CBS Newsletter
Fall 1997
pg. 4

Utilities Group Aids in Restructuring Process

Researchers at the Energy Analysis Program's (EAP) Utility Planning and Policy (UPP) Group are helping ensure that energy efficiency, renewable energy, and a host of other important issues are not overlooked as California and the nation restructure the electric power industry. The UPP staff is analyzing the potential impact of restructuring on efficiency and renewables, modeling a variety of potential restructuring policies, and assisting federal customers seeking to better understand emerging electricity markets. UPP Group Leader Chuck Goldman is participating in discussions on how to distribute surcharge funds set aside for energy efficiency in California, and Acting EAP Head Stephen Wiel is assisting state lawmakers and regulators by overseeing the National Council on Competition and the Electric Industry.

Dramatic Changes in Progress

All these activities have been spurred by the dramatic changes currently shaping the U.S. electricity industry. Sometimes erroneously referred to as deregulation, electricity industry restructuring involves the de-integration of what was long considered utilities' natural monopoly over the generation, transmission and distribution of electricity. Key legislation in the 1970s introduced competition into electricity generation, and today the general consensus is that bulk-power markets are in fact competitive. In recent years, economists and others have argued that the retail segment of the electricity market could be restructured to be similarly competitive. That is, restructuring advocates have argued that there are no economic reasons why retail customers, large and small, should not be able to choose an electricity supplier in much the same way they can choose a telephone company. At least eight states have enacted legislation that will allow customers to choose their own electricity supplier, and others are following suit (see map). In addition, several bills on restructuring have been introduced at the federal level. In most of these restructuring plans, regulated utilities would retain only certain transmission and distribution functions.

A key question arises from the restructuring process: what will become of public support for energy efficiency, renewable energy, and other important public-purpose programs mandated in a regulated system but that may not be supported in emerging electricity markets?

New policies will likely be required, and the UPP staff is involved in assessing a range of proposed policies. Researchers Chris Marnay, Robert Markel and Cooper Richey are using computer models to explore potential impacts of new policies. "We run the NEMS and Elfin models to see what we can learn about new policies designed to promote renewable energy," says Marnay, adding, "Our forecasts show that, in the near term, policy will remain an important ingredient in continued renewables development." NEMS simulates energy flows throughout the entire U.S. economy, and Elfin models production costs in the electric power sector. Both tools offer insights into the complex interactions among energy policy, energy markets and environmental impacts.

In other work, Ryan Wiser and Steve Pickle have reported on the role of green marketing for renewables and on financing issues policymakers should consider when crafting new renewables policies. Joe Eto and Evan Jones have explored options for deploying photovoltaic systems under restructuring, and Steven Stoft has found that proposed transmission-pricing formulas could actually hamper use of renewable and other intermittent energy sources.

California Considers Efficiency Policy

In some areas, however, new policies have already been adopted. In California, a small surcharge (~0.2¢/kWh) will help fund programs than support energy efficiency, renewables, low-income energy assistance and research and development. Advisory panels will oversee the distribution of these funds, and UPP Group Leader Chuck Goldman has been appointed by the California Public Utilities Commission to serve as one of nine members of the California Board for Energy Efficiency. The CBEE will direct $225 million per year in funding for energy-efficiency programs over a four-year period. It is charged with overseeing the independent administration of energy-efficiency programs designed to transform markets by providing cost-effective energy-efficient services to customers not normally served by markets, furnishing customers with information on the costs and benefits of efficiency measures, reducing market barriers to investments in efficient products and services, and creating a sustainable and competitive energy-efficiency services market.

The UPP staff has the luxury of focusing on a few key issues related to restructuring, but for state legislators and regulators trying to keep up with the full array of issues surrounding restructuring, staying informed can be daunting. To meet this challenge, the National Association of State Legislatures and the National Association of Regulatory Utility Commissioners jointly chartered the new National Council on Competition and the Electric Industry. Acting EAP Head Stephen Wiel was named Executive Director for the National Council in March 1997. "The National Council is a partnership between NARUC and NASL to deliver high-quality and timely information on the electric industry into the hands of decisionmakers," says Wiel. Stuart Chaitkin of the California Public Utilities Commission has joined Berkeley Lab part-time to assist Wiel with National Council affairs.

—Steve Pickle

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Steve Pickle
Energy Analysis Program
(510) 486-4189; (510) 486-6996 fax

For more information and a list of available and downloadable publications, visit the UPP Web site.

This work is supported by DOE's Office of Utility Planning and Policy.

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