On November 7, 2018, the Pennsylvania Public Utility Commission’s (“PUC” or “Commission”) Damage Prevention Committee (“DPC”) held its inaugural meeting in Harrisburg, Pennsylvania.  The DPC is a creation of Act 50 of 2017, which enhances Pennsylvania’s Underground Utility Line Protection Law (i.e., the “One Call Law”) to prevent accidental strikes.

Comprised of excavators, utilities, municipalities, and regulators, the DPC operates collectively to review incidents, identify what went wrong, and issue corrective actions (including penalties).  These review sessions are not legal proceedings and are essentially a measure to analyze mistakes and determine what actions will make accidental strikes less likely to occur.  The process for each review is as follows:

  1. The PUC’s investigator requests information from the project owner, facility owner, and excavator regarding the incident.
  2. The PUC’s investigator prepares a report and recommendation for the DPC.
  3. If the incident will be discussed at the meeting, the project owner, facility owner, and excavator receive written notice of the option to participate in the meeting.
  4. The PUC’s investigator provides the DPC with an overview of the incident and provides photos of the damage.
  5. The DPC asks each of the parties involved in the incident to explain what happened and what actions they took. The DPC prefers to hear directly from the parties, rather than from their lawyers.
  6. The DPC decides whether to issue penalties on any of the parties.

The DPC’s initial meeting revealed several key takeaways for utilities, excavators, and other entities:

  1. It’s important for any party served with a notice to appear before the DPC in relation to an incident to consider attending the DPC meeting to present that party’s side of the story and answer questions. Several DPC members noted their disappointment with parties that failed to attend.
  2. If any pipeline hit results in the release of flammable, toxic, or corrosive gas or liquid which endangers life, health, or property, then the excavator must immediately call 911 and notify the facility owner.
  3. The DPC considers whether the parties involved in the incident employed prudent excavation practices.
  4. It’s important that each party take clear photographs of the site where the strike occurred. With the availability of digital cameras, it may be advisable for excavators to take videos of the One Call Markings prior to beginning the project.
  5. It’s critical that each party record in writing any conversations with the other parties about the incident.

The next DPC meeting is December 11, 2018.  If you have any questions about the DPC or other Commission proceedings, please do not hesitate to contact Pam Polacek (ppolacek@mcneeslaw.com) or Aly Hylander (ahylander@mcneeslaw.com).

 

 

 

 

On November 29, 2018, the Pennsylvania General Assembly’s Nuclear Energy Caucus (“NEC”) released the “Bicameral Nuclear Energy Caucus Report” (“Report”) that details the NEC’s findings on nuclear energy issues during the 2017-2018 Legislative Session.  The Report finds that Pennsylvania’s five nuclear plants provide numerous benefits, including supporting jobs, providing zero-emissions energy, moderating electricity prices, and ensuring grid resilience and reliability.[1]  As a result, to avoid adverse “employment, economic, and environmental impacts associated with the premature closures” of Pennsylvania’s nuclear facilities, the Report suggests that Pennsylvania has four options to determine the future of its nuclear industry:[2]

  1. Do nothing and leave Pennsylvania’s clean energy resources, including its nuclear plants, on a trajectory to early retirement – effectively allowing PJM to dictate the mix of resources serving Pennsylvania.
  2. Modify AEPS (or establish a ZEC program) to put nuclear generation on equal footing with other zero-emission electric generation resources in Pennsylvania.
  3. Modify AEPS (or establish a ZEC program) with a “safety valve” mechanism that (depending on the outcome of the FERC proceeding) would allow Pennsylvania to adopt a new capacity construct proposed by FERC that is designed to accommodate state programs to support preferred generation resources.
  4. Establish a Pennsylvania carbon pricing program.

Despite the detail in the report, several questions remain unanswered and issues remain unaddressed:

