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Archive for March, 2017

This will be the first of a series of articles explaining the impacts and the need for President Trump’s Executive Orders (EO) on energy and the environment.  The overall focus of policy reform comes down to doing what makes sense in boosting air and water quality while encouraging economic growth.  In other words, improving the quality of life for all Americans. 

Reviewing press coverage there is a common theme from the left there will be little impact from the orders, such as revoking the Clean Power Plan (CPP).  For example, there is a frequently quoted report that claims 85% of the states are already on track to meet the 2030 CPP carbon dioxide emissions goals for power plants because of changing market forces.  So, why is the left so upset with the orders, and why were the regulations made in the first place if they aren’t accomplishing much?  The EPA itself estimates fully meeting the CPP will only reduce global temperatures 0.02 degrees C by 2100.  The Executive Order does make one big difference.  The CPP was estimated to add $9 billion to $75 billion a year in electricity costs, and that will not happen now.

            There is a fundamental difference in governing philosophy between liberals and conservatives.  The Obama Administration concentrated on perfecting the liberal version of the administrative state.  The underlying belief is government experts can do a better job directing our lives than individuals by developing policies, rules, and regulations to cover every aspect of our lives.  If a rule doesn’t work well just come up with a better one.  The conservative philosophy is individuals, separately and collectively through market forces do a better job of maximizing the overall quality of life.  Conservatives recognize some regulation is needed to protect people from abuses.  We all agreed we needed to improve air and water quality from where we were in 1980.  We now need to agree how much cleaner and at what cost.

            CRI recently wrote in detail how the Obama Administration focus on rule making distracted it from actually making improvements (see “Sorting Root Causes of Air Quality Improvements 2009 to 2015”).  The EPA’s index of air quality improved by 2% a year between 1980 and 2009, but regulations only moved the dial 2% in 7 years under Obama.  Ozone is the primary pollutant still over air quality standards.  Ozone levels have come down 1% a year between 1980 and 2009, but only 1% in seven years under Obama.  Similarly, water quality in the Chesapeake Bay improved almost 2% a year between 1986 and 2010 under a voluntary agreement, but has seen no improvement since the Obama Administration created a formal regulatory process.  Instead of reporting water quality improvement, the administration brags they met 60% of their activity goals.  Do we want regulations or results?

            The EPA has been using questionable science and economic assumptions to build the case for their regulations.  They start with a conclusion and do whatever is necessary to make the numbers work.  The EO requires established science vetting and economic assumptions be used to restore rigor and transparency to the regulatory process.  Stay tuned for more details in future articles

David T. Stevenson, Director, Member Trump Administration EPA Transition Team

E-Mail: DavidStevenson@CaesarRodney.org

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At the ninth annual National Summit on Education Reform sponsored by the Foundation for Excellence in Education held (November 30 to December 2) in Washington, D.C., Governor Jeb Bush, the keynote speaker, told the attendees that they had to, “Be big, be bold, or go home.”  Tweaking has a role to play in improving education but the current situation demands boldness.

In an article, “Choice, Charter Schools, and Education Reform”, written by William E. Manning, former president of the Red Clay Consolidated School District, he described the current Delaware school system as a “large bureaucracy” which he referred to as “the Blob”.  He also observed that, “…the system isn’t worth repair.” and “…let’s just pitch it and get a new one…” designed along certain principles. 

He recommended a confederation of independent schools each locally managed and free of regulations about who to hire and how to teach.  The schools would be evaluated only by performance data that would be shared with the public.  Since district responsibilities would be significantly reduced, the new system would need only a small administrative cadre.  Professional assistance would be provided to schools but only if they requested it.  Districts would offer,” …helpful resources rather than regulation.”  Teachers would be offered meaningful professional development as their status in the system would be elevated along with appropriate compensation.  These are most of the points.

The Caesar Rodney Institute is supporting a systemic change to our education bureaucracy called the “BOLD PLAN”.  It significantly alters the way the current education system operates by empowering the individual schools to make operational decisions to best serve their students.  The concept was introduced in Delaware in 1995 and was supported by the Governor, the Delaware Department of Education, and the business community.  A few charter schools were to pilot the idea and to serve as models for the traditional public schools.  Through a controlled growth plan and appropriate administrative development, every traditional public school would eventually have the same decision-making authority as a charter school with a much simplified district oversight function.

CRI’s BOLD PLAN incorporates the best features of the 1995 Charter School Law and the Memorandum of Understanding designed by Delaware’s DOE for Priority Schools.  If the changes proposed in the MOU were expected to raise the performance of the state’s lowest performing schools, why wouldn’t those changes be offered to all public schools?

