Arkansas Electric Energy Law : Arkansas Electric Energy Lawyer & Attorney : Eric Hughes Law Firm : Wind & Solar Power, Distributed Generation : Arkadelphia, Little Rock, Pine Bluff

Bloomenergy unveiled its long-awaited fuel cell technology today.  This is a story we have been following for some time, and have reported on extensively:

Will Bloom Boxes Make Your Electric Utility Obsolete

Bloom Energy to Unveil Bloom Boxes Wednesday

Bloom Boxes Could Promote Economic Development in Arkansas

According to the Bloomenergy data sheet a Bloom Box, which it now calls an Energy Server, uses either natural gas or directed biogas as fuel.  The fuel required at rated power is 0.661 MMBtu/hr of natural gas.  Its rated power is 100kw (the claim is that is enough to power 100 homes for base load -- this may actually be too low).

As for emissions, the data sheet states:

In addition, the fuel cells act not only as an electricity generator, but also as a storage device.  So electric power generated by solar or wind, for example, will be integrated with the "Energy Server" to further reduce the carbon footprint.

Moreover, the benefits of distributed generation are a reduction in the cost and complexity of transmission and distribution, the company asserts.

eBay CEO John Donahoe was quoted by Josh Lowenshon as saying that his company installed 65,000 feet os solar panels and powered 18% of its campus.  Then, it installed five Bloom Boxes and powers 15% of its campus.  Brian Kelly of Coke says the fuel cells are powering 1/3 of ifs Odwall plant; Brian Kelly of Cox indicates that they are powering 70% of its facility in San Francisco; and Bill Simon of Wal Mart says Bloom Boxes are carrying 60-80% of its energy needs at peak in the buildings where they are installed.

Now that we know more details about Bloom Boxes, tell us what you think.

The new fuel cells manufactured by Bloomenergy, called Bloom Boxes, and partially unveiled Sunday night on CBS's news program 60 Minutes, will be further revealed during a  Bloomenergy announcement Wednesday at the headquarters of one of its first customers, Ebay.

For those who have not been following this story, the Bloom Box fuel cells are a stack of ceramic wafers with a proprietery ink on each side separated by a metal alloy.  Fuel (currently natural gas, but it may be operated with other fuels) goes in one side of the ceramic wafer, and oxygen goes in the other.  The resulting chemical reaction -- which does not involve combustion -- produces electricity.

According to the 60 Minutes report, Bloomenergy has installed the devices for 20 commercial customers, including Ebay, Wal-Mart, Google, and Fed Ex.  Reportedly, the fuel cells have reduced the cost of electricity for those customers, Ebay saving as much as $100,000 on its electricity costs.

With a reported $400 million in venture capital backing, principally from Kleiner, Perkins, Caufield & Byers, led by John Doerr, the stakes are obviously high for Bloomenergy.  And the company is not without its critics, as pointed out by Paul Keegan in Fortune Brainstorn Tech:

"I definitely think Bloom is over-hyped," says Jacob Grose, senior analyst at Lux Research, which specializes in emerging technologies . . . .  "what Bloom offers does not seem to be unique -- other fuel-cell companies are doing very similar things.  The real question is whether Bloom has unlocked the secret of how to make thiese things cheap, and I'm very skeptical of that."

One hopeful that Bloomenergy has done just that is the reason K.R. Sridhar and his secretive company has decided to go public.  According to the Keegan article,

Turns out it wasn't his idea -- his customers are forcing him to show his hand.  "They are pushing, he admits.  "They are saying if you're not going to say anything we're going to go out and say we're doing this."

If its customers want to publicize what it is doing, then the company must be doing something right.

DOES THIS BENEFIT ARKANSAS?

