June 01, 2015

Literary Resources

JoAnne L. Dunec


Regulating Public Utility Performance: The Law of Market Structure, Pricing and Jurisdiction

Scott Hempling ABA Section of Environment, Energy, and Resources, Second Edition, 2013

“For over a century,” author Hempling notes, “the law of public utility regulation has supported and disciplined the nation’s infrastructural industries: rail, trucking, electricity, gas, telecommunications and water.” He explains,

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Regardless of industry or era, utility law has shared fifeatures: its mission (to align private utility behavior with the public interest); its diversity (from state grants of exclusive franchises to federal constitutional protection of shareholder investment); its integration of multiple professional fields (accounting, economics, engineering and finance); its sources (constitutions, statutes, rules, adjudications, judicial review); and its flexibility (accommodating multiple market structures and public purposes).

However, according to the author, “[n]ew political challenges are causing policy makers and practitioners to stretch regulation’s principles and processes,” which raise questions, including,

Facing climate change, they ask: Should utilities and their customers become responsible for “greening” energy production and consumption? Debating universal service, they ask: Should we broadband to every home, and at what cost and whose cost? Concerned about privacy, they ask: Should consumers’ private consumption of data be available to profit-seekers?

“These questions, and many others,” Hempling observes, “expose two tensions: Ideological (e.g., private vs. public ownership, government intervention vs. ‘free market’); and federal–state (e.g., which aspects of utility service are ‘national,’ requiring uniform regulation, and which are ‘local,’ warranting state experimentation?).”

Regulating Public Utility Performance explores these issues. First, an overview of regulatory law is provided, which describes the regulatory framework and sources of regulatory law. The balance is divided into three parts. Part One addresses market structure, ranging from traditional utility monopolies to competition and related matters. Part Two explores pricing, including rate-setting and regulatory restrictions and oversight. Part Three covers jurisdiction with chapters addressing the federal-state relationship and exploring future alternatives.

A helpful list of acronyms is at the beginning of the book and a “selected” bibliography is included at the end.


Energy Storage

Lamb, W., “Energy 360: Lightning in a Bottle,” Dwell (May 2015), provides an update on energy storage, a key factor with respect to renewable energy. “For years,” author Lamb notes, “dreams of a bright green future fueled by clean sources of renewable energy have been tempered by the inconvenient reality of their intermittency. The sun doesn’t always shine, of course, and the wind doesn’t always blow, making it hard for them to consistently feed the grid.” Some form of energy storage is necessary. Lamb notes,

The idea is simple enough: If energy from renewables can be stored and dispatched to the grid during periods of peak demand, solar and wind would become more cost-effective, simpler to scale, and truly viable alternatives to fossil fuels.

Large-scale energy storage testing, the author reports, is now underway, “from a set of enormous caverns in a salt formation southwest of Salt Lake City to California’s Tehachapi Mountains [which] hold promise to fundamentally reshape the way energy is produced and consumed.” The author notes,

Like many efforts to slow the pace of climate change, the shift toward storage is being driven by California, where Governor Jerry Brown signed a law in 2011 mandating that the state generate 33 percent of its electricity from renewables by 2020. The California Public Utilities Commission followed that in 2013 by ordering its investor-owned utilities to install 1,325 megawatts of storage, also by 2020.

That explains why Southern California Edison, the state’s second-largest utility, made headlines in 2014 with a pair of bold moves that add up to a calculated bet on storage. It signed contracts for 264 megawatts of storage—a large order relative to its share of the 1,325-megawatt mandate—and it unveiled a 32-megawatt-hour lithium-ion battery facility in Tehachapi that it is treating as a “demonstration project,” in part to evaluate its potential for integrating renewable energy from wind and solar into the grid.

Four other companies—Pathfinder Renewable Wind Energy, Magnum Energy, Dresser-Rand, and the Duke-American Transmission Co.—according to the author, “have teamed up on an $8 billion plan to move energy from a proposed wind farm in Wyoming to the Los Angeles area by way of four cavernous storage chambers, each about the size of the Empire State Building [in] the salt domes of Millard County, Utah.”

