9:15-9:30 a.m.: Welcome
Presenter:
• Andrew Hoffman, Director, Erb Institute, Ross School of Business/SNRE, University of Michigan
The conference opened with an introduction by Hoffman, Director of the Erb Institute and Holcim (U.S.) Professor of Sustainable Enterprise. He discussed the increasing salience of energy issues on campus, and the role that business schools can and should play in the analysis and discussion of the intersection between business models and broader societal objectives with respect to the electricity sector and its customers. Professor Hoffman asserted that by hosting gatherings like this (the third in a string of conferences focused on shifts in the energy markets) the Erb Institute was expanding the vision of the role of an institute at a university.
Session “Visioning the Future”
Presenter:
• Tom Catania, Erb Institute, Ross School of Business
Catania, former Vice President of Government Relations at Whirlpool Corporation and the Erb Institute’s first Executive-in-Residence, thought it appropriate to open our conversation in the university setting with some reflections from a famous philosopher, former New York Yankees catcher and manager Yogi Berra. The “Yogiism” deemed most appropriate for a discussion of Michigan’s energy future was “the future ain’t what it used to be.”
Catania observed that the challenges the power sector is currently facing, and the pace at which the future is mingling with the present and destroying the past, are absolutely amazing. Markets are moving much faster than the regulatory system is designed to accommodate, and many things that were on the near- to mid-term horizon last year are already upon us. When a utility was thinking about its future 30 to 40 years ago, it worried about demand trends and how to get assets in place to meet ever-rising demand. Future planning is now much more complicated; none of the usual political complexities associated with allocating costs among different parts of the rate base are any simpler, and the process is filled with new actors and the requirement to integrate new sources of energy into the grid in real time. The challenge is to ensure that the regulatory process keeps pace with the trifecta of accelerating changes in technology, changing societal expectations about energy generation and its impact, and rapidly evolving utility business models in response to both technology and regulation.
In the end, Catania invited the audience to share expectations for the event. In response, videographer Peter Sinclair noted that energy technology is changing in a way similar to the advent of the Internet or cellphone technology. He asserted that our current energy infrastructure will be eaten up by new technologies (including solar photovoltaics and other forms of renewable energy and energy efficiency) and called conference participants to action, asking “What is the plan?” According to Sinclair, such technology is coming whether we are ready or not, so we have to choose between riding the wave and benefiting from it, or finding ourselves in deep trouble related to infrastructure in five to 10 years.
9:45-10 a.m.: Introduction of Janet McCabe
Presenter:
• Dennis Dobbs, Vice President of Generation Engineering and Services, Consumers Energy
Dobbs introduced McCabe, who gave the keynote speech at the Michigan Energy Futures Conference. He asked the audience if they remembered where they were on Monday, June 2, 2014, the day that the EPA issued the proposed rule to reduce carbon emissions from existing power plants — the Clean Power Plan. For Dobbs, like many in the energy industry, this day was a monumental event, comparable to the day that JFK was assassinated or the birth of a child.
Businesses, utilities and government bodies are still working to decipher and predict the implications of the Clean Power Plan for themselves, their customers, the state of Michigan and the nation. Dobbs thanked the University of Michigan for hosting this important dialogue, which will directly impact the state’s energy industry as it continues to advance and create 21st-century energy infrastructure.
Dobbs urged McCabe to share her perspective on the Clean Power Plan and its intended implications, both local and national. He praised the EPA for doing a good job of reaching out to stakeholders, both before and after releasing the rule, and thanked them for the flexibility they granted the states in building out a plan that works best for utilities and states. “An unprecedented rule like this requires unprecedented action,” stated Dobbs, who went on to explain the ways in which Michigan stakeholders have already started to collaborate to understand how the rule will affect reliability, affordability and the environment in Michigan.
He urged regulators to work with utilities to create plans and policies that withstand legal challenges and provide the certainty needed for utilities to operate and profit, explained the efforts that Consumers Energy has already taken to reduce emissions 35 percent in the next few years and highlighted the negative effects that further acceleration could have on business. Dobbs acknowledged that Consumers might not agree with every aspect of the Clean Power Plan, but thanked the EPA for putting forth a proposed rule and proactively seeking feedback from stakeholders. He was encouraged by the commitment to working together to find a path forward for Michigan and the nation’s health, prosperity and safety.