Electric energy law and policy are some of the most intriguing issues of our day.  The purpose of this blog is to foster a discussion of the issues and at least imagine some of the policy alternatives and other ideas that might lead to energy independence, economic development, and a healthier environment.  These are some ideas about how technologies like Bloom Boxes can benefit our state (or any other state for that matter):

• Manufacturing.  Arkansas is already becoming a leader in renewable energy manufacturing, with significant facilities for the production of wind turbine component parts, including blades and nacelles.  Let's hope the Arkansas Economic Development Commission, its Arkansas Energy Office, and regional organizations such as the Arkadelphia Regional Economic Development Alliance are working to attract these types of companies utilizing emerging technologies.
• Utilities.  Although we speculated last November whether Bloom Boxes would make your electric utility obselete, that will probably not be the case.  More likely, utilities will install Bloom Boxes at substations, turning the substations into generating facilities.  The real question is will Bloom Boxes make generating facilities like the Turk plant and the White Bluff facility obselete?
• Municipalities.  Municipalities can benefit from Bloom Boxes in a number of ways:
  • Municipal owned utilities.  Arkansas law provides a mechanism for municipal owned utilities.  In the future Bloom Boxes may provide a viable generation alternative for municipalities and, for those municipalities with a large enough landfill, landfill gas may provide at least a portion of the fuel for the Bloom Boxes.
  • Sustainable communities.  Employees and employers both are increasingly concerned with the sustainability of operations, as the Keegan article notes.  A community that can provide cleaner electricity production would be attractive.
  • Community job creation.  Municipal owned utilities create jobs for the local community.
• Commercial and Residential.  The Keegan article notes that Ebay saved $100,000 in electricity costs after installing Bloom Boxes, an example of more efficient energy production being a good business decision.  The possibities for residential implementation are numerous.  Here are two:
  • Residential developers could make a Bloom Box generating station a part of the development, to be operated and maintained by a property owner's association.
  • Individual homeowners could band together and install a Bloom Box serving two or more residences, and make its operation and maintenance a covenant running with the land.  Thereafter, subsequent purchasers of the property would be obligated to continue participating in the operation and maintenance, as well as continue receiving the benefit of the cheaper electricity.

Bloom Energy is expected to unveil its Bloom Box fuel cells Wednesday.  We noted the potential for Bloom Boxes to be a game changer some time ago.  And anticipation for an announcement has been mounting, especially since the Bloom Box was featured in "60 Minutes" program by Lesley Stahl.

If the reports about the abilities of the Bloom Box are correct, it truly could be a game changer.  So far the claims are that:

• The primary material in the Bloom Box is beach sand, a plentiful and ubiquitous resource, which is baked into thin ceramic wafers.
• The wafers are painted with proprietary inks on each side.
• Oxygen is introduced to one side and fuel (typically natural gas) is introduced to the other.
• The result is a chemical reaction (not combustion) that produces electricity.

Google, Ebay, Wal-Mart and others have reportedly used the bloom boxes extensively.  In the "60 Minutes" report by Stahl, the Ebay CEO indicated that Bloom Boxes at the Ebay campus performed much better than the acres of solar panels on Ebay roof tops.

Moreover, the Bloom Boxes are reportedly very fuel efficient.  We have seen reports that the boxes are 50-60% more efficient than producing electricity through traditional gas turbines.  And, in this age of carbon consciousness, the emissions are far lower than other fossil fuel electricity generation methods.

Oh yes . . . and the cost?  Commercial versions under testing at Google, Ebay and other locations currently sell for around $800,000.  Home models, with a target availibity of within five years, are supposed to come in below $3,000.

I recently read comments by Forrest Lucas, the owner of Lucas Oil (which has its name on the stadium where the Indianapolis Colts play), opposing the construction of a biomass generating facility in Crawford County, Indiana.  The article in the Louisville Courier-Journal by Grace Schneider quotes Mr. Lucas as saying, apropos of government-sponsored grants, property tax abatements, state incentives and federal tax credits for such facilities:

If these guys come in with their own money, it's one thing.  This is about America wasting huges sums of money. . .  This is not just about Crawford County or the state of Indiana.  It's not a good thing for the country.

which made me wonder if government (public) support for those developing industries is such a good thing.  Afterall I strongly believe, as the country at large does, that free market capitalism is best way to create national wealth and raise the standards of living for the greatest number of people.  I take from his comments that Mr. Lucas believes that, too.

But after thinking about it I concluded that public programs designed to support and encourage the development of alternative and renewable energy sources is a good thing.  There are three basic reasons for this conclusion:

• Public support for new technologies and industries, whether through tax policies or direct subsidies, have been utilized from the country's beginning to create a economic growth;
• Considering the significant public subsidies to fossil fuels, alternative and renewable energy sources suffer, at least partially, from an artificially created competitive disadvantage;
• Based on our ongoing need to develop clean energy and foster energy independence, no source of energy should be eliminated from the portfolio yet.

