Should Big Utilities Pay for Their Bad Choices? — Episode 117 of Building Local Power

Date: 7 Jan 2021 | posted in: Building Local Power, Energy | 0 Facebooktwitterredditmail

In this episode of Building Local Power, host John Farrell, Co-Director of ILSR, interviews Leslie Glustrom, founding member of Clean Energy Action, an organization working on accelerating the transition from fossil fuels to a clean energy economy. They discuss Clean Energy Action’s white paper on utility accountability and how we can equitably transition to a clean energy future. Some highlights of their conversation include:

  • Why electricity and transportation should be our first priorities when it comes to decarbonization.
  • Alternative approaches to securitization, which can be a strong tool for paying off the remaining cost of coal plants.
  • Why utilities, not customers, should be responsible for the cost of retiring fossil fuel assets.
  • The vast potential of a decentralized electricity system.

“And of course this [cost] will fall disproportionately on low-income customers… Basically, we’re saying utilities have a problem, and poor people and small businesses will pay it off. And that just intensifies the economic inequities in our society.”


Jess Del Fiacco: Hello, and welcome to Building Local Power, a podcast dedicated to thought-provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future. I’m Jess Del Fiacco, the host of Building Local Power and Communications Manager here at the Institute for Local Self-Reliance. For 45 years, ILSR has worked to build thriving, equitable communities where power, wealth, and accountability remain in local hands.
Jess Del Fiacco: In this episode, John Farrell, the Co-Director of ILSR and Director of our Energy Democracy Initiative interviews Leslie Glustrom from Clean Energy Action about how we can equitably retire coal plants and other fossil fuel assets.
John Farrell: Leslie, welcome to the program.
Leslie Glustrom: Thanks, John. Great to be here.
John Farrell: You have been working for years and years advancing the cause of clean energy in Boulder. I was hoping you could start by just explaining a little bit about: how did you get into clean energy work, and why have you been so focused, as so many people have been in Boulder, on this idea of local energy as well as clean energy?
Leslie Glustrom: Thanks so much, John. Some people know my actual background is as a biochemist. I’m trained as a biochemist. I’ve always been interested in the interface of science and society. So I’ve worked on a wide array of issues in my now relatively long life. I’m in my 60s. I’ve worked on everything from radioactive waste to livestock raising on public lands to a lot of other things. But for the last almost 20 years, I’ve worked almost solely as a volunteer advocate on climate change and clean energy.
Leslie Glustrom: As a biochemist and someone who loves the natural world and a deep sense that we only know of one planet that supports life… There may be other ones out there, but they’re a long ways away, that this planet is really priceless. So, about a little less than 20 years ago, as our children were in college, I said, “I’m no kind of mother if I don’t do everything I can to address… what was clear to me was a looming crisis in the livability of this planet. So, in 2004, with two kids in college, my husband a teacher, I resigned from my job doing biochemistry research and devoted myself full-time to climate change.
Leslie Glustrom: So, if you care about climate change and you want to actually do something about it, not just study it, then obviously decarbonization, which is now a word that’s widely used but wasn’t one that we widely used when I began, you go there. Now a lot of the inventories have been done, but back then, we just thought, “Well, electricity, burning coal, all of that is very likely the largest source of greenhouse gas emissions.” So, while there are literally millions of things we need to do to find a new way to live on this planet, we try to simplify this as: number one, decarbonize your electricity; number two, decarbonize your transportation; and number three, do everything else. And it’s been confirmed over and over and over again that, really, focusing on decarbonizing electricity is the first, most cost-effective, and the most generally effective approach.
Leslie Glustrom: I always say in all of our endless meetings here in Colorado, and I work with people around the country, I’m like, “I’m a biochemist. Ask me about protein structure.” I actually know more about that than I know about a lot of these things. But you are forced, and I think that’s one reason these podcasts are so helpful, because it can help people realize that we all end up coming to these same realizations, even though we come from many different places. And just watching Jonathan Scott’s Power Trip, and I strongly recommend it because you just see all these people from all these walks of life coming to these principles that Institute for Local Self-Reliance has done such a remarkable job of pulling together all these threads cutting across many sectors of our economy and helping people think about a new vision. So I just want to thank ILSR for that. That’s how I got started in clean energy and monopolies and securitization and coal and all of those things.
