Envisioning a Future Without Investor-Owned Utilities – Episode 222 of Local Energy Rules

Mike Shriberg:
It seemed pretty clear to us that you’ve got this quick take ability, which actually could drive a major benefit, and it’s really worth it for folks who are looking at municipalization across the country to see if their states have similar statutes that can be used in this way because you put your finger on it: that’s the number one barrier is that IOUs will drag it out. They have every incentive to do so and they can spend almost unlimited sums in the courts. And none of us working at the municipal level have that same access to resources.

John Farrell:
What if there were meaningful alternatives to the for-profit, investor-owned utilities that could serve us up a cleaner, more reliable and more equitable electricity system? In a remarkable 400-page report called Roadmap to Clean and Equitable Power in Michigan, a group of 20 students put together an analysis of four alternatives to the existing utility system structure – from a statewide public agency to a sustainable energy utility. Joining me in September, 2024, Mike Schreiber, professor of Practice and Engagement at the University of Michigan School for Environment and Sustainability, explained the four alternatives and what each one had to offer. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly, power, energy, democracy, and how communities can take charge to transform the energy system. Mike, welcome to Local Energy Rules.

Mike Shriberg:
Oh, thanks so much for having me. Pleasure to be here.

John Farrell:
So I just want to start by asking you a question I like to ask all my guests, which is what led you to this work as a professor and then to support your students and looking at this issue of electricity system governance and climate change?

Mike Shriberg:
Yeah, there’s really two streams. One is my own interest and I’m relatively new to being a professor. I’ve been at University of Michigan coming up on a year and a half now, but long in energy policy, and most of my work has been in the nonprofit sector for various nonprofits, most recently the National Wildlife Federation. And then as a local advocate, I live in Ann Arbor, Michigan, and I’ve served on their energy commission for a decade and I’ve done a lot of volunteering around those kinds of works. So that’s one stream.

But the second and probably more important is that we had two partners come to me and my colleague Andy Bucksbaum, and these partners from Michigan Climate Action Network and the Michigan Environmental Justice Coalition. And they really wanted to think long-term and have “unbiased” analysis. We know there’s no such thing, but like an analysis that takes an objective look to guide their work in the future. You only have so many chips in the nonprofit world, and elsewhere, and so much time. And they were thinking about what could be most effective if we’re thinking about governance and energy governance in Michigan over the long term.

John Farrell:
Well, I love how this came about and I was hoping you could talk a little bit on how this report was developed, maybe starting with what were some of the initial questions that either those partners had or that you and the students had that you were looking to answer?

Mike Shriberg:
Yeah, I mean, so the initial questions were really what if we envisioned a future either without or with a diminished role for investor-owned utilities? And it was started that big and broad, and this is in the wake of something, I know you’ve covered well on the show, but some bruising energy battles here in Michigan over time and some local energy battles that have been going on. And the NGOs wanted to take a step back and look at the big picture. And so we started what I would call a really iterative process here. We brought together top grad students from across different fields. So not only environment, public policy and law, some of the places you might expect, but also business physics, information systems, engineering, social work, public health – you name it, we had it. We had this incredible group of students apply to do this work and they had to apply, we only could take 20 of them. And that brought them together for this iterative process. And then we started developing criteria, reliability, affordability, equity, and sustainability and trying to figure out how we compare across different options.

John Farrell:
Now, the summary of the report I think does a really nice job of explaining its purpose, and I’ll just read a quote from the report: “Michigan’s laws and policies are proving inadequate to solve our energy problems given a spiraling climate crisis, increasing energy, consumer demand, rapidly increasing costs and decreasing grid reliability.” Could you illustrate maybe with some numbers or examples like what Michigan electricity customers are facing and why this is so important to address?

Mike Shriberg:
Yeah. Well, I mean maybe the basic example is I was out of power last week, and so were many of my friends and colleagues. Michigan has some of the highest costs, lowest reliability and lowest environmental values of anywhere, certainly in the region and in the country. People are frankly fed up with the utilities and there’s been good work done at the legislative level as far as it goes. There’s been good work done by our current governor and her team on that, but I don’t think anyone would argue that we’re moving fast enough right now compared to both the climate crisis, and compared to the equity and justice challenges we have, and on reliability for sure. And so we’re still not getting the best possible options for electricity, and that’s no different than most places in the country. But what’s happening is that communities like where I live in Ann Arbor are still stuck with this outdated grid, but want to do more. They want to do better. They actually want to get away from some of the dirtier fuel sources. And so these debates have been spiraling and heating up, and I know you’ve covered some of them here. It’s not just in the little enclave where I live in Ann Arbor, but it’s popping up in Detroit and the metro areas, it’s popping up in the rural communities here. And we kind of realized that the analysis of this wasn’t keeping up with the demand for it. And so that’s why we brought this group together and we paired the students of course with, we’ve got a lot of expertise both here at the University of Michigan on faculty, but we also brought in experts from across the region, public service commissioners, all kinds of energy consultants and people to kind of bring that knowledge base up really, really quickly. It was a learning process and I don’t mind saying a learning process for the faculty, myself and my colleague Andy as well. And really intense, really intense. And the results I know is over 400 pages of analysis among other things. It’s a dense product, but that’s because of the thought that went into it and the complexity of the issues that we’re looking to address here.