The new system would recognize the importance of autonomy for local school leadership (principals and teachers answerable to parents), the need to focus on performance-based accountability, the value of customized education, and the critical role played by an established school culture of success.

BOLD legislation would specify areas of local decision-making.  Such areas would include: 1) Authority to hire and dismiss all staff; 2) All programing inputs (school calendar, schedule, curriculum aligned to Delaware standards, instructional practices and methodology, textbooks, technology, etc.); 3) Marketing and planning; 4) Support services including transportation, food, and maintenance; 5) Budget preparation and expenditure control with surplus operating funds retained by the school.  Schools will have autonomy from any district or Delaware DOE requirements not mandated by state or federal law.

District school board responsibilities would include: 1) Hiring and performance evaluations of Chief Education Officers (CEOs, formerly, principals); 2) Approval of proposed annual budgets and major capital projects; 3) Review of appeals of CEO decisions; 4) Operational support in areas such as legal, financial, personnel, facilities, etc. as requested by CEOs; 5) Facilitation of intra and inter district meetings of CEOs if requested by them.

For a state the size of Delaware, nineteen school districts is more than what is needed.  New York City and Los Angeles have many more students but each has only one school district.  Any cost savings could be used for additional expenses that may be incurred by the transition.

The BOLD PLAN complements Delaware’s other education improvement efforts (Visions, Races, etc.).  In fact, it may even complete them.  At the very first Vision 2015 meeting hosted by Dan Rich, then Provost of the University of Delaware, he ended the meeting by telling the attendees that if they wanted to improve Delaware’s public schools they had to be bold and, if they didn’t want to be bold, they should get out.  Hmmmm, it seems that Dan was way ahead of Jeb.

Ron Russo, Senior Fellow, Caesar Rodney Institute

Founding President, Charter School of Wilmington

Former Principal, St. Mark’s High School

 

 

 

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Public Service Commission
Cannon Building
861 Silver Lake Blvd., Suite 100
Dover, DE 19904

RE: 3008 Rules and Procedures to Implement the Renewable Energy Portfolio Standard (Opened August 23, 2005), PSC Docket 56, published March 1, 2017

Please accept these comments in the matter of the adoption of rules and procedures to implement the Renewable Energy Portfolio Standard Act, 26 DEL. C. §§ 351-363, as applied to Retail Electricity Suppliers.  We note this proposed regulation is appropriate in light of Superior Court ruling, C.A. N15A-12-002 AML, dated December 30, 2016, upholding the claim by the Delaware Public Advocate and the Caesar Rodney Institute the Public Service Commission (PSC) incorrectly delegated authority to write this regulation to the Division of Energy & Climate pursuant to the clear language in the Renewable Portfolio Standards Act, and remanding the issue to the PSC for proceedings in accordance with the Court’s decision.

We appreciate the care and thoughtful approach of the PSC Staff in drafting the regulation.  We especially support the affirmation legislative intent was to recognize there is unpriced value to the RPS by allowing a 3% electric rate premium, but did not require those externalities be calculated as an offset against the Cost Cap Calculation.  However, we do point out one issue requiring additional clarity.  We recommend the following additions (in Italics) to clarify the inclusion of REC and SREC Renewable Compliance Charges from Qualified Fuel Cell Providers.

3.2.21.1.1 The total cost of RECs retired to comply with the RPS, including that portion of the net Renewable Compliance Charge from Qualified Fuel Cell Providers used to meet REC requirements, plus       

3.2.21.1.3  The total cost of SRECs retired to comply with the RPS, including that portion of the net Renewable Compliance Charge from Qualified Fuel Cell Providers used to meet SREC requirements, plus           

3.2.21.3.2 The total cost of RECs retired to comply with the RPS, including that portion of the net Renewable Compliance Charge from Qualified Fuel Cell Providers used to meet REC requirements, plus

3.2.21.3.3 The total cost of SRECs retired to comply with the RPS, including that portion of the net Renewable Compliance Charge from Qualified Fuel Cell Providers used to meet SREC requirements, plus

3.2.21.4.2 The total cost of SRECs retired to comply with the RPS, including that portion of the net Renewable Compliance Charge from Qualified Fuel Cell Providers used to meet SREC requirements, plus

            While including the QFCP cost would seem to be self-evident, we note the Division of Energy & Climate has excluded these charges in past Cost Cap calculations.  The Division itself included the QFCP costs in the first three of four iterations of their proposed regulation “2102 Implementation of Renewable Energy Portfolio Standards Cost Cap Provisions”, now in the process of repeal.  The Division will be responsible for the actual calculation, and so needs a clear direction on including the QFCP charges.  We note the PSC regularly balances price, reliability, and environmental issues, while the Division of Energy & Climate is an advocate for renewable energy potentially biasing their regulatory process.  That is why writing the Cost Cap regulation was left to the PSC by the legislature.