John Farrell: Let’s talk a little bit about this specific issue of securitization. First of all, I just want to salute in even becoming an advocate who can understand the issue, I think is something to be proud of because it’s a complex financial instrument, unfortunately. I’ve heard it described by some folks as basically refinancing a house. You take the existing debt, and you try to go out and get a cheaper interest rate. Then, with the savings, you try to do something different. Can you explain a little bit about: how does securitization align with this goal of decarbonizing the electricity system? Why are we talking about securitization? What can it do?
Leslie Glustrom: Mm-hmm (affirmative). Well, I want to be really clear. I see securitization, which I’ll describe a little bit more, as a tool. Like all tools, there’s a time to use it and a time to not use it. I sometimes refer to it as a sledgehammer. A sledgehammer’s a tool, too, but you don’t usually want to start with a sledgehammer when you have whatever you’re trying to get done. Again, I am not a financial person in any way, shape, or form. I’m a mom who’s trying to understand these issues, and here we go.
Leslie Glustrom: The concept behind securitization, as you described, is that, when we retire, for example, coal plants before the end of their useful life, you have money you still need to pay off, the undepreciated portion of the asset. And the concept behind securitization, the benefit of it… Now, I’m here to talk about why we need to be careful using this tool, but just to begin with the benefit, the benefit of it is that when we pay off undepreciated assets in, say, a coal plant, at the utility’s cost of money, rate-payers will typically be paying about 7%. So, again, using the mortgage example, it’s like having a mortgage at 7% or 8%, give or take what’s called the weighted average cost of capital for utilities, an average of the cost of their debt and of the cost of their equity.
Leslie Glustrom: Securitization allows the issuance of bonds that are likely to have a much lower cost of money, perhaps in the 3% or 4%. So the advocates talk about going from paying 7% on the money to pay off this undepreciated coal plant, the part that hasn’t been paid off… Instead of paying 7%, you’ll pay 3% to 4%, just like if you refinance your mortgage, your monthly mortgage payment will go down. That can be true, but I believe we need to begin with the question of who should pay off the undepreciated asset that the utility has. That should be our first question.
Leslie Glustrom: The assumption tends to be that, if the utility has an undepreciated asset, then their customers need to pay it off. Respectfully, only a monopoly would think like that because every other business that has a problem of whatever kind has to pay it off themselves. They have to write it off their books. They have to do all those things that businesses in the competitive world do. And respectfully, only in these monopoly-controlled utilities would they assume that somehow they take, frankly, the mistakes that they have and make their customers pay for it.
Leslie Glustrom: We can continue on, but the bonds in the financial world are referred to as rate-payer obligation charge bonds or rock bonds. But I think those words, rate-payer obligation charge, are important words because not many people like me… I’m a mom, right? I balance my checkbook, and after that, I’m not a financial person, let’s just say. Securitization, it’s scary, and that’s one reason I wrote this report, is to try to begin the process of demystifying this. I think referring to these as rate-payer obligation charge bonds makes it very clear that the endgame is to have rate payers pay off the utilities problem. While that may be a tool that we want to use, we should ask many questions before we think that somehow securitization is the key.
Leslie Glustrom: Then, just to go back, obviously if you can pay off an undepreciated coal plant at 3% or 4% instead of 7%, it makes it more cost-effective to do it. If we’re trying to accelerate the retirement of coal plants, that is one possible tool for doing it. There are many other possible tools, including having the utility own the mistakes. They are the ones who’ve made the profits for all these years. They can afford to bear some of the costs of this transition that we’re going through. They can more than afford to bear it, as we’ll talk about. But obviously we want to reduce, and we want to decarbonize. We want to reduce our carbon emissions. I’m fully on board with that. I’m just not fully on board with assuming that rate payers should pay off utilities’ mistakes.
John Farrell: The report that you referenced that you’re working on now that should be released by the time this podcast is out, planned for release here in mid-December, was tentatively called Privatizing the Risks and Not Just the Profits: How to Truly Retire Coal Plants and Fossil Fuel Assets Early and More Equitably. It is really a response to this conversation that we’re having about securitization because it’s really been touted by a lot of folks as, “This is a great deal.” Just like me refinancing my home can be a great deal for me, it seems like, hey, if we can pay less to retire these dirty power plants, that’s a great deal.