John Farrell:
Well, I appreciate you giving a nod to some of the things that we’ve already talked about on this podcast. Just for people who want some specific things, Episode 207, I had Gregory Woodring who’s the president and founder of Ann Arbor for Public Power to speak about that local issue and discussion of electricity governance in Michigan. And then we also had on episode 189, Alex Hill from We The People of Michigan talking about the issue of reliability, which obviously was something very recent for you and the disparity in the quality of the distribution system. So I’ve already had people on to talk about some of those issues specifically in Michigan, giving a lot of really good context that I imagine also informed your report.

Mike Shriberg:
Yeah, yeah, and I’ll say John didn’t tell me to say this ahead of time, but we use so many of these podcasts as our background too, an incredibly rich source of information. And frankly, there’s not a lot of information out there in what I’d call the academic literature, in the peer reviewed literature, that’s looking really deeply at these sort of local energy options and these alternatives. They’re both new and there’s not a lot of people studying them out there. So we were digging deep for information sources and using a lot of the conversations like we’re having today.

John Farrell:
So I want to start getting into the report here and hearing a little bit about what you discovered, what you were researching. The report offered three alternatives to today’s grid model that is reliant primarily on for-profit, investor-owned utilities that have a monopoly to serve a certain region of the grid. And you also had one option that’s focused on reform of that existing system. Could you just give a high level overview of the four options, then we’ll start to dive into them a little more?

Mike Shriberg:
Sure. And if we sort of array them in terms roughly of how radically different they would be from our current system, we’d start with analyzing what it would be like to have a statewide public utility. So this would get rid of investor owned utilities, and essentially have a co-op or a municipal model for the entire state and not have private companies. So that’s probably the most extreme in terms of differences.

The second would be something that probably people are very familiar with, but it’s the expansion of municipalization. It’s been very stagnant, stagnant here in Michigan for reasons we can get into if we want. But what would it look like to have an expansion of that model?

The next one, and probably the least known would be the sustainable energy utility. Washington, DC and Delaware, are places that have these functioning, but it’s essentially in the model that we were looking at allowing a municipality to operate their own utility alongside an investor-owned utility without taking over the grid and the property. So it’s sort of that middle ground on that.

And finally, the option that people are probably maybe the most familiar with, the reform of what we call here the Public Service Commission. Every state’s got their version of this, but separate out a little bit about what can be done now and what would require a new legislation, and basically trying to take the best cases of how you tweak the current model on that.

So if you array it from basically tossing out the current model completely and changing it to how we can do tweaks to the current model, that’s what we analyzed,  those four options. They don’t neatly fall out on a grid, but that’s roughly arrayed with how radically different they’re from our current model.

John Farrell:
It’s probably worth noting that option one, having a statewide public utility was sort of what was on the ballot in Maine last year with Our Power Maine campaign, and we did have someone on from that campaign to talk about how that turned out, which I won’t spoil the surprise for people who haven’t listened to that episode. But then we also did a six-part series on public power called the Promise and Peril of Publicly-Owned Power that kind of covers what you’ve talked about in option two, and I’d love to talk more about those two public ownership alternatives.

So I’m sure listeners to this podcast are pretty familiar with the idea of city level public utilities. There’s already over 2,000 of them in the US. So can you talk a little bit about, if I understand correctly, you were looking at this idea of widespread city level utility takeovers, that option two in the analysis.

Mike Shriberg:
Exactly, exactly. And what we did is we weighed the pros and cons, and there’s debates raging here as there are elsewhere. And it’s interesting because the general conclusion, and we kind of did this red light, yellow light, green light in terms of looking across different criteria, but the general conclusion is that it can be beneficial to individual communities who have a good setup for municipalization if they’re set up, if you have the right sort of politics behind it, if you have the right funding behind it. But there’s of course no guarantee that you actually get the climate reliability and affordability benefits. You sort of get what the community demands and can get out of it. You probably have a better shot than you do with investor owned utilities. But one thing that we looked at, which I don’t think had been done before, is if you take this model and say there’s more of them and say there’s public support for building this, part of the thing is there’s a big initial cost to this.

