While blockchain technology is most closely associated with the cryptocurrency Bitcoin and more recently the financial industry, there is a new category of tech companies that are focused on using blockchain technology to reshape the energy industry. These companies are using blockchain in order to help utility companies track renewable energy credits, facilitate metering and billing, manage energy data such as market prices and cut out intermediaries such as retailers.

Last year, over 320 million dollars was invested in 120 start-up companies that are using blockchain to transform the way the energy industry conducts business. Blockchain is a relatively new technology which uses digital blocks of transactions to permit an individual party to conduct and bill a transaction directly with another party. All transactions that take place on the blockchain are verified by a decentralized network of computers and are recorded on a distributed ledger. Blockchain provides a secure way to do anything from executing smart contracts to tracking supply chain data. Robert Hacket, a writer for Fortune.com, defines blockchain in one of his recent articles:

“Though it sounds like a series of defensive maneuvers ripped out of an NFL playbook, the blockchain is actually a way to structure data…This coding breakthrough—which consists of concatenated blocks of transactions—allows competitors to share a digital ledger across a network of computers without need for a central authority. No single party has the power to tamper with the records: the math keeps everyone honest. Forty of the world’s top financial firms are experimenting with the tech.”

PHOTO CREDIT: McKinsey & Company Electric Power & Natural Gas

In New York, utility companies Avangrid, Con Edison, National Grid, the New York Power Authority and Indigo Advisory Group have come together to explore different use cases for blockchain within their businesses. In a recent article by the group, they determined that the best use cases for blockchain within utility companies include automating customer management, automating clearing and settlement, tracking renewable energy credits, increasing cybersecurity, and connecting electric vehicles to the grid. The New York consortium and other companies within the energy industry have determined that the above use cases for blockchain in the industry will increase efficiency by streamlining data management, metering, and billing. Furthermore, they have determined that the use of blockchain within the industry would decrease overhead for utilities and lower costs to consumers by facilitating the metering and billing process between the utility and the consumer instead of involving intermediary retailers and brokers.

Although blockchain technology is still in its infancy, it is only a matter of time before the technology revolutionizes the way the energy industry operates. Stephen Callahan, Vice President of Energy, Environment & Utilities, Global Strategy, at IBM boldly predicts, “What the internet did for communications, blockchain will do for trusted transactions, and the energy and utilities industry is no exception.”

Lawyers, consultants and business leaders working in the rates and regulatory area will find the recently released Pennsylvania Public Utility Commission’s (PaPUC or Commission) Guide to Utility Ratemaking helpful, even if you don’t practice in Pennsylvania.

The original Rate Case Handbook was first published in 1983. The handbook served as a valuable resource for energy and utility practitioners. Just as before, the updated guidebook is well laid out and manages to make complex information easy to digest.

In the new edition, readers are given both a general overview of how each utility (water, gas, telecom and electric) service is produced, priced and delivered, as well as a thorough synopsis of the legal and administrative structure of the PaPUC. The 181 page handbook is comprehensive and provides information on the following:

While many of the foundational principles outlined in the original handbook have retained their applicability, technological advancements and discoveries from Marcellus Shale to smart meters and distributed generation commanded special attention in the new update. A big thank you to authors James H. Cawley, former PaPUC Commissioner, and Commissioner Norman Kennard, as well as to those who aided in the completion of the project. It provides a relevant discussion on modern ratemaking issues.

Commissioner Sherina Edwards just completed her term on the Illinois Commerce Commission (“ICC” or “Commission”). I am honored to catch up with her this month to discuss NextGrid and the future of the electric industry. This is a must-read for utilities and anyone interested in the utility of the future.

Q. Commissioner Edwards, thank you for taking the time to provide me with this interview. Let’s just dive right in. Why is it important for the Illinois Commerce Commission to do a “NextGrid” Modernization Study?

One thing that all parties in the electricity industry agree on is that with new and ever-changing technologies, the industry will evolve more in the next ten years than it has in the past one hundred. What we don’t necessarily know is how these changes will affect the system and what part the key players – consumers, regulators, utilities, policy advocates – will play in this evolution.