John Farrell: But, as you highlight, the missing piece of the conversation has been: who owns things, and who pays for them? Because when I refinance my own home, I’m the only one that’s paying for it. There’s not some third party involved who initially bought the house and has been making investments in it or has been using my money to make investments in it. I don’t know that the analogy’s really going to hold up. The idea that a refinance is a good thing, from that perspective, trivializes that very important distinction between who’s owning things and making choices in the utility business under a monopoly system and when it’s happening with a home.
John Farrell: Let’s dive into that a little bit. You’ve already alluded to this, but we’re talking about power plants that we want to retire because they pollute. And we’re talking about power plants who somebody in an executive suite of a utility company decided that should be built at whatever time that they were built. So some of these power plants are older. Some of them are newer. As you say, there are some costs that we still haven’t paid in terms of paying off these power plants as customers because we’re usually on the hook for that. In over 30 states, utilities are monopolies. So they get to charge to their captive customers whatever their regulators let them get away with. But why shouldn’t we, as customers, pay to refinance utility power plants? Why shouldn’t we be on the hook for that?
Leslie Glustrom: That’s a good question. Obviously, at this point, mostly utilities commissions will make this decision, and they could decide that customers will pay for some or all of the fossil fuel plants. I’m going to use coal plants because that’s what’s right in front of us right now. Customers may be required to pay for some or all of that, and if you pay it at 4%, you’re better off than at 7%. But my argument is that we should first ask: what’s the equitable resolution here?
Leslie Glustrom: The utilities did make the decision to build these plants. They did make the decision… In our case in Colorado, customers may need to pay off some part of these undepreciated fossil fuel assets. But in most businesses, if you’re caught carrying the fashions from five years ago and you can’t sell them, that’s your problem. So the utilities commission are going to come up with some decision. I think it’s unlikely that they will force the utilities to carry the full burden of having built fossil fuel plants that are no longer wanted, needed, or cost-effective. But I don’t think they should also just assume that rate payers now are responsible for 100% of this problem that utilities have had. So, in my mind, we should first ask this question.
Leslie Glustrom: In some cases, I’ll be honest… There’s a big coal plant in this state where the utility knew from the beginning they shouldn’t build it. It’s supposed to operate until 2070 completely off-scale. And we ought to be asking that question.
John Farrell: Is this the Comanche 3 plant, by any chance?
Leslie Glustrom: Yes, it’s a big coal in Pueblo, Colorado. It’s what’s called Unit 3 in Pueblo. The utility refers to it as Comanche 3. And when we look at the analysis that just came out last week by Emily Grubert… It appeared in Science. We’re either the last or one of the very last coal plants planned for. I think it’s important that we ask ourselves, given what the utilities knew or should have known, should they have invested in a billion-dollar coal plant that they thought would operate until 2070? That’s a Colorado-specific question.
Leslie Glustrom: But when we think about the national audience, if you’re in Georgia or Kentucky or South Carolina or Utah or wherever it is, you probably have a coal plant that has maybe 100 or 200 million left on it that hasn’t been paid off. And all I’m trying to do is empower citizens and advocates to ask the question of: what’s the equitable way to deal with what I refer to as the stranded assets from our fossil fuel era? And I believe the answer will be unique to each state and to each power plant, each utilities commission, to each utility. But I want to empower our citizens and advocates to ask that question and not assume that because the utility has a problem, the utility’s customers need to pay for that problem. No other business would ever make that assumption.
John Farrell: I think it’s really important that you raised this particular question at this time, Leslie, because I look at the kinds of news stories and disclosures that we’re hearing about the fossil fuel industry in general, that in the past few decades, they knew about the implications of burning fossil fuels since the ’70s or the ’60s. They were even studying it themselves in the case of oil companies. So it’s funny to me to think, number one, we have this issue of: what did they know, and when did they know it in terms of the decision-making process?
John Farrell: And we have, unfortunately, for a long time, let utility companies off the hook on environmental harm in terms of being able to produce electricity and not pay for the environmental impacts, obviously. And I think there’s certainly an element of that to the decision-making. But I feel like, as well, and probably what has motivated you and has certainly motivated me and a lot of the work that we’ve done, is that there are a lot of cost-effective alternatives available in the last decade or two to building coal plants and gas plants.
