APPA’s Sue Kelly testifies on capacity markets, hydro and more at Senate hearing

American Public Power Association (APPA) President and CEO Sue Kelly testified May 19 at a U.S. Senate Energy and Natural Resources Committee hearing on proposed bipartisan energy supply legislation. She shared APPA’s views on how to improve Americans’ access to affordable, reliable and environmentally responsible electricity.

Kelly emphasized the need to reform mandatory capacity markets, to simplify and coordinate hydropower licensing and to avoid imposing a federal renewable electricity standard (RES) on utilities.

The Senate hearing was held as part of ongoing dialogue on more than 75 legislative proposals introduced earlier this month by Sen. Lisa Murkowski (R-AK), chair of the Senate Energy and Natural Resources Committee, Ranking Member Maria Cantwell (D-WA) and other senators on the committee, to modernize America’s energy policies. Sen. Murkowski encouraged introduction of these proposals in advance of a broad energy bill she is assembling in consultation with bipartisan committee members.

“America’s energy landscape has undergone a dramatic change since Congress last acted on comprehensive energy legislation. Our domestic energy supply has gone from scarce to abundant. Our energy renaissance underscores the need to modernize America’s energy policies. These targeted bills are an important step toward ensuring economic growth and improving Americans’ standard of living,” said Murkowski in a press release.

Capacity Markets

Kelly in her testimony focused on two proposed bills — S. 1222, introduced by Sen. Murkowski, and S. 1272, introduced by Sen. Ed Markey (D-MA) and Sen. Elizabeth Warren (D-MA) — dealing with the mandatory capacity “markets” certain Regional Transmission Organizations (RTOs) operate. These RTOs are regulated by the Federal Energy Regulatory Commission.

While called capacity markets, they are in fact regulatory constructs that have required electricity customers to pay billions of dollars without achieving the stated intent to provide reliable and diverse power supplies. They have not incented the building of new generation where it is most needed, as APPA’s report, Power Plants Are Not Built on Spec, 2014 Update, reveals. Customers in RTO market states, including states with mandatory capacity constructs, are now paying more for their electricity than they did in 1997, according to another new APPA report, 2014 Retail Electric Rates in Deregulated and Regulated States.

Kelly said APPA recommends that FERC eventually phase out the mandatory capacity constructs and replace them with voluntary, residual capacity markets. In the meantime, APPA proposes that RTOs that have not yet implemented mandatory capacity markets should not do so without unanimous support of the states in the region. RTOs that already have mandatory capacity constructs should not stop utilities and states in their RTOs from self-supplying capacity to meet their customers’ needs.

Hydropower Licensing

Kelly’s testimony highlighted the need to reform the current hydropower licensing process. Excessive regulatory barriers and delays keep the electricity industry from tapping into the full potential for new hydropower facilities and increased output from current facilities. Therefore, said Kelly, APPA supports the concepts in S. 1236, introduced by Sen. Murkowski, which would reform the regulatory process for licensing hydropower projects. FERC should be designated as the lead agency overseeing the licensing process, and should coordinate the efforts of other federal and state agencies in the process.

In her written testimony, Kelly also expressed support for the Reliable Investment in Vital Energy Reauthorization Act (S. 1270) introduced by Sen. Cory Gardner (R-CO) and the Marine and Hydrokinetic Renewable Energy Act (S. 1058) introduced by Sen. Ron Wyden (D-OR). Both bills propose to expand incentives for and research and development of new hydropower capacity. 

Federal Renewable Electricity Standard

APPA is concerned about the proposal in S. 1264, introduced by Sen. Tom Udall (D-NM), to introduce a federal RES, said Kelly. There is no need for a federal standard, as state and local governments are best placed to develop policies regarding renewable energy.

Public power utilities consult with their customer-owners about their needs and plan what is appropriate for their communities. Public power utilities are also taking steps to reduce greenhouse gas emissions by increasing hydropower and other renewable energy production, adding new nuclear facilities, using more natural gas fired generation, and increasing energy efficiency and demand response efforts. They will continue to do so as they comply with EPA’s soon-to-be finalized rule under Section 111(d) of the Clean Air Act. Yet another federal mandate imposing a federal RES of 30 percent by 2030, as proposed in S.1264, would limit the flexibility needed to implement 111(d) and likely increase electricity prices.

Kelly commended the Senate Energy and Natural Resources Committee for putting together the first comprehensive energy package since 2005. She reiterated APPA’s commitment to work with the committee to develop a broad bipartisan energy package.