Well, what if you had pooled resources? What if you had state funds going towards it? It gets a little tricky on the equity criteria because it’s probably good for the municipalities themselves, or it can be, just the profits from IOUs being transformed into community benefits. But it’s probably bad in terms of rate structure for those outside the boundaries who are still stuck with investor-owned utilities now taking away rate basis and all those other things. So we looked a lot at those justice implications and it’s a mixed story. And of course, I mean they’re all case dependent, but the municipalities are even more, I think, location dependent in terms of what kind of benefits you get out of it. So it wound up as kind of an option, I’d say in the mid range with a lot of pros and cons, but when you start scaling it up, it does create this equity challenge that’s so jumped off the page to myself and the students working on this.

John Farrell:
It’s so interesting. I want to just dive into that for a second. I think it’s something a lot of people don’t think about, but if the city of Ann Arbor, for example, went through with its public power campaign, exercised its right of eminent domain takes over the infrastructure from DTE, what you’re saying is somebody who lives a mile outside of Ann Arbor still is a DTE customer, and DTE is now maybe not as well off, for one thing, because they’ve lost the customers in Ann Arbor, but they’re also not going to see any of the benefits of Ann Arbor’s public power system. And is that partly to do with the laws around municipalization, that Ann Arbor can’t extend its publicly owned utility to serve people outside the municipality?

Mike Shriberg:
That’s correct. So the laws, and I honestly don’t know how widespread this is, the laws in Michigan under our state constitution, our municipalities can only serve within their municipal boundaries. So, right, if you are a hundred feet or a mile or 10 miles outside, you can’t be served by that municipality. And a case like Ann Arbor, which is not unique in some ways in one bordering town, Ypsilanti is an underserved community that would be hard-pressed to have higher rates. You’ve got a rural community in one direction, you’ve got a suburban community of Detroit that’s relatively well off than another. Well, all those communities would be impacted quite differently when you take away a rate base of relative wealth and certainly of high demand like Ann Arbor because of the University of Michigan and some of the other things that are contained within it. And so a lot of it, of course, depends on how you set the boundaries of systems that when you do this analysis. It’s sort of an obvious conclusion. But it’s something that we struggled with a lot is how do you assess that? And we decide to assess, if you look statewide at municipalization, what would happen and the justice and equity criteria start to not look as good at that moment.

John Farrell:
You kind of alluded to this idea of there’s a big upfront cost for municipalization. It’s something that drives me crazy when it gets brought up because of course when you’re really buying, when you talk about a public power thing. it’s not like you’re buying a bunch of infrastructure only you’re buying customers, you’re essentially buying out the right to serve an exclusive set of customers. So the idea that it is expensive is both true and also a little bit misleading because you’re also buying the people who will pay the bills for that infrastructure. Now I know there’s a whole debate, of course, about what that price is that you’ll pay, and that is something I’ve talked about on this podcast that utilities try to jack up the price and make it less affordable for communities. Can you talk a little bit about this idea of potentially creating a pooled resource for municipalization efforts? And is there any way, on the flip side, I’m thinking of Boulder, Colorado where they had the money as a community to pursue it, but they still spent a decade in basically public referendums and litigation to try to do the takeover. Is there any way to shorten that part of the process, or did that come up at all in the research?

Mike Shriberg:
Yeah, so it did. And one of the things that the law students, and my fellow, I’m not an attorney, but my fellow faculty member who taught this with me, Andy Bucksbaum, is, they found that there’s actually quick take legislation here that new municipalization campaigns can take advantage of, meaning the fair price for the muni gets determined upfront and you can start moving forward without these 10- to 20-year battles.

And of course, folks like Greg who you talked with with Ann Arbor for Public power, were really interested in this, because you’re still going to have court battles that rage probably for a long time because it’s in the IOU’s interest to drag this out as long as possible. But in the interim, that customer base is part of the municipality and actually the assets have transferred over. And so I’m not sure exactly how many states have laws like this. This would be challenged in the courts and all that, but it seemed pretty clear to us that you’ve got this quick take abilities, which actually could derive a major benefit. And it’s really worth it for folks who are looking at municipalization across the country to see if their states have similar statutes that can be used in this way because, you put your finger on it, that’s the number one barrier, the IOUs will drag it out. They have every incentive to do so and they can spend almost unlimited sums in the courts. And none of us working at the municipal level have that same access to resources. So there’s a few Ace in your sleeve things like that that this report brought out. This is probably the biggest of those.

John Farrell:
If you have a link to the particular statute, I’d love to share it on the show page because I think people would be very curious about that. Although of course once I publish it, I feel like there will be a raft of legislation being passed in various states, making sure that that isn’t available. One of the things that we’ve seen is how the laws around municipalization – I think about the example in Minnesota specifically, and I cite this in a report I recently published – that after the investor-owned utility lost a case in front of the Supreme Court over a fight about municipalization, the state legislature just the very next year passed a law making it harder for cities to do public power takeovers. So it is kind of that connection between the political power of utilities. So I’d love to hear more about the quick take process, even if it’s only available in Michigan at this point, I think people would be very curious to hear a little bit more about how that works.

