed by the utilities anti-competitive practices to actually hold them accountable under antitrust law. Uh, so that’s another one of the reforms that we sort of have suggested that the FTC might explore once it’s collected information.

John Farrell: I’m gonna ask you this same question, Liz, and kind of the, the remedies that you’re seeing, or maybe some of the outcomes that we could see from this. But I wanted to stick on this issue about like the political stuff, cuz you had mentioned it Liz in the, in the context of Florida Power and Light. And I keep getting curious about, you know, there’s, the Supreme court recently has sort of established a legal line of thinking around this side notion of compelled speech. And they did it in the context of unions, but it seems to have a lot of potential relevance here where we have utilities that are monopolies. So I can’t choose where to spend my money on energy, right? If I want electricity service where I live in Minneapolis or where I’m living in Tallahassee or where I’m living in San Francisco, I have one choice. Just even describing it as a choice is a little bit silly and that, that utility, whether it’s part of its profits or whether it’s the money that’s going to cover expenses for the system like that money is captive, I’m captive. And then the utility goes out and they spend that money. Whether it’s helping a ghost candidate run for office, whether it’s buying political ads to support certain ideas or campaigns, they do lots of things that many of us would never want our money spent on in terms of political speech. I guess it seems to me like that is potentially one of the remedies that Congress could consider in light of any FTC investigation. I, yeah, I’m just so, Liz to pass to you, maybe you think that’s crazy, not interesting to talk about you have other things you wanna talk about, but I’m just gonna throw that out there as something that I saw as very interesting  in this idea about kind of utility political machinations. Liz Veazey: Yeah. That is a good question. I mean, I think Howard might have more ideas since he’s a lawyer on like what actually could happen on that front in terms of, but there are some state laws that exist. I think that provide some limits to money that utilities can spend on lobbying or certain political activities or at least say that that money has to come out of the pot. That’s like for their shareholders versus rate payer funds. John Farrell: Mm-hmm. Is there anything else Liz that you’d like to add? We can come back to Howard on the lobbying thing, if he’s interested, in terms of like the potential remedies from the petition things that you’ve been thinking about, Solar United Neighbors is particularly feeling like, oh, you know, this is a, this is one of those things. Maybe it’s around that energy metering compensation, rooftop solar interconnection. Is there something in the work that you do in particular, helping people go solar and the fight for solar rights that you see as really important and you hope that the FTC would provide some remedy to address? Liz Veazey: Yeah, that is a good question. I think there could be action at the federal level that maybe helps enshrine people’s rights to go solar and have fair competition, maybe something around micro grids and other sort of aggregation of distributed energy resources. I mean, we’ve seen some action at, on that, you know, already around order 2, 2, 2, 2, and sort of the aggregation of distributed energy resources. But you know, maybe there’s more that could happen at the federal level around that to sort of increase this competition. You know, there could be potential increased support for public power and sort of like the REA of, you know, earlier this century and supporting rural electrification and rural electric co-ops and people coming together to bring electricity. I think the federal government could help support people in states to buy out investor owned utilities. And I know there’s an initiative, I just attended an event today with folks from Maine who are working hard on doing just that in Maine and you know, they want to lower rates and address climate change and really support distributed solar. And they want to create this public power authority in Maine to really drive that because they’re not seeing that from the investor owned utilities now. So I think that’s another interesting idea. Howard Crystal: I’d like to go back to the, I’d like to go back to your first amendment question for minute, if that’s okay. John Farrell: Yes, please do. I would love to hear more about it. Howard Crystal: It’s an area I’ve spent a bunch of time working on. So the first thing to just tee off of Liz’s point, it’s true that there are laws that on the books that restrict the ability of utilities to charge rate payers for lobbying activities, but the first thing to note, and to tie it back to the petition that doesn’t, you know, regardless of, of whether they’re using their profits or rate payer money, they can’t do illegal things including like bribing legislators, right? So when they’re, when they’re bribing legislators, it doesn’t matter if they’re using their profits for that. It’s the division is irrelevant. So that’s like one category of abuses that kind of abuses that we talk about are illegal activities that utilities are engaged in. It doesn’t matter where the funds come from. So that’s sort of level one level two is this question about where, what pot of money, right.

And it is true that in general, under the current state of the law, there is a lot more latitude for how companies lawfully spend their profits than how they spend rate payer money. But again, and there are examples of this in the petition, including in the First Energy context, Energy and Policy Institute has helped to uncover that not only was First Energy involved in illegal activities, they were using rate payer money for that. So it is kind of adding insult to injury. And that absolutely is not allowed, not just for illegal activities, but for the kind of lobbying activities that as Liz said, most state laws and at the federal level, the federal energy regulatory commission generally prohibit utilities from charging rate payers for their lobbying.

But there’s another, a third layer to that, which is what constitutes lobbying. And on that, we actually have a, a separate petition that’s pending before the Federal Energy Regulatory Commission (FERC) having to do with the way in which currently utilities routinely charge rate payers for their membership dues and trade associations, like the Edison Electric Institute and the American Gas Association who then used that money for all kinds of regulatory advocacy. Now this isn’t going to a legislator and trying to convince him to, you know, classic lobbying. This is participating in regulatory proceedings, right? Writing comments, opposing, you know, greenhouse gas regulations, et cetera, or then litigating in court against those protections. I mean, these are things that cost, you know, regulations, right? Those things cost utilities money. They don’t generally support them. And they use for the current system, they’re often using rate payer money. So you might be quite surprised to know that you, when you pay your electricity bill, part of that money is actually being used to file a lawsuit against a regulation. That EPA is for that to actually protect your clean air and clean water. But that’s the way the system currently works. And we’re trying to reign that in before FERC with a new accounting system that would make it much more difficult for rate payers to be charged for that kind of advocacy.

John Farrell: That’s so great to give that overview and we’ll make sure that we have, I just wanna note we’ll have links on our show page to the FERC petition, the FTC petition, the Salt River Project podcast, all the things that we’ve referred to in this conversation. So folks can follow that trail down a little bit further. I just wanna wrap up by asking, you know, is there anything that people who are listening to this podcast can do, I know that, you know, Solar United Neighbors had a webinar about this petition it’s, I’m, I’m guessing they can still get online. And hear a recording of that. The petition language itself is on the Center for Biological Diversity’s website, but what can people do? What, how can they either learn more? Or is there any particular action they can take to support this if they are so inclined? Liz Veazey: Great question, John. Yeah. People can see the webinar on Solar United Neighbors’ YouTube channel, and on our website, we do have an action where people can, you know, sign on to this and send a message to the FTC and to their national representatives. I will send you a link to that and people can go to solarunitedneighbors.org/action, and you should be able to find the action on that page. It’s called it’s time to hold monopoly utilities accountable. John Farrell: That’s great. Thank you, Liz. Howard, anything? Howard Crystal: I’ll just add it’s, this is an opportunity to sort of build power, right? The Federal Trade Commission is an incredibly powerful and important federal agency, but they do a lot. They’ve got a lot on their plate. So it’s incumbent upon all of us to convince them that this is important enough that they should conduct this investigation. And that involves not just, you know, as Liz said, individual, you as an individual, if you can join the call by signing on that’s fantastic. But if you are part of an organization, your organization can weigh in and shoot a letter to that Federal Trade Commission and show your support. If you have access to or involved in politics, and you could convince your town or your community otherwise, uh, to let the federal trade commission know that this is an important investigation, that’s also be hugely helpful. But I think the more groups and individuals that the FTC hears from that this is important. And again, just to be clear, we’re not, you know, the, the petition is not asking for a particular outcome, we’re asking for an investigation. So it’s a pretty low bar. So if you agree with us that there’s enough here. When you take a look at the petition to actually look further, then please do everything you can to try and help us convince the FTC to take this up. John Farrell: I’m thinking of the dozens of leaders from cities that have made a hundred percent renewable energy commitments and run into the brick wall of their electric utility company ought to be the kinds of folks that would be interested at a minimum in signing on to this petition. So I really appreciate that, Howard, that there’s an opportunity for them as well. Well, Liz Veazey and Howard Crystal, thank you so much for taking the time to explain this petition, the potential role the federal trade commission, and helping to hold monopoly utilities accountable. Really appreciate you joining me today. Howard Crystal: Thank you, John. Liz Veazey: Yeah. Thanks John. It was great. John Farrell: Thank you so much for listening to this episode of Local Energy Rules, where I discussed a new petition to the federal trade commission to address monopoly utility abuses with Howard Crystal, Legal Director of the Energy Justice Program at the Center for Biological Diversity and Liz Veazey, Policy and Rural Energy Director at Solar United Neighbors. On the show page, look for links to a press release about the petition and an action page where you and your organization can add their voices to those from the Institute for Local Self-Reliance, Energy and Policy Institute, and the organizations of my two guests. Also on our website, you can find out about the FERC petition to reign in utility lobbying spending as well as several relevant podcast episodes, including an interview we mentioned with Jean Su about an antitrust case against the Salt River Project utility in Arizona, a conversation with David Pomerantz about the dark side of utility monopolies and ILSR’s own report about the problems posed by the monopoly structure of our energy sector. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