The PSC should maintain consistency in its interpretation of the role of RECs from Qualified Fuel Cell Providers.  There are several precedents to consider.

  • The PSC approved the Fuel Cell Tariff in 2011. The Fuel Cell Act required the Commission to reject the tariff if the net levelized cost per month for the fuel cell project exceeded the net levelized cost of the highest current tariff, or the Bluewater Wind project.  The PSC Staff Consultant estimated the levelized cost of the Fuel Cell Tariff to be $1.34/month for the average residential customer compared to $2.27/month for Bluewater Wind.  Built into the assumptions was the Fuel Cell Act provision for energy production to offset the need for RECs and SRECs.  Without this offsetting value the cost of the Fuel Cell Project would have increased over $2.00 more a month, and would have exceeded the price cap requiring rejection of the Fuel Cell Tariff.  DNREC took this one step further and allowed each megawatt-hour of fuel cell generation to create two RECs, while an actual wind farm only creates one REC for each megawatt-hour of generation.  Clearly the REC value component influenced the PSC Tariff approval process.
  • The proposed regulation recognizes QFCP RECs in section 3.2.4 which spells out energy production from the QFCP can be used to fulfill the RPS requirements, and section 3.2.5 requires PJM-EIS GATS tracking similar to all other RECs and SRECs. The QFCP RECs are equivalent to any REC from any Eligible Energy Resource.
  • Every required annual report of RPS cost and the total Retail Cost of Electricity filed by Delmarva Power has included the QFCP cost without objection from the Division or the PSC Staff.
  • In PSC “Docket 13-250 Electric Bill Transparency”, the working group unanimously recommended, and the Commission ruled the Renewable Compliance Charge would be broken out on electric bills. It is now on each monthly bill and includes the QFCP REC cost.  How can the Commission explain to ratepayers any inconsistency of what they can see for themselves on an electric bill to what is used to determine whether the Cost Cap has been exceeded?
  • If the QFCP wasn’t supplying RECs, Delmarva would have had to purchase them under contract or on the spot market. We will shortly see the current contract cost for RECs when the Delmarva RFP solicitation for RECs is complete.  Clearly the QFCP RECs have a cost that adds to the Renewable Compliance Charge.  One could point out the QFCP RECs are expensive.  However, using information from the Delmarva 2014 IRP, page 73, Tables 8 and 9, we can calculate a forecasted cost for the current 2016 Compliance Year.  The costs are $68.14/REC from the QFCP, $33.73 /REC from three existing wind farm contracts, and $24.23/REC from the spot market.  The QFCP RECs are the most expensive but not extraordinarily so.  For example, SREC values vary from a high of $312 from the first residential procurement auction, to $217 from the Dover Sun Park, to $68 in the latest procurement auction, to $15 in the current Maryland spot market.  The Fuel Cell Tariff approval and construction of the generation facility was contemporaneous with the three existing wind farm contracts, and so are representative of a range of REC value at the time the Fuel Cell Tariff was approved.

In conclusion these precedents, and ratepayer expectations cry out for clarity on the fuel cell issue.  Please consider our clarifications to the proposed regulation to ensure the QFCP portion of the Renewable Compliance Charge is included in the RPS Cost Cap Calculation.

Sincerely,

David T. Stevenson
Director, Center for Energy Competitiveness
Caesar Rodney Institute
e-mail: DavidStevenson@CaesarRodney.org
Phone: 302-236-2050
Fax: 302-827-4558

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You can make your voice heard right now at the Delaware Public Service Commission (PSC) to protect against future electric bill increases.

The PSC is considering a regulation on how to calculate the cost impact on electric bills of Delaware’s requirement that our electric suppliers purchase more expensive and unreliable wind and solar power every year.  In 2010 the legislature amended the Renewable Energy Portfolio Standard Act (REPSA) to include a cost cap of 3% on electric bills. The legislature figured there was value in using renewable power, but it didn’t want to overburden ratepayers, many who are living paycheck to paycheck.  Thus, it wrote a cap into the law that said electric bills should never go up by more than 3 percent to buy renewables.  If the cap was exceeded, the requirement for more renewable power was to be frozen until costs came down.  In 2011, the legislature again amended REPSA to allow a portion of the cost of fuel cell generation that Delmarva is forced to buy (and for which ratepayers are forced to pay) to count as renewable energy so Delmarva would not have to buy as much wind and solar power.