John Farrell: While we’re at a point now where it is, in fact, generally cheaper to do those clean energy options, it was still at least competitive and definitely when you take into account those pollution costs even a decade or two ago. To me, that seems like one of those important questions about how much customers should be on the hook, is: to what degree could the utility have made a different choice at a similar price to deliver the same power to customers? And it seems that we are going to have several examples, I would think, across the country where it would be the case that they could’ve made a different choice and could’ve avoided this situation. And therefore, the customer should not be liable for all of the remaining costs on these power plants.
Leslie Glustrom: Yes, I think that’s exactly right. Thank you, John. I think you’ve said it very well. What did the utilities know, and when did they know it? So, on a coal plant that was built in 1960 or 1970, I mean, they could’ve known. The science on climate change has been clear since the 1850s. Eunice Foote, look her up. She’s great. She figured it out in 1856, if I remember. So, if they’d been paying attention, even in the 1960s and ’70s, they definitely could have known that carbon dioxide was going to warm the planet with very powerful consequences.
Leslie Glustrom: But if you built a power plant in the ’60s or ’70s, it’s pretty much fully depreciated now. Most of the profits have been taken. They were cheaper back then. We’re talking $50 to $100 million. It’s not going to have a big impact either way. I still think it should at least be split but not 100% one way or the other, probably. But as you get closer and closer to the 21st century, the role of a businessperson, man or woman, is to look ahead and to understand and to think about how markets are changing. Of course, when you’re a monopoly, you don’t do that as much because you’ve got this captive audience.
Leslie Glustrom: So part of this discussion over securitization is also this discussion that Institute for Local Self-Reliance has done such a great job of helping us think about: monopoly and near monopolies and how that goes. So, yeah, I think it’s very important that citizens and advocates feel empowered to ask: what did the utilities know, and when did they know it? And they could’ve known about climate change in 1856 and even a little earlier, actually. But the closer it gets in time, I believe the more responsibility they have.
Leslie Glustrom: Again, when we have regulated monopolies, investor-owned utilities, they’ve reaped the profits from these capital expenditures known as coal plants. They earned their 7%. So, on a billion-dollar coal plant, the first year, they got about $70-odd million in profits for having built a coal plant that’s accelerating the destabilization of the climate of the only planet we know. It’s unconscionable to be making profits destroying the only home we know of. And this has been increasingly clear. I’d say by the early 1990s, it was really, really clear if you read the science.
Leslie Glustrom: Now, we all know the stories of what the utilities and the oil companies and everybody else did to obfuscate this, or we know some part of those stories. But what they knew or what they should’ve known and when they knew it, they should’ve known it a long time ago. And many of them did know it a long time ago. The reports on what Exxon knew, David Pomerantz’s report on what utilities knew from the Energy Policy Institute are all important resources as citizens and advocates ask this key question that you’ve identified: what did they know, and when did they know it?
Jess Del Fiacco: We’ll hear more from John and Leslie in a minute, but first we’re going to take a short break. Thanks for listening to Building Local Power. We’re all very happy to be leaving 2020 behind and excited for what 2021 has in store, including an exciting lineup of guests for this very podcast. But there will be plenty of work to be done, as well, and your support can help us hit the ground running by heading over to to contribute today. Any amount is sincerely appreciated.
John Farrell: I’m curious, Leslie, to what degree this might have played out differently. Utility monopolies were set up 100 years ago or a little longer because, when we were doing it, it was considered very inefficient to try to string up multiple sets of wires to each residence. You have these networks that you’re building out. You didn’t really want lots of duplicative infrastructure. So we said, “Okay, well, we’ll give you protection from competition. We’ll let you have captive customers, even though that’s anathema to our usual belief in free markets in this country.” And we stuck with it for a really long time. I feel like we had this moment in the ’70s where we really got a lesson in the costs of that kind of system, where utilities got really burned by inflation because they were financing really big power plants that took a long time to build. And cost overruns multiplied against higher inflation rates, and there were a lot of really terrible investments that utilities made 50 years ago.
