Tom Tanton, E&E Legal’s Director of Science and Technology, traveled to Jefferson City, to present invited testimony to Missouri’s State Senate. The Senate’s Interim Committee on Utility Regulation and Infrastructure Investment took informational testimony from a variety of stakeholders and subject experts. The Committee was interested in changes occurring in the regulatory paradigm (regulatory compact) nationwide and what is being tried in other states, what’s working and what’s not. Missouri is contemplating changes to utility regulation and their Public Service Commission’s charge to ensure fair and reasonable rates while ensuring infrastructure robustness and modernity. Mr. Tanton’s broad view on how the regulatory paradigm can benefit from modification, not wholesale abandonment, was well received. His testimony was informed by over forty years in infrastructure policy.
Mr. Tanton emphasized several key points:
- Critical infrastructures are interdependent. What happens in natural gas affects and is affected by changes in electricity. Both are affected by what happens, and how regulations impact, water and telecommunication and banking. The Legislature in Missouri needs to take an integrated approach.
- Do not rely on simplistic “benefit/cost’ analysis but remain aware of distributional effects of contemplated policy and programs, lest cross subsidies crop up. This is especially important for programs like net metering that are beset with subsidies and regressive harm to the less well to do. Further, program benefits can often be achieved at lower cost. Similarly, benefits and costs are not linear with respect to penetration. Emission reductions from many renewable energy options fall off rapidly with increasing penetration, and can become emission increases.
- Be prepared for contingencies especially with respect to long term policy changes. The example of California’s electricity crisis, brought about by natural gas infrastructure disruption and a wholesale electricity market bidding protocol that was not flexible, enough illustrates this point. Had California in pace a bidding protocol that could deal with temporary electricity shortages, ratepayers could have saved perhaps $20billion. This illustrated the famous Hayek claim of ‘fatal conceit’ and was all predicated on what turned out to be an incorrect forecast of electricity supply.
- The electricity market is no longer exclusively met by integrated monopoly utilities. Consumers are faced with sales pitches from a new group of providers, such as solar installers, who need to be regulated to one degree or another in the interest of consumer protection.
- Missouri’s Public Service Commission should keep a vigilant eye on Federalism and the impact Missouri has, through programs like renewable portfolio standards, on other states connected to the same grid.
Mr. Tanton’s prepared remarks can be read here.