Commission Failed Georgians in Nuclear Fiasco — Episode 176 of Local Energy Rules

Patty Durand:

There’s no scenario in which a for-profit company would miss their budget by more than twice as much, miss their delivery window that they’ve committed to by more than seven years, and still make a profit on all of it. So a monopoly shouldn’t be able to do that either.

John Farrell:

At the heart of the entire structure of the U.S. electricity market is an assumption that electric utilities that have a monopoly over delivery of power can be held accountable to the public interest by public officials who have been elected or appointed to a state public service or public utility commission. But where are the gaps between the ideal and the practice? Patty Durand, candidate for district two of the Georgia Public Service Commission, joined me in January, 2023 to explore everything from election hijinks to grossly overpriced nuclear power plants. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is Local Energy Rules, a biweekly podcast sharing powerful stories about local renewable energy. Patty, welcome to Local Energy Rules.

Patty Durand:

Thank you. Thank you for having me. I’m excited to have this conversation.

John Farrell:

So I wanted to start off by just asking you, you’re a candidate in Georgia. They elect these regulators that oversee the utility companies. You’re a candidate running for the Georgia Public Service Commission. Could you just start by talking about what it is that motivated you to run? Why do you want to serve on the Public Service Commission?

Patty Durand:

Sure, absolutely. Initially I was not interested in running for any office. I have no lifetime career goal of serving as an elected official. But I worked in energy for a long time. I ran a national nonprofit called the Smart Energy Consumer Collaborative and that nonprofit did research on consumers and grid modernization. And before that I worked at Georgia Tech for a while on smart grid projects. And before that I ran the state chapter of the Sierra Club in Georgia. So I had originally changed my career from working in IT, information technology, to working on climate change issues, which is why I left it to the Sierra Club. And then I left the Sierra Club to work on grid modernization, the smart grid, because I thought it was a faster way to scale up renewables than what the Sierra Club was doing, although they’re doing very important, very good work. But I thought if businesses led the change, that would accelerate what I saw as a lack of interest from businesses in renewables. Of course, this was a while ago, we can’t say that now.

So I ran SECC for a decade and that gave me a front row seat into what was happening across the country at other state commissions with other utilities. And I saw a lot of great work. And then I would come back to Georgia and be disappointed that those things weren’t happening here. And there was one incident in 2019 where the Georgia Commission was considering and eventually did adopt a demand charge rate plan for residential consumers. And I was invited to present some of our research during the rate hearing that showed that consumers didn’t want that rate plan and didn’t understand that rate plan. And I brought other research from RAP, the regulatory assistance project, showing that rate plan actually harms consumers.

But that rate plan passed and I was surprised and disappointed and I went to see my opponent to ask him, at that time he wasn’t my opponent, he was just one of the most approachable commissioners, to ask him why he voted for it and why the commission allowed this to pass because it clearly harms low income customers. And he did not have good answers. It was clear to me he didn’t understand the rate plan, that he hadn’t read the research that was provided to him. And of course the commission went against its own staff’s recommendations. The staff recommended not approving this plan since he didn’t understand the plan. And that was his responsibility was to understand rate plans and protect consumers from monopoly pricing power and price gouging. I just realized, wow, things are worse than I realized and that somebody needed to do something. And you know that old saying, if not me, who <laugh> for a while I looked for someone else to run and then I decided it just needed to be me. Now that’s my story.

John Farrell:

Yeah. Oh gosh, that’s really striking to go through all of the work that you must have put in to present your evidence before the commission and then to find that the decision that they made was not only a bad one, but really ignored all of the work that you put in. Really disappointing. And I can <laugh> anticipate also very motivating then as you’ve started your own campaign to serve on the public service commission. Now there’s one other thing I think that’s worth talking about that has been going on in Georgia for a while that touches on this issue of consumer protection and costs. I actually just realized, I’ve read the name of this nuclear power plant that’s being constructed many times. I don’t actually know how to pronounce it, so I’m gonna let you do it first.

Patty Durand:

Okay.

John Farrell:

But if you could talk about this nuclear power plant that’s been under construction for years and years and years and maybe explain it for folks in kind of terms of what’s going on, but also then maybe help draw some connection about like what has been the role of the commission in overseeing this project and do you feel like they’re doing due diligence in making sure they’re protecting Georgia consumers through the process that utility’s been going through and constructing this nuclear plant?

Patty Durand:

Yeah, sure. It’s pronounced Plant “Vo gel,” in my mind, I pronounce it Plant Vog tell –Vogtel because that’s how you spell it. It’s V O G T L E, but the T is silent. So it’s plant Vogtel. That power plant has been under construction since 2009. They received what’s called streamlined double tracked licensing from the Nuclear Regulatory Commission. There was a bit of a nuclear renaissance in the oughts where a lot of utilities pursued nuclear. But during that same timeframe, natural gas prices declined rapidly and so did solar and other states and other utilities abandoned their nuclear plans and went for the less expensive options. So it ended up just being Georgia and South Carolina that proceeded with building their plants because regulatory oversight is pretty weak in the southeast and tends to favor businesses and utility preferences. So of course utilities wanna build because that’s how they make money is CapEx, you know, capital expenditures and investments.