 

The Purpose of Monopoly Electric Utilities

Electric utilities were granted monopolies out of convenience; they could build one large power plant, one set of transmission lines, and serve all of the customers in the area — all while taking advantage of economies of scale. However, circumstances have changed. Solar technology is cost-effective at a small scale and empowers individuals to generate their own electricity.

Thanks to the Public Utility Regulatory Policies Act of 1978 (PURPA), homeowners have the right to generate their own electricity from rooftop solar installations. Beyond solar, home and business owners are reducing their energy dependence by making buildings more efficient, timing their energy use, or aggregating demand response.

Monopoly utilities see all of these innovations as competition. Acting on behalf of their shareholders, rather than their customers, they are using their monopoly power to suppress these threats to their profit margin.

They are driven by their bottom lines, which lead them to make decisions that prefer both centralized power and fossil fuels, which is most of the power they provide

— Howard Crystal

Utilities Abuse their Monopoly Power

Veazey highlights stories from Florida as examples of shady utility behavior. Florida Power and Light has been fighting against customer rights for years, says Veazey. The utility spent millions in 2016 on a campaign that would make it harder for people to go solar. More recently, the utility drafted its own bill to eliminate net energy metering. The bill passed the Florida House and Senate, but was vetoed by the Governor.

They spent millions and millions of dollars to sort of, they were trying to dupe Floridians basically into voting for this thing that they thought would support solar when it actually would just further entrench FPLs power and make it harder for people to go solar in Florida.

— Liz Veazey

Because utilities have grown in size and power, says Crystal, state legislatures and regulatory bodies are struggling to rein them in. The repeal of the Public Utility Holding Company Act in 2005 further diminished state control.

Now what we’re seeing around the country… is utility companies abusing their monopoly power to continue to control the power system. And one of the forms that that takes of course is efforts to disincentivize and dissuade customers through all sorts of means – both kind of legal, although problematic, and not so legal.

— Howard Crystal

A Petition to the Federal Trade Commission

235 organizations have petitioned the Federal Trade Commission to investigate energy utilities, including Solar United Neighbors, the Center for Biological Diversity, the Energy and Policy Institute, and the Institute for Local Self-Reliance. The Federal Trade Commission (FTC) can investigate across state lines, identify anti-competitive and anti-consumer practices, and then take appropriate action.

Investor owned utilities are really taking advantage of their monopoly power to squash the semi minimal competition from like rooftop solar and other distributed energy resources

— Liz Veazey

If the FTC takes up the investigation and finds evidence of utility abuses, enforcement may come through the Department of Justice, the Department of Energy, or legislative improvements like the Public Utility Holding Company Act.

Episode Notes

See these resources for more behind the story:

• Watch a Solar United Neighbors webinar on the Federal Trade Commission petition.
• Read the Roosevelt Institute’s brief on utility shareholder primacy.
• Read the FERC petition to rein in utility lobbying through trade association dues.
• Listen to episode 136 of Local Energy Rules, which covers an antitrust case against the Salt River Project utility in Arizona.
• Listen to a conversation with David Pomerantz about the dark side of utility monopolies.
• Read ILSR’s report on America’s monopolized energy sector… and how we can fix it.

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country, using ILSR’s interactive Community Power Map.

This is the 201st episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares powerful stories of successful local renewable energy and exposes the policy and practical barriers to its expansion.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update. 

Featured Photo Credit: sha in LA via Flickr (CC BY-NC-ND 2.0)

Local Energy Rules is celebrating a milestone!

For this episode of the Local Energy Rules Podcast, host John Farrell reflects on 10 years of making the podcast, what he has learned from over 200 guests, and answers some listener questions.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

 