According to Janice Lin of the California Energy Storage Alliance and the Global Energy Storage Alliance, reports the author, these projects, and the investments behind them, are signs that storage “is going to become a standard part of the tool kit that utilities and grid planners use to maintain, plan, expand, and optimize the grid.”

The article concludes with the following suggestions for further information; “Smooth Operators,” the Economist (Dec. 6, 2014), economist.com; “Grid Energy Storage,” U.S. Department of Energy (Dec. 2013), energy.gov; DOE Global Energy Storage Database, energystorageexchange.com; “Energy Storage Hits the Rails Out West,” Scientific American (Mar. 25, 2014), scientificamerican.com.

Carbon Sequestration

Petit, C., “Carbon Quakes: An Escape Hatch From Global Warming May do Some Harm While Doing Good,” Science News (Jan. 24, 2015), published by the Society for Science & the Public, explores “[o]ne promising strategy for curbing climate change [which] is to pump much of the CO2 from fossil fuel-fired power plants into deep underground storage where everybody hopes it will remain for a millennia.” However, notes the author, “deep geological storage of CO2 might produce as many or more quakes than are now being triggered by oil- and gas-related wastewater disposal.

He further notes that scientists have determined “that it is remarkably easy to trigger earthquakes, even in regions that historically have been seismically silent or nearly so.” According to Mark Zoback, a Stanford University geophysicist, “We have faults that are accumulating stress over thousands to hundreds of thousands of years, even in Iowa, so when you inject water or gas or any fluid it can set them off.” As noted by the author, such earthquakes are “formally called induced seismicity, or quakes triggered by human activity.”

Such quakes are of concern because “Carbon Capture and Sequestration (alternatively, Storage)” (CCS), the author observes, “is a central strategy under consideration by climate policy analysts for curbing global warming.” The “nation’s biggest test of deep carbon storage” is underway in Decatur, Illinois, located 180 miles southwest of Chicago at the North American headquarters and processing plant of Archer Daniels Midland (ADM), a large agribusiness company. As the author describes,

The possible escape hatch from global warming . . . is found in a row of outdoor fermentation tanks [which] turn 3.3 million metric tons (130 million bushels) of ADM corn into 1.3 billion liters of ethanol for blending with gasoline. Leftover mash becomes food for livestock, the used-up yeast fish food. And out the top comes about 2,700 tons per day of nearly pure CO2.

This plant’s CO2 is not part of the world’s CO2 problem in the same way that CO2 from fossil fuel combustion is. The corn as it grew took carbon from the air, so putting it right back as CO2 balances the carbon ledger. Still, to stash such “biogenic” CO2 away permanently offsets some fossil CO2 emissions and, more importantly, paves the way toward isolating CO2 arising from coal and natural gas production.

The CO2 will be pumped approximately “2,100 meters underground into a formation called the Mount Simon Sandstone [which] underlies most of Illinois and rests directly on the continent’s granite shield or basement rock.” The Illinois State Geological Survey and the United State Geological Survey are maintaining seismographic arrays near the well to detect earthquakes. “The largest yet recorded,” reports the author, “was about a magnitude 1.0.” As part of the testing two more deep wells will be drilled which “should render the plant’s ethanol works nearly free of CO2 emissions.”

The author notes, “[s]o far, it seems, so good,” though skeptics remain regarding the effectiveness of such sequestration on a larger scale. Nonetheless, the author concludes,

If technical barriers fall and if restrictive regulations or government incentives change and give companies, including operators of gas-and coal-fired power plants, a good business reason to install carbon capture and sequestration equipment, then perhaps CO2 sequestration will become an immense industry in its own right. And perhaps the occasional rumble underfoot may, aside from rattling nerves, be a reassuring sign that humankind is sending fossil carbon in CO2 waste back underground where we found it.

For more information, the author suggests, “man-made earthquakes update.” 

JoAnne L. Dunec

JoAnne L. Dunec is vice president and underwriting counsel at Old Republic Title in San Francisco.