Patty Durand:

So Plant Vogel and Plant Summer both began their construction and in 2017 the cost overruns were so extensive – actually before then, but late teens, the cost overruns were so extensive that the main contractor for the reactors, which was Westinghouse, went bankrupt. And that enabled both states to revisit their contracts and their decisions on their plants. And so South Carolina said we’re out, too expensive, we can’t do this to our customers, we can’t afford it. The analysis showed that continuing the plant would cost more than what they’d already invested in it and not be worth it. Georgia, as you know, continued. They did not reach that same decision. It was a flawed decision. There’s a lot of research that shows that the continuing the plant was a sunk cost, which means that it defies logic to continue.

It’s a common fallacy where people think, well I’ve spent a lot, I can’t stop now or I’ve wasted that money. But in fact, if you will waste more money by continuing, it is the rational decision to stop. And that is what the analysis was. The analysis found from public service commission staff and expert testimony, a lot of nuclear expertise was brought in and public opinion was strongly against continuing. By all accounts, this plant should have never continued. The commission voted for it anyway, in defiance of all of that input and feedback, and to answer your question about their oversight, it has been abysmal. Georgia is one of only three states in the country with no consumer utility council, which is a separately funded sometimes departments, sometimes agencies, sometimes division where it’s staffed with experts, experts in utility regulation and people whose only job is to protect the public interest. And Georgia defunded its state consumer utility council in 2008 during the great recession under the guise of budget cuts.

Since then of course we’ve had multi-billion dollar budget surpluses, but no effort to bring back the CUC and I find it hard to believe that in 2008 that office was defunded. And then in 2009 here comes planet Vogtel the very next year with no cost caps and no consumer protections in place. Like who gets to build something with no cost caps? But that’s what happened here in Georgia and again in 2017, the commission put no cost caps in place and no consumer protection. So consumers are on the hook for all of the money and literally the sky’s the limit. And the sky has been reached, if you will, because it’s now at 34 billion, under construction since 2009. It was supposed to be delivered in 2016 for 14 billion. Here it is 2023 and we’re at 34 billion, or 20 billion over budget more than twice of what they said it would cost.

And consumers, if the commission allows, of course the commission can choose to not allow cost recovery on all these cost overruns, which is what I think they should do because there are independent monitors, there’s an independent Vogtel monitor that files a report every six months to a year. And there’s also public service commission staff that are working on providing oversight. And there is extensive reporting from both entities that this project has been mismanaged, that the management onsite skip steps, try to double up testing, don’t do the paperwork they’re required to do, don’t follow IEEE engineering standards and on and on. There’s no scenario in which a for-profit company would miss their budget by more than twice as much miss their delivery window that they’ve committed to by more than seven years and still make a profit on all of it. So a monopoly shouldn’t be able to do that either.

And that’s what I think the commission is, where they have failed the people of Georgia. That’s one of many ways where they failed the people of Georgia in this plant. And lemme just end by saying 34 billion is not the total cost, that’s just direct costs. There are a lot of indirect costs that are not included in that. And I’ve been encouraging the media here in Georgia to do better at reporting those indirect costs because for example, the commission gives Georgia Power unusually high profit margins, a very high return on equity. The average return on equity for utilities is 9.5% in 2019. The commission gave Georgia Power 10.5% and they can earn up to 12% from this thing called an earnings band. The commission also gave Georgia Power an upside down capital structure where they have a different debt to equity ratio that delivers more profits for Georgia power. All these things together are done to prevent Wall Street from punishing Southern Company, the parent of Georgia Power, in their stock and to prevent credit agencies from downgrading bonds because the risk is so high for this plant that their stocks and bonds would be downgraded or decline if the commission weren’t doing a backstop with delivering wheelbarrows full of profits. None of that’s counted toward the cost of plant Vogtle and it should be. That’s another failure from the commission.

John Farrell:

I just wanna mention one article I saw in the last year that I thought was also really interesting on the topic of the earnings that are allowed for Georgia power and the return on equity. So you mentioned that, you know, the national average for these regulated utilities is about 9.5%, so it’s a full percentage point higher for Georgia Power and as well as some other protections are like the potential for increasing those earnings. The Pearl Street Station Finance Lab did a really interesting analysis of return on equity. It’s a chart that I love to trot out on Twitter every once in a while, but basically, you know, looked at it back dating back to the 1970s and in the past the equity guarantees that we gave monopoly utilities was really pegged to other very low risk investments. Cuz as you’ve indicated right, the public service commissions are often protecting these utilities from market risk. And so things like the value of treasury securities for example might be, might have been a common benchmark, but there’s an interesting trend over the past 40 to 50 years of divergence where utility return on equity has remained very high, whereas other lower risk investments, especially when in that low interest rate environment we had in the past couple years we’re down at like one or 2%. So it’s really striking just in general, like even the average nationally, not even Georgia Power in particular seems to have very high earnings potential for a business that has a lot of protections from risk.