John Farrell: I always wonder about the counterfactual. What if, instead of doubling down on monopoly at that point in the way that we did, a lot of states basically said, “Well, we’re going to have more oversight of how utilities plan and build power plants,” that if we had said, “Why don’t we think about opening this up to competition?” And there was one law that did that, the Federal Public Utilities Policy Regulatory Act of 1978, PURPA, did at least start opening up some opportunities for competitive generation.
John Farrell: But I’m just curious. Do you think things would’ve played out differently if we had really invested in… By that time, there were alternatives. There were solar panels put on the White House in the late ’70s. There were wind turbines being put up in California. If we had gone that route two decades before we really started seeing states do it through mandates, might we be in a very different situation now?
Leslie Glustrom: Yeah, of course we would’ve been, and of course the argument is… And thank you very much for that piece of history. I would suggest to your listeners the book Power Struggle by Rudolph and Ridley as a very good accounting both of these big struggles over monopoly control in the early part of the 20th century as well as what happened when utilities overbuilt, invested heavily in nuclear power plants. It’s a great resource. Again, Power Struggle, and the authors are Rudolph and Ridley.
Leslie Glustrom: So, yeah, we can play this game a lot. What if? There’s more than a few of those things we could say about our history, and one of the things I say is: what if George Washington had given up? He got beat a lot. Maybe he should’ve just given up. The king was really powerful, most powerful army and navy on the planet. And they had to die. Advocates these days, we suffer, but we’re not dying or sleeping in the cold. So what if George Washington had given up, and we were still part of England? Obviously this is analogous, in a sense, to this, frankly, battle we’re having over control of, in this case, energy. But Institute for Local Self-Reliance helps us see how it’s connected across all these segments of our economy. What if George Washington had given up, and the king was still in charge?
Leslie Glustrom: But he didn’t give up, and that’s an amazing story. Again, I encourage your listeners to go back and remind themselves what they all did, freezing in Valley Forge and all of that. So I believe we need to continue on. Yes, we fail. We did not take advantage. The obvious argument back then was, “Yeah, you could do solar, but that was solar thermal on the White House. And solar’s too expensive. It’s 40 or 50 cents a kilowatt hour, and we can do coal for three. So you wouldn’t want to do something stupid like make poor people pay for expensive power.” Those are those arguments back then.
Leslie Glustrom: I think now we can see that, again, the planet is priceless, and we should have understood that because when you destabilize the climate of the planet, you destabilize everything, including government, civil society. This is the most profound consequence of all, which is that we lose the ability to maintain stable states, which people all over the world already live with that problem. But when you start to think about the industrialized North all of a sudden not being able to maintain a stable government, a stable society, and what that means is just profound. And we should have at least had a more profound conversation. But, again, I’m neither an economist nor a time machine. So we can’t turn it back, but we can go forward. We do have another moment now in history where we can use this moment to ask the questions that you’ve just asked about the 1970s.
Leslie Glustrom: And why I think securitization is one of the important threads to pull on is because the way it’s presented… And the response we’ve written that you’ve mentioned is a response to a report by the Rocky Mountain Institute. I have a lot of respect for the Rocky Mountain Institute. But in this case, I feel like they didn’t think deeply enough or broadly enough about where we are in this point in time and what our opportunities are and, in a sense, it’s not just an opportunity, but it’s really an imperative to come up with a different structure that’s both more equitable for customers and the providers and also has a different topology, which brings us back to the local power story that Institute for Local Self-Reliance has told so often and so well.
Leslie Glustrom: When we rely on the big grid, we end up with big problems. Most recently, right before this podcast was recorded, we had a big snowstorm in the Northeast. At least 200,000 people were without power. We’ve had fires in California, fires in Colorado, fires in Oregon, floods. The big grid is an amazing contraption, but it’s also not very stable. When squirrels can bring down the grid, you know there’s a problem, to say nothing of fires and floods and massive snowstorms. And as we move into this century with more and more extreme weather, I think it’s important that we consider that just continuing on and on and on with the big grid, big power plants several hundred miles away from where you live, bring the electricity to your refrigerators and computers and TVs over big power lines… Now, when the snow falls or the trees fall or there’s big tornadoes or hurricanes or whatever, all of a sudden, people are sitting in the dark.