GOVERNMENT SUBSIDIES TO NEW INDUSTRY AND INFRASTRUCTURE HAS HISTORICALLY BEEN THE CATALYST FOR ECONOMIC GROWTH

Anyone with a smidgen of knowledge about the economic history of this country knows that free markets are aided and sustained by government rules and regulations, government investments, and government tax policies.  Certainly the Father of free market capitalism as practiced in the United States, Alexander Hamilton, understood that.  Just read Hamilton's First and Second Reports on Public Credit and his Report on Manufactures.  Likewise, the tariffs of 1816 and 1828 were taxes designed to protect and spur the growth of particular economic sectors.  That has been the case throughout the country's history.  In his book Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now, the investment bankerFelix Rohatyn eloquently describes some of the government programs upon which our free market economy is built:

• The Erie Canal
• The Transcontinental Railroad
• The Rural Electrification Administration
• The Interstate Highway System

There are other, but you get the idea.

RENEWABLE ENERGY SOURCES COULD COMPETE BETTER ECONOMICALLY BUT FOR THE GOVERNMENT SUBSIDIES TO FOSSIL FUELS.

Fast forward to today and consider the debate on government tax policies and other incentives that are designed to spur the development of alternative and renewable forms of energy.  Opponents of these forms of energy often say that they are too expensive, that the generating capacity of wind, solar, biomass and other forms of renewable energy would not exist without government subsidies.  That is undoubtedly true.  But here is another truth:  those forms of generation are at a greater competitive disadvantage than they would be if not for government subsidies to fossil fuels.

I once heard a preacher say there is nothing wrong with fishing with your kids on Sunday morning.  Fishing is a wholesome activity, and especially good if you are spending the time with your family.  However, he went on to say that an even better activity is spending that time with them in church.  Both activities are good; just one is better than the other.

The same principal applies to Arkansas's growing biomass industry.  Phoenix Renewable Energy is building biomass plants in Camden and El Dorado for the the production of wood pellets.  The pellets will be used in Europe for home heating and electricity production.  That is good.  Certainly those communities in South Arkansas can use the jobs and economic development that Phoenix is creating.  There may be an even better use for Arkansas's biomass potential, however.

We previously noted that Arkansas has the biomass potential to produce 150% of the state's residential electric needs.  Moreover, biomass is certain to have an increasing share of the U.S. electricity generation portfolio.  Why not utilize that fuel within the state, rather than importing fuel (coal) for electricity production, and exporting dollars?  Arkansans currently spend 10.1 billion annually for fossil fuel, a significant portion of which is fuel for the production of electricity.

The Arkansas Code, sections 14-206-101 through 14-206-112, permits Arkansas municipalities to acquire or construct, and operate, an electric public utility plant for the production, transmission, delivery, or furnishing of any public service.  Moreover, section 14-200-101 permits municipalities owning or operating facilities may extend service to rural areas contiguous to the municipality.  Municipalities in Arkansas with nearby biomass stocks, including timber and wood products waste, biomass feed stocks grown on marginal agricultural land, and even municipal waste, in conjunction with companies like Phoenix Renewable Energy, should consider municipal electric power generation and distribution.  The benefits are obvious:

• Local economic development -- through the construction and operation of facilities, as well as through the manufacture and installation of distributed generation systems made an integral part of a municipal electric utility.
• Keeping the money for fuel costs in the community -- rather than importing fossil fuel and exporting dollars, the money for fuel stays in the local economy.  Arkansas timber owners, loggers, and wood products manufacturers would have a ready market for what would otherwise be waste products.  Moreover, Arkansas farmers and landowners would have additional cash crops.
• More local control of energy production -- decisions about energy production would be made locally, rather than by entities far away without knowledge of local conditions and needs.
• Creating a sustainable community -- What industry wouldn't want to locate in a community with sustainable power production and what employees wouldn't want to relocate to an environmentally conscious community?
• Incentives for integration of smart grid technologies and distributed generation -- In a sustainable community, grass roots efforts at distributed generation could be rewarded through a net-metering policy that purchases any excess generation, rather than our current state system that is like a cell phone plan where you surrender the unused minutes.

Point to remember:  Lest you think municipal electric generation from biomass is a pie-in-the-sky proposition, read about the Joseph C. McNeil Generating Station in Burlington, Vermont.  That electric power generating station has been producing power from wood waste for Burlington for nearly 30-years.