Patty Durand:

That’s right. I’ve seen that study and that’s very compelling and disappointing for those of us that care about keeping costs low, so more people can afford the essential service of electricity. And that’s not the only place. There’s an energy policy newsletter, I don’t know what they would call themselves, a scholarly set of articles called Energy Policy and they did a report called Utility Return on Equity, a Puzzle. And then the whole study was on why is return on equity for utilities is unhinged from market risk. And I think I posted a cover shot of that headline and I said, is it really a puzzle? I think we know why <laugh> <laugh>, I think we know why. It’s because so many commissions are in regulatory capture and defer to the preferences and pressures of the regulated that they shouldn’t be. But they are, they clearly are. So that’s unfortunate for people struggling to pay bills that utilities are doing so well financially to their detriment.

John Farrell:

I would be remiss too if I didn’t mention another, I think really stunning article that looked at and maybe a little bit more lay accessible as well. There was a piece that was written, I think it was called Power Failure for the Post Courier in South Carolina back in 2017 by Tony Bartelme was the lead author. The piece though there was other contributing writers. The reason I’ve remembered this piece for years and years is that he used the phrase “a bonfire of risky spending” to describe not just the Plant Vogtel project as well as the South Carolina Nuclear Project that’s since been scrapped as well as some other big and risky projects. Another thing I wanted to ask you about actually that’s real that he talks about in this piece when you talk about the sort of protections that the utility is getting is he talks about pre-dating some of these mega projects, many of which have gone south. There were also changes to policy that let utilities collect the cost of doing the construction before the plants were completed. And this was, this was a big change actually. In the past, a utility would recover its costs after it had delivered something. And as you’ve kind of outlined here, you have a project that is way past the deadline and way over budget, but Georgia Power is actually collecting that money now from customers even without there being a single kilowatt hour delivered from that project.

Patty Durand:

Yep. Normally that would be illegal to charge customers for something they didn’t have and didn’t get. But in 2011, the Georgia legislature passed legislation called Construction Work in Progress or CWIP and that allowed the Public Service Commission authority to do something they didn’t, they didn’t have before, which was attach a fee on every customer’s bill. I’ll just call it a tax because that’s what it is. The Public Service Commission then of course immediately, at Georgia Power’s request, instituted what’s called an NCCR rider or Nuclear Cost Construction Recovery Rider on every customer’s bill since 2011. Every month every bill has had an NCCR rider on it that ranges from 3% to 12%. It’s a lot of money and we’re still paying it. It should have been repealed years ago when it was clear that Georgia Power was incompetently executing on this project.

And according to the Atlanta Journal Constitution who did the numbers, customers have now paid over a thousand dollars on their bills total for that NCCR tariff and Georgia Power has earned 9 billion in profits from the delays because they’re getting a profit on that tax from the delays on this project. And that is another reason that I’m very upset about the quality of the oversight from the Public Service Commission. I mean there’s just instance after instance, this being a big one, the commission should have never allowed this to continue since the project was delayed. And since they started getting reports that showed the delays where the fault of the company, it’s not like they could be held blameless and they could say, well we didn’t have the talent or Covid happened or there was a recession. All those things were factors, but they’re minor factors and the reporting shows that they’re minor factors and shows what the major factors were.

And it was the failures I mentioned earlier, yet we’re still paying as though nothing has happened. Like none of that is known. Well it is known and it’s wrong and 34 billion is federal levels of money spent by one state on one power plant. In fact, I’m calling it the most expensive power plant ever built on earth. And it might be the most expensive construction project of any ever built on earth because the only things I could find more expensive was the International Space Station at 60 billion and the Federal highway system at a hundred billion dollars. There could be something more expensive than those two or more expensive than 34 billion. But I, I haven’t found it and that’s just awful to do to the people of Georgia. You know, we’re not a rich state and we have among the lowest cost of living in the country, yet we’re paying national average for utility rates, above average for utility bills, and we’ll be number one in the country once all these costs get put into rates. And that’s just ridiculous. That’s horrible. That’s a failure of the mandate of the Public Service Commission to protect the public interest. And that’s another reason that I’m running because somebody needs to do something to correct what’s happening down there and I intend to be that person.