NextGrid is a statewide collaborative that will bring those key stakeholders together to address these critical issues by examining the use of new technologies to improve the state’s electric grid while also minimizing costs to consumers.

Illinois is not new to progressive and trailblazing leadership from customer choice laws in 1997 to the Energy Infrastructure Modernization Act in 2011 and, lastly, to the most recent Future Energy Jobs Act at the end of 2016. Illinois, and the ICC, as the energy leaders in the state, would be remiss if it did not address these coming changes that will face the utilities and ultimately every citizen in the state of Illinois. At the end of the 18-month process, NextGrid should serve as a guiding tool for all key stakeholders in how we can continue to work together to implement some of these significant changes.

Q. What do you think is currently the biggest challenge facing the utility industry?

I think the biggest challenges currently facing the utility industry are the silos built up between all of the key stakeholders. There so often seems to be a hard wall between industry, the regulators and the consumer advocates. In a day when the conversation regarding the utility of the future is based on the evolving and changing consumer, from passive to active, having all relevant players at the table is something that is required if we truly are going to make the massive improvements on all fronts in the industry from grid modernization to consumer education and understanding.

Q. It is an exciting time as more and more nontraditional companies are becoming involved in the utility industry. What advice do you have for these entities regarding their need to understand the existing regulatory framework and the ICC’s concern for customers?

My advice to non-traditional players is to work with both the traditional players (e.g. utilities, consumer advocates, etc.) and the Commission early and often so that their strategic goals and products can be integrated into Illinois’ energy landscape more seamlessly.

The ICC’s official mission is to balance the interests of consumers and utilities to ensure adequate, efficient, reliable, safe and least-cost public utility services, while promoting the development of an effectively competitive energy supplier market. You’ll notice that both consumers and the development of a competitive energy market are included there. Ultimately the Commission’s job is to balance these sometimes-competing interests, but I fear the perception often is that regulators are “against” the non-traditional companies and favor the status quo. In reality, there are so many experts throughout Illinois, particularly at the Commission, who can guide new entrants through the process of integrating their products and services. My experience has shown that Commissioners view their role as a unique opportunity to unite stakeholders and encourage dialogue, not create difficulties for non-traditional stakeholders. However, the onus is on these types of stakeholder to engage in coordination and discussion via formal initiatives, such as NextGrid, and informal conversations; when companies operate in silos, they are ultimately doing themselves a disservice.

Q. Do you envision a need for legislative changes to fully address the rate design challenges utilities face regarding DER and Micro-grids?

Because the goals and vision of each Commission can be different, I think updates to legislation are the surest way to guarantee that the current Commission’s emphasis on increased technology and innovation continue in perpetuity. A change to legislation also gives utilities and other stakeholders the certainty they need to make investments and plans for the future. However, I also think that market transformations and shifting customer expectations will continue driving the demand for increased DER, micro-grids, battery storage, etc., regardless of if/when laws and regulations change.

I personally believe that it is important for Commission regulations and State legislation to keep pace with these kinds of changes, but I also recognize that not all stakeholders can afford to wait for “regulatory lag” to catch up with in real-time innovation. I think the NextGrid process is a big step in the right direction for regulators in Illinois. While the long-term goal may be legislative certainty, I think we are on the right track for the short-term by engaging with stakeholders and investigating how processes like rate design will be impacted by the integration of new technology.

Q. There is a concern nationwide about the aging utility workforce. What are utilities in Illinois doing to respond to the challenge of the aging workforce … to ensure that the next generation of employees are adequately trained before there is a mass exodus of institutional knowledge?

More than one-half of the current utility workforce will be eligible to retire in the next six to eight years which has the potential to greatly impact utilities’ ability to continue to innovate and solve the electrical transmission challenges of tomorrow. In Illinois, utilities have shown that they understand how the aging workforce could potentially negatively affect their operations and have taken measures to address it head on. Mainly, the utilities have developed strategic plans to retain and develop employees to fill these critical roles, hopefully before any such mass exodus will occur. Additionally, these measures include aggressive recruiting programs in an effort to fill the gaps that may be left in a few short years or less. One positive of this demographic shift is an increased focus on diversity and a much-needed emphasis on the recruitment/retention of a more representative work force and supplier base. Of course, many utilities have also incorporated technology solutions that will allow utilities to break down internal silos and address significant issues using less people than they historically have had to (i.e. convergence of information and operational technology and customer service and distribution operations).