Mike Shriberg:
And it might very well be available in other places. I just don’t know. Our analysis was specific to Michigan, but I’d be glad to provide the links to that, and it was an exciting finding.

John Farrell:
So I’m going to come back to, I mentioned very briefly about how Maine had a campaign on this, most aggressive strategy of a statewide public power agency or cooperative agency. Could you talk a little bit more about what that would look like and are there any examples out there either domestic or international that we’d be able to borrow from?

Mike Shriberg:
Yeah, well, the short answer is no on the examples, at least in that domestically, I mean, we basically modeled what it would look like largely if Maine’s efforts had gone through. If it had gone through, and I imagine most of your listeners have paid attention to the debate here. Nebraska is the only state where something like this exists. But I think the best way of thinking about it, at least when we were starting analyzing this, it’s like how do we explain it? It’s kind of like if a co-op covered the entire state, that’s probably the best example of that. And then individual cities or municipalities could keep their municipal utilities, but you have a public authority that covers the entire state. We had to make a bunch of assumptions here, right? Because it doesn’t exist. We brought in some utility economists to help us kind of look at the cost of this. We kind of leaned on our students who are in the business world, someone who had significant consulting backgrounds to kind of do the assessment part of that and looked at the implications. But it really is out on a limb a bit because it’s a developing model. And we tried to take a look at what we thought were some of the best parts of what was on the ballot in Maine, combined it with some of what’s happened in Nebraska, and then use best practices for co-ops and kind of look at a model like that to form what we think would be the best statewide public power agency in Michigan, if it existed.

John Farrell:
That’s great. Thank you for giving that overview. Well, I invite people to read more about it in the report and how that model would work. I know it also, it makes me think of, I know there’s been a campaign in New York to have a statewide public power procurement agency that would focus particularly on electricity generation, which I think would be a little bit different from this. But it’s kind of interesting to see how there are these different overlapping ideas that folks have out there about how to exercise more public authority over this very important public service.

Mike Shriberg:
And the basic premise, I mean I know you covered this in many different ways, is that this is an essential public service. Why shouldn’t it be something that’s covered in the public way? Other services throughout the state are, I mean, it’s just a basic principle on that.

John Farrell:
So we’ve kind of covered the two most ambitious options, the sort of statewide public option, the city by city public option. I was hoping you could explain the sustainable energy utility in part because I still have a little trouble wrapping my head around it. But this idea that it’s sort of the parallel city-run utility to the incumbent utility, I just want to note that it’s scored the highest among the four models on the quick check metrics of climate, reliability, energy justice, and affordability. But it also, if I understand it correctly, kind of relies on people to opt into the services from that local sustainable energy utility. So I guess what examples did you have out there that gave the research team confidence that it could perform so well when history, I feel like, suggests that for a lot of these things involving energy choices, it’s hard to get people to opt in to an alternative.

Mike Shriberg:
Yeah, yeah. I was a bit surprised by this overall that it came out so well because it’s the newest idea and probably the least tested in some ways. But obviously the big advantage, and this kept coming up over and over again, is that you get to essentially shed the investor-owned utilities, but without the legal battles and the massive expense of taking over the assets that most of these assets here in many places haven’t been taken care of well, and aren’t necessarily useful for the modern energy economy. So when you start off with that base, and you can do it quickly, at least in Michigan where this falls under the constitutional protection of municipalities, municipalities can start this immediately. So here in Ann Arbor, it’s actually on the ballot in November, so it’s coming right up to actually form this. It’s actually not even a hundred percent clear that you’d have to put it on the ballot, but I think the political decision makers here decided let’s do it that way because then we are a hundred percent secure and politically that it’s going to be advantageous.

But the disadvantage is as you point out that it’s opt-in, and it takes a bunch of savvy, and it takes a bunch of time from municipal staff or the staff of the sustainable energy utilities. So it remains to be seen how much opt-in you’d get. Ann Arbor is making the argument that it’s going to be cheaper, it’s going to be more efficient, it’s going to be more reliable, and you get your renewable energy with it. And so people are going to jump at this opportunity. But the scalability is difficult on this. And one of the things too is you cannot build alternative grids unless they’re connected by people who opt in. So let’s talk about stringing together local solar, having a battery backup that, say, is shared by a block, there’s a problem. You can’t cross property boundaries unless people opt in. So there are difficulties in that piece.

And so the pathway to do energy efficiency and home solar on there is pretty clear. I mean, you’re just operating an efficient energy service provider essentially, but you’re doing it with the advantages of municipal finance and things like that when you start talking about community power, when you start talking about community solar, I think it’s got high potential, but they’re also really high barriers. And the other thing of course is that the IOUs are going to throw out every potential barrier to this because it is direct competition without having to pay for the asset value that they’re trying to inflate, as we were talking about earlier. So there’s a beauty to that, but the investor-owned utilities go after this option in any possible way they can. And we don’t even know exactly how they would because it doesn’t exist yet. But I guarantee that to DTE this is something that they are very, very concerned about.