John Farrell:

I’d love to take a step back and ask you about this sort of model of utility regulation in general. I mean I think the experience that you’re having in Georgia with Plant Vogtle, among other things has really illustrated maybe a worse case scenario to some degree. But I wonder as well, other than Hawaii, every state has this same model of the utility that runs the distribution system that poles and wires you see in your backyard, and in most states, the utility that owns the power plants as well, makes money as you pointed out on capital expenditures. Basically they spend a dollar and they get a return on that dollar over time. But so much in technology has changed about the way that people can produce electricity about the technologies that are available to address things. Just as a couple of examples, we have tens of thousands, hundreds of thousands of folks across the country who have put solar on their own rooftop at their own expense and are providing electricity that often serves the grid.

So the monopoly on power generation is no longer necessarily true. That was sort of like fundamental to this decision of how we structure our market. And then you think about things like transmission capacity, there’s a lot of conversation among folks advocating for clean energy. Oh we need more transmission and they’re probably right, but there’s also a lot of non-construction related technology. There’s things like dynamic line ratings that allow more power to be pushed based on the temperature and the wind speed outside. There are things like reconductoring lines instead of building new lines that are less expensive but maybe not as interesting to a utility that makes money by spending money on building things.

You’re running for office in part to just hold the regulatory system accountable to its promise, which is to oversee a monopoly utility. But I’m just sort of curious like in your thinking about how to make the system better for consumers, is there something that needs to change in the way that Georgia is regulating utilities? I mean, do you need to go the way that Hawaii did and try to pay utilities more on performance? Are there other things that you’re thinking about that maybe big picture, maybe not in your first term if you got elected that you would want to see happen?

Patty Durand:

There are definitely lot of changes that I would like to see happen and as you’ve noted, other states are moving that direction. So there’s performance based rate making, which is what you’re referring to in Hawaii. And other states have approached PBR too. There’s also decoupling, which is removing the incentive for utilities to constantly increase electricity sales. They can still make money on energy efficiency and demand response and other policy and technology decisions. There are a few other business model reforms that I’ve been looking at. One of them is called Totex rate making. Have you heard of Totex? It’s kind of new.

So it was just, well I don’t know how recently, but I just found out about it recently from Rocky Mountain Institute, a very credible nonprofit that Amory Lovins founded decades ago that is still doing a lot of great work. And they had a webinar and issued a report advocating that utilities look at this or that. State commissions look at this as a business model reform to eliminate what they call CapEx bias. And so Totex instead of meaning capital means total. And so the CapEx bias is what we talked about where utilities make more money the more and bigger, more expensive things they build, they don’t make any money on operations O&M costs. So Totex is saying, what if they made money on operations and then they wouldn’t be pushing against the things that need to happen in this country. Like what you referred to – dynamic line ratings. There’s also [inaudible], there’s virtual power plants, there’s distributed energy. I mean the list is long.

So this report and this webinar talks about how to restructure the way utilities earn their compensation so they can make a return on those other investments too and this capital bias because that worked well for a hundred years in the 20th century, we wanted to build out a massive grid across a very large country. So that business model, the CapEx bias worked well for the United States. It was great, but in the 21st century it’s not working well anymore because we have new goals. We need to accelerate clean energy, we need to build resilience and harden the grid. We need to engage customers and we need to keep costs low. And CapEx model is not doing that, as we’ve seen in Georgia.

And we’ll see once plant Vogtel goes online, a lot of Georgians have no idea this is happening. People don’t pay attention to energy policy and energy regulation. And Georgia has unfortunately named our state regulatory office service commission instead of utility commission. So it’s even harder for voters and customers to know like what does a public service commission do? What does service mean? It doesn’t mean anything. So I’ve been advocating for legislators to rename it public utility commission so at least people have a clue that they’re regulating utilities and that’s where decisions are being made on how much you’re paying.

So yes, I would look at utility business model reform. I would look at Totex rate making because I respect Rocky Mountain Institute a lot. They’ve said that no states have done that yet, but it is happening in Europe with some success. I would also look at performance-based rate making. I would like to see a Consumer Bill of Rights, a utility consumer bill of rights that shows the rights that consumers have. Georgia State law has a mandate like many states or maybe even all states, I don’t know, on setting just and reasonable rates. That’s the law in Georgia. It’s a law in most or maybe all states. And we clearly are violating that state mandate.

The best example I have is the demand charge rate plan I mentioned, I mentioned that’s why I launched my campaign. But actually that rate plan was ended the end of last year. In December of 2022, the commission had another rate case. Every three years there’s a rate case and they eliminated that rate plan as the default option for new customers, which they had approved in 2019. It went into effect in 2021. I launched my campaign and all that. I said, so the rate plan was the default for new customers for two years, all of 2021 and all of 2022, it’s no longer happening. And so for really for a brief moment, I thought about ending my campaign because the main thing I launched for was gone except for all the other things I discovered such as plant Vogtel’s lack of oversight. And so we know Georgia’s not setting just and reasonable rates or that demand charge rate plan wouldn’t have happened. I mean there’s no state commission in the country that would adopt a new rate plan without doing a customer impact study. Like that’s why they exist. And Georgia didn’t do one.

