What is your reaction to how the EPA’s carbon emissions rule might affect your state? What are some ways your state is already prepared and what might be more challenging?
Our initial reaction to the rule, both from the Maryland state perspective and from RGGI of course as well, we’re just really pleased as punch that they’ve explicitly recognized RGGI as a compliance pathway to meet the goals.
We think they got the structure right on this in providing the flexibility that the states asked for in order to protect reliability and affordability at the same time meeting their own environmental goals that I think are increasingly becoming important for economic regulators as well.
In justifying how they worked toward what the goals for individual states would be, I think there are still some questions for us…as for the assumptions and whether they’re all correct and reasonable. There’s some questions we have on the assumptions and how they got to, for example, 37 percent for Maryland. We come together and look at a weighted average for the region and see how we can get that.
It’s a little bit different for us because looking at what they’ve put forth they’ve just sort of shown you the pathway as to how they’ve figured out that they think it’s reasonable From there make your own proposal that’s what they’ve said to us. They’ve given us that flexibility. They’ve explicitly allowed RGGI to be a compliance mechanism.
For RGGI, we think we can go forward doing what we’ve been doing–looking at a mass-based approach, looking at our three-year compliance periods the way this is structured. And we can continue to build our economies by reinvesting the dollars from those auctions.
Also from 2005 to 2012, Maryland started out with 56 percent of our generation as coal. By 2012, it was down to 43 percent. At the same time, our natural gas production, thanks to Pennsylvania for example, went from 3.5 percent to 13 percent. We still have between 25 and 30 percent of our production comes from nuclear as well.
(On the 2012 starting year): I believe (earlier work) was already taken into account. There are other questions I have for a 2012 baseline, for example that was a year where we had a lot of storms. Are those assumptions of what our generation looked like during that year reasonable and correct? Or should we look at something like a three-year average? Or should we look at a few years earlier?…I’d like to think they would take that reality into account and look at suggestions, but I don’t know.
Do you foresee your state having a formal or informal stakeholder process?
Maryland Department of Environment is responsible for the regulations, and they have a formal and legal process by which they engage stakeholders, they put forth a proposal, then there’s a certain time period in which they accept comments, they respond to all of those comments and then they finalize the regulation.
One of the benefits we’ve seen come out of RGGI, besides the obvious economic benefits…is being able to share resources and administration of a program like this among the states. But also because of this and our other environmental and energy-related policies in our state…our energy-related agencies meet once every two months. We make a concerted effort to meet with the Governor’s Energy Office, the Public Service Commission, the Department of Environment and the Department of Natural Resources to talk about energy-related issues. That has become ingrained in the way we do things… That’s going to work to our advantage also in figuring out how to deal with the Section 111(d) proposal.
Even within the RGGI states, some states like Massachusetts have their environmental agency and their state energy office that are the two leads, whereas in most other states it’s the public service commission and the environmental agency.
There’s an interesting difference between how states will deal with this if they are vertically integrated. If they order certain types of generation–they have that direct control–as opposed to operating within an independent system operator or a regional transmission organization–theirs is easier in terms of saying this is what you have to do and the economic regulators go and do it.
We don’t control specific energy, we don’t dispatch it. Working within (the PJM Interconnection) in Maryland (and other grid organizers in other RGGI states)… Each of us have to rely on our independent system operators to do that dispatch on an economic basis only.
(National Association of Regulatory Utility Commissioners) has been really helpful in setting up workshops looking at should we or should we not look at a regional approach. We think it made sense because it’s proven, because it’s cost-effective, because it follows the regional nature of our grid. We think it works and we’ve proven that it works, but it doesn’t work for all states. Take Colorado…their state has done a lot with respect to energy efficiency and renewables, but they don’t operate within an ISO, so it’s not really an option for them to look at it regionally.
Do you feel your role and responsibilities as a state regulator are evolving? Why or why not?
I think our role is changing…but I think it’s always changing. It may be at a more accelerated path right now because of technology and because of customer demands pushing and because of increased frequency of severe weather and reliability and increased consumer reliance on electricity.
Our role is changing to one of a lot more risk analysis than we have done in the past. And that is actually related to RGGI, to our environmental (issues), but it’s mainly related to reliability and resilience and we have limited dollars that we can spend from the ratepayers, and we have to figure out how to most efficiently spend them. So we have to choose whether we put all our eggs in a basket of preventing outages or we have to save some money back from recovery.
Where we spend limited dollars is a really big question facing us, and that requires not just an engineer sitting in one block and an accountant sitting in another block and an economist looking at something else. It requires a much more interrelated and interdisciplinary analytical review.
What are some of the biggest energy issues facing your state?
Reliability and resilience. We’re also facing issues related to…supporting states rights to contract for new and existing generation that’s going to help with reliability and affordability and environmental aspects of our energy grid. It’s sort of at that nexus of what is wholesale and retail is the question at hand, and I think that’s a big issue for us.
There’ a NARUC paper…that looks at the bigger question of reliability and how do you break that down and put it in its respective buckets to figure out where you’re going to spend those limited dollars. Under the umbrella of reliability, there is the normal sort of availability every day. Making sure our aging infrastructure is replaced as need be, making sure we have the right technology to minimize the duration of outages–smart grids, things like that. But then there’s also resilience, which is two parts–one is the ability to withstand external forces and that could be weather, it could be cybersecurity attacks, it could be malicious or accidental, it could be solar flares, (electric and magnetic field risks).
This interview was conducted at the NARUC summer meetings in July 2014. To see Q&As with commissioners from other states, visit our interactive map. For a broader story about how state regulators from around the country are reacting to the EPA’s carbon emissions proposal, click here.
If you’re a commissioner and didn’t get to talk to Morning Consult at the conference, feel free to contact Emily Holden. We’d love to hear from other state officials and stakeholders too.