John Farrell:
I mean, I can imagine, based on some of ILSR research around the way that utilities exercise market power over interconnection, you’re not buying those grid assets. And as you say, they might not be in very good shape, but they might also be really useful for that individual customer like, oh, I’ve got a solar project. Am I under the SEU going to set it up? So it’s like a standalone or very often it’s more advantageous to have it grid connected. Maybe there’s compensation for excess generation, for example, that I can get that might be cheaper than a battery or I can get that in addition to a battery. So I can imagine a few things already that the utility might do. Yeah, and I guess actually one follow-up question I did want to ask you about in part because you had this sort of broader team beyond folks that just work on energy policy is on this question of crossing private property.

I remember back when we did research on microgrids like a decade ago, and unfortunately things haven’t changed much, the real barrier was on the multi customer microgrid, it was can you connect basically multiple electric customers either going across public right of way like a street, even if it was like one city block and everybody opted in, like neighbor to neighbor. I’m thinking about, okay, so you have the right to connect people, maybe people are willing to opt into it, but how do you structure the legal framework for that? Would you do, maybe you didn’t even get into this, but I’m already thinking about 99 year leases or easements that maybe you have for someone who shares a driveway right now you have that for sharing an extra power line that’s going down the alley. I don’t know, it just blows my mind this idea of how do you address that? And maybe that’s what you were saying is that idea of multi customer stuff is so complex, but there’s lots the SEU could do for individuals,

Mike Shriberg:
And it’s exactly what, and if we didn’t get into that level of depth, but it’s exactly what the city of Ann Arbor is working on now. And hopefully if a ballot, and I’ll just say personally, hopefully if this ballot initiative passes, that’s going to be the next step. And we’ve got a super innovative city leadership here, Missy Stoltz, who’s our director of sustainability and climate action, I didn’t get title quite right, but at the city who’s leading this is looking into these very things and is starting to hire out some expertise to make that happen. The legal framework of being able to interconnect is there, municipalities have that ability constitutionally protected and people can opt into it, but how you structure it is mind bogglingly complex. And this would be groundbreaking. Be groundbreaking.

One of the things that I think that’s happening, and I think it’s happening in a really smart way, is starting with some very low income neighborhoods that have had a lot of education on energy efficiency and renewables, and they’re already operating in sort of a community focused way. So there’s one particular area of Ann Arbor where a lot of this action has been focused, and that both is a smart way to do it. It’s also just and equitable way to do it, and it’s a way to build support within the community kind of from the ground up. And so that’s one approach. It’s already underway here, but if the SEU sustainable energy utility gets off the ground, which I hope and expect it will, that’ll accelerate because right now it’s really just energy services on a one-on-one basis, as opposed to being able to do that as an entity and operating essentially as a utility, but without the shackles that come with the investor-owned utility’s assets.

John Farrell:
Yeah. One last question and then I want to get to your broader topic on the utility reform proposal. I was just as we were thinking back to the conversation about, I thought about community choice energy or community choice aggregation, which I know one of Michigan’s neighbors Ohio has had for quite a long time. This involves the city, again, not taking over the grid, but getting to take over the procurement of electricity for its residents and small businesses. The reason I thought of it is of course, because the successful versions of this really relied on an opt-out model. So when the city passed the legislation to create this community choice provision, customers would by default be enrolled with the city and they could opt out rather than opt in. Is community choice something you looked at at all in this report, or did you glean any sort of insights from the opt-out opt-in concept that’s part of that?

Mike Shriberg:
We didn’t look at it. You can’t do it right now in Michigan. It is banned. And as someone who grew up in Ohio, it’s always painful for me to show that Ohio is ahead on this and some other things actually that we’ll talk about in a minute. But we did not look deeply into that just because it would take a legislative change to allow that to happen.

John Farrell:
Yeah, fair enough. Well, let’s get to the utility reform option. I’m interested in this for a couple reasons. One is because the one I’m most skeptical of coming into this conversation personally, but also just because I imagine that a lot of folks who are working in this space will gravitate toward it because of the uphill battles to do with a lot of the other ones, obviously municipal takeovers, statewide public power, not an awesome track record of success over the past couple of decades. Super curious to see how the sustainable energy utility thing turns out. But I think a lot of folks have been focused on this idea of can we reform the way the system works to make it work better? So can you just start by explaining what were the key four components of the utility regulation reform proposal that was part of your report and your investigation?

Mike Shriberg:
Yeah, so first, performance-based regulation. So this is, I think people are familiar with this generally, but it’s linking utility revenues and rate making to performance, not just sales and trying to do that well.

The second is promoting innovation, so lowering barriers to change and barriers to innovation right now. And again, something that’s been tried in different places and the thought was, what if we put together some of the best models of this?