So I would look at an one of those models. One of the things I advocate is that a state, an independent state commission be convened to look at why Plant Vogtel happened, how it can be prevented in the future from ever happening again. And utility business model reform would be part of that commission. If I couldn’t get the state to create such a commission, then I would create it out of the Public Service Commission. If I were elected, we would look at everything on the table like that.

John Farrell:

We’re going to take a short break. When we come back, we talk about the entitlement to the monopoly franchise, the proper role of legislators and regulators, whether utilities should be allowed to lobby and how rooftops solar should fit into the mix. You are listening to a Local Energy Rules podcast with Patty Durand, candidate for the Georgia Public Service Commission.

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John Farrell:

One of the things I thought was really interesting that I heard about in California, speaking of utility failures, you have Pacific Gas and Electric that has famously now gone bankrupt twice – the second time for the wildfire related damages that were the utility’s responsibility to due to underspending on maintenance and getting at that Totex versus CapEx thing, right? You  don’t make money doing maintenance, you do make money buying things. And so they underspent on things like maintenance that would’ve helped avoid the wildfires. Somebody mentioned to me there were conversations in California by a number of different places, San Francisco, there were some other public agencies that were considering trying to take over parts of PG&E service territory. Basically replaced them as the utility through a process called municipalization. We actually just did a six-part podcast series about that whole like public power takeover option and the challenges and the potential benefits and costs.

But another thing that has been floated that I thought is really interesting and I’m curious if you’ve ever heard of it or if there’s any way to include it in the conversation, is about the monopoly franchise that utilities have That monopoly service territory that they get is not permanent. It’s not a guarantee, it, I mean it’s been treated as something permanent in almost every case. But one of the things I think is really interesting is that the law would give a public service commission the right to say, well Georgia Power, we’re not going to close you down for your failure, but we’re gonna give the exclusive service territory that you have to another utility that maybe would do a better job. And it could be a public utility, a publicly owned one, it could be another private company like Duke Energy or someone else that already serves the Southeast. Is there any conversation at all about this idea that maybe a utility that performs so badly just shouldn’t have an entitlement to the franchise anymore?

Patty Durand:

Not that I’ve seen or heard of and I would be afraid to pursue anything like that because of Enron’s experience and because of Georgia’s own experience with natural gas deregulation, Georgia Natural Gas was deregulated and because the legislature allowed the natural gas industry to have such heavy influence, they created a market that actually raises costs. And Georgians pay 50% above the national average for natural gas. Nobody knows it. I only discovered it because a professor from A&M University on Twitter had posted a spreadsheet of base natural gas costs or the cost that you pay before you use a single therm of natural gas in your home. What are the flat fees that everyone’s paying? And he posted that and I noticed he didn’t have Georgia Power on there. So I asked him could I add Georgia Power? He sent me the spreadsheet, I did the research and we’re paying twice as much as the highest utility on his spreadsheet.

And I sent him and we looked at together the document that creates the pricing structure and we’re paying a demand charge fee on natural gas too, which is a fee that you’re assessed for the highest usage that a customer has during their bill cycle. That’s nonsensical. Demand charges are meant for, and were created for, commercial and industrial businesses that need to use the maximum output the grid has. And so the utility builds the grid to meet that and service that need. Residential customers don’t come anywhere near maximizing the grid need a demand charge is unnecessary and punitive. And that’s what the research showed that I gave the commission that they didn’t pay attention to. But also, let’s say you care about peak time charges, which this commission does not, but if you did, you would simply do a time of use plan or a peak time rebate. I mean there’s so much easier, less expensive ways to send price signals for customers to reduce their energy during peak times.

But back to your question, I think the problem here lies with the Public Service Commission not doing their job and less of Georgia Power not doing its job. Although it did do a bad job with this project, this project should have never been approved. It shouldn’t have been approved in 2009 and it shouldn’t have been approved in 2017. And if it was approved either time, customer protection should have been put in place and cost caps and a budget should have been put there. So that’s a failure of the commission, not the utility. And also what I like to tell people is that Georgia Power has a monopoly granted to them by the people of Georgia. It’s not permanent to your point, it’s granted to them by the people of Georgia through the state legislature. The same in any state. So if the people knew more and demanded more from their legislators, we could fix and should fix some of these issues, which is why I’ve been calling for an independent commission to look into what the failures are that created this plant Vogtel disaster for Georgia.

John Farrell:

Just sort one clarifying thing about the franchise. You, you talked about the experience with deregulation and the franchise I don’t think necessarily would change the idea of be being a monopoly. It would just be handing the monopoly to a different company. But I, you kind of clarified right at the end there anyway, the perspective here that I think is really important is it’s not that Georgia Power is like defying the commission or doing a poor job with the orders it’s been received. It’s that the commission is not holding them accountable enough and giving them the appropriate direction in terms of serving the public, which is really interesting.