Arkansas Nuclear One, which provides one-fourth of the electric power in Arkansas, and more than half sold by Entergy Arkansas, turned 35 this month, according to an article in Arkansas News.  Entergy supports climate change legislation, and in 2001 voluntarily capped its carbon emissions to the previous year's release.  More importantly, it has since reduced its emissions by 17.5 percent, to 43.9 million tons in 2008.  According to company officials, Nuclear One is emissions free.

Regarding the importance of climate change legislation, the article quotes Entergy Chairman and CEO Wayne Leonard as saying:

We're playing Russian roulette with the planet and our economy.  The difference is there's a bullet in every chamber except one.  We have to answer the question of whether we're more important than future generations.  I believe with all my heart that everybody involved in this debate in their own heart knows what the answer to that question is.

Not all groups view nuclear power as the right alternative to reduce emissions and retard climate change.  The article notes that the Sierra Club in Arkansas is opposed to nuclear power because of nuclear waste.  The Sierra Club supports the use of wind, solar, and geothermal, along with natural gas a a bridge fuel, to provide electric power and reduce carbon emissions.

Our Take:  Every type of electric energy generation has its own drawbacks.  Wind and solar are emissions free, but are intermittent and require a lot of land and significant investments in transmission.  Coal is cheaper, but the emissions are a primary driver of climate change.  Natural gas has fewer emissions than coal, but is subject to price volatility.  Nuclear power solves the problem of emissions, but there are safety concerns and problems disposing of nuclear waste.  However, if the overriding goals are energy independence and stopping climate change, then each form of generation should be seriously considered and implemented where and when appropriate.

The Wind Coalition, a group devoted to the development of wind energy in the United States, is attempting to intervene in the Arkansas Public Service Commission's White Bluff Docket, wherein Entergy Arkansas and the other owners of the White Bluff generating facility seek approval for environmental upgrades.  According to the Wind Coalition's filings, its

members have begun acquiring land rights to potentially construct wind farms in and near Arkansas, and are willing and able to provide renewable energy in Arkansas to [Entergy Arkansas] or other companies.  A Declaratory Order from the Commission indicating that the Project (which, as structrured, has no renewable generation component) is in the public interest would potentially preclude the Wind Coalition from providing such renewable energy to [Entergy Arkansas] or another entity in the future.

In addition, the Wind Coalition states that permitting it to intervene would:

• ensure that wind energy is considered on the same playing field as other types of generation such as coal, nuclear, and natural gas;
• assist in the evaluation of Entergy's price assumptions for coal supply; the capital costs of wind power; wind capacity factors; the economic impacts of joining the Southwest Power Pool; and whether Entergy considered the improved import capability from the upcoming transmission upgrades approved over the next four years;
• assist the Commission in developing a full, fair and adequate record upon which to base its decision concerning whether the White Bluff upgrades as currently structured is in the public interest.

Entergy asserted in its original petition that it "considered whether renewable generation and efficiency alternatives would be appropriate for comparison" but "concluded that it would be unrealistic to assume that either alternative" would be effective.  If the APSC permits the Wind Coalition and other similar groups to intervene in this docket, submit additional evidence, and independently evaluate Entergy's analysis, would certainly go far "in developing a full, fair and adequate record upon which to base its decision regarding the proposed White Bluff upgrades.

The Arkansas Public Service Commission Staff sought a suspension of the procedural schedule in the Commission's White Bluff docket on December 3.  Entergy Arkansas joined in that effort today.

The requested delay is based upon the response of the U.S. Environmental Protection Agency and U.S. Forest Service to the proposed permit for the facility to be issued by ADEQ.  In a letter to the Arkansas Department of Environmental Quality regarding the permit application for the White Bluff upgrades, the EPA noted that:

we do not feel an SO2 emission limit of 0.15 lbs/MMBtu has been shown by the Arkansas Department of Environmental Quality (ADEQ) to be BART [Best Available Retrofit Technology]. . . [W]e do not believe ADEQ has properly conducted its BART analyses . . . including the Entergy White Bluff facility, as required by 40 CFR 51.308.  Had this analysis been performed, we feel that a more stringent control level would have been likely shown to be BART.

The U.S. Forest Service echoed those concerns.