Episode Transcript

John Farrell: Today we’re celebrating the 200th episode of Local Energy Rules, a podcast journey covering 10 years and everything from cooperative wind projects to antitrust law to inclusive utility financing. Instead of our usual format, I’m taking a moment to reflect. So here’s what’s in store if you keep listening. First, the backstory of Local Energy Rules, why and how we started the podcast and what I’ve learned about podcasting. Hot tip, get a good microphone. Second, which guests have come back multiple times because they kept impressing us with their work on energy democracy, and which celebrity tweeted out about a Local Energy Rules podcast about Puerto Rico. Third, I’ll talk about my favorite episodes because they taught me something new and how my guests have convinced me to evolve the podcast to talk more about monopoly power. And finally, I’ve got a few podcast recommendations of my own and some answers to your questions. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. John Farrell: So let’s start with the start of the Local Energy Rules podcast. I just have to start with a shout out to an intern that I had a decade ago, Wade Underwood, who was willing to help me figure out how to record and publish a podcast, something that I had never tried before, but also to my colleague Christopher Mitchell, who directs the community broadband program at the Institute for Local Self-Reliance, who pioneered podcasting for our organization about six months before I decided to dive in. His Community Broadband Bits podcast has over 500 episodes and he’s also gone into a bunch of other things as well. He’s got several other podcasts and even a video show called Connect This on YouTube. I definitely recommend checking out if you have any interest whatsoever in the issues of broadband access. Chris is a great host and has covered hundreds and hundreds of places and programs and policies that help communities get access to affordable broadband. John Farrell: So when we got started with this podcast, we started with the same kind of thing that we do a lot of time on this podcast on Local Energy Rules, which is highlighting local successes. In fact, the first podcast episode was with Anya Schoolman, who was then helping to organize what was called the Mount Pleasant Solar Cooperative in Washington D.C. aided by one of her teenage sons and his friend who were helping go around and talk to neighbors in the Washington D.C. neighborhood that they lived in and trying to get them to go solar together as a way of overcoming some of the informational hurdles to figuring out how does solar work, how would it work for me? As well as to get more competitive bids from solar installers. Their cooperative was successful, but also launched an entire organization, Solar United Neighbors. I’m privileged to sit on the board of that organization, but it’s now a national organization with chapters in more than a dozen states helping people to go solar and providing nonpartisan, unbiased information for homeowners about what it’s like and what’s involved in going solar yourself. John Farrell: And that theme of highlighting local successes, even if not all of them have grown in quite the same way that Solar United Neighbors has out of that Mount Pleasant Solar Cooperative, included a lot of other local success stories including about community solar, two different community wind projects, and a public power campaign you may have heard of in Boulder, Colorado. Those first 10 episodes have led to some similar themes that we’ve had over the years in the Local Energy Rules podcast. A big one has been about city leverage. We’ve talked about community choice energy, about franchise fees, about local climate funding. In fact, we had an entire series for over a year called the Voices of 100%. That was specifically about talking with leaders from cities, sometimes it was mayors, sometimes it was sustainability officers, sometimes it was advocates in the community about their efforts to get their city to a hundred percent renewable electricity. That series still holds up as a good story of the challenges that face a lot of communities in trying to reach those ambitious goals, especially if they don’t own their own utility. John Farrell: Speaking of that, we’ve also talked a lot on this podcast about public power. We did an entire series in the fall of 2022, a six part series. It was our most ambitious podcast project yet because we actually recorded all of the interviews, almost a dozen, before we published any of the six episodes, and we tried to knit them together in more of a story form to help people understand the full implications of public power. So we talked about why communities wanted public power, how they went about trying to get it, why it was so difficult to accomplish creating a public power utility when you already had an incumbent for-profit utility, why there might be some reasons you might not want public power or some of the drawbacks that we’ve seen in existing public power institutions and also what are some alternatives to public power if communities are looking for ways to have more control over their electricity and energy future but aren’t up for the fight of trying to establish a public power utility. John Farrell: So in addition to city leverage and public power, we’ve talked about a lot of community renewable energy projects, probably over two dozen community wind and community solar projects and about the challenges that they had to overcome in order to be successful. I like to think that a lot of these stories are what helped lead to many of the community solar policies we see across the country now in over 16 states helping to smooth out and to remove some of those barriers to make community energy and community energy ownership more possible. We’ve talked about electric vehicles with the City of Austin’s utility, with Tony Seba, with Boulder County, with New Hampshire Electric Cooperative, all about how we can build out an environment from the charging infrastructure to understanding the technology to the incentives that can be provided locally and to the ways that electric vehicles can better integrate into our electricity system as an asset and not just as something that consumes electricity. John Farrell: We’ve talked a lot about great cooperatives, Farmers Electric in Iowa, Kit Carson in New Mexico, Kauai Island in Hawaii, Delta Montrose in Colorado, New Hampshire Electric, Midwest Energy and Holy Cross Energy in Colorado. All of these cooperatives have lived up to their ideal of flexible democratic and accountable to their members more than almost any others that we’ve seen. And there’s probably a lot that I’m missing cooperatives that are out there doing great work that will have on future podcast episodes, but these are the cooperatives that help demonstrate how the rural electric cooperative model and the cooperative ownership model can really do a lot for its members and a lot around clean energy. And we’ve seen some of the earliest solar programs in the country at Farmers Electric had more solar watts per capita than any utility other than those in Hawai’i. we had Kauai Island on talking about how they’ve gotten to over 70% renewable energy on their grid. Kit Carson and Delta Montrose talked about breaking away from their generation and transmission cooperative and restoring more of that local self-determination that cooperatives have so often wanted. New Hampshire Electric came on to talk about their vehicle to grid or transactive energy rate that’s going to allow their customers to sell power back to the utility. And Midwest Energy was on to talk about inclusive utility financing and ways that utilities can help treat energy efficiency improvements on customer property as a utility asset, as something that they can invest into lower bills for everybody. John Farrell: And we’ve also had great cooperatives that aren’t rural electric cooperatives like the People Power Solar Co-op, Co-op Power, and Cooperative Energy Futures, come on and talk about benefits of cooperative ownership. You’ve probably also heard about that in the report that we’ve published called Advantage Local, where we go in chapter and verse on all the social and economic and environmental benefits of cooperative ownership of clean energy and these folks came on and talk about it and give us specific case studies of why it is that clean energy ownership is so important. John Farrell: So we’ve had a lot of great themes over the years. I’ll focus on cities, on community energy, electric vehicles and cooperatives, in addition to having these wonderful themes and a lot of learning that I’ve done, and I’ll talk a little bit more later about some of the podcasts that have really taught me the most about the work that I do around energy democracy. I’ve also learned a lot about podcasting. I’ve learned how important it is to have a good audio set up. In fact, the first dozen or so episodes unfortunately were recorded with what I like to call the Blue Snowball. In fact, if you Google that, you’ll actually get a picture of what this microphone looks like. Is not a bad microphone, it’s an external microphone. It connects by USB to your computer, but it really isn’t very high quality. Picked up a lot of background noise for example, and you can tell in the difference between this episode for example, recorded on a much higher quality mic, and from this first dozen episodes how much of a difference that made. John Farrell: I also had to learn a whole bunch about the software necessary to set up and record. If you use a Mac as a computer, Audio Hijack Pro, I cannot say enough about how great it is because it doesn’t matter what platform you use to connect to your guests, Zoom or Skype or some other method of making that connection. Audio Hijack Pro can grab the audio for you and even do it in different channels to make it easier to edit. Another thing that we’ve learned that is really important, especially because every once in a while either my guest or myself have some audio problems and if I have audio problems, I can just rerecord the questions that I was asking the guest after the fact without having to have them come back on and record all over again. And speaking of that, always I’ve learned how important it’s to ask for backups. John Farrell: My apologies still to Mary Leslie of the Los Angeles Business Council who did a wonderful interview with me in the early years, probably in like 2015 about feed in tariffs. We lost that entire episode because either I forgot to hit record or my recording software wasn’t working and I hadn’t asked her to record a backup. So now I do as a matter of course. We’ve never had to use the backup, but we do go through that effort of making sure that we have one. Alright, we’ve covered a lot of things so far about how this podcast got started and what we’ve been talking about in terms of our themes, what I’ve learned about podcasting. I want to just do a shout out really quick to some of the repeats. Some folks or some entities that have been represented multiple times on this podcast. John Farrell: The Kauai Island Electric Cooperative. I spoke with someone on their board years ago about their ambitious goals in terms of renewable energy and then spoke with their CEO David Bissell about how far they had come. They were at over two thirds renewable energy at the time and he came out at an interesting moment when they had actually had some struggles because of some outages from their fossil fuel generation coinciding with some very cloudy days, and he talked about why it wasn’t the fault of any one particular technology and how they had had to learn how to manage that. I still recommend that episode almost more than anything to folks who are skeptics about how much renewable energy we can get. Kauai Island, as you can suspect from the name, an island, they have the harder job of just about anybody at getting to a high level of renewable energy because they’re not connected