Stronger Leadership Needed from DC Energy Regulators

Testimony
of
Mark Rodeffer
Sierra Club DC Chapter
DC Council Committee on Business and Economic Development
Public Service Commission Budget Hearing
Thursday June 3, 2021

Thank you, Councilmember McDuffie, for holding this hearing on the budget of the Public Service Commission. My name is Mark Rodeffer, and I am testifying on behalf of the Sierra Club DC Chapter. The Sierra Club is the nation’s oldest and largest environmental advocacy organization, with chapters in every state. Here in DC, we have 3,000 dues-paying members, including many in Ward 5.

Our top priority is combating climate change and ensuring that DC meets its climate commitment to eliminate fossil fuel use by 2050. We are a formal party to several cases before the Commission, where we advocate to uphold the District’s climate commitments, as the Commission is statutorily required to do under the 2018 clean energy law that you, Councilmember McDuffie, shepherded through this committee.

Gas Utility Business Model Evolution

DC’s climate commitments are outlined in the Clean Energy DC plan, which states: “Achieving its 2050 GHG carbon neutral target will require the District to eliminate fossil fuel use.”^[1] In 2018, the Commission allowed the Canadian fracked gas supplier AltaGas to purchase our local gas utility on the condition that the combined company “evolve its business model to support and serve the District’s 2050 climate goals (e.g., providing innovative and new services and products instead of relying only on selling natural gas).”^[2] The Sierra Club calls on the Commission to take robust action to ensure the gas utility meets its climate commitments, and later in our testimony we outline how the 2022 budget can help the Commission meet this commitment.

The Sierra Club understands that part of the Commission’s responsibility is to ensure financially healthy utilities, not for the benefit of the companies’ shareholders, but rather to ensure that District residents have reliable service from the utilities. We believe the role of the Commission is not to deny any utility from operating a business, but instead to ensure the utility business model is consistent with DC’s climate commitments. The financial health of a utility should not be at odds with DC’s climate commitments, in fact, the utilities should be financially healthy because they are meeting DC’s clean energy commitments. The Commission’s job is to ensure that happens.

The gas company that AltaGas bought in 2018 is named WGL, which stands for Washington Gas Light. When the company was founded in 1848, its business was providing street lighting with gas. But WGL evolved its business from providing lighting to providing heat for buildings. And it can evolve its business model again, continuing to provide building heating through sustainable means, such as:

• Clean energy micro-district heating systems using geothermal energy;
• Industrial-scale heat pump networks; and
• Wastewater heat extraction systems.

Other utility regulators have approved similar plans. For instance, the Massachusetts Department of Public Utilities approved an application from the Eversource gas utility to build a network of geothermal heating and cooling systems that will cost homeowners $20 a month, or $5 a month for low-income households.^[3] Research demonstrates that the cost of geothermal heating and cooling is essentially free after the systems are installed because there is no fuel cost other than electricity to power the heat pumps. This protects ratepayers from severe fluctuation in fossil fuel prices.^[4]

We understand that DC’s gas utility and its Canadian fracked gas parent company have never undertaken such endeavors and would prefer to continue their fossil fuel pipeline-based business. Because of this resistance from the utility, it is essential that the Commission take proactive leadership to lead the utility toward clean energy heating systems. The Commission should require the utility to begin pilot projects exploring how it can continue providing heat to buildings in DC without fossil fuels.

Funding for Independent Climate Consultant

The Sierra Club was pleased that the Commission opened a proceeding to guide the utilities toward compliance with DC’s climate commitments. On November 18, 2020, the Commission opened Formal Case No. 1167 to consider whether DC's energy utilities are meeting the District's climate commitments and to guide the utilities in the “right direction.” The Commission’s order opening the proceeding mentioned the need for “a comprehensive plan for how utility or energy companies can help the District achieve” our climate commitments.^[5]

DC will not meet its climate commitments without dynamic and proactive leadership and concerted efforts from the Commission. Guiding the gas utility toward carbon neutrality will not be an easy task, both because its primary business right now is selling fossil fuels and because of the utility’s resistance to meeting its commitment to evolving to a climate-friendly business model. To ensure DC’s climate commitments are met, the budget for the Commission should include funding for an independent consultant to evaluate any plans from the utilities to ensure their proposals are consistent with DC’s climate commitments and the Clean Energy DC plan. Additionally, the funding for the independent consultant should allow for it to provide its own proposals and studies to determine the plans needed to ensure our climate commitments are met. We cannot rely on the utilities alone to plan for meeting our climate commitments.

Depreciation of Fossil Fuel Assets

In its pipeline replacement filings before the Commission, AltaGas appears to seek to depreciate its fossil fuel infrastructure spending until 2085, fully 35 years after DC has committed to end fossil fuel combustion.^[6] This is wholly inconsistent with DC’s climate commitments.^[7] For DC to meet its climate commitments, the Commission must not allow depreciation of any fossil fuel asset past 2050. Any cost recovery from DC ratepayers for pipelines or other fossil fuel infrastructure must end by 2050. Forcing DC ratepayers to bear the cost of imprudent and risky gas investments past 2050 is akin to forcing someone to take out a 30-year mortgage on a home that will likely cease to exist in 15 years.

By requiring the gas utility to fully depreciate fossil fuel assets by 2050, the Commission would not take any stand today for or against continued use of gas pipes; it would merely acknowledge that there is a risk to the gas business model that warrants taking out insurance in the form of accelerated depreciation. In other words, accelerated depreciation is not a decision to remove gas pipes today, but merely limiting the burden for future ratepayers if the assets become obsolete in future.

Transportation Electrification

The potential for electric grid load growth due to transportation electrification over the coming decade is projected to be substantial. We urge the commission to continue to engage with stakeholders in Formal Cases 1155 and 1130. Developments such as the Residential Plug-In Vehicle (“R-PIV”) rate plan are good first steps, but the level of coordination with stakeholders required for rate design and grid planning will need to be more extensive to ensure reliability and affordability while also supporting the District’s transportation electrification goals. A particular example is planning for electrification of the Metrobus fleet, which will require ongoing planning between the Washington Metropolitan Area Transit Authority (WMATA) and Pepco. Though the benefit to electrifying the bus fleet will be substantial in its own right, it will also help develop the practices required to appropriately plan for grid upgrades as more commercial and individual customers convert to electric vehicles.

Power Purchase Agreements

We applaud the Commission for requiring DC’s electric utility to procure 5 percent of its electricity through renewable energy from new long-term contracts, also called power purchase agreements (PPAs), which provide long-term income streams to renewable energy companies, enabling them to build new solar and wind farms to deliver the renewable energy that the contracts require. Once the power purchase agreements are implemented and DC sees the financial, health, and climate benefits they bring, we urge the Commission to require increasingly larger amounts of Pepco’s electricity to come from these agreements. We hope that when the Commissioners testify, they will provide an update on the status of implementing the PPAs.

Conclusion

Thank you, Councilmember McDuffie, for the opportunity to testify today. The Sierra Club appreciates the small steps taken by the Commission to date to meet its climate mandate. We believe stronger action and more proactive leadership is needed. We ask you to provide oversight of the Commission to ensure the District benefits from a proactive Public Service Commission.