The upshot is that action by the EPA and other federal agencies could delay the implementation of the upgrades beyond the 2013 target date.  Therefore, the Commission Staff and Entergy have requested a suspension of the procedural schedule until the federal concerns are addressed by the ADEQ.

More important than the procedural delay, however, is the effect of the federal action on whether the project, as proposed, can move forward.  If there is a change in the allowable emissions rate, that may effect whether the technology proposed to be used is sufficient to meet the new allowable emission rate.

The more fundamental issue the Commission will have to address is whether, in light of other existing generating resources, the facility upgrade should be approved at all.

A new Natural Resources Defense Council report, A Clean Energy Economy for Arkansas, argues that clean energy is a key factor for rural economic development in the state.  Some key facts underlying the analysis are:

• Each year Arkansans spend $10.1 billion for fossil fossil fuels.
• Which translates to $3,500 in energy costs for every person (not household) in the state.
• 78% of those energy dollars leave the state, never to return.

Arkansas ranks 13th in per capita energy consumption, and is expected to need 2,500 megawatts (MW) in new generating capacity over the next 15 fears.

The report cites a previous NRDC study indicating that "green jobs" primarily in construction, engineering, installation, agriculture, and operation of rural energy production facilities -- jobs which cannot be exported.  According to the report, clean energy investments 3.6 times more jobs for people without a college education, and 2.6 times more jobs for people with a college education, than comparable investments in fossil fuel energy.

The report goes on to examine

the potential for renewable resource development in Arkansas and finds unprecedented opportunity for long-term economic growth in rural communities as well as new income sources fro farmers from an array of emerging clean energy technologies, particularly wind, biofuels, biopower, and biogas.

 Wind Power.  40 of Arkansas's 75 counties have commercially viable wind resources.  A federal government study projects that 1,000 MW of generating capacity would create $830 million in economic benefits over 20 years, including 3,496 construction and locally stimulated indirect jobs and 504 permanent operations jobs.

Biofuels.  With its strong agricultural base, Arkansas is "perfectly situated to become a center for the next generation of biofuels production."  Existing Arkansas crop and timber residue are "sufficient to produce 770 million gallons of transportation fuels each year, equivalent to 50 percent of all the gasoline used in Arkansas.

Biopower.  The report points out that combining solid biomass with coal at existing power plants is a relatively low-cost way to ramp up renewable resource development.  "If 10 percent of Arkansas's coal-fired power capacity were replaced with biopower, more than 700 new long-term jobs would be created, not including new agricultural jobs to produce and harvest the biomass fuel."

Biogas.  Methane from decomposing manure has 21 times the global warming potential as carbon dioxide.  While Arkansas is one of the nation's leading livestock and poultry producers, it has no operating biodigesters.  "In addition to providing a potential source of revenue and energy for livestock operation, anaerobic digestion systems create high-quality fertilizer and other byproducts while reducing odors, water pollution, and emissions.

Important Point.  Even the Arkansas Energy Office recognizes the potential for producing electric power with biomass, estimating that Arkansas has sufficient biomass potential to supply 150 percent of the state's residential electricity use.

A November 19 ruling by the Federal Energy Regulatory Commission will allow Entergy Arkansas to withdraw from a System Agreement with the other Entergy companies.  In December 2005 Entergy Arkansas notified the System Agreement participants that it intended to withdraw from the agreement as of December 2013.

Entergy Arkansas's withdrawal was prompted by the action of Louisiana regulators, which had caused some of the cost of Entergy Louisiana's more expensive natural gas fueled generating plants to be shifted to Arkansas rate payers.  Entergy Arkansas generates electric power primarily through nuclear and coal fired plants.

According to the Arkansas Democrat Gazette, FERC's ruling will save Entergy's Arkansas customers about $218 per year.

Other Important Points:

• If FERC does not permit a rehearing, the Louisiana regulators can appeal to the United States Circuit Court of Appeals for the District of Columbia
• As FERC Chairman John Wellinghof points out, the ruling "will allow Entergy and any interested party to engage in meaningful negotiations for a successor arrangement to the System Agreement to be in effect prior to the withdrawal of Entergy Arkansas. . . ."

Last March Entergy Arkansas sought a Declaratory Order from the Arkansas Public Service Commisson approving the installation of various environmental controls at its White Bluff facility made necessary by the Arkansas Department of Environmental Quality's implementation of the EPA's Regional Haze Rule.  Without the environmental controls, the facility will have to close in 2013.