to anyone else who can back them up. John Farrell: Another repeat that we’ve talked about a lot on this podcast is Boulder, Colorado. I talked to their mayor back in 2009 when they were first considering the issues of municipalization, to Steven Fendberg, who was an organizer with New Era Colorado, and most recently came on as a state senator to talk about his utility accountability work. But I’ve talked to him about Boulder. I’ve talked to city staff about their 10 year journey for public power that ended without forming a public power utility and in fact informed a lot of our public power podcast series about what you can still get from a public power campaign even if you don’t end with public power. And another person that’s been on multiple times is Mariel Nanasi from New Energy Economy, New Mexico. It would be most appropriate to just call her a force of nature. She has worked on everything from municipalization in the city of Santa Fe to a hundred percent clean energy legislation ensuring that it is equitable and consumer focused to community renewable energy and community solar, which she’s been working on the most recently. John Farrell: I also want shout out to Jean Su who came on, she’s now actually a of ILSR’s board, but she is the interim executive director at the Center for Biological Diversity and a great ally of ILSR in our work to understand monopoly power of utilities. One thing that was really fun about doing the podcast a couple of years ago was that I did several episodes around Puerto Rico. I was invited to speak on the island about distributed energy at a conference shortly after Hurricane Maria and it inspired me to talk to some other folks on the island to learn more about what they were doing and how they were organizing to make their grid more resilient and more democratic and more in service of the needs of the average Puerto Rican resident. One of those episodes in September 21, with Ingrid Vila from Cambio, a network of and coalition of organizations that’s been working on advancing a grid that prioritizes local and community solar, actually caught the attention of Mark Ruffalo, the actor who retweeted that in September, 2021. Still tickled to think that there was something that he saw of ours that he thought was interesting enough to share, but I definitely recommend that episode if you want a chance to understand what Puerto Ricans are up against in terms of trying to be successful in their efforts to bring clean energy to the island, from the colonial history to the recent struggles with their public utility being insolvent, and then the challenges of dealing with their relationship with the federal government in being able to have some sense of self-determination. So Ingrid Vila, that episode is number 138 and I highly recommend it. John Farrell: One of the most amazing things about doing podcasting is realizing how much you have to learn from your guests. I often get ideas for episodes because I’ve heard something about an interesting project going on or I’ve built a relationship with somebody working on a clean energy policy idea or because they’ve reached out and are interested in learning something from me. And I just cannot emphasize enough how much I’ve learned from all of my podcast guests over the years. So this is going to be a little bit of a list, but I’ve tried to organize it around different topics where I think my guests have provided an enormous amount of information to me and help me do my job better in terms of advancing the goals of energy democracy. So I have a few different categories I’m going to run through here. One is around community-based renewable energy. Second one is around cooperatives. The third is a category around public power in cities. The fourth is about a hundred percent clean energy policies and state policy. The fifth is around utility behavior. The sixth is around utility market power and monopoly abuses. The seventh is around Puerto Rico as I already mentioned. Then I’ve got a couple special buckets that were single episodes but around topics that I don’t generally understand a lot about or didn’t before then and felt like I learned an enormous amount. John Farrell: So let’s start with community renewable energy. There were two episodes in particular that I picked out that I felt like were really instructive in my understanding of how community renewable energy worked. The first was actually one of my first episodes, episode seven with Brian Minish. He represented the South Dakota Wind Partners, a community wind project that was developed in the early 2010s on the heels of the American Recovery Act enacted under President Obama and in the wake of the great recession and the economic collapse due to the housing market. One of the key reasons why the South Dakota Wind Partners and other community wind projects were able to be successful in that timeframe was because in the wake of the economic collapse, the tax credits that the federal government had been providing for clean energy weren’t able to be used because typically what would happen is a clean energy project would sell those tax credits to another investor and when you wanted to have a community-based project, the problem was that in order to offset your income with these tax credits, you would need what was called passive income. John Farrell: I’m not going to get into the weeds. I can recommend that you go listen to episode seven if you want to understand more about it or just search the term passive income on ILSR’S website and you can probably find some of our old research on it, but it really helped me understand what the barriers were around having a group of investors do a community renewable energy project. The way that federal tax law impacted that, not just in the design of tax credits, something that’s been addressed under the Inflation Reduction Act with direct pay, but also the issue of passive income. That episode was really, really helpful for me in being able to write the Beyond Sharing report back in 2016 about the challenges of community renewable energy as well as exciting about the few times that folks were able to overcome that. John Farrell: There was another episode called Green Energy Farmers. I don’t remember the exact episode number, but that also talked about a community wind project in Iowa that was similarly able to be successful due to that particular timeframe in which there was a cash grant instead of a tax credit that enabled community wind projects. The second episode that I really wanted to uplift in terms of my learning about community renewable energy was episode 175 a little more recently with Dan Juhl, a long time community and local wind and solar developer in Minnesota. The title of the episode is Who Needs Transmission Wires Anyway, and it really highlights the fact that we undervalue the ability of some of our small scale projects, and in this case small scale meaning about five megawatts enough to serve maybe a thousand homes. Dan was developing projects that were solar wind hybrids, so together they would have a very high capacity factor, which means that they would be able to provide electricity at a very high rate 24/7. John Farrell: And these projects can be located on the low voltage part of our electricity system on the low voltage side of substations, really serving local needs and in places where you don’t need to upgrade transmission capacity in order to build them. I think that’s very important of course right now at a time when we’re talking about lots of constraints on the transmission system in order to build the clean energy that we need to fight climate change and to capture all the economic benefits for our electricity system. A second category where I’ve learned an enormous amount from my guests is around cooperatives. It goes all the way back to episode 12 when I had Warren McKenna on, he was the general manager at Farmer’s Electric Cooperative in Iowa. As I mentioned before, their feed-in tariff program led them to have more solar watts per capita than just about any other utility in the country back in the early 2010s, even more than utilities and cities in California. John Farrell: It was a really impressive story about how a cooperative could just say, you know what? I think this is something we want to do, and they could figure out a way to use their local authority to meet that member interest in doing solar and do so in a way that was affordable for them as well. I also have to call out episode 92 with David Bissell. I mentioned to him before he was the CEO and is the CEO of the Kauai Island Electric Cooperative, and they’re really proving that clean energy can work at really high rates out on Kauai Island. Over 70% of the electricity they generate comes from solar. They can’t do wind power because of issues with migratory birds, which is a real shame for them because they have trade winds that comes through Hawaii that would be very useful for them to tap. John Farrell: So they’ve had to be very creative in figuring out how to make it work. And they have, in a way, I think that provides lessons for utilities everywhere because Kauai Island is more isolated than most utilities in its ability to get to clean energy future. And the final one that I want to call out, although there are probably more honestly that have taught me a lot, was episode 182 with Brian Callnan and it’s about the fact that this idea of vehicle to grid is really ready, that the technology is there. The New Hampshire Electric Cooperative is starting to offer this new transactive rate to allow customers to sell power back to the utility if they have a vehicle that can be programmed to do so, and there are cars out there already, like the Nissan Leaf can do that. And so it taught me again that here’s cooperatives on the cutting edge of how technology can work, ready to find a way to allow their customers to help them manage the grid more effectively is very exciting. John Farrell: A third category where I’ve learned an enormous amount from my guests is around public power in cities. This goes all the way back to episode 15 with Ken Regelson from Boulder, Colorado, and we talked at that time about a report that had been recently released saying that the city could, by taking over its electricity system, meet its clean energy goals faster and at a lower cost than the incumbent utility could provide the electricity. And so it was one of my first lessons about the power of the switch to public ownership and that promise that is available for so many cities that if they do invest in public power, it can help them meet their climate goals, their economic goals, and do so in a way that will cost consumers less for electricity. It was a very powerful story and one reason that I kept tuned into what Boulder Colorado was doing for so many years. Episode 87 with Kate Harrison, a city council member from Berkeley, California, taught me how cities could fight the gas company as they were one of the first cities in the country to say that there would be no more new gas hookups for properties in the city as a way to signal that it was time to move to electricity, a cleaner source for heating and cooling homes, for cooking, for water heating, for all the other services. John Farrell: It was also a really important lesson for how states could step in and preempt this practice. Our community power map shows that something like 15 to 20 states now have preempted cities from making this similar kind of policy decision. Many of them without ever having a city in their state take this action. But having just seen what Berkeley did and being informed by ALEC or one of the other conservative networks of policymaking stepped out in front and tried to prevent their cities from making those choices for their citizens. I also then want to call out episodes 119 to 120 where I spoke with leaders from Portland, Oregon and Seattle, Washington about how cities can make big investments in their climate future. Both cities were very interested in dramatically