The next is doing a percentage of income payment plan. So this is actually tying rates to income levels, again, experimented on, and a couple of places are doing some of this quite well. What would the best models of this look like?

And finally having an office of consumer advocates, so formally representing utility customers in proceedings under the egis of state.

And so those are kind of the four components. And what we looked at are what have been some of the most effective components out there in our view so far. And I agree with you, I think many of these “effective,” I’d put that in air quotes because sometimes it’s work, but probably not to the level that many of us would hope. But what if you combine this together into the most powerful push possible? How far can you get towards those goals of sustainability, reliability, affordability, and equity?

John Farrell:
We are going to take a short break. When we come back, I ask Mike to talk about the evidence behind performance-based regulation, why we should trust utilities with innovation and how to implement income indexed electric bills. You’re listening to a local Energy Rules podcast with Mike Schreiber, professor of practice and engagement at the University of Michigan School for Environment and Sustainability. Hey, thanks for listening to Local Energy Rules. We’re so glad you’re here. If you like what you’ve heard, please help other folks find us by giving the show a rating and review on Apple Podcasts or Spotify, five stars if you think we’ve earned it. As a bonus, I’ll gladly read your review aloud on the show if it includes an energy related joke or pun. Now back to the program.

So I’d love to dive into the performance based regulation. Is there a decent record or evidence or examples of that working around these aims of climate progress, affordability and equity in the US?

Mike Shriberg:
There are, I would say a few examples that may start working well, and Hawaii might be the best of those. Hawaii has been sort of working on this and has got its plan in place and it’s predicted to work by lowering costs in increasing the environmental attributes of the grid. But there are also some concerning trends in that. So it’s unclear how it’s going to go. And that’s the same in Connecticut. Connecticut’s has been working towards this in some ways, but it’s early on. It’s also unclear how it goes. So I wish I could give you a more definitive answer on that. I think the answer is we don’t know. We don’t know. And I’ll just say I personally share some of the skepticism on this overall, but I also think it’s important to look at this as in the short term and to take a clear-eyed look at what some of the states have been doing on this and kind of see how they play out. But none of them are far enough along right now to know. I mean, the case in Michigan, it’s like, I don’t want to say this in a more neutral way, but we’ve been studying it since 2016 and I see no evidence that it’s actually been put into place in any significant way besides really tweaking around the margins. And that’s not what we’re talking about here. If it’s tweaking around the margins, it’s not going to work or it’s not going to hit those aims.

John Farrell:
It’s so funny you mentioned that. I remember there was a process, it had a shorthand name, I think it was like E21 or G21, similarly in Minnesota, and it was going on for a number of years, a broad stakeholder process. Utilities were in there, NGOs were in there, academics in there, businesses were in there and they got to the point of kind of agreeing like, Hey, we think there could be some really good outcomes from trying some more performance-based regulation. And it wasn’t throwing everything out of the incumbent thing, but it was kind of like, how do we create incentives and penalties that might direct toward the outcomes that we want to see? And the next phase was, Okay, we need to bring it to regulators or to the legislature in order to enact that change. And the utilities just dropped out of the process at that point. We’re like, well, it was interesting to study it. Thanks for spending all that time, but we’d rather not change how this works because it works out very well for us. So I’m sure that one particular anecdote, being from Minnesota and having watched that take place here has colored my perception of how effective we can be in getting it into place in other places. But I’d be very curious to see how it turns out in both Hawaii and Connecticut for sure.

Mike Shriberg:
Yeah, and I think that experience is similar in the political power and the market power of utilities is huge. And actually one thing I meant to mention upfront, but I don’t believe I did, is that we did not look at the political feasibility of these options in the short term. We should have maybe framed that upfront. And that’s because our partners in this really wanted to look big. They wanted to look long term and in the long term, anything’s politically possible. So we didn’t rate these on whether you could politically overpower the utilities or things like that. Michigan’s got a structure where there’s two utilities that control 90% the market and are probably the most powerful forces in the state legislature. So you have very strong incumbent utilities politically here. But we were looking at it based on sort of the policy long aims and against criteria, not against the politics. I wasn’t saying you were giving difference, but just reminded me that I forgot to mention that earlier.

John Farrell:
Yeah, I appreciate that. Well, I’ll come back to that particular question about political feasibility later. So I think it’s good that we’re teeing that up now. Let me talk about the second reform provision. So the first one was the performance based regulation. Then the second one was this idea about sort of an innovation sandbox. I guess one question I had about that was why go through a process of creating an “innovation sandbox” as it was called for utilities who aren’t just sometimes opposed to things that are different but also have sort of a conservative culture of how they operate. Why look to do that as something that they would do as opposed to figuring out how existing companies that are doing innovative things like virtual power plants maybe in states that have sort of more open tariffs or markets figuring out some way to bring that kind of innovation in?

