ORIGINAL REPORTING: New Tools To Bring Equity To Electricity Service

Utility regulators eye new tools to ensure equity efforts don't impinge on other policy goals; It is up to regulators to solve the power sector’s cost of equity conundrum, equity advocates said.

Herman K. Trabish, February 21, 2022 (Utility Dive)

Editor’s note: Bringing the interests of all electricity users into decisions made in the regulatory process is becoming an essential element of the energy transition.

Recent U.S. Department of Energy research verifies serious institution-based inequities in the power system’s delivery of electricity, but it can be rectified, utilities, regulators and equity advocates said. Lower-income households’ utility service disruptions are five times more frequent than higher-income households, and service losses by households of color are “far more likely” than for whites, according to a November 2021 Lawrence Berkeley National Laboratory (LBNL) paper. For both of those types of households, “disconnection notices signal an emergency,” the LBNL paper said.

If inequities “baked into the existing system” are not reversed, they “are likely to become more pronounced” as the energy transition accelerates because equity is also equitable access to clean energy, energy efficiency and rate relief programs, consumer, utility, energy and environmental justice representatives wrote in the LBNL paper.

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Through fairly allocated costs and benefits, regulators “can absolutely address inequitable outcomes,” Commissioner Abigail Anthony of the Rhode Island Public Utilities Commission told Utility Dive. But it is important to differentiate inequities in utility regulation “from inequities in other parts of the economy or society that are squeezed into utility bills and services.”

Advancing equity requires new programs and rate designs that merge traditional cost of service regulation with public interest principles, power system stakeholders agreed. But those programs and rates must also protect against rising electricity costs that regulators, utilities and ratepayers in California and other states worry may slow the electrification needed for decarbonization and impede other ratepayer-funded policy goals, many said. Innovative Arrears Management Programs (AMPs) and Performance-Based Regulation (PBR) are potential win-win alternative paths to equity and other policy goals for utilities and ratepayers, the stakeholders said.

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“Energy equity is the fair distribution of the benefits and burdens of energy production and consumption,” according to LBNL Senior Program Manager Lisa Schwartz, the paper’s technical editor. It “can be a goal, tool or metric,” because equitable affordability is a goal, customer participation in regulatory debates is a tool, and metrics validate “policies, regulations and programs.”

Recent policy initiatives by at least 13 states and the Biden administration are taking regulation beyond its traditional objectives of reliable, safe and affordable electric service to a new objective of serving the public interest, Schwartz added. That change in regulatory priorities can change access to electricity service, access to energy efficiency and clean energy programs and rate-setting… click here for more

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