I’m gonna take this in a little bit different direction and to talk a little bit about your own election or your own campaign because I feel like it dovetails a little bit with what you talked about in terms of the role of the legislature. So one of the things that ends up being true in many states is that not only are utilities have they captured their regulators, they also have often captured their legislatures. Virginia has been a really poignant example of this in which the utility lobbied for a bill that allowed them to keep excess profits. So when they over collected fees and rates from customers, the commission wasn’t even allowed to force them to give the money back to Virginians. And then I remember there was another subsequent bill, so they started to get some scrutiny for that and a subsequent bill allowed them instead to reinvest that money in the grid and earn a profit on it a second time to essentially double dip sort of famously. So there are some other issues here too that are even outside of like the regulatory model itself, but about the like interface with state law and state legislatures and the political power of utilities. I don’t know if any of that is a perfect lead in to the saga that you’ve been enmeshed in. But could you talk a little bit about what’s going on with your attempt to run for the commission and how there have been some hijinks there in terms of your ability to even be a candidate?

Patty Durand:

Sure. Yep. Back to the Energy Policy Journal newsletter, whatever they are, a colleague of mine in the energy space, Paul Alvarez, who owns the Wired Group, wrote an article for the Energy policy journal talking about why legislators should stay out of energy regulation for the exact reason you gave. Legislators tend to be manipulated by deep pocket utilities who donate to their campaigns and they make decisions and pass laws that require or allow commissions to do things that they shouldn’t be doing, such as the construction work in progress legislation in 2009 in Georgia. And your own example, Paul’s piece that published in energy policy, you know was really a deep piece.

But the key takeaway that I had was that the reason commissions exist at all is to gather expertise with utility regulation and energy policy. And so diffusing that or allowing that to bleed over into legislators, decision making influenced by utility lobbyists is a complete distortion of that creation of that structure that is meant to protect customers. That’s why they exist. And if you’re gonna have legislators coming in and telling them what to do and making alternate decisions, then people get hurt. As you saw in Virginia and as I’ve seen in Georgia. So his, I feel a little bad, you know, I’ve spent a lot of time on this discussion talking about how I want the legislature to do this and do that and set up an independent commission and utility business model reform. But I don’t know how else to do it because it’s not gonna happen in the commission. But it’s a double-edged sword. It should not be happening at the legislature either.

And a long time ago I worked for a green space nonprofit and a lot of public parks in Atlanta get funding from the city, really all, most fundings from the city, but they do their own fundraising as part of getting funding, they had to sign an agreement that they will not lobby against the city in accepting that funding and they wouldn’t speak badly of the city. And we were talking about how frustrated we were once about not getting something from the city and somebody said, well let’s write letters to the editor and let’s show up at the next hearing. And people are like, whoa, wait a minute. We signed something that said we weren’t, you know, we’re not gonna do that. And shut that whole conversation down. And since then, of course I’ve seen the magnitude a thousand fold worse for utilities being able to lobby and donate to legislators and commissioners that shouldn’t be happening. If it can’t happen for a little park, it should not be happening for an essential service like energy. They should not be allowed to lobby and donate because then we get what we’ve gotten, which is this kind of distortion and failure points.

In terms of my campaign, my campaign was paused last year because of litigation from four Black plaintiffs who alleged racial discrimination in the way the elections are held. They said that the statewide nature of the election in Georgia for Public Service Commission violates the voting rights because they cannot elect a black person to the commission. And in fact, in 140 years, only one Black person has ever been elected and he was appointed first. So he had incumbency. They won their case, as they should have, in federal court. They did an amazing job of proving racial discrimination. I attended hours of those hearings. It was compelling, it was sad, it was shocking. And they won. And the state of Georgia appealed saying, no, no, it’s not racial discrimination, it’s just partisanship. We just want Republicans to win. That’s why we have the districts the way we do. That’s why we have the structure the way we do. That appeal was heard last December in the 11th circuit Court of appeals and everyone is expecting the ruling to happen any day. It hasn’t happened yet.

So we’re all waiting. If the plaintiffs lose, I’m sure they’ll appeal. It’ll be a bitter pill to swallow after having won. If the state wins and the plaintiffs lose, then they’ll appeal. If the state continues to win on appeal, then they’ll continue the election as it was before, which is a statewide race. If the plaintiffs win on appeal, then the state is obligated to redraw the district so they don’t privilege white voters, which they do right now. That was proven in court. And to require the election to be held districtwide and not statewide so that people in that district have a chance to elect someone that represents their views and interests, which is not possible now with a statewide vote. So that’s what we’re all waiting for. Of course, I don’t know which way the court will rule, but in either case it’s likely to be a special election this fall, I’m guessing September. That’s what the state law says for special elections in odd numbered years, which this is, so it’d be probably December 19th I think is the date. Once the ruling is in, the Secretary of State’s office has to set that date. And so I don’t know, I mean that’s a lot of unknowns, but that’s what I know.