increasing the amount of money that they were able to invest in community-based solutions to the climate crisis in a way that was more equitable and addressed historic harms, especially to communities of color to low-income communities. And they did so and they did so in innovative ways that made sure that the burden of paying those taxes fell on folks who could afford it, either high income earners from tech companies or very large retailers who had sales over a billion dollars a year. I definitely recommend listening to those episodes. It’s also a lesson in preemption as I believe Oregon State government promptly preempted any other city from following Portland and providing a similar kind of funding mechanism. John Farrell: The last thing in public power dimension of course, is just our public power podcast series. It’s six episodes starting with episode number 163, and for anybody who wants to learn the basics about public power, why people do it, how to do it, who some important contact folks are, I definitely recommend them. One other category that we’ve learned a lot about is about a hundred percent clean energy policy at the state level. John Farrell: So we’ve got episodes 90 and 92, about two very different places that are getting close to a hundred percent renewable electricity, Kauai Island, Hawaii and Burlington, Vermont. Burlington, Vermont actually already gets a hundred percent of its electricity from renewable sources. The municipal utility there accomplished that goal several years ago, so we spoke about how they were pivoting to thinking about other sources of energy including working around electric vehicles or electrifying home heating and cooling. In episode 72, I talked with Mariel Nanasi about how big state climate policy can unfortunately cave to the utility and give up a huge amount of the benefits, or alternatively it can be written to support energy democracy. And she talks about the Energy Transition Act in New Mexico and the fight there to make sure that communities would actually benefit from the transition to clean energy. John Farrell: Speaking of making sure state policies are good and equitable in terms of their both process and their outcomes, in episode 185, I spoke with Haley Havens from the Initiative for Energy Justice and she spoke about the big equity gaps in some of the early a hundred percent clean energy policies and about what needs to be done to make sure that subsequent policies do a better job. An inspiration for me frankly, in understanding that importance of good process was Leah Bamberger, sustainability director in Providence, Rhode Island where she talked about the city’s not climate action plan, but climate justice plan and how they made a really concerted effort to include members of the community in the process of developing the plan. And it made significant differences in the focus on greenhouse gas emissions. Instead of thinking broadly just about carbon and carbon dioxide, they were talking about the kinds of overlaps between things like criteria pollutants and particulate matter near the city’s port and how the communities that lived there were much more focused on getting the pollution away from their homes away from their children in a way that would protect their health and in a way that would protect the climate. So it allowed the city to focus on both those things at the same time. John Farrell: And the last thing I just want to point out, and this is so important because ILSR does so much work talking about good policy is that in episode 153 I spoke with Crystal Huang and the recently deceased Al Weinrub, rest in peace Al, about how implementation of policy matters a lot too. They came on to talk about how ILSR’s Community Power Scorecard is giving California and around community renewable energy really was shortsighted in the sense that it didn’t feel like an A on the ground when it was so difficult to actually develop community-based and community owned renewable energy projects. In other words, implementation matters and it’s something that we take very seriously in thinking about how we talk about that project from now on and in making sure when we talk to other folks about good policy that we talk about the importance of making sure that it gets implemented well as well. We’re going to take a short break when we come back, I share the episodes that have taught me the most about utility behavior and monopoly power, Puerto Rico energy efficiency programs, and even building electrification. I talked briefly about how Local Energy Rules has evolved, share a few podcasts that I recommend, and then answer some of your questions. You’re listening to the 200th episode of the Local Energy Rules Podcast with me, John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance. John Farrell: Hey, thanks for listening to Local Energy Rules. If you’ve made it this far, you’re obviously a fan and we could use your help for just two minutes. As you’ve probably noticed, we don’t have any corporate sponsors or ads for any of our podcasts. The reason is that our mission at ILSR is to reinvigorate democracy by decentralizing economic power. Instead, we rely on you, our listeners. Your donations not only underwrite this podcast, but also help us produce all of the research and resources that we make available on our website and all of the technical assistance we provide to grassroots organizations. Every year ILSR’s small staff helps hundreds of communities challenge monopoly power directly and rebuild their local economies. So please take a minute and go to ilsr.org and click on the donate button. And if making a donation isn’t something you can do, please consider helping us in other ways. You can help other folks find this podcast by telling them about it, or by giving it a review on iTunes, Stitcher, or wherever you get your podcasts. The more ratings from listeners like you, the more folks can find this podcast and ILSR’s other podcasts, Community Broadband Bits and Building Local Power. Thanks again for listening. Now, back to the program. John Farrell: Another really interesting episode was episode 38 with Mary Powell. She’s now the CEO of Sunrun, but at the time was the CEO of Green Mountain Power. It’s the only investor-owned utility in the United States that is also a benefit corporation and she was instructive in talking about how even an investor-owned utility can embrace distributed energy if they want to change their culture and if they’re willing to look at ways that they can make money from doing that instead of the utility scale and investor focused model. There are still great stories coming out of Vermont how Green Mountain Power is one of the first utilities to start leasing batteries to its customers, using them to support the grid, but also allowing them to be useful to their customers in providing backup power. And it’s something that they’ve really doubled down on. Now is everything Green Mountain Power does great? Probably not, but it was really instructive to talk to Mary Powell at the time she was there about how not every investor owned utility has to resist this transition to distributed renewable energy as they so often do, warned by their trader organization, Edison Electric Institute. John Farrell: There’s probably no topic that has been more important and instructive to me in the evolution of my work at the Institute and in the work that we’re doing now than the guests who came on to talk about utility market power and monopoly abuses. It was probably kicked off around episode 69 when I had Bill Schnell on. He was from Grand Rapids, Minnesota and talking about the David versus Goliath fight that every community faces if they want to do something that their electric utility does not want to do. It was particularly interesting because Grand Rapids owns its own utility. It has a city owned distribution utility, but in this case it was the bigger utility, the for-profit utility that sold the electricity to the city of Grand Rapids that objected when their city wanted to do a community solar project with battery storage and they were facing down how the utility was resisting and in fact, using their lawyers and their litigation power to sort of beat down the city’s efforts to do community renewable energy. I think they eventually reached a compromise, but it was a really important lesson about how even when you own the local utility, you may be beholden to a larger utility under some contract to buy power, something that’s also been true of cooperatives. And it really highlighted the importance of not only having that local control but having some flexibility around your decision-making. John Farrell: Another episode that was a big point of learning for me about market power and monopoly was episode 109 with Scott Hempling about how utilities are unfairly profiting from their public franchise when they merge. So Scott has written an amazing book, which I highly recommend, that assesses the situation with utility mergers over the past couple of decades and how so many investor owned utilities have merged together to become these big multi-state or even multinational conglomerates. And what he points out is that the real value in these merging entities, the real value that they’re trading on in the merger is the fact that they have this publicly granted monopoly and that without, without those guarantee of those customers, these mergers and these businesses really don’t have much value, but they’re essentially trading on that public value for private profit. John Farrell: Another episode that was really instructional for me was episode 126 with Cisco from OhmConnect talking about the large and equitable potential of virtual power plants. The work that OhmConnect does, aggregating customers together, reducing their bills and then reducing bills for all electric customers by providing services like demand response and energy efficiency. And he also talked about how market barriers lock out this kind of business in most states. In fact, there’s only two states, California and Texas, where they’re currently able to do business and based on FERC’s order to the states, the Federal Energy Regulatory Commission, it might be until 2030 until we see those markets develop in other places. Another episode again, really important. Episode 135 with Yochi Zakai was about why you need to know about this idea called hosting capacity if you care about getting lots of local solar, it’s an analysis that’s required of utilities and I think seven or eight states now that where they have to map out on their distribution system where it’s easiest to connect more local solar to the grid where they have capacity and it’s really essential, especially as we start seeing markets get more mature for local clean energy. John Farrell: Shout out for episode 149 with Ari Pescoe on the monopoly link between transmission and net metering. Before that episode, I don’t think I’d ever really realized how much utilities exercise monopoly power in a way that inhibits clean energy at the utility scale, not just fighting rooftop solar. And what he has uncovered in his research, he has two amazing papers that he’s written on what he calls the utility transmission syndicate is that utilities exercise market power and political power over the transmission planning process in a way that it’s curtailing our ability to do clean energy because they prioritize owning the transmission lines over building ones for regional interconnection that would support more wind and solar development. I have to celebrate Jean Su who’s been on the podcast twice from the Center for Biological Diversity, episode 136 and episode 152. She opened my eyes to the idea that federal antitrust policy could potentially be brought to bear on utilities for acting in anti-competitive ways. John Farrell: In episode 155, I talked to Michael Murray from Mission Data and he taught me about the danger that we have in letting utilities control all the data about the electricity system and how hard