Commissioner Edwards, this was an incredible interview. Thank you for providing us with such an honest, insightful and fresh perspective. You may no longer be on the ICC but your knowledge and wisdom will continue to shape the industry. I appreciate your time. 

Emergency Preparedness and Operations Reliability Standards

Most of the world was stunned to hear that Hurricane Maria left the island of Puerto Rico completely without electricity. When Hurricane Irma hit Florida, utilities across the United States sent thousands of linemen and other utility workers to assist Florida utilities. The picture below highlights a portion of the visiting crews ready to provide help.    

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Photo credit: Eversource

Upon hearing of an island-wide blackout, I thought, “Crews drove across the United States to Florida. The effort required to send utility trucks and other equipment to Puerto Rico will be epic. Ferries will be in high demand.” And sadly, even before the island was hit by Hurricane Maria, the Puerto Rico Electric Power Authority had already filed for bankruptcy in July 2017. The Authority stated then it needed more than $4 billion to overhaul its outdated power plants and reduce its heavy reliance on imported oil. In 2016, 47% of Puerto Rico’s electricity came from petroleum, 34% from natural gas, 17% from coal and 2% from renewable energy. Most American utilities rely on natural gas, coal, nuclear and renewable resources. Fuel source aside, how does a utility recover from an island-wide outage?

In the U.S., the Federal Energy Regulatory Commission (FERC) has rules to address this very issue. And on September 20, 2017 the FERC issued a Notice of Proposed Rulemaking (NOPR) regarding revised Emergency Preparedness and Operations (EOP) Reliability Standards (please note that the document is large and may take some time to load) submitted by the North American Electric Reliability Corporation (NERC), intended to:

  • provide accurate reporting of events to NERC’s event analysis group to analyze the impact on the reliability of the bulk electric system (EOP-004-4);
  • delineate the roles and responsibilities of entities that support system restoration from blackstart resources that generate power without the support of the grid (EOP-005-3);
  • clarify the procedures and coordination requirements for reliability coordinator personnel to execute system restoration processes (EOP-006-3); and
  • refine the required elements of an operating plan used to continue reliable operations of the bulk electric system if that primary control functionality is lost (EOP-008-2). 

I appreciate the work done by regulators and utilities to provide a reliable and resilient electric grid. Comments on the NOPR are due 60 days after publication in the Federal Register

Yesterday, former Pennsylvania Public Utility Commissioner (PaPUC), Robert F. Powelson, was officially sworn in as a Federal Energy Regulatory Commissioner, ending a six month drought in which the Federal Energy Regulatory Commission (FERC) did not have a quorum. The FERC is responsible for permitting decisions on energy projects such as natural gas pipelines. The lack of a quorum sidelined at least 15 energy infrastructure projects with an approximate value between $15 billion and $25 billion and an estimated 75,000 jobs. The projects include the $2 billion Nexus pipeline in Ohio and Michigan; the $1 billion PennEast pipeline in Pennsylvania and New Jersey; and the $5 billion Atlantic Coast Pipeline in West Virginia, Virginia and North Carolina. This is the first time the FERC has been without a quorum in its 40-year history.

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Last week the Senate unanimously confirmed Powelson and Neil Chatterjee, an energy policy advisor to U.S. Senate Majority Leader Mitch McConnell (R-KY). Chatterjee was officially sworn in on Tuesday. As a Pennsylvania based regulatory attorney, I join the Pennsylvania Public Utility Commission and others here in the Keystone State in congratulating the FERC’s newest Commissioner, Robert F. Powelson. Now the rest of the country will discover the reasoned judgement Pennsylvania has experienced. Those looking to discover more about Commissioner Powelson might enjoy this interview I did with then PaPUC Chairman Powelson regarding Pennsylvania’s energy future.  