Leslie Glustrom: And obviously there’s another model sprouting up underneath it. It’s often referred to as a microgrid model, a more decentralized model. But you’ve got solar panels somewhere, either on your roof or on the school down the street or on the grocery store or whatever. You’ve got some storage built in. And when the big grid goes down, these microgrids are often the one place where you can go and charge your phone while the food rots in your refrigerator or whatever.
Leslie Glustrom: The one reason I think we want to have these questions asked now, at this moment in history, is that to continue the big centralized monopoly-controlled structure is not only inequitable from an economic point of view, it’s also not wise as we move into a century that’s going to be just characterized by one… How many times have you heard on the news, “We’ve had floods, but we’ve never had a flood like this,” “We’ve had fires, but we’ve never had a fire like this”? In Colorado, it used to be a big deal to have a fire above 10,000 acres. This summer, we had three fires above 100,000 acres, and one was above 200,000. That’s not going up linearly. That’s going up more exponentially.
Leslie Glustrom: We have no idea how big the fires will be in 2030, 2040, 2050. Not only is that devastating from both all the people who’ve lost their homes and all the animals who’ve lost their habitat, all the forests that we lose, but the power goes out. And if we haven’t rearranged our electric system in a way that’s much more… The term is resilient, ability to continue to function in the face of these extreme weather events, I don’t even know how to think about it. What about when the fires are 300,000 and 400,000 acres all over Colorado and floods in the Midwest are just way beyond floods that you and I remember from when we were kids?
Leslie Glustrom: I think, yes, if we’d made that change in the ’70s, we’d be in a different place. But I can’t turn the clock back. But this is now 2020, and it’s very important that people ask these fundamental questions. Securitization is one because if we just securitize, we, in a sense, support the existing monopoly power structure with large, centralized generation, and we will miss another amazing opportunity.
John Farrell: Why don’t we dive into that? We’ve talked about these three issues here. One is the imperative to decarbonize and to address climate change. But then there’s this issue of equity and this issue of monopoly and decentralization that are at stake. Why don’t we talk a little bit about what’s specifically in the report in terms of the critique and a different approach to securitization? How do we retire these in a more just manner, these fossil fuel power plants? How do we do right by the communities and the workers and customers? Then what’s a different future look like?
John Farrell: I keep thinking about… I don’t know if we want to talk specifically about this, but in New Mexico, they passed a law that essentially enshrines securitization and also essentially handed off all of the potential profits and benefits from clean energy to the utility, the same utility that made all the bad bets and said, “Not only are we going to let you extract from customers payment for the bad bets you made, we’re also going to let you make profits off of all the good things that we want built.” I think we don’t want to go there. I’m guessing that we share that opinion.
John Farrell: I should also mention, too, so as far as this report is concerned, that the Institute for Local Self-Reliance is signed on to it as a supporter of this excellent critique of this tool. But let’s talk about what a more equitable and just approach to using these kinds of tools to decarbonize the electricity system.
Leslie Glustrom: I think as we look at the challenge before New Mexico, before Colorado, to some extent before Minnesota and many other states, there is an array of tools that can be used, an array of alternative approaches. But I think the citizens and the advocates will need to be empowered to ask those questions. That’s why we wrote the report along with Institute for Local Self-Reliance and several other organizations that are supporting it, is to just begin the process. Again, I don’t hold myself out as an expert in any of this, but I wanted to help others begin to ask these questions and just to take a spectrum of responses, first of all just in paying off the stranded assets. Then we can talk about the workers and a lot of other things.
Leslie Glustrom: In terms of paying off the stranded assets, typically, when a business has a mistake, they have to write it off. So that’s one end of the spectrum, which is the utility has to write it off. In Colorado, our local and investor-run utility, they’re part of Xcel. In Colorado, they’re known as Public Service Company Colorado, their old name. And Public Service Company Colorado, in 2019, which is the most recent data we have, they had $578 million of after-tax net income from Colorado. So, after they’ve paid all of their executive salaries and all of everything they do, frankly some of the gold-plating that they do and a whole lot of other things, they still had $578 million left over.