it is for customers to even to get access to their own data, much less being able to share that with a third party that might be able to offer them some services to reduce their energy bill and even reduce their energy bill in ways that benefits the entire electric grid. A couple more things that I’ve learned about market power and monopoly power, A couple more episodes, episode 177 with David Gahl and Justin Baca. We talked about the lack of data that most state utility commissions have around interconnection costs and timelines of the utilities that oversee this really key process in the markets for distributed energy. They wrote a letter to the Energy Information Administration at the federal level requesting that they collect this data on their annual surveys of distribution utilities. They declined to do so for now, but there’s still hope that they will in the near future and it would be essential to give utility regulators the ability to properly oversee the interconnection markets in each state and how their utilities are handling the really important and crucial aspect of allowing distributed projects to connect to the grid. John Farrell: And speaking of that, episode 188 with Mari Hernandez from the Interstate Renewable Energy Council about their freeing the grid report is all about interconnection and about this crucial step, whereas David and Justin talked about the information that we have about it, Mari and IREC talk about the rules. How do we set good rules to make sure that there is fair and non-discriminatory access to the energy system for people to be able to connect their clean energy projects? John Farrell: Just a few more episodes I want to share about where I learned so much. Episode 77, 78 and 138 were about Puerto Rico and I spoke with Marcel Castro Sitiriche and Ingrid Vila and learned about how a colonial past still haunts this American Island grid and how local solar and storage could be the answer. Puerto Rico has just suffered over and over and over again throughout its history because of its unique status of having American citizens in a territory that don’t have federal representation. They still pay taxes and they don’t get all the benefits and there are so many reasons they are continuing to suffer from trying to recover from Hurricane Maria many years ago. The last two episodes are just shout outs for things that were a little bit of a tangent, but also I thought really enlightening information about how the energy system works. Episode 122 is with Marti Frank, who’s a program evaluator for energy efficiency programs, and she talked about how we do completely go about backwards doing incentives for energy efficient appliances that instead of doing rebates that people get after the fact, we need to lower the price of the things that are the most energy efficient at the point of sale because half of Americans simply buy the cheapest refrigerator or washer or dryer that’s on the floor at the store at the time because they can’t afford anything more, and that cheapest appliance had better be the energy efficient one. John Farrell: The last thing is episode 178 about building electrification is a great conversation with Nate Adams and Steve Pantano. Nate is with HVAC 2.0, Steve is with Rewiring America, and it was generated by a debate on Twitter between the two of them about the costs of electrification. And we really got into the weeds about what is it that needs to happen to change – how do we change the issue with contractors being that point of contact with customers and many of them having the wrong idea about how electrification works? What do we do to make sure customers have the right ideas about how much it’s going to cost and what their expectations should be? It was a fascinating conversation. I’ll just sum up to say that I have learned so much from doing this podcast and it’s one of the pleasures of doing it is that bringing on guests to talk about these issues has really been educational for me and I hope for you as a listener. John Farrell: One of the things that I wanted to share about the podcast and its evolution and why so many of these recent episodes that I was just talking about are about market power and monopoly abuses is that I realized after some of our early episodes that too many of the amazing community clean energy stories were one-offs, South Dakota Wind Partners, University Park Solar, Monadnock Food Co-op. There’d be this one really great story of like, oh, this community came together and was able to collectively own these wind turbines, this community or these solar panels, but it was hard to replicate and the circumstances of their success were often like, oh, there was this one grant or there was this limited time federal incentive, or oh, we had free legal support because two of the people who were part of the project team were attorneys in their day jobs and were able to give us pro bono assistance in terms of developing the projects. John Farrell: And it became clear and clearer that there are systematic and systemic barriers to these community and local energy projects. And that became the priority for our work is investigating how do we identify those barriers and how do we overcome them. I want to wrap up with just two things. One is a shout out to some other podcasts that I like and have learned a lot from. And then the last thing is I sent out an Ask Me Anything to our email list on social media to see if people had any questions just in general that I could answer. And I’m going to take a stab at the mailbag here and see if I can in fact answer these, ask me anything or not. So first though, the podcast that I’ve really enjoyed listening to that I highly recommend, there are links on the show page. John Farrell: So first though, the podcast that I’ve really enjoyed listening to that I highly recommend, there are links on the show page. There’s the Just Solutions podcast with Aiko Schaefer that really drills down into what are the clean energy policies and practices that are getting equitable outcomes. There’s the Energy Transition show, which is one of the deepest and most informative dives with Chris Nelder. The Energy Markets podcast with Brian Lee. I was just on in the past few months, does an amazing job of asking this question of how do we quarantine the monopoly, how do we make sure there is room for competition and access to the system? And then finally, Volts with David Roberts. I followed David’s writing since back at his days at Grist, then at Vox and in all of his evolutions. And I just think his cogent analysis not only of clean energy where he does such a great job of bringing on guests to explain how the system works, but his analysis of the political economy and how people make decisions and the politics of clean energy. I think his statement that where you elect Democrats climate policy follows has been really instructive for understanding how decisions are often made as well as the deep insights that I’ve gained around things like network, geothermal or distributed solar or energy storage or even transmission. A shout out to all of those podcasts, Just Solutions, the Energy Transition Show, Energy Markets Podcast and Volts. I highly recommend both following them and subscribing to them to the degree that you are able to do so. John Farrell: And with that, I’m going to wrap up with this Ask me anything mailbag and then talk maybe a little bit about what’s upcoming for the podcast over the next year. But just want to thank you so much for being a listener of Local Energy Rules. We really can’t say enough how flattered I am that when I meet people for the first time and they say, oh my gosh, I recognize your voice, what a treat it is, but also particularly because they’ll say, I learned so much from your podcast. And that is definitely part of what we are hoping for is this opportunity to share what I have learned over 17 years in doing this work. John Farrell: So let’s go to the mailbag and see what people are curious about when I offered them to ask me anything. Question number one from Leatra Harper, how do we stop the big utility lobbyists and interests from penalizing distributed generation? I think this starts at the level of organizing. You need to organize. You need to educate people about how the energy system works and why this matters and what incentives the utilities have. And then you have to strategize and figure out a way that you can oppose that problem. So Leatra is involved in a lawsuit against Bowling Green Ohio utilities for their changes to policy to fight distributed generation. You can look for legislation, you can advocate at a public utilities commission. John Farrell: There are lots of places where you can take those arguments and try to figure out how to change them, and it really depends on your community and where you think you have power and leverage in terms of what might work the best. So I wish I could give a general answer of how do we stop them, but broadly the solution is going to be how do we get utility incentives to align with distributed generation and how do we get them out of the way? And this is part of research that I’ll be publishing soon on investor-owned monopoly utilities, but I think this is twofold. One is removing the control that the utility has over the distribution system so it can’t impose and block its competitors. And the second one is how do we make it in their financial interest to support distributed generation, for example, by taking care of upgrades to the distribution system to make sure that everyone has access. John Farrell: Question two is from Albert Lin. Albert, great to hear from you. Love the work of you and others on utility return on equity, which is what your question is about. How do we get advocates and interveners at public utilities commissions to pay attention to how high the return on equity is that is being awarded to utilities by state commissions and how it creates a huge incentive to stay the course in terms of investing in large fixed assets like giant power plants and transmission lines? Number one, I’d say I’ve got a new report coming out here very soon on monopoly utility monopoly power, and it does address this and in fact references some of the work that Albert you first shared with me about this problem. The second thing I just want to highlight is you can fight back. There’s a great example in Minnesota recently with a rate case involving Xcel Energy where advocates successfully argued that the utilities rate of return needed to be reduced by a percentage point in order to better account for the actual risk and reward calculus that there is for making investments in large infrastructure when you’re a monopoly and can recover those costs from captive customers. It’s not enough and in fact, the evidence suggests that anywhere from two to $20 billion a year is over-billed to utility customers across the country because we overpay utilities for their capital and yet it is a fight that we need to have. John Farrell: Question three here is from Doug Jones in Minneapolis where he asked, does it make sense to have a mechanism to add solar panels to an existing solar installation when your energy needs increase, such as if you buy an EV or maybe get a heat pump? And I would say, yeah, of course it makes a lot of sense to do that. The policy unfortunately is really against that. In fact, I don’t even know how you would go about that process with the utility company because when you sign up to do interconnection and for net metering or to get an incentive, it’s usually for a project of a certain size. And I remember I’ve actually asked my solar installer because I have panels on my roof about doing that, and he said that it would be very difficult and I think most likely it would be treated as a separate installation. So I think we do need new policy, new interconnection rules to make it clear that people should be able to add panels to their installations. One thing that would also be helpful though is if we remove any