The powerful giants of the fossil-fueled electricity system are facing choices to change their business models, as a result of two developments: Regulations to decrease carbon dioxide pollution, and price drops in solar energy allowing more ratepayers to install rooftop photovoltaic systems. However, many utility companies are not responding in ways that will allow customer choice and decrease pollution, and are instead turning to regulators to protect their monopolies.
Regulatory capture is a particularly apt description for the powerful electric utility industry. It occurs when an agency created to act in the public interest and regulate an industry instead advances the interest of that business, resulting in policy outcomes that favor the regulated entity.
Utilities outside of the wholesale market have virtually no competition, and some also are partial owners of coal mines, natural gas pipelines, and other infrastructure necessary to move fuel long distances. In fact, both Tucson Electric Power and the Public Service Company of New Mexico have tried to purchase the San Juan Coal Mine to continue supplying the coal-fired San Juan Generating Station.
This control over the electricity market and supply chain creates significant revenues and profit margins which in turn is used to influence state governments regulators. Arizona provides a good example of regulatory capture and how fossil fuel interests work to maintain the status quo in the utility sector.
Regulatory Capture in Arizona
The links between influential groups such as the corporate-funded bill-mill American Legislative Exchange Council (ALEC) and the utility industry, and the introduction and passage of anti-clean-energy legislation have been well documented.
It was reported in 2013 that the Edison Electric Institute (EEI), the member organization for utility companies, helped draft an ALEC-model bill aimed at preventing the growth of solar energy. Additionally, EEI has now begun to lobby municipal leaders at ALEC’s new organization, the American City County Exchange, over net metering and municipalization. Simply put, ALEC-connected legislators were and continue to use EEI-written templates and talking-points to push state legislation that benefits the utility industry.
Arizona and ALEC have a long history. Former Arizona Corporation Commissioner (ACC) Brenda Burns was on the board of ALEC for 9 years. Some of the large corporate clients in ALEC are the electric utilities industry, coal, natural gas, and nuclear industries. Ms. Burns served as ALEC’s national President in 1999 and lobbied for Unocal, a company that exported petroleum, at the state Legislature where she served as Arizona State Senate President.
Burns was in a good position to advance the utility industry’s interests when she was a member of the ACC from 2010 to 2014. Burns, along with former Commissioner Gary Pierce, went after solar with gusto, pushing an amendment to charge customers with solar panels a $50 additional fee every month.
Pierce was in the news recently thanks to a whistleblower’s letter sent to the ACC alleging that Pierce helped steer money to target Democratic candidates for the commission and had lunch meetings with APS CEO Don Brandt, possibly violating commission rules. The whistleblower worked as an assistant to Commissioner Pierce at the time.
If the allegations of the whistleblower prove to be true, corruption would have occurred on a level not seen in years at the ACC. Back in 1999, the FBI investigated Commissioner Jim Irvin for committing mail and wire fraud in connection with a failed gas company merger. Irvin resigned in 2003, when he faced impeachment charges.
Results of Regulatory Capture
Why are Arizona’s utilities, along with EEI, pushing so hard to prevent solar energy’s growth in the market? It’s because the utilities make a lot more money from old, polluting power plants than they do from solar.
The results of regulatory capture are playing out right now in Arizona. The state’s second largest utility, the Salt River Project, voted to add a $50 per month fee for customers who install solar. This decision will result in at least $600 extra per year for solar users. Most recently, Tucson Electric Power proposed a new net metering plan that would increase the bills for customers with rooftop solar by about $22 per month.
Solutions
The 100 year old U.S. regulatory system is showing its age, but who will push and help bring about change? Only the regulators and the utilities have enough access to the mechanisms of power to bring the change needed to advance ratepayer choices and decrease pollution.
One step to solving this problem of regulatory capture is passing legislation aimed at preventing utility companies and their parent corporations from spending millions of dollars in the elections of the regulatory officials.