Mike Shriberg:
Yeah. Well hopefully it’s not either/or, but this was a work within the system type of option. So whereas some of the earlier options were throughout the system and start fresh, this was kind of a look at what can we do within the current system. And when you talk about things like we were just talking about performance based regulation and we’re going to talk about some things related to income and others, you actually have to provide some way for innovation. Otherwise we’re stuck in these same boxes. I mean, utilities have an incentive to be conservative, and that’s not necessarily wrong. You don’t want your electric utility taking unnecessary risks, but the structures that they’re under right now do not allow for a lot of innovation even within the rules. And then when you go outside of that and the IOUs have almost no incentive to go beyond that, so you have to set this up. And Connecticut I think has done a nice job with piloting this and sort of fast-tracking changes and things like that. So I guess the bottom line is it’s done either orbit within the structure we have in the state, the virtual power plants, I would love to have options like that. They’re not going to break through with the current legal and policy structure we have.

John Farrell:
It’s helpful to hear though that there is at least one place that is finding a way to allow the utilities to do that. And hopefully once you see something successful like that come through, it helps to start changing that culture of like, well, we can try something and it’s okay for us to try something and we’re curious to do it, especially if it’s tied into a way that they can earn money other than the traditional way.

Let me ask you about the income index payment plan. So the third component of utility reform, I’m sort of curious in terms of the mechanics, how that works as a customer. I suppose someone has to know my income for me to have an income indexed payment plan. How did your group envision finding that information or setting what somebody’s bill would be like?

Mike Shriberg:
Yeah, so it has to be opt-in unfortunately, or I say unfortunately just because a lot of low, low-income customers based on experience don’t actually opt-in to it. And so you can know based, there is some publicly available data that helps you target which customers may be eligible, but the only people who really know their own incomes and can verify are the customers themselves. So that is the achilles heel of this particular one. And I’ve worked actually more on this within the water sector, and that happens, it’s the same problem. You can target your marketing and engagement around folks who are predicted to have these lower income levels, but because of confidentiality and other things, people actually have to prove or they have to show what their income levels are and opt into it. So that does limit the reach. And unfortunately, some other places have found that they’ve actually limited the number of people in the program so much that when people do try and opt in, it’s been full. Obviously that’s an administrative problem, what’s happened in some places like Ohio and elsewhere, but ultimately people have to opt into it.

John Farrell:
Did you look at all, I know, and maybe you didn’t, which is fine, but I know one of the things that I’ve heard that was kind of intriguing, I don’t know if it was around utility bills or maybe it was around community solar, but kind of some emerging conversations about partnerships with the state agencies that manage either family assistance dollars or food stamps where it’s sort of like if you are already in that program, you’re automatically enrolled in this program under the utility thing. Is that something that was possible or is that something where, as you were alluding to, confidentiality laws would get in the way?

Mike Shriberg:
We didn’t look deeply into that particular thing, so I’m not sure what the bottom line was, I’m not sure about that one. This is where it’d be helpful, the students who were doing all this detailed work, maybe they actually did, and I’m not recalling it at this moment too, so I don’t want to speak fully on that, but I don’t recall that. That’s probably the better answer.

John Farrell:
Yeah, sounds good. Now I get to ask you to speculate a little bit. I imagine this is not something you talked about so much in the report, but obviously something I think about a lot is in terms of the implementation of a utility reform scenario, there are a number of examples of utility regulators who are, to put it generously, very ineffective. From the Alabama utilities not being required to do rate cases for decades, to Ohio regulators taking bribes from the utility companies they’re supposed to oversee. So I guess I’m curious, to what degree do you see the success of the utility reforms relying on having utility regulators that are doing their job effectively and holding utilities accountable? To what degree is that an important component here in terms of the implementation? And is there anything else that we can do to make sure that that continues to be the case in the long run?

Mike Shriberg:
Yeah, I mean it very much matters having regulators do their job on that, and that’s proven hard. And the examples that you just gave, Alabama and Ohio, are two of the extreme examples there. There’s a couple of things that you can do of course to make it more likely they are. One is something that we were talking about, which is having an office of consumer advocate right in there. So within state government internal accountability, not that on the other end of this, as I worked for a while at the Public Interest Research Group and we were sort of rate payer advocates and got some money from the utilities to come knock on the door and say, Hey, are you considering what these rate impacts are to other people? But there’s no substitute for having someone within state government. And then the other thing I’ll give, and this is maybe a more general answer to this, is that having some of the right people, and I’ll tell you something that gives me hope on this, and it is just a little microcosm from this group. I had this extraordinary group of really, really hard working students on this that went above and beyond. There was at one point in this project where one of the students said, I could tell she was working hard on this. I said, how many hours are you putting into this class? She goes, oh, for this class, 40 to 50 a week.

John Farrell:
Wow.