artificial limitations on how much solar somebody can put on their house right now, it’s often indexed to how much electricity is used or has been used over the past 12 months, and we should remove those restrictions and allow people to put as much solar on their building as they can, recognizing that that energy load will be rising over time if not in that particular building that in that neighborhood or in that community as we electrify everything. John Farrell: Our next question is for Matt Roberts, a former Local Energy Rules guest with the Sustainable Ohio Public Energy Council. He has a few questions and I’ll try to tackle ’em all. Number one, is it worthwhile for communities to buy their portion of the distribution grid from an investor owned utility company? There’s sort of two questions baked into that financially. Absolutely. Already the utility recovers all the costs from its captive customers of owning the distribution system. And if you want to make choices about the distribution grid, owning it is a great way to do that. However, the process of buying out that utility is often extraordinarily challenging and time consuming. See our episodes about Boulder, Colorado or about the recent fight in Maine over public ownership, the utility does not want to sell and they fight back very hard. And so just be prepared for that challenge. John Farrell: Matt’s second question is, is there a success story for solving the split incentive dilemma and making energy efficiency improvements, especially in high rental communities? So this is the incentive where maybe the building owner doesn’t pay the utility bill, the renters do, but the renters then don’t have permission or the decision-making authority to make improvements that would reduce their energy bills. I would definitely recommend the last episode of Local Energy Rules number 199 with Matt Flaherty, which is going to cover exactly that issue with inclusive utility financing. Third question from Matt and the last one I will address. Should local and state governments procure materials as a way to reduce costs for constituents? Should they also work to streamline permitting on the permitting? Absolutely. There’s already a great tool called Solar App plus that was developed in a collaboration between the National Renewable Energy Laboratory and a variety of cities that creates a presumptive and online and instant permitting process. John Farrell: Like you’ve got an iPad with you at the property, you put in the characteristics of the project and you can get a permit immediately. That is the kind of streamlining that we need for solar projects to make it easier to do them. Now, whether or not local and state governments should buy solar panels, inverters, heat pumps as a way to reduce costs for constituents, maybe, I don’t know if that’s a great idea. Certainly cities or states have access to low cost capital through bonds and they could potentially do that, although they’re not experts in it by any means since it’s not a practice that they’re usually in. So I’m not sure. But there are also cooperative models like Amicus Solar. It’s sort of like the ace hardware of solar. Ace Hardware, by the way, for people who don’t know, is a national network of cooperatives that pool their power together, their buying power so that they can compete with hardware stores like Lowe’s or Home Depot. John Farrell: So they’re able to get their materials, their products at a lower price because they pool their buying power together and that’s what Amicus Solar does for its members and it certainly could be replicated in any state. Joy Loving from Rockingham County of Virginia asks about the value of working at the state level for policies to shift utility incentives around affordable energy such as compensation for utilities based on environmental and social outcomes. Joy, I love the question. Working at the state level is always really important because that’s the way that our country is structured in terms of regulating electric utilities and energy utilities. So there’s public utility commissions or public service commissions that do that oversight of the for-profit utilities and state legislatures of course oversee any utility that operates in the state and can set the rules for how those utilities operate. I think Hawaii is also a really powerful example, and we had a podcast episode a ways back with Isaac Moriwake who talked about they changed the incentives for the utility in Hawaii to base it entirely on performance, and we’re in the early days of trying to understand how successful that was, but it’s one of the few places in the entire country trying to change from what’s called the cost plus model where utilities get paid back for building a power plant plus some profit to focusing on actual incentives for performance. John Farrell: And I think that’s really important. I also just want to note that in Minnesota for example, we worked at the state legislature to pass what was called the value of solar tariff, which tries to calculate some of the environmental and social benefits of solar and requires the utility to include them in its calculation of solar’s value. I only wish other states like California had done that before they slashed compensation for rooftop solar. We’ve got another question here from Rikki Honnold about whether it’s possible for the largest natural gas users to actually have to pay more than residential users once they renegotiate franchise fees. This is a great call to research that ILSR has done over many years on what are called utility franchise fees. I’ve recommend checking out our website about it, but essentially a lot of cities, while they might not be able to choose which gas or electric utility serves their customers, they do have a contract with that utility called a franchise that allows them to negotiate with the utility every 10 or 20 years over certain aspects of the service delivery. John Farrell: And in addition to that, a lot of cities have the authority to set a fee that is charged on those gas and electric bills to cover the costs of those services being delivered using public right of way. And some cities like Minneapolis have successfully used that to create a pool of funding for equitable climate work and clean energy development. So yes, it should absolutely be something that your community looks at. I’ve just got two more questions from the mailbag, one from Andrew Stone. How have states that have implemented FES order 2222 with both utility and customer owned batteries achieved that? First of all, FERC is the Federal Energy Regulatory Commission and thus order was about creating what are called demand response markets, which is to say non-utility methods of allowing people to say, I have a battery and I’m willing to reduce my energy at peak energy use times on the grid if you’ll pay me for it. John Farrell: And the rules that FERC set down are about how do you aggregate together people in order to provide that service sometimes called virtual power plans. I don’t know a whole lot about this more than I learned in my Local Energy Rules episode of Cisco DeVries from OhmConnect, where he talks about the early markets that are available in California and Texas and the way that his company is helping to aggregate customers together to do that. So certainly there are good models of how that can happen, but unfortunately, as Cisco mentions, only two states, California and Texas had markets that they were able to participate in at the time. So I don’t think that implementation has gone very quickly. Unfortunately. Our last question is pretty broad, but I think pretty insightful about how the system works from Laila Atalla, apologies if I didn’t pronounce your name correctly, but she wanted to ask this question, do higher fixed charges help or hurt energy democracy? John Farrell: And she was specifically thinking about in California how they’re considering a significant increase in the fixed charge on the electric bills along with a proposal to make it income graduated. So I think there’s a few things about this question that I love that help uncover kind of how the system works. First of all, fixed charges are supposed to be in general rate design principles for things that are fixed costs. So the important lesson that I learned from an economist a long time ago, but also from people who’ve been involved in utility rate setting is in the long run, all costs are variable. So it might seem like something is a fixed cost today, but that’s because you simply haven’t set the strategy or the planning horizon in order to figure out how to change that cost. And so I’m very skeptical and have worked for many years with folks in a group called Nix the Fix across the country to try to reduce fixed charges on customers because they unfortunately fixed charges, the higher amount you pay on a given month as a fixed charge as opposed to for how much energy you use discourages you from doing anything to conserve or produce electricity. John Farrell: And to give an example of how much of an impact that can have in 2021, there were 1.3 million California solar customers. And assuming they each spent about $30,000 putting solar on their roof, which is probably an underestimate given that some of them went solar very early when the costs were much higher, they had collectively leveraged $39 billion in private capital to help supply clean energy to the Golden State. So we need to give people a reason to invest in things like clean energy, and we can’t do that if we increase the fixed charge on their bill. We’re basically giving them a disincentive. We’re saying, don’t bother. You just send all that money to the utility and let the utility figure it all out. And I think that’s really disappointing. John Farrell: I’m particularly disappointed in California where the fixed charge proposal is being married with this proposal of having indexing the fixed charge and utility bills to income. We can do income graduated or income indexed charges on utility bills without increasing fixed charges dramatically. The two are not married together. So if California wants to address equity and how much people pay for energy, they should do that. But it doesn’t come about at the same time that you screw all of the beneficial local conservation, energy efficiency and rooftop solar methods we have for reaching our clean energy goals by raising fixed charges. So separate out the two things, focus on what it is that matters and do them appropriately. I just want to say thank you again for traveling this journey with me on the Local Energy Rules Podcast. Not only through over 10 years and 200 episodes, but also just through this episode today about how it started, what I’ve learned about podcasting, some examples that people have found useful, including our one celebrity callout, where I’ve been learning the most over these 10 years from these different episodes. And I’m sure there’s many that I didn’t mention where I also learned many things. Why this podcast has evolved from just celebrating local and community-based projects to talk about monopoly power and markets, and a call out to other podcasts that I have enjoyed as well as a chance to answer some of your questions from the mailbag. Thank you so much to those who sent in questions in response to our invitation. It was a pleasure to take a moment to talk of those things. And as always, keep your energy local and thanks for listening. John Farrell: Thank you so much for listening to this episode of Local Energy Rules and a look back at 200 episodes, the podcast evolution, and a chance to answer some of your burning questions. Look for links to the many Local Energy Rules episodes I mentioned on the show page, where you’ll also be able to find links to the podcasts I’ve recommended. And thanks for joining me on this journey to learn more about energy democracy and monopoly power. Local Energy Rules is produced by myself and Maria McCoy, with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