John Farrell:

I’m super curious here because I don’t follow commission elections in a lot of places. I’ve heard about them in Arizona where utilities have been famous for spending a lot of money to influence the election of their regulators. Is it typical to have districts for commissioners or are they typically elected on a statewide basis in other states? Are you familiar?

Patty Durand:

There are 10 states that elect commissioners and they all have districts. But I believe only Georgia allows the vote to be statewide and not districtwide because it is pretty weird to require commissioners and candidates to live in a district, to represent a district. But then everyone can vote. So what’s the point of a district if the people of that district can’t elect their representative? It doesn’t make any sense. Well it does make sense if you know what the goal is, which is to keep Black people and minorities from holding office, because then whites can always outvote blacks cuz there’s way more of us. And that has been very effective. And same with women. Very few women, maybe one woman ever has been elected. Same with Jewish people, same with any minority. Same with LGBT. None of them have ever been elected. It’s been very effective. And I hope plaintiffs win because this lack of diversity is very harmful. Georgia has a beautiful amount of different racial demographics and diversity and those people should all be able to elect someone and should be represented on the commission, not just one type of person.

John Farrell:

That’s fascinating. I don’t think I fully understood until you just explained it a second time. So there are districts in where in which the commissioner candidate has to live in order to represent that district, but the people who are electing them are not just necessarily people just in that district. You said the vote is statewide. So I can live anywhere in the state and be voting for a commissioner that ostensibly serves a city of Atlanta or Savannah or what have you.

Patty Durand:

Exactly. Crazy. It is crazy. And actually on that point, that was why I was temporarily disqualified from running because the census allowed the legislature to redraw the legislative districts and the state took advantage of that to redraw the Public Service commission districts. There’s no requirement that happens, but they claim it was required because of the census. And so they redrew the district and made sure that my county was not part of district two – where I had to live to be eligible for this race. So they took it out and they said, oh look, you’re not qualified. So I moved to another county in district two, but they still said, well, you don’t have the year, you don’t have a year’s residency, so you’re out. So I appealed, sued, whatever, went to court and won.

During discovery, I was able to get, my lawyer actually was able to get text messages between my opponent and the commission chair sharing my address, making sure that my address was removed from the district. And I was able to get those texts published in the Atlanta Journal. I put ’em all over social media, we submitted them to court and the judge agreed with me that I had been unfairly targeted. It’s against the law,  it’s obviously legal to redraw a district, but it’s against the law to target an opponent and disqualify him or her from that district. And so the judge ruled in my favor and I remain eligible for district two. I won the primary. That happened right before the primary.

In fact, the night before the primary that the Secretary of State, Brad Raffensperger contacted all of Georgia’s polling areas and said put up signs so that voters know not to vote for Duran, she’s not eligible. And they did. And we rushed to court the next morning with an emergency appeal asking for an injunction and having, asking for the Secretary of State’s office to have those voting areas take those signs down and to allow me to be eligible for the primary until the full case could be heard. And the judge granted that too. So I won the primary and then won that case. So yeah, it’s been a while. I’ve seen more lawyers in the last 10, 12 months than I have my entire life. <laugh>.

John Farrell:

Oh my gosh, that’s incredible. Fascinating, as someone from outside of Georgia, to hear the name Raffensperger again.

Patty Durand:

That’s not even all. My opponent blocked me on Twitter because he didn’t like some of the things I was saying about him. Some of the criticisms. I filed a lawsuit on that, because social media is considered the public square in the modern era we live in. And if an elected candidate uses social media for communicating with their voters, with the public, for the purposes of their office, they’re not allowed to block critics. I mean, unless they’re profane or threatening, which I’m not. So I won that lawsuit I guess about three weeks ago and he had to unblock me. So, two for oh, or however you say that, on the law <laugh>.

John Farrell:

My goodness. I just wanted to ask you about one last thing. In terms of your candidacy and your interests, rooftop and community solar has been sometimes a very contentious issue that comes before commissions most famously recently in California where they are on their sort of third iteration of net metering policies. I’m just curious kind of how you, we talked, you talked, you touched on this a little bit when you were thinking about sort of other ways to reward utilities in their business model. Things like virtual power plants, microgrids, other approaches of in in which rooftop and community solar might play a role. How are you thinking about those either as sources of clean energy or as part of utility accountability or other ways utilities can earn revenue? How are you thinking about those kinds of technologies, sort of the polar opposite, if you will, of plant Vogtel at the very large scale?