Photo Credit: FERC

The Board on Energy and Environmental Systems (BEES) of the National Academies of Sciences, Engineering, and Medicine provides independent advice to the United States government and the private sector on science and technology policy issues related to energy and the environment. Given the importance of electricity to our nation’s health, safety, and economy, BEES has researched methods to minimize the impact of extreme weather events, earthquakes, cyber-attacks and other disasters that have the potential to cause large-scale outages. BEES’ most recent report, Enhancing the Resilience of the Nation’s Electricity System will be publicly released at 11 a.m. EST on July 20, 2017.

To provide insight regarding important issues in the report, BEES will host a free webinar on July 20, 2017, at 2 p.m. EST. The following authors will be panelists on the webinar:

  • Granger Morgan, Chair, NAS, Carnegie Mellon University, Pittsburgh, Pennsylvania
  • Jeff Dagle, Pacific Northwest National Laboratory, Richland, Washington
  • William Sanders, University of Illinois-Urbana Champaign, Urbana, Illinois 

They will identify technologies, policies and organizational strategies that should be implemented on the federal, state, and local levels. At the conclusion of the presentation, webinar participants will have an opportunity to ask questions.

On July 20, 2017, you can download the report on the National Academies Press website at nap.edu. Go here to register for the free webinar.

This week, the Illinois Commerce Commission (ICC or Commission) launched NextGrid, an initiative to explore the utility of the future. It will be an 18-month statewide collaborative aimed at transforming Illinois’ energy landscape and economy. The study will focus on finding new technologies, utility business models and regulatory strategies to transform the state’s grid into a more flexible and efficient resource. NextGrid will be managed by the Commission. An independent third-party facilitator will assist the Commission in engaging electric utilities, communities and stakeholders such as industry, academia, ratepayer advocates and environmental advocates as they examine the following areas:

  1. Consumers, Communities and Economic Development
  2. Grid Design, Digital Networks and Markets 
  3. Regulation and Encouraging Innovation
  4. Climate Change and the Environment

Anne Pramaggiore, ComEd President and CEO, addressed this development:

“We commend the Commission for taking a leadership role in establishing a forum for designing the future-oriented business model and joining ComEd’s effort to maximize the smart grid and deliver new value to customers. We see NextGrid as an opportunity to find common ground on critical issues facing our industry and as a driver of the clean, lean, ultra-resilient energy future our customers want.”

All members of the energy stakeholder community are encouraged and invited to provide input and suggestions regarding the selection of a facilitator and topics to be considered as a part of NextGrid by filing comments in response to the Resolution by April 30, 2017. Comments can be emailed to nextgrid@icc.illinois.gov

If you are new to the industry or simply want to brush up on the basics, the Federal Energy Regulatory Commission’s (FERC) consider the recently released Reliability Primer a gift. The comprehensive manual not only provides an overview of the FERC’s role in overseeing the reliable operation of the power grid, it provides a great overview of the electric power system. It should be required reading for electric utility employees, especially new hires and those with legal or regulatory responsibilities. This manual helps newcomers develop foundational knowledge in an industry riddled with acronyms and jargon. Its title, Reliability Primer, could very well have been Electricity 101 and 102.

Starting on page 10, the Primer begins with the basics, providing a detailed discussion about the three main functions of the electric system; generation, transmission and distribution. In the discussion regarding generation, the Primer explains the various types of power plants, ranging from thermal to renewables such as wind and solar. Data on energy sources is also provided. With the fracking boom, it is not surprising that natural gas is the leader with coal and nuclear rounding out the top three fuel sources.

If you want to understand the FERC’s authority under the Federal Power Act (FPA), section III of the Primer provides a detailed discussion. It explains the Energy Policy Act of 2005 and the FERC’s implementation of Section 215 of the FPA. The reader will gain an understanding of the FERC’s authority and oversight in the development and enforcement of mandatory reliability standards for the nation’s bulk power grid. The FERC states the Primer is written to be used as a traditional text or reference manual and I agree. 