10 Years, 200 Episodes of the Local Energy Rules Podcast

Farrell and Energy Democracy Intern Wade Underwood published the first episode of Local Energy Rules, an interview with Anya Schoolman, in January of 2013. Schoolman and the Mount Pleasant Solar Cooperative were hoping to procure solar panels for 10 percent of their D.C. neighborhood through bulk purchasing — an idea that would later grow into the national organization Solar United Neighbors.

In 10 years, the podcast has covered topics such as community choice energy, franchise fees, local climate funding, public power, community renewable energy projects, electric vehicles, and rural electric cooperatives. Farrell shares some lessons learned over 200 episodes of podcasting, including using a good microphone, finding an adaptable recording software, and recording backup audio.

Learning Along With the Listeners

The Local Energy Rules interview format relies on our guests and their deep expertise on a wide range of topics. Farrell shares what he has learned from some favorite episodes:

• Brian Minish and Dan Juhl shared their experiences with community-owned renewable energy (see also ILSR’s recent report Advantage Local).
• Warren McKenna, David Bissell, and Brian Callnan have each shown how rural electric cooperatives can lead on clean energy and innovation.
• Leaders in Boulder, Berkeley, Portland, and Seattle have demonstrated the power in community organizing and stretching local authority.
• Consumer-owned utilities, including Kauai Utility Cooperative and Burlington Electric, have had the most success in progressing toward and reaching 100 percent renewable energy.
• Mariel Nanasi shared how big state climate policy can cave to the utility and Haley Havens defined what makes a state 100 percent clean energy policy more equitable.
• City electeds, sustainability staff, and community organizers contributed to our deep dive on city clean energy commitments, Voices of 100 Percent, including an episode on the Providence Climate Justice Plan.
• Crystal Huang and Al Weinrub explained some of the gaps between policy and implementation and how ILSR’s Community Power Scorecard might not reflect the experience of advocates on the ground.
• Green Mountain Power, the first and only B-Corp certified investor-owned utility, has shown how utilities can embrace distributed energy.
• The podcast has broadened from highlighting individual community renewable energy projects to an exploration of utility market power and monopoly abuses, including interviews with Bill Schell, Scott Hempling, Cisco DeVries, Yochi Zakai, Ari Peskoe, Jean Su, and Michael Murray.
• David Gahl, Justin Baca, and Mari Hernandez got into the weeds on interconnection.
• Marcel Castro Sitiriche and Ingrid Vila (featured on both episodes 78 and 138) shared their visions for a more resilient power grid in Puerto Rico.
• Marti Frank shared how to make better use of home appliance rebates.
• Nate Adams and Steve Pantano gave a deep dive on whole home electrification.

Finally, Farrell answers questions from listeners: How do we stop the big utility lobbyists and interests from penalizing distributed generation? Does it make sense to have a mechanism to add solar panels to existing installs when energy needs increase? Is there a success story for solving the split-incentive dilemma in making energy efficiency improvements, especially in high-rental communities? Do higher fixed charges help or hurt energy democracy? Listen to the episode or read the transcript for his answers.

Episode Notes

See these resources for more behind the story:

• Check out some of John Farrell’s other favorite podcasts: Just Solutions with Aiko Schaefer, the Energy Transition Show with Chris Nelder, the Energy Markets Podcast with Bryan Lee, and Volts with David Roberts.
• ILSR’s first podcast, Broadband Bits,  now has over 500 episodes.

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country, using ILSR’s interactive Community Power Map.

This is the 200th episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update.

Featured Photo Credit: Florante Valdez via Pixabay

Matt Flaherty discusses the barriers to home energy upgrades, how inclusive utility investment is a scalable solution that addresses many of these barriers, and what it will take to get utilities on board with on-bill financing.… Read More