  1. The Report does not specify the amount of subsidies that nuclear generators should receive. Any policy decision must include an analysis of the costs to consumers and the potential impact on employment and investment in Pennsylvania.
  2. The Report discusses testimony from a portion of the stakeholders (e.g., the nuclear industry, environmental advocates, and organized labor coalitions), but groups that serve as “watchdogs” to ensure that consumers’ costs and interests are considered by the legislature (e.g., the Pennsylvania Energy Consumer Alliance, the Pennsylvania Manufacturers Association, AARP, etc.) were not invited to testify before the NEC. By doing so, the NEC omitted a key stakeholder group that has a different perspective about the potential costs and pitfalls of “saving” the nuclear industry.
  3. The Report relies on a Brattle Group study to support the assertion that nuclear generators moderate electricity prices, thus providing $788 million in reductions to the energy costs of Pennsylvania’s consumers. However, that study assumes that there is no replacement of the retiring nuclear capacity with new generation.  Within the last three years, sufficient natural gas generation has been constructed (or is under construction) to match the entire Pennsylvania nuclear fleet, including those facilities that are not retiring (Susquehanna, Peach Bottom, and Limerick).  In December 2018 alone, Tenaska is scheduled to begin operation of a 925 MW plant in Westmoreland County.
  4. The Report summarily dismisses the fact that consumers paid $10 billion for stranded cost to the generation owners, without recognizing that those subsidies were calculated over the expected lifetime of the project. Once those payments were made, ratepayers were not expected to bear the financial risk that the plants could close.  Providing additional ratepayer subsidies is reneging on the bargain.
  5. Nuclear plants are not “prematurely” retiring – they are retiring because they cannot compete in the market. This is a natural effect of competitive market forces.  Non-competitive fuel sources (e.g., coal, inefficient gas, etc.) should retire from the market while stronger resources prevail.  Any attempt to interfere with these natural market sources will interfere with price signals and thus impact current and future investment in replacement generation.
  6. The Report makes errant assumptions (e.g., assuming that all Pennsylvania nuclear generators will retire) and misstates PJM’s conclusion in its fuel security study, which is still ongoing.

 

We are continuing to review the Report and will provide further updates.  In the interim, if you have any questions, please do not hesitate to contact David Kleppinger (dkleppinger@mcneeslaw.com), Pam Polacek (ppolacek@mcneeslaw.com), Kathy Pape (kpape@mcneeslaw.com), Kathy Bruder (kbruder@mcneeslaw.com), or Aly Hylander (ahylander@mcneeslaw.com).

[1] https://nuclearenergy.pasenategop.com/pennsylvanias-bipartisan-nuclear-energy-caucus-releases-report-detailing-impacts-of-losing-the-states-nuclear-industry-and-provides-options-for-taking-action-in-2019/

[2] Report, p. 30.

Recently, the Pennsylvania Department of Environmental Protection (“DEP”) issued a notice that the final draft of the Finding Pennsylvania’s Solar Future plan (“Solar Plan”) will be released this fall.  After receiving comments from businesses, utilities, nonprofits, academia, and citizens, the DEP will hold another stakeholder meeting on November 15, 2018, to discuss the final Solar Plan and present the draft strategy support guide.

By way of background, the Solar Plan began in 2017 as a statewide planning project led by the DEP’s Energy Programs Office (“EPO”).[1]  The goal of the Solar Plan is to equip Pennsylvania to produce more solar energy.  Specifically, the Solar Plan set a target that 10 percent of retail electric sales will come from in-state solar energy sources by 2030.  The DEP indicates that this 10 percent target is achievable but challenges the “business-as-usual” model and promotes development of a variety of strategies that could be pursued.  Essentially, to meet this 10 percent goal, approximately 11 gigawatts of solar energy must be installed in the State.[2]

In developing the Solar Plan, drafters considered five main strategies:[3]

  • Increasing the Alternative Energy Portfolio Standard (“AEPS”) requirements for solar to 4-8 percent by 2030;
  • Providing customers access to capital, including provision of loan guarantees;
  • Adopting carbon pricing;
  • Creating uniform policies for siting and land use; and
  • Considering tax exemptions that encourage solar deployment and assist solar projects in finding project sponsors with tax equity.

In addition to those core five approaches, the Solar Plan’s authors considered other strategies involving decentralized projects (i.e., solar panels on residences) and grid-scale solar projects.[4]

Stakeholder responses to the draft Solar Plan were varied, with some in support of the Plan and others critical.  Some commenters indicated that the Solar Plan impeded the goals of the Electricity Generation Customer Choice and Competition Act (“Competition Act”) because the Solar Plan proposed to reinstate centralized generation planning beyond what has already occurred with the existing AEPS statue.  In addition, concerns were raised about the costs of implementing strategies proposed in the Solar Plan and how those would be recovered.  While the planning phases for the Solar Plan were funded by a combination of a grant from the Department of Energy (“DOE”) and time and resource investments from DEP and other associated partners, it is unclear what the costs of implementing the Solar Plan’s programs would be or how (and from whom) those costs would be recovered.  Those questions may be answered at the November 15 stakeholder meeting with the release of the final Solar Plan.  In the meantime, if you have any questions regarding the information discussed above, please contact Pamela Polacek (ppolacek@mcneeslaw.com) or Aly Hylander at (ahylander@mcneeslaw.com).

[1] https://www.dep.pa.gov/Business/Energy/OfficeofPollutionPrevention/SolarFuture/Pages/Finding-Pennsylvania%E2%80%99s-Solar-Future.aspx

[2] Id.

[3] Id.

[4] Id.