Well, that cap was exceeded in 2013. Renewables now add about 9% to electric bills, or $100 a year to residential bills, but there is no freeze!  Some industrial customers are paying a job-killing half million to a million dollars a year.

The story of how a freeze was avoided should make your blood boil.  The legislature added the 3% cost cap in 2010 and told the PSC to draft a regulation governing the cost cap calculations, with DNREC’s Division of Energy & Climate (Division) performing the actual calculations.  Then, the two agencies would consult to determine whether a freeze was called for. This division of labor made sense.  The PSC regularly balances the competing objectives of price, reliability, and environmental concerns in approving utility rates.  The Division of Energy & Climate advocates for renewable energy, which could potentially bias its approach to a cost cap calculation regulation to avoid a freeze.

The PSC ducked its responsibility, impermissibly delegating the duty for drafting the cost cap regulation to the Division.  The Division took its sweet time finalizing the regulation (almost four years), until the end of 2015 — thus avoiding doing a calculation that would have led to a freeze.  Moreover, the Division’s final regulation twisted the calculation process to avoid a freeze.  First, it flatly ignored the cost of the Bloom Energy fuel cell project.  Look at your electric bill: you will see the Renewable Compliance Charge broken into the fuel cell cost (Delaware Qualified Fuel Cell) and the wind and solar cost separately.  Divide the charge by your total bill to see what percentage you are paying.  Even though the fuel cells are fueled by conventional natural gas, the legislature approved fuel cell generation counting against the RPS requirements at twice the rate of an actual wind farm!

Second, the Division attempted to calculate the value of unpriced externalities, such as the health impacts of less air pollution, and count those externalities as part of the cost of electric supply.  In doing so, it used outdated emissions data, outdated health impact values, and counted jobs created in the solar industry, while ignoring jobs lost because of higher electric rates.  After exaggerating the benefits, it wanted to allow another 3% price increase!

The REPSA requires that our electric suppliers purchase 25% of their power from renewable sources by 2025; the current year’s target is 14.5%.  The idea was to generate renewable power in-state.  Instead, we are only generating about 1% of the power we use from in-state solar projects.  The rest is coming from landfill gas and biomass projects that were in place before the REPSA became law, natural gas-fired fuel cells, and out-of-state windfarms that raise electric bills but create no Delaware jobs. The point is that for all its cost and effort, the REPSA isn’t even close to doing what it was supposed to – but it is increasing the amount that Delawareans pay for electricity.

The Delaware Public Advocate (DPA), a state agency tasked with advocating the lowest reasonable rates for regulated utility consumers, and CRI petitioned the PSC to do its job and issue regulations.  The PSC refused.  The DPA appealed the PSC’s order and won!

The PSC has now drafted proposed cost cap regulations.  To read them, go to http://regulations.delaware.gov/register/march2017/proposed/20%20DE%20Reg%20713%2003-01-17.htm .

Here’s where you come in.

The PSC did eliminate the use of externalities in the cost cap calculations.  However, the wording is not clear enough: the fuel cell costs are excluded from the cost cap calculation.

CRI thinks the cost cap calculations should take into account the cost to buy solar and wind power and the amount going toward Bloom energy fuel cells when calculating the total cost of REPSA compliance.

If you think so too, let the PSC know. Written public comments are due by Monday, April 24, and the PSC will conduct a public hearing at 1 PM, April 6.  Written comments may be sent to Joseph DeLosa, Public Service Commission, 861 Silver Lake Blvd., Cannon Building Suite 100, Dover, DE 19904, or by e-mail to joseph.delosa@state.de.us.  The hearing is at the same location.

We are encouraging submission of written comments to the PSC similar to the following with the subject line “Regulation Docket No. 56”: “We support the proposed regulation, but please add clarifying language to ensure that the net cost of Renewable Energy Credits from a Qualified Fuel Cell Provider shall be included in the RPS Cost Cap Calculation.”                            

The improved regulation will probably result in a freeze to the increasing requirement for wind and solar power.  It will keep the cost from rising further.  (Interestingly, the price of solar installations has fallen so far it is likely that new solar projects will still be built without the state mandate, as is happening at many locations across America now).

David T. Stevenson
Director, Center for Energy Competitiveness
Caesar Rodney Institute

 

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