Leslie Glustrom: So, even if we had, in our case, let’s call it a $800-million problem, they could write it off in four years at $200 million a year and still have over $300 million of after-tax net income. So they can certainly afford to do this. I’m not advocating for the utilities to bear 100%, but we could. Maybe somebody tougher than I would do that. But I do think we can split it. You could just start 50/50 because that makes life easy. We’re going to split it. The regulatory system failed our state here in Colorado. So we’re going to force customers, who are represented by that regulatory system, to pay half of it. It hurts me to say that because customers clearly had no meaningful involvement in this process. They tried. We had hundreds of people say, “Don’t build this new coal plant down in Pueblo that’s supposed to last until 2070,” and we failed.
Leslie Glustrom: So we could split it 50/50. We could also say… For example, if the coal plant is 60% of the way through its life, then customers would be responsible for 60% of what’s remaining, and utilities, 40%. So the farther the plant is, if it’s 80% or 90%, then customers have gotten most of the benefit. They might pay 80% to 90% of what’s left, and the utilities would pay 10%. Again, that’s just a way to rough cut it. The utilities commission could take their job very seriously and ask the question that you asked, John, which is: what did the utilities know, and when did they know it? And when should they have known it?
Leslie Glustrom: Very strong argument that utilities knew back in the 1970s, ’80s, and certainly the ’90s. And if they didn’t know it, they should’ve known it, that heavy reliance on fossil fuels was going to destabilize the climate of the only planet we know that supports life. So you could do a big, long investigatory docket or whatever it would be in your state, and then decide, “Oh, it’s going to be 39%, 61.” Have I done that right? Whatever the division is, or you could do what seems to be the assumption in this particular case, the securitization report from Rocky Mountain Institute, utilities have a stranded asset, customers pay 100% of it all. What I’m trying to advocate for is we should not start at that place. Securitization may be a tool. It may not be a tool. We could also pay off the plant and the utilities commission could say, “We’ll pay It off, but we’re only going to pay you the cost of debt, which is maybe 3% or 4%. You don’t have to do the whole bonding securitization pathway.”
Leslie Glustrom: There’s lots of options, but the first step is to ask that question. When the utilities have a stranded asset, what is the whole array of options we have? Let’s not start with the assumption that customers… And of course this will fall disproportionately on low-income customers. Middle and upper-income customers are often getting solar. So they’re much more insulated from this. Basically, we’re saying utilities have a problem, and poor people and small businesses will pay it off. And that just intensifies the economic inequities in our society.
John Farrell: I love that you have so many different ways that we can approach this because it is really disappointing how much of the conversation is just about, “Hey, we’re going to refinance, and it’s great because we save money.” And we just ignore the face about responsibility, which I think utilities would love to have us do. You asked about somebody who would more be more forthright or whatever about it. I’d be happy to say that 100% of it should be covered by the utility. If nothing else, it’s a better negotiating position. But I think we should have a presumption that the utility has responsibility for this for sure.
John Farrell: I really do admire, too, the way that you’ve worked up this notion, too, about the useful life of the plant, the the older the plant is, the less likely it is the utility would’ve known that there were these implications, the less likely it would’ve been that there were really cost-effective alternatives available in the market. And maybe customers have a higher responsibility, whereas I think that plant that you’ve mentioned in Pueblo, only 10 years old now and expected to run to 2070, it’s ludicrous that customers should really be on the hook for very much of that. Everybody has known by 2010, and it’s really sad that you even have a utility commission that would’ve approved that plan, frankly. But I don’t think that means that we can’t hold the utility liable for making a poor decision.
John Farrell: Anyway, working in a lot of my opinion in there, obviously. What are some of the things that we can do other than… There’s this question of the remaining debt of these stranded assets and who, between the utility and the customers, is going to carry it. What are some other ways that we can make sure that the outcome is more equitable in terms of how we use the savings? Once we’ve made that decision about how we refinance or who is writing off the expense, how do we use those resources in a good way?
Leslie Glustrom: Yeah, thank you so much. It’s an excellent question, and I do want to talk both about using the resources to support a just transition, which I strongly support for the workers and the communities, and also for creating a differently configured electrical system. But I want to make sure your listeners understand one concept that they will run up against quite quickly, and that is the regulatory compact. And the report that will come out in mid-December from Clean Energy Action with support from Institute for Local Self-Reliance will talk a little bit about this.