Recently, the staff of the New York State Department of Public Service issued its recommendations in the Value of Distributed Energy Resources Proceeding. The 68-page report provides a comprehensive discussion regarding the compensation and valuation of distributed energy resources (DER). Among its many recommendations, the report provides that existing rooftop solar systems should continue to receive compensation under their current net energy metering (NEM) contracts for a period of 20 years from the date of initial operation. However, customers can also leave NEM and adopt the new proposed compensation method. Other recommendations include:

  • Utilities would develop fee-based, “Virtual Generation Portfolios” – a pool of new DER projects that will be developed in conjunction with private energy companies.
  • Interim measures for Community Distributed Generation (CDG) projects that are in the advanced stage of development. For a limited 90-day period, a specific amount of CDG projects can qualify for compensation under the current NEM framework in order to aid the transition to the new methodology and ensure that early CDG development can deliver on increasing DER access to all New Yorkers.
  • Distributed Generation projects, such as solar for large commercial customers, fuel cells, farm waste generators and micro combined heat-and-power would also transition to the new methodology following action by the New York Public Service Commission.
  • Behind-the-meter generation should be recognized for its environmental value and for contributing to the state’s overall Clean Energy Standard (CES) goal. 

Initial comments on the report are due December 5, 2016, with reply comments due December 19, 2016. Action by the New York Public Service Commission on these recommendations is expected in January 2017. 

The utility industry has a reputation for being stodgy and slow to innovate and change. Yet one of its main regulators is quite different. The Federal Energy Regulatory Commission (FERC) has often taken the lead when it comes to embracing technology and adopting new ways of connecting with the public. From electronic filing to webcasts of public meetings, the FERC seemed to be an early adopter. Last month, FERC did it again with the launch of “Open Access,” the podcast series. According to host Craig Cano, the goal is

“to have a conversation about FERC, what it does and how that can affect you. FERC can get very legal and very technical, so we will strive to keep it simple.”

The podcast begins by explaining what FERC does:

“… oversees the interstate transmission of electricity, natural gas and oil. FERC’s authority also includes review of proposals to build interstate natural gas pipelines and liquefied natural gas terminals, and licensing of nonfederal hydropower projects. FERC protects the reliability of the high-voltage interstate transmission system through mandatory reliability standards and it monitors interstate energy markets to ensure that everyone in those markets is playing by the rules.”

In the first episode, Mary O’Driscoll of FERC talks with Charles Curtis, the first chairman of the FERC. They take a walk down memory lane where I learned the good ole days were not always so good. The former commissioner states,

“The Federal Power Commission, before it, was a commission in significant disarray. It had a decisional process that assigned the Commission about 22,000 decisions per year, and it had a backlog of some 20 to 25 years of matters awaiting decision of the Commission.”

Ouch, I can’t imagine any business waiting that long for adjudication.

In the second episode, Ms. O’Driscoll connects us with then-commissioner Tony Clark, who reflects on his time at the Commission as he prepared to leave at the end of September 2016. Former commissioner Clark served one term at FERC, having been nominated by President Obama and sworn in on June 15, 2012. Prior to that, he served 12 years as a member of the North Dakota Public Service Commission, including a term as its president. With this being one of the most lethal presidential elections since I have been voting, it is refreshing to hear former commissioner Clark discuss FERC’s nonpartisan approach:

“When you’re talking about something as important as energy, which is critical to the safety and well-being of the nation’s economy and our people, you want to have decisions that are made in a nonpartisan, nonpolitical way. … You may disagree from time to time with commissioners on a certain issue, but it tends to not be political. It is often said around here there’s not a Republican way or a Democrat way to keep the lights on. So I think that nonpartisan nature of it makes it easy to work with people in good faith. Over the four-plus years that I’ve been here it would be difficult to find any particular pattern in terms of vote. Here was a coalition of commissioners that always voted together and here is the other side that voted together in a bloc on certain things. It never worked that way. And I think the key is you have to maintain a degree of collegiality and respect.”

Wow! The house, the senate and candidates should take note! You can listen to both episodes here.