Patty Durand:

Yeah, so this is one of the saddest, most frustrating parts of energy policy to me is rooftop solar is the beginning of a new world order where customers can be engaged in energy. Back to our conversation about the monopoly isn’t like a permanent thing. It’s also true that utilities don’t get to decide for all of us how energy is produced and consumed. They don’t get to make that decision. They’re a player, they’re not the decider. And people get to also produce energy now that we can, we get to use battery storage from our EVs if we want to. We get to produce energy off our roofs if we want to, or buy a subscription to community solar or have a microgrid and on and on. But utilities are blocking that.

And especially in the southeast where I live, Georgia Power has blocked rooftop solar. So we are 43rd in the nation for the amount of rooftop solar penetration, and we’re the 14th sunniest state right now. I think the numbers are 0.3% of the grid is served by rooftop solar generation. It’s practically untrackable. It’s so tiny. So I’m frustrated because our commissioners often say derogatory things about California, like, oh, look at how badly they’re regulating PG&E, they’re going bankrupt. But when California redrew their net metering program to be less incentivizing, they were all over that, look, California’s not doing it. We shouldn’t do it either. But the fact is that California has about 20% of its generation in rooftop solar. So they’re light years ahead of us. And they were trying to repair a failure in rate making that had occurred that caused a distortion in rates in their state. And it’s too complicated to get into here, but they were repairing a problem. Whereas all that’s happening in Georgia is blocking rooftop solar because it doesn’t make money for Georgia Power.

Net metering helps customers make money. I mean they don’t really make money. It just reduces the payoff sooner. Instead of like 25 years, it drops to like 15 years with a good net metering program or maybe even 10 years if it’s a great net metering program. And the reason I said it’s sad and frustrating is because studies show that if utilities or commissions would examine and analyze exactly where on the grid rooftop solar could relieve congestion, where could we have more solar? So we wouldn’t need a substation upgrade, we wouldn’t need new transmission or new power plant. Where could we reduce peak energy costs? But those studies don’t happen because utilities don’t want them to happen because they don’t want to add that kind of generation to the grid. We don’t know. We don’t know how much money could be saved from rooftop solar and then could incentivize customers in those locations if we knew.

And that leads into my frustration with small modular reactors and these other claims that we have to have nuclear if we wanna address climate change. Really? Why don’t we look at all the things that are less expensive, available now, that’s being blocked by utilities and state commissions. What about energy efficiency? Georgia has no demand response. We don’t have rooftop solar and we’re one of many states. Let’s get the roadblocks out of the way and go for these cheap things that are not happening before we do yet another iteration of yet another claim that nuclear is gonna save the day when it never has met any of the claims and promises that’s been made. So yeah, rooftop solar is frustrating to me. I admire states like New Jersey and California that have incentivized it. And even South Carolina, once they canceled Plant Summer, that opened up a whole world of renewable opportunities and they have one of the best net metering programs in the country. They’ve got five, or I forget, five or 10 times the amount of rooftop solar that Georgia does with half the population. Those kind of things are great and should be happening everywhere.

John Farrell:

Patty, I just had to say, I can’t thank you enough for coming to join me to talk about this sort of really thorny question about how to effectively regulate utilities and the different challenges that you’re dealing with, not just in terms of the actual mechanics of how do you regulate a utility to provide good public service, but also the challenges of the legal and political battles that you have to fight in order to get to a place where you can have a commission that would actually take that job very seriously. So thank you so much for the work that you’ve been doing around accountability.

Patty Durand:

You’re welcome. Absolutely. Thank you for having me.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules about the challenges of monopoly regulation of electric utilities with Patty Durand, candidate for the Georgia Public Service Commission. There is a lot to look for on the show page for this episode. For a dive into the alternative ways to reward for-profit regulated utilities, check out the Local Energy Rules podcast interview with Isaac Moriwake about performance-based regulation in Hawaii as well as the Totex or total expenditures research from the Rocky Mountain Institute. You can also hear more about the role of regulators in my recent interview with former Arkansas Public Service Commission chair Ted Thomas. For more information on how much utilities earn as profits, we’ve posted links to the Pearl Street Station finance lab’s analysis of utility return on equity over the past few decades, as well as the report from Energy Policy that Patty referenced, which is called Regulated Equity Returns: a Puzzle. For more about the opportunities with rooftop and local solar, check out my interview with the author of Freeing Energy Bill Nussey, as well as my talk with the University of Minnesota professor Gabriel Chan about the value of solar. And a previous interview with Ohm-Connect CEO Cisco DeVries about virtual power plants. We’ve also linked the Atlanta Journal Constitution article about the text messages between Patty’s opponent and the PSE chair in the attempt to influence the redistricting process that impacted Patty’s campaign. And finally, you can check out an interview we did about a petition that’s asked the Federal Trade Commission to investigate monopoly utility abuses. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.