Mike Shriberg:
And for this particular class, she was like, that’s my last semester. This is what I decided to focus on and I’m just doing it. And this individual now actually works in the utility regulation space and actually three of these people out of these 20 currently work either at network or one of the utility commissions right now. And so that gives me great hope. We need incredibly smart minds like this who are helping and that are in that regulator space and the fact that these students actually were interested in that space and brought in, and that there are jobs available now, and that’s where we’re seeing infrastructure dollars and other things that are being pumped into this. And so that gives me some hope on it. I don’t want to be Pollyannaish on it because it does depend on things that we’ve seen have failed time and again, and the power of incumbent IOUs can never be underestimated, but I do see some glimmers of hope there.

John Farrell:
I’m going to skip my last cynical question about utility political power because I think we all recognize that it is something that we have to contend with and just ask you instead. Do you imagine that the reform options that you’ve been exploring in Michigan could work in other states too?

Mike Shriberg:
For the most part, yes. When you look at sort of the principle level and the basics of it, and if you look at the report, the chart that kind of compares these four broad options across the different criteria, those generally apply across the different states. Now there’s nuances in each one and the legal parts like sustainable energy utilities work better in Michigan because municipalization is enshrined in the constitution. It’s not something that the investor owned utilities can go after. And then there are parts within Michigan that make it harder to do that. One thing that I would say that’s fairly basic and I think underutilized and our students turned up and some of the law professors that we’re working with is that states are probably not using the just and reasonable or the reasonable and prudent standards – that are pretty much in every basic energy law and every statutory authority of public service commissions and others – to the maximum extent.

Now, some have started to push on that. In Minnesota, for example, started to use that more aggressively. Well, that’s universal. You can actually get some of this done, we think, under existing authority without having to go back to the legislature. But in each state, it also does depend on what has to go back through the legislature and what are the politics of the moment for that and what are the politics of the investor-owned utilities. So I’m going to give you the really precise answer of yes and no. In some ways, yes, in some ways, no, I don’t know how I can do it much better than that.

John Farrell:
I think that’s very fair. Is there anything I didn’t ask you about this report that you think is kind of an important finding or important lesson for folks who work in climate and clean energy advocacy or who work in the utility regulatory space?

Mike Shriberg:
I think the biggest thing is to think about the multiple criteria that we have for advancing energy reform or however we think about it and how they can play against each other in a positive way. So one of the things we talked about is sustainable energy utility rose to the top because there are some strong justice criteria that can be part of it, and it depends on how it’s set up at a local level. But because you have the option and because you’re controlling some of the pricing and because you can provide direct services to customers, you can get those multiple benefits. And I think sometimes, in this world, advocacy and people focusing on a particular facet of the energy debate, we’re not looking across the different criteria and then at what it means.

The second thing I’d say, and we talked about this a little bit, but what it means outside the boundary of your own community. We talked about this with munis because what if you’re a hundred feet or a mile outside the boundary of the muni? What does that mean for the whole system? Because when we’re talking about the wholesale changes that we need and our electricity delivery, we have to kind of lift up that level and look beyond the boundaries.

So just sort of at the principle level, those are a couple of things that jumped out to me and what was an incredibly rewarding, intense process. And we’re just in the stage of starting to distribute the results, and people have been really interested to see this work because it’s a little different take on some of these questions that you and others are wrestling with on a daily basis.

John Farrell:
Well, Mike, thanks so much for joining me to talk about this report for folks, again, a reminder, it’s called Roadmap to Clean and Equitable Power in Michigan. I’ll have a link to it on the show page, but a tip of the hat to you and your students for some incredible work investigating these really challenging questions of how do we get from where we are now to a future of climate justice and clean energy and the different pathways there.

Mike Shriberg:
Well, thanks and thank you for having me. And I just want to give the credit to the students who did this incredibly hard work. I spoke before about how that was to me, maybe the best part of this, and what felt empowering and hopeful was all these incredibly bright young minds who were so focused on this, in some cases, to the detriment of their own sleep and their other classes and things like that. They got so into it and it just showed the power of this and people searching for a new and better way. So thank you so much for having me. I really appreciate the conversation.

John Farrell:
Thank you so much for listening to this episode of Local Energy Rules with Mike Schreiber, professor of Practice and engagement at the University of Michigan School for Environment and Sustainability, where we discussed Roadmap to Clean and Equitable power in Michigan, a new report on alternatives to the Monopoly investor owned utility electricity system on the show page. Look for a link to the Roadmap report and to the quick take legislation we discussed related to municipalization. We’ll also have links to the many related local energy rules podcasts, including two with public power advocates in Maine with Lucy Hochschartner in episode 197 and in Michigan with Gregory Woodring in episode 207, as well as our six-part series on the promise and peril of publicly-owned power. We’ll also link to my discussion of disparities in Michigan’s electric grid with Alex Hill in episode 189. Local Energy Rules is produced by myself and Ingrid Behrsin with editing provided by audio engineer Drew Birschbach. Tune back into local energy rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.