Nancy LaPlaca served as Policy Advisor to Commissioner Paul Newman from 2009-2012; and is a graduate of Arizona State University’s College of Fine Arts and College of Law. She is now a Senior Fellow at the Energy and Policy Institute, and a consultant working on solar policies.
This article appears in Apr 23-29, 2015.
“It’s because the utilities make a lot more money from old, polluting power plants than they do from solar.”
And where do those utilities plan to GET that “lot more money from old, polluting power plants…?” Out of YOUR back pocket, that’s where. The utilities have had YOU captured (as customers) from the first time you paid the electric bill at your rented or owned apartment or house. Now they’ve used some of that extra money from your electric bill to PURCHASE favor from the corporation commissioners.
Great job, Nancy, setting for the simply but elegant truth about legal (and possibly some illegal) corruption at the Arizona Corporation Commission.
This kind of attack on solar energy is a lingering blast from the past, a last gasp of the fossils, think Neanderthal, and is nationwide. And the more we expose it, as is done so well by the whistleblower and in this oped, the more it will slink back into it’s cave, its proper place in our modern American energy picture. Dr. Harvard Ayers, Climate Voices US
We need much more people power and solar power in Arizona, not coal power or co-opted power. Tell everyone you know, as well as the elected officials in Arizona, that it is time to understand the terrible human health and environmental impacts of coal and coal ash in our environment. And it is time to do something phenomenal about our climate that is heating up here and dryng up our water supplies. We CAN make sane and sensible choices for our future survival on this beautiful Planet Earth that is our home. Let’s replace those elected officials who value money over human survival and elect people who make sane decisions. But we cannot wait longer. The time is now!!!
Great comments.
Great article!! oh for the days when utilities were actually “public utilities” and they functioned to provide service to the public in return for a monopoly in a certain geographic area. Their only purpose was to serve ratepayers. Only an enlightened public that holds them responsible and votes can reverse the current short-term profit making and political pay-back reaction to changes that are inevitable.
Get batteries if you can afford them, you may just be glad you did. (You’re gonna need a lot to run A/C in Tucson, FYI; maybe you should insulate the house first/instead).
Batteries = Off Grid. No TEP, no APS, no ACC.
They screw with you, you ‘move’ and have the electric disconnected.
Give the guys in suits the finger, you’re American, do it with pride!
Well said, desertrat . There was an article quite a few months ago – not sure whether it was in the Weekly or online – that compared the electric company to the industry that used to make buggy whips. As cars became popular, people weren’t buying buggy whips any more, and they sought protection by politicians. Similar events when scriveners were no longer needed due to the advent of photocopiers. This is what happens with capitalism – technology progresses, and new industries take the place of old ones.
The day will come – not sure whether it will be in two or three years (probably more) or fifty years (probably less) – when we no longer need the electrical grid, and that day will come sooner in the Sunbelt than it will elsewhere in this country. The combination of solar power and smaller, more efficient batteries will eventually become universal. In the meantime, electric companies, I recommend one word to the electric companies – diversify. You can make this transition smoothly, or you can be dragged into the future, kicking and screaming.
The utilities cannot be ignorant about the coming load defection revolution. Maybe willful blindness and a hope their ACC will save them is driving their resistance?
http://www.extremetech.com/extreme/204004-…
Will 2015 be remembered as the year that solar and batteries became a reasonably priced alternative to reliance on the grid? The cost of solar has come down so much that, when combined with energy efficiency, energy management (like switching power consumption to hours with solar gain) and batteries, it is now feasible for this off-grid energy to cost in the range of utility costs. By 2020, it will be cheaper to go off grid than to stay on it.
This is largely because most utilities are not endorsing the new paradigm but are fighting it.
It is only financially good for them to fight solar in the short term. In the long run, they will suffer for it, and may well go out of business as the new paradigm overwhelms their opposition.
Advanced batteries like Tesla, Enphase and JuiceBox Energy are making will change everything. The price is dropping as fast and Solar panels did and computer chips under Moore’s Law. Power to the people is now very possible. Micro GRIDs of neighbor to neighbor will make it even more robust.