10-10:45 a.m.: Opening Keynote and Dialogue
Presenter:
• Janet McCabe, Acting Assistant Administrator, Office for Air and Radiation, EPA
As Acting Assistant Administrator for the EPA’s Office of Air and Radiation, McCabe is responsible for leading the agency’s implementation of the Clean Power Plan. The draft rule was released on June 2, 2014, under Section 111(d) of the Clean Air Act; the comment period was extended until Dec. 1, 2014.
During the Michigan Energy Futures keynote, McCabe emphasized the agency’s desire for as much specificity as possible in submitted comments. “The more information we get,” she stated, “the more we can figure out if and what we need to adjust.” She acknowledged that the goals, as currently set out, are going to be a challenge for certain stakeholders, but made clear the EPA’s dedication to working with stakeholders to design a rule that does not have unintended consequences for utilities, consumers or the grid.
The proposed rule draws on actions that are already being taken. It is an unusual rule, in part because of the fact that President Obama instructed the EPA to go out and talk to people before writing the rule, rather than writing in isolation and seeking feedback afterwards. Dobbs’ comments indicate that this approach has been favorably received by the energy industry.
McCabe remarked on some of the more common questions and feedback the EPA has received during the public comment period, including regarding the 2012 rule start date, ability to count pre-2012 reduction activities, biomass, renewable energy standards, how states will write and enforce plans, and the effect of the plan on energy prices and jobs. These are all elements that the EPA is committed to working through. The EPA, which already has received 700,000 comments, is expecting at least a million, in addition to thousands of pages of technical and legal arguments. Despite these challenges, the EPA is focused on getting the final rule out by June 2015: “The threat of climate change compels us to move quickly,” asserted McCabe.
She expressed confidence that state air-quality directors and commissioners will be able to develop effective plans, though she noted that it would involve a significant effort to bring together the various stakeholders.
11 a.m.-12:15 p.m., Panel I: Energy Supplies in Transition
Moderator:
• Mark Barteau, U-M Energy Institute Director
Panelists:
• John DiDonato , Vice President of Development, NextEra Energy Resources
• Robin Newmark, Associate Lab Director, Energy Analysis and Decision Support, National Renewable Energy Lab
• Gregory Ioanidis, President, ITC Michigan
• Dennis Dobbs, Vice President of Generation Engineering and Services, Consumers Energy
This panel explored which energy resources will be integral to meeting the demand of future generations and the expectations of customers, business, industry and investors. How will future federal regulatory action and carbon concerns influence the energy mix and deployment of energy resources? How big of a challenge will it be to integrate variable energy resources? What energy resources will power Michigan in 2025?
Barteau kicked off the panel by discussing the aspects of energy that resonated most with the consumer as reflected in the Energy Institute’s newly minted Energy Survey. They included environmental friendliness, affordability, and reliability.
Dobbs began his section by asking the audience to reflect on three hypothetical scenarios that could potentially occur in the near-to-medium term. The first was a heat-wave scenario where consumers faced unreliable electricity; the second was a scenario of increasing electricity prices where families might have to choose between paying their energy bills and other necessities; the third was a scenario where there is stable, low-cost electricity but a degrading environment and unpredictable weather. Dobbs claimed that any of these scenarios could be imminent, and argued that our greatest challenge is not to promote one scenario but rather to manage for all three by maintaining a balance between energy that is affordable, reliable, and clean.
He closed by requesting that the audience learn, get involved and come together to help build a comprehensive energy program for Michigan that “prioritizes sustainable energy and maintains balance.”
Next, the audience was asked the following question: “Which source of electricity has the lowest price for new generation in the U.S.: coal, geothermal, wind or solar?” The answer was wind.
This segued nicely into Newmark’s presentation. Using detailed technical slides, she clearly showed how the cost for wind and solar are reaching grid parity, while deployment has skyrocketed and coal reliance has dropped by 10 percent over the past few years. She cautioned, however, that in order to change the system, we need to understand it in totality.
Newmark stated that the current transformation is causing stress on the system — both business- and policy-wise. She argued that innovations like a “smart water” U.S. electric system would make a tremendous impact on resource use and could be very effective, claiming that Michigan is already drawing more water from the ground than falls each year in rain, and that outlier extreme-weather events are becoming more common.
She argued for disaster recovery plans that combine renewables and energy efficiency, describing a future where renewables are combined with microgrids that isolate themselves when the grid goes down; a future where the country is operating at 80 percent renewables by 2050. Newmark warned that this type of future comes with cost and integration challenges, and noted that the optimal portfolio for any given state will look different. Michigan, for example, should move towards a combination of wind, natural gas and biofuel.