Entergy and the co-owner's of the White Bluff facility contend that implementation of the environmental controls is the lowest cost reasonable alternative to meet their customers' long-term power supply needs.

However, a number of groups, including Entegra Power Group, LLC, GDF SUEZ, The Wind Coalition, Audobon Arkansas and the Sierra Club, dispute that Entergy properly considered a broad range of alternatives.

Why is this Important?  This PSC docket, unlike the docket approving construction of the Turk Plant, will focus attention on existing generating facilities and force the Commission to decide whether to allow utilities to build new generating capacity, expand their owned existing capacity, or make them utilize capacity already in existence, even if owned by a third party.

An interesting article in the December 2009 issue of The Atlantic magazine, Who Needs the Grid, reports on an old technology newly adapted to produce electricity cleanly and inexpensively:  fuel cells.  Bloom Energy has a power producing device -- called a Bloom box and about the size of a coffee table -- capable of powering a 5,000 square foot house.  The article, by Lane Wallace, reports that a five-kilowatt Bloom box has been used in an ongoing trial at the University of Tennessee, and,

has proved twice as efficient as a traditional gas-burning system and produced 60 percent fewer emissions.

Some of the article highlights are:

• The Bloom box has been in development for eight years with the support of a reported $250 million in venture capital.
• It is "fuel agnostic," meaning the boxes can be run on existing propane, natural gas, or ethanol sources, but can also be run on plant waste (biomass) or almost anything containing hyrdogen and carbon.
• The boxes operate independent of the power grid, critical for developing countries lacking infrastructure -- and nice for any consumer that wants to be free of its utility.

What Does It Mean?  One thing it means is that your local generating and distribution utility better get good at innovation.  If the ideas the utilities have expressed in the Arkansas PSC dockets on Sustainable Energy Resources, Ratemaking, and Energy Efficiency are any indication, they will be obsolete before they know it.

UPDATES:

Bloom Energy to Unveil Bloom Boxes Wednesday

Bloom Boxes Could Promote Economic Development in Arkansas

Bloom Boxes Unveiled by Bloomenergy

With the debate over the cost of generating electric power by fossil fuel versus renewable resources, a new report from the National Research Council is timely.  Congress requested the report to assess the external effects caused by various energy sources over their entire life cycle -- for example, not only the pollution generated when gasoline is used to run a car, but also the pollution created by extracting and refining oil and transporting fuel to gas stations.  These effects are often not reflected in energy prices, so government, businesses, and consumers may not realize the full impact of their choices.

The committee that wrote the report focused on monetizing the damage of major air pollutants -- sulfur dioxide, nitrogen oxides, ozone, and particulate matter -- on human health, grain crops and timber yields, buildings and recreation.  The report concluded that electricity produced from coal at 406 coal-fired power plants had non-climate related external costs -- not reflected in the price the electricity consumer pays -- of $62 billion, or about 3.2 cents for every kilowatt-hour (Kwh) produced.  The climate based monetary damages range from 0.1 to 10 cents per Kwh.  The report also stated that coal-fired plants are the single largest source of greenhouse gases in the U.S.

On the other hand, the life-cycle damages of wind power are small.  Although wind power currently produces just over 1 percent of U.S. electricity, it has large growth potential.

Why this is important for Arkansans? 

• Arkansans have relatively poor health compared to the rest of the nation and health care costs are rising.  Coal fired power plants contribute to both problems.
• Agriculture, timber production, and outdoor recreation are a big part of the state's economy.  Coal fired power plants can hurt those parts of our economy.

Electric energy efficiency, conservation, demand response, innovative ratemaking, and transmission are hot topics throughout the United States, and the Arkansas Public Service Commission is actively addressing these issues.

• ENERGY EFFICIENCY.  Beginning in 2006, the Commission led an inquiry into the potential for utility led energy efficiency and conservation programs (06-004-R).  The result was the Commission's Rules for Conservation and Energy Efficiency Programs, under which the state's electric utilities implemented Quick Start C&EE programs for 2008 and 2009, and have filed plans for a Comprehensive C&EE Plans for 2010 and beyond.
  