Over the past few weeks, the Pennsylvania House of Representatives and Senate have passed most of the bills that make up the revenue package to fund the previously-passed appropriations in the budget.  Significantly, the proposals endorsed in July by the Senate and the Governor to increase the utility Gross Receipts Tax (“GRT”) on electricity, and to expand the GRT to natural gas service, are not included in the Tax Code portion of the final revenue package.  The final funding package also excludes the Marcellus Shale severance tax and the suggested application of sales tax to commercial storage services (which were very broadly defined).

We will provide more information regarding the entire budget and revenue package at a later date.  In the interim, if you have any questions, please feel free to contact Pam Polacek (717-237-5368) or Kathleen Duffy Bruder (717-237-5318).

In April 2017, Energy Secretary Rick Perry issued a request for the Department of Energy (DOE) to organize a study examining electricity markets and reliability.  The request was looking to explore three specific concerns: 1) The evolution of wholesale electricity markets, including the extent to which federal policy interventions and the changing nature of the electricity fuel mix are challenging the original policy assumptions that shaped the creation of those markets 2) Whether wholesale energy and capacity markets are adequately compensating attributes such as on-site fuel supply and other factors that strengthen grid resiliency and, if not, the extent to which this could affect grid reliability and reliance in the future; and 3) The extent to which continued regulatory burdens, as well as mandates and tax and subsidy policies, are responsible for forcing the premature retirement of baseload power plants.

As one may imagine, this request led a number of environmental and intermittent resource groups to question exactly what this exercise was attempting to accomplish and if its findings would be politically focused.  After months of abundant speculation, on August 23, 2017 the DOE released its findings.  While the principal conclusions of the study will not come as a surprise to those in the electricity markets, the study seems to take a solid “middle of the road” approach.

Perhaps most significant in this otherwise extensive and unclear report was that the DOE did not find that renewables are a threat to grid reliability and also did not obviously state that coal was necessary for grid reliability.  They specifically said, “Hydropower, nuclear, coal and natural gas power plants provide [essential reliability services] ERS and fuel assurance critical to system resilience”.  By grouping these fuel sources all together they relax the discussion around each of these fuel sources, predominantly coal and nuclear.

The main take away from the study is that favorable economics of natural gas-fired generation was the primary driver of baseload (i.e. coal and nuclear) power plant retirements.  Low growth in electricity demand (attributed to some permanent loss of load from the economic downturn and energy efficiency policies) coupled with the expansion of renewables on the grid have also played pertinent roles in baseload retirements.  The report also touched on adverse economic impacts of the requirements for regulatory compliance for some baseload plants.  DOE primarily named coal and nuclear costs to implement the  Mercury and Air Toxics Standard (MATS), the EPA’s Clean Power Plan and the Cooling Water Intake Rule as reasons cited for additional plant retirements.

The report was expected not only to analyze but also provide “concrete policy recommendations and solutions”.  In this space, the recommendations presented were less concrete and particularly vague.   The bulk of the recommendations focused on FERC.  Some of those suggestions included having FERC expedite their ongoing efforts with states, RTO/ISOs and stakeholder input to improve energy price formation , studying and making recommendations on regulatory mechanisms to compensate grid participants for services necessary to support reliable grid operations and working to expeditiously process LNG export and cross-border natural gas pipeline applications.  The report also calls on DOE and other Federal agencies to accelerate and reduce costs for licensing, relicensing and permitting of grid infrastructure like nuclear, hydro, and coal providing some hazy “specific reforms” for these technologies.

The DOE is looking for the public to submit comments regarding this study, although it is also unclear who is receiving these comments and how long this window will be open. The report will not end the ongoing debates in various states regarding whether nuclear and/or coal generation resources should be subsidized to ensure that all existing plants remain in operation, even if particular plants are inefficient or uneconomic.  It also fails to address whether wholesale market changes adopted after the Polar Vortex (such as PJM’s Capacity Performance product) are sufficient to provide the additional compensation and market signals to ensure generation reliability.

For additional information, please reach out to: Amy York (ayork@mcneeslaw.com) or Pam Polacek (ppolacek@mcneeslaw.com).

Recently, many large commercial and industrial enterprises have sought to reduce their operating expenses by shopping for their electric supply.  If you are negotiating an electric supply agreement with an electric supplier, there are a few key terms that you should consider.  Please click here to learn more about the following key negotiable terms: (1) price and product; (2) regulatory changes and other price change opportunities; (3) contract term and renewal; and (4) billing issues.  If you have any further questions, please contact us and we will be happy to assist you.

For many commercial and industrial companies, energy costs comprise a significant portion of their operating expenses.  Although many companies rely on their engineering, facilities management, and procurement departments to implement energy efficient strategies to reduce these costs, legal teams can also play an important role in ensuring that companies are making the most of every opportunity to reduce energy expenses.   For more information on how legal counsel can help companies create smart energy-management strategies, please click here for an in-depth report by Pamela Polacek, a Member of McNees Wallace and Nurick’s Energy and Environmental Group.