Leslie Glustrom: I want to thank so much Professor of Law at Harvard, Ari Peskoe, for doing a very detailed analysis of the concept of a “regulatory compact” because what citizens and advocates will hear is like, “Oh, we have a regulatory compact. You approved this coal plant. So now you have to pay for it because of the regulatory compact.” Professor Ari Peskoe at Harvard has written a detailed analysis of this concept of regulatory compact and, as he says, framing utility regulation as a compact is a rhetorical device that’s been invoked by industry to argue against competition and in favor of rate increases and cost recovery for investments that did not benefit rate payers. Professor Peskoe did a detailed analysis of many utilities commission decisions as well as court cases. And he concludes, on the contrary, PUCs and courts have explicitly rejected such arguments based on the regulatory compact. Undoubtedly, the attorneys will say, “Oh, there’s a regulatory compact,” but feel empowered to push back against that concept.
Leslie Glustrom: Scott Hempling, who’s also been on the ILSR podcast… It’s a great podcast, for those that haven’t listened to it yet. And Scott Hempling, who’s an attorney, been involved in utility regulation for a long time, also took a look at the regulatory compact. He says it even more succinctly. The bottom line? Repetition does not create truth. There is no regulatory compact. So what the utilities want us to think is, “Well, we have regulation the regulators approved. So now we get cost recovery, and now customers have to pay and use these rate-payer obligation charge bonds known as securitization or they have to pay us our full weighted average cost of capital, 7%.” They have a lot of attorneys, and they’ll say that.
Leslie Glustrom: So I think those two resources there, the Ari Peskoe paper and the Scott Hempling analysis on regulatory compact, are important. You can also ask just, “Show me where in the laws of my state is the regulatory compact exist.” I tried that with several powers to be in Colorado. I asked at least 15 times and never got an answer because it doesn’t exist. But even people who I respect, attorneys that have been around this for a long time in Colorado are like, “Oh, there’s a regulatory compact.” I’m like, “I respect you, but there is not such a thing.” There’s a concept. It’s a rhetorical device. As Scott Hempling says, “Just because they repeat it a lot doesn’t mean it exists.” But it does exist in the minds of a lot of regulators and certainly a lot of utility attorneys and all of that. So feel free to push back, and again, that Ari Peskoe paper as well as the Scott Hempling analysis are very helpful.
Leslie Glustrom: You asked, John, about how do we use this… If we’re going to save money, if we’re going to pay off these coal plants and either the utility writes it off or we pay for less of it at 3% or 4% instead of 7%, that can lead to some savings in Colorado. The bill that authorizes securitization here slices off 15% of those savings to use for just transition for fossil fuel workers and their communities. And I just want to say I have profound sympathy. If you’ve ever been through job change, you know how terrible it is. Millions and millions and millions of Americans have been through that process.
Leslie Glustrom: So I’m very profoundly sympathetic, but it’s very important for the fossil fuel workers to understand this is not a political issue. Fossil fuels are nonrenewable. When it comes to both coal and natural gas, the two I know well, the ones that can be produced at a profit are long gone. They’re now carbon dioxide and methane in the atmosphere. So this is not just get a new president or get a new governor or get a new whatever and you’ll get your job back. You’ve got to face the reality. These are nonrenewable resources, and it’s time to pivot as millions and millions of Americans have done. I get that that’s very difficult. I would like to have support. I would like to have training. I’d like to have transition payments for these workers, given that millions and millions of Americans have had to do it, including my husband and I. Millions and millions of Americans have had to do it more than a few times without any support of any kind.
Leslie Glustrom: Then, of course, the other thing that I’m very interested in is opening up the market to more competition, to more innovation, to more decentralization, to a different topology for our electrical system because relying on the big grid in the 21st century, it’s already led to very, very big problems. And as we go through year after year, decade after decade, it’s going to become increasingly obvious that making your power 200 miles away and putting it on transmission lines is a very brittle, unstable way to run this system. So put those solar panels on your schools and on your churches and on your grocery stores or on your roof if your roof is big. Run the wires, create a little microgrid. Build in some storage. Start to envision a different, decentralized mode just as, when I was in college, all the computers were centralized, now we all carry around a massive amount of computing power in our briefcases or purses or whatever. And we have these little black things in our pockets that we call phones but really do 200 or 300 other things.
Leslie Glustrom: Then we want to come through the same