• TRANSMISSION.  The Commission's Electric Transmission Docket, (08-136-U) was initiated in September 2008 to consider the state of the existing transmission network and to gather "information on new technologies related to the efficient transmission of electricity."  Not is the Commission examining new technologies that will "lead to greater optimization of the electric transmission grid" but is also considering "the adoption of 'Smart Grid' technologies" to increase energy efficiencies for consumers.
  

• RATEMAKING.  The implementation of Smart Grid and other technologies leading to energy efficiency and conservation pose issues of cost recovery and other revenue issues for utilities.  Therefore, the Commission initiated a docket expressly to consider innovative ratemaking rules (08-137-U).  In its Order establishing the docket, the Commission noted that while increased energy efficiency and demand response opportunities may decrease usage by consumers of electricity, but acknowledged "that revenue recovery by the utilities could be compromised absent possible implementation of decoupling mechanisms."
  

• SUSTAINABLE ENERGY.  Finally, the Commission is also considering the "expanded development of Sustainable Energy Resources ("SER")" (08-144-U).  The Commission defined SER to include energy efficiency, demand response, automatic metering (including the "Smart Grid"), and renewable resources.  Moreover, the Commission pointed to a number of regulatory models implemented across the country that include cost recovery for utilities implementing SER programs and lost revenue allowances (decoupling of utility profits from sales volume) to remove disincentives fro utilities to help customers save energy.

In light of the overlap between these four dockets, the Commission might consider consolidating them into a single docket for developing a regulatory framework that addresses:

1. Current and future generating capacity requirements;
2. Rules for siting and transmission for utilities and Independent Power Producers;
3. Integration of electricity produced by renewable resources;
4. Standards for the implementation of demand response, including automatic metering and "Smart Grid" technologies for consumers; and
5. Rules for cost recovery and decoupling.

Energy law and policy are important issues in our time.  On the one hand, energy needs are projected to grow at an accelerating rate, taxing the supply of available energy resources and increasing our dependence on foreign sources of energy.   On the other hand, energy generation, transmission, distribution, and consumption contribute to climate change and have other adverse environmental consequences.  Supplying our energy needs now and in the future --at a reasonable cost and with the least possible negative impact on the environment -- is a challenge that confronts us all.

However, there are opportunities in these challenges, particularly in the field of electric energy.  While still small, the share of utility scale electric generating capacity taken by wind, solar, geothermal, biomass and other renewable and alternative sources of energy will only grow.  Even so, those sources of electricity generation currently have their own limitations, such as reliability for base load, along with siting and transmission issues.  While those alternative sources of energy hold out promise for the future, the current reality is that older and cheaper technologies for producing electricity, like coal and natural gas fired power plants and nuclear power, will be the primary sources of electric energy for the foreseeable future.  But some argue advances in clean coal technology and carbon capture and sequestration will reduce the environmental impact of those sources of electric energy.  Although, cap-and-trade legislation such as the American Clean Energy and Security Act of 2009 (Waxman-Markey), which attempts to impose the true costs of those dirtier technologies, could put renewable energy resources on an equal economic footing.

Moreover, new technologies in demand side management hold out the promise of increasing energy efficiency in ways that are both observable and measurable by the average electric energy consumer.  Advanced metering and smart grid technologies, coupled with appliances equipped with computer chips to communicate with the meter, and software to measure and report electric usage, will empower consumers to take more control over their own energy usage.  Those same technologies, including net metering, will increase the effectiveness of distributed generation systems like residential solar and small wind installations.   All these advances will change the consumer's relationship with their electric power supplier.  Thus, new regulatory and rate-making mechanisms must be studied, including decoupling of the rates electricity distributors charge from the amount of electricity supplied.

These are interesting times for electric energy law and policy, and Arkansas is at the forefront of confronting the challenges and capitalizing on the opportunities.  For example, the continuing fight over the location of SWEPCO's John W. Turk coal-fired generating plant in Hempstead County has implications for electric generation and transmission in Arkansas and across the nation.  And, with the location of LM Glasfiber and Nordex wind turbine blade manufacturing facilities in Arkansas, the alternative and renewable energy sector is contributing to economic development and job creation.

At the Hughes & Hughes Law Firm we have been following these issues with interest.  We want to be a participant with you in meeting the challenges of our time.  Therefore, this blog is designed to be a source for news and commentary about electric energy law and policy that effects Arkansas business, industry, municipalities, landowners, consumers, and others.  We hope you will join our conversation.