Electricity Markets
Electricity Markets

Legislative trail to a bright energy future

On May 19, I testified before the Senate Committee on Energy and Natural Resources during a hearing on energy supply legislation. I wanted to share my oral comments here on my blog. Click here to download the written testimony I submitted to the committee.

Good morning Chairwoman Murkowski, Ranking Member Cantwell, and other Senators on this Committee. Thank you for inviting me to testify. I am Sue Kelly, President and CEO of the American Public Power Association. APPA commends your hard work putting together the first comprehensive energy package since 2005. While it may be hard to find consensus, APPA is ready to work with you to improve Americans' access to affordable, reliable, and environmentally responsible electric power.

I will set out APPA's views on several of the supply-related issues in the bills before you. I will discuss hydropower licensing, mandatory capacity markets, and a federal renewable energy standard.

Hydropower is a cornerstone of our generation mix. It supports the affordable and reliable operation of our nation's power grid. Seventeen percent of the power that APPA members generate comes from hydropower. One hundred public power utilities operate one hundred and fifty nine FERC-licensed projects, with over twenty one thousand megawatts of capacity.

The current hydropower licensing process needs to be reformed. Right now, public power and other utilities cannot increase their investment in emissions free hydropower without protracted resource agency reviews. There is significant potential for new hydropower at non-powered dams throughout the country. Hydropower could be substantially increased at existing facilities and at water distribution conduits and canals. But there are excessive regulatory barriers to doing so.

APPA therefore supports the concepts set out in Senate Bill 1236, which reforms the regulatory process for licensing hydropower projects. FERC should be the lead agency overseeing the process. It should be able to establish and enforce deadlines for other federal and state agencies involved in that process. We also support the goals of Senate Bills 1058 and 1270. Increased federal funding for research and incentives will help develop hydropower resources.

Second, I'd like to discuss mandatory capacity markets in the eastern regional transmission organizations, known as RTOs. Senate Bills 1222 and 1272 address these regulatory constructs, which are often mislabeled "markets." They are meant to make sure generation and demand-side resources will be there when needed to meet electricity demand. They have not lived up to that promise, which is why they are constantly being tinkered with. But they do account for a substantial share of electric bills consumers and businesses pay each month.

APPA appreciates the interest Chairman Murkowski has shown in this issue, as Senate Bill 1222 shows. We are particularly pleased to see the legislation list among its objectives "an enhanced opportunity for self-supply of electric capacity resources" as well as a "diverse generation portfolio" and "availability of transmission facilities."

However, we are concerned that the bill may lack the teeth to achieve needed reforms. APPA is also concerned that it does not include costs to consumers in the list of objectives which could force tariff amendments. Finally, we fear owners of generation in regions without mandatory capacity markets could use Senate Bill 1222 to advocate for these constructs in their RTO regions.

APPA also appreciates Senators Markey and Warren's introduction of Senate Bill 1272. This legislation requires the GAO to answer the fundamental question APPA and its members have been asking: whether these constructs produce "just and reasonable" rates, as the Federal Power Act requires.

While both bills kick off a much needed dialogue, we believe there is already more than enough information to support changes. APPA has recommended FERC phase out mandatory capacity constructs over time and replace them with voluntary, residual capacity markets. In the meantime, APPA proposes two fixes. First, RTOs that have not yet implemented mandatory capacity markets should not do so without unanimous support of the states in their regions. Second, RTOs that already have mandatory capacity markets should not impair the ability of retail utilities and states to self-supply their capacity obligations.

Finally, APPA has concerns with Senator Udall's legislation to establish a renewable electricity standard. Many of you know public power utilities strongly support renewable energy. We have been leaders in developing it. However, APPA believes at this point there is no need for legislation to create a federal renewable energy standard. State and local governments are best placed to implement such policies. Moreover, the cumulative impact of various EPA regulations is leading to increased retirements of coal-fired power plants throughout the U.S. The EPA's soon-to-be finalized regulations to reduce CO2 emissions from fossil-fuel fired power plants will accelerate this trend. Utilities are increasing the amounts of electricity they generate from renewable resources, and taking other steps to reduce CO2 emissions. A federal RES is therefore unnecessary.

Again, thank you for the opportunity to appear today. I am happy to answer any questions you may have.

I know there are a number of other bills under consideration today, including some that apply to our sector. APPA has reviewed them and can work with their sponsors as the Committee moves forward."