DiDonato spoke next, beginning by asking the audience the following question: “A year contains 8,760 hours. Given average wind speeds, during what percentage of hours will a wind farm in Michigan deliver some energy to the grid?” He asserted that wind delivers energy to the grid 85 percent of the time; however, wind does not operate 40 percent of the time. He explained the importance of these statistics for a company like NextEra, which has the largest portfolio of wind in the U.S. (about 10,000 megawatts), with $500 million of it from Michigan.
He believes that NextEra is very well positioned for the future of energy supplies, claiming that the energy resources which will be required to satisfy investors and customers and meet future demand will look a lot like the company’s current portfolio. DiDonato listed other important factors in determining the future of U.S. power supplies: water, air-cooling demands, and necessity of low-carbon strategies. He spoke to customer and investor demand for clean tech and advancements in low tech, which are allowing windmills to hit their peak more easily, and . argued that regulations and economics are tailwinds, pushing such developments along. The retirement of low-cost and zero-emission nuclear, on the other hand, is a significant headwind making it harder to attain carbon reductions, a point addressed in greater specificity during the luncheon keynote by former Indiana Senator Evan Bayh. Contrary to popular opinion, DiDonato argued that integration is not a very large challenge for renewables — especially in regions that are large and balanced.
DiDonato closed by predicting that Michigan will switch from coal to natural gas and may have cleaner coal and new nuclear permits. In order to comply with the EPA’s Regulation 111(d), however, he argued that Michigan needs nuclear.
The final speaker was Ioanidis, who began by giving an overview of ITC Michigan, an independent transmission company operating in the wholesale marketplace. According to Ioanidis, ITC is inherently in the business of planning for the needs of the grid. As such, it needs to have a comprehensive understanding of how all factors impact energy consumption and generation.
The power of a network, he argued, is that there are multiple paths to a source in sync, and while transmission only makes up about 10 percent of the national electricity bill, it’s a much larger part of the country’s overall energy infrastructure. As such, reliability is a huge issue for electricity transmission. As a state “that builds stuff,” Ioanidis stated that Michigan cannot tolerate outages.
Ioanidis spoke to the importance of security, highlighting grid redundancy and reliability as the best guarantees of energy security. Reliable transmission is essential for successful Renewable Portfolio Standard implementation, mandatory for microgrids, and enhances the competitiveness of wholesale markets. No matter what shape the future of energy takes, transmission is central to the discussion.
12:30-1:45 p.m.: Lunch and Keynote
Speakers:
• Ross Dean Alison Davis-Blake
• Former Indiana Senator Evan Bayh
Davis-Blake welcomed the conference attendees to Ross, whose mission is to develop leaders who make a positive difference in the world. She defined that positive difference in three ways:
1. Making an economic profit.
2. Creating great places to work.
3. Creating businesses that are great neighbors.
She noted that no problem is purely technical, but also political and managerial. With that, she welcomed Bayh.
The Democrat and former Indiana governor is the co-chair, with former Republican Senator Judd Gregg, of Nuclear Matters. He discussed the benefits of nuclear energy as a reliable, carbon-free energy source, particularly in light of the new challenges that the energy sector faces in cutting carbon emissions. Michigan relies on nuclear for 30 percent of its power. Of non-carbon sources, it comprises 94 percent of electricity generation.
The U.S. relies on nuclear for 20 percent of its power. Bayh praised the diverse portfolio of American energy sources, noting that “diversity is a good thing” because it breeds reliability. He also spoke of the reliability of nuclear power specifically, as well as its contribution to carbon-free energy sources in the U.S., contributing 63 percent of the nation’s carbon-free energy.
The EPA is striving to bring emissions down to levels seen 10 years ago within the next five to 10 years. Because nuclear contributes greatly to carbon-free energy, if it was cut from the energy portfolio, it would be exceedingly difficult for the U.S. to meet EPA admissions objectives, as well as economically disruptive. Germany is mothballing its nuclear plants, leading the country to be dependent on Russia for much of its energy. That also had the effect of driving up the residential price of energy and carbon emissions in the short-to-medium term. If we were to do the same here, it would have a significant impact on the economy, environment and energy affordability.
Bayh addressed the impacts that anemic economic growth have had on the energy industry. First, slow growth has led to less energy use. Second, natural gas has enjoyed a major revival, providing energy at a lower cost with relatively lower carbon emissions (though larger than nuclear). However, this carries the risk of creating an overreliance on natural gas as an energy source.
Finally, Bayh noted that in the spot market pricing system, the value of reliability and low carbon emissions are not considered. He also questioned whether federal tax credits for renewable energy like wind and solar are unnecessarily favoring one form of zero-emission energy at the expense of another in nuclear. Bayh believes that we have to revisit the rules to assure they are equal for all forms of carbon-free generation.
He concluded, “There is no way we will accomplish our climate change goals if we abruptly take a significant portion of carbon-free energy out of the market.” Put simply, if the U.S. wants carbon-free sources, we must be agnostic about the source of that energy.
1:45-3 p.m., Panel II: Changing Utility: Business Model
Moderator: Liesl Eichler Clark from 5 Lakes Energy
Panelists:
• John Caldwell, Director of Economics at Edison Electric Institute
• Lisa Frantzis, Senior Vice President of Strategy and Corporate Development at Advanced Energy Economy
• Ron Binz, principal at Public Policy Consulting
Caldwell opened the discussion by stating that in his opinion there will be several business models, based on a variety of key drivers. The first driver is reliability: America has crumbling infrastructure, there have been historically significant storms recently and reliability in our digitized age is much more important to customers than ever. The second driver, our wish to have cleaner energy, is seen on both legislative and regulatory levels.
Caldwell does not consider price to be a driver because, according to the Bureau of Economic Analysis consumer expenditures survey, average households’ nominal spending on electricity hasn’t increased since 1959. Nor does he believe that customers’ desire to have more control over their bills via mobile applications is a driver. Caldwell believes that “one of the values of electricity, one piece of the brand of electricity, is that customers don’t have to think too much about it,” and that this is how it should remain in the future. Caldwell also does not consider the slow growth of electricity sales to be a driver.
In the future, Caldwell sees a variety of alternative business models:
1. A natural gas-inspired model, which he called the “business-as-usual model.” Other ancillary services, such as power storage and competitive non-utility generation sources, will be layered on top.
2. A market-based model: Caldwell expressed doubts that providing subsidies, such as net metering or feed-in tariffs, provides a viable longer-term model. As an example, he cited Germany’s feed-in tariffs, which at the end of the day have resulted in a misallocation of resources.
3. A network utilities model, which he considers to have several different roles. One is as a market enabler, allowing for two-way power flows. Another is transaction broker, similar to a network market. Two other roles that utilities could consider are working on the other side of the meter with distributed generation providers, financing and consulting, or working on customers’ premises as a solution integrator.
Frantzis started her talk by noting that core grid attributes that utilities used to provide (universal access, safety, reliability and affordability) are changing. Instead, new desired attributes have emerged — environmental sustainability, resilience, adaptability/flexibility, greater customer control and more service options. There are additional pressures on utilities: a need to replace or renew aging infrastructure (rising costs), minimal to declining load growth (falling revenues), variable renewable energy integration (wholesale and retail), cyber and data security, as well as regulatory changes. These transformations are inevitable.
She noted that three states — Massachusetts, Hawaii, and New York — are on the forefront of exploring new business models. Massachusetts came up with “grid modernization,” which includes three major elements: grid modernization, time-of-use rates, and incorporation of electric vehicles. Hawaii has a lot of distributed generation, especially with solar coming on the grid. Changes are occurring to align Hawaiian Electric Company’s business model with customers’ expectations and state policy. New York presents the most comprehensive plan on the future model for the electricity sector, emphasizing distributed energy resources (DER). According to the research conducted on New York (report available on the Advanced Energy Economy website, aee.net), there are three pillars of future industry: customer products and services, the network infrastructure and operational model, and the regulatory framework. The New York vision is that utilities no longer provide basic services but rather value-added services. And in New York, utilities see performance-oriented regulatory framework as an opportunity to make money. Currently, utilities are measured and rewarded on the ability to maintain reliability, safety and adequate service. In the future, utilities should be measured by outcomes that go beyond these metrics.
Still, six key questions should be addressed: When should advanced metering functionality be part of basic service and when should it be a value-added service? When should data access be free and when should there be a charge, and to whom? Who should be allowed to own DER and under what circumstances? What should performance metrics look like? Should incentives be symmetrical? How do we transition to outcomes-based ratemaking regulation?
In addressing the question of new business models, Ron Binz, principal at Public Policy Consulting and former Chairman of the Colorado Public Utilities Commission, mentioned a book by Peter Fox-Penner called Smart Power, in which he predicted several directions in which utilities can evolve. One is called a “smart integrator,” the other is “energy services utility.” Binz calculates that these changes were not evident a year ago. Some people have called the smart grid the Energy Internet — an application of IT technologies to the grid. Binz likened the grid to an organism, with the ability to evolve in a different way than we expect. To optimize the grid, one must be just as interested in the operation of every freezer as with bigger facilities.
So what happens to the utility in this scenario? It obviously has to be that smart integrator, whose software can manage both individual refrigerators and steel plants at the same time. Every device in the grid will know what every other device is doing. The first role of this new entity is the distribution system operator, which will be able to offer services over the grid. There will be a number of brokers, who own assets, and who bundle services that come from different sources and present these bundles to customers. This is what is happening in Texas right now.
One of the issues is reconciling the differing roles of integrated utilities versus today’s disaggregated utilities, where generation is separated from other functions. Some utilities may want to get out of generation: where will that generation go, and how will it be provided? The West may establish an ISO in the next 10 years. So the prediction of Fox-Penner about two different pathways would, rather, be something in between, a hybrid of smart grid and DSO.
3-4:10 p.m., Panel III: Evolving Regulatory Frameworks
Moderator:
• Greg White, Michigan Public Service Commissioner
Panelists:
• Ron Binz, Public Policy Consultant
• Sonia Aggarwal, Director of Strategy, America’s Power Plan
• John Proos, State Senator from Michigan’s 21st District
• John Quackenbush, Chairman, Michigan Public Service Commission
The panel focused on how to keep Michigan’s energy affordable, reliable and flexible while protecting the environment. Is there a need to broadly decouple utility rate-based compensation from the traditional measure of number of electrons produced and sold? What is the future of traditional rate-of-return, cost-of-service ratemaking? What is the appropriate model to value utility performance?
Binz, former Chairman of the Colorado Public Utilities Commission, started the Utilities 2020 project to “investigate what new regulatory models would be needed to allow utilities to evolve to new business models.” He claims that “We shouldn’t be so arrogant to say we know what the model is going to become.” In Utilities 2020, all regulations should be incentive-based, driven by the belief that we need to reward the behavior we want utilities to engage in.
As an example, Hawaii is proposing rate-based rate-of-return regulation, where revenue and sales are decoupled. But the public utilities commission is complaining that nothing motivates the utility to become more efficient. They want a regulatory gauntlet of rules that the utility must follow.
Within the Utilities 2020 project, Binz had interactions with leading commissioners and utilities CEOs and found the following points in regards to the status quo:
• Not motivated to be particularly efficient as companies;
• Not happy with the confusion about climate;
• Complained that regulators did not always understand their business;
• Welcome notion of new regulatory bargain.
Aggarwal is a part of Energy Innovation, based in San Francisco and working in the U.S., China and Europe. It focuses on changing utility business models and energy markets. She also runs America’s Power Plan, a project that brings together experts in the field, focuses on the challenges and changes that are hitting the sector and makes recommendations to decision makers.
Key areas in today’s power scenario noted by Aggarwal:
• Pricing has been significantly cut to renewable sources such as solar;
• 100 million thermal batteries deployed across country;
• New competition hitting industry (retail and wholesale);
• Extreme weather events cause issues on the grid, which bring reliability and resilience into question;
• Infrastructure issues (a D+ rating);
• 111(d) and the huge environmental regulatory changes coming from D.C.;
• All happening as demand remains flat.
With these considerations, she questions if cost-of-service regulation is necessary. Furthermore, what would happen if compensation was based on performance rather than rate of capital deployment? The benefits “could be large enough from these new efficiencies, based on rewarding performance, that we could start conversations about how to share the value fairly, rather than the cost.”
Quackenbush, Chairman of the Michigan Public Service Commission, said that due to 2008 legislation in Michigan, the state has been preparing for several years for goals set by the EPA, and that Michigan must look beyond 2015 and into that 10-year window extending to 2025. He notes that there is more room for renewables and that coal plant retirements are on the horizon, with replacements coming from with onshore wind or natural gas. Looking forward, there will be a large focus on energy efficiency, as it has the potential for low cost and big savings. The governor sees energy efficiency as a great resource.
He suggests rewarding performance (performance-based model) and sharing proceeds from energy. This system could be incentive-based rather than mandatory. Areas to incentivize include energy efficiency, reliability, safety and customer satisfaction.
Proos explained that the overarching issue for Michigan is certainty, and the challenge is to effectively communicate about the complex energy industry to his constituents. He explained further: “We have large goals and objectives, but the reality is that you have to do so in reasonable ways, that can be explained to the people that stand to benefit from those large goals and objectives.”
Proos stressed that Michigan, as an agricultural and manufacturing state, requires a significant, strong, reliable and affordable power source.
4:20-5:30 p.m., Panel IV: Integrating and Moving Forward
• Moderator: Tom Catania, Executive-in-Residence, Erb Institute
• Panelists: all conference speakers
The conference’s concluding session convened all conference speakers to discuss common themes from the day with an eye toward charting a path forward. Conference participants were invited to join the discussion and ask questions.
The first question, asked by Catania, centered around whether utilities are investing their money in the political arena, trying to fight the Clean Power Plan, instead of preparing themselves for a market-oriented future. Commissioner White responded, saying he believes the utilities are engaging with regulators and eager to move forward with improvements. He noted all sorts of communication that can and does occur.
Senator Proos observed, however, that in recent meetings, the only three people representing consumers were legislators. The day’s sessions marked progress in his mind, because a utility representative mentioned consumers and how they fit into the equation. Proos believes that if utilities can get the world handed to them through legislative avenues, they will fight for that. He stated that consumers want transparency, and believes that while intentions on both sides of the conversation are good, everyone wants to influence the debate in his or her best interest. This is where he believes legislators come in: “If you can’t come up with the answers in this room right now, then it is up to legislators to come up with the answers in the bill that sunsets in 2015.”
The conversation then turned to interstate collaboration and the various models that states can adopt to achieve the requirements set out in the Clean Power Act. An audience participant noted that signs point to regional collaboration being an effective and likely model, and wanted to hear more on that from the panel. The responses echoed Janet McCabe’s earlier statement about the EPA encouraging such regional collaboration to happen. Chairman Quackenbush stated that the Michigan Public Service Commission is starting to engage with other states along these lines to explore whether states could offset one another’s reductions. Sonia Aggarwal referenced FERC Order 1000, which examines the efficiencies that could come out of regional alignments.
When asked about incentive-based regulation, Ron Binz spoke to the need for transparency in the regulatory process. “Wall Street needs to understand what states are doing,” he said, “so investors understand what is at stake.” He is in favor of a system where utilities can improve their earnings by more efficient performance.
The panel was asked for its thoughts on ways to speed up the transition to renewables and increased energy efficiency. Specifically, Chairman Quackenbush was asked whether the MPSC would work on incentives to decrease infrastructure costs associated with renewables. The chairman responded, saying that he had recently visited Sandia National Laboratory and was encouraged by the research on energy storage. He is hopeful that storage costs can be brought down over time, but indicated that he did not see that being immediately possible.
Binz added that Section 111(d) of the Clean Air Act will increase energy efficiency considerably because energy efficiency is a carbon reduction tool. He anticipates seeing companies that have not looked into carbon reduction using efficiency as way to deal with 111(d).
Catania brought the conference to a close by asking if the current political and regulatory systems are capable of dealing with the pace of change facing utilities as a result of rapidly changing market forces. Chairman Quackenbush answered with an emphatic “yes,” that he believes the 2015 Clean Power Act legislation will set regulatory bodies at a good pace to deal with these changes.
Binz had a slightly different message, saying that while the current system could likely get us where we need to be, it’s probably not the most economically viable way of doing it. He is in favor of enabling regulatory bodies to incentivize utilities to make the required changes.
Quackenbush responded, saying that he did not see the current regulatory system as broken, as can be illustrated by the healthy returns that utilities still enjoy. He agrees that the industry is moving in a new direction, and believes it makes a lot of sense to reevaluate where we are, where we are going and how to reshape the regulatory model to support that in a positive way.
The theme of customer transparency surfaced again, with Quackenbush reemphasizing the importance of people understanding what they are paying for. If all customers see is costs going up and they do not see value added, they will not be happy. On the other hand, if they can see why they are paying more — getting more value — they will be more accepting. A self-identified skeptic, Quackenbush wants to see the energy community asking the right questions and getting the right answers. He believes Michigan has fallen behind due to its lack of an integrated resource planning process, which he believes is integral to transparency in the regulatory process. Overall, he believes the key to success is a flexible and adaptable plan, over which the MPSC can call the shots.
Aggarwal closed the conference on a positive note, with another emphatic “yes” regarding the ability of Michigan’s regulatory structure to keep up with changing energy-market demands: If willing to work hard, today’s participants and the larger Michigan energy community “can change the tire while the car is moving.”
The conversation fostered by the second Michigan Energy Futures Conference is only the beginning. All the participants agreed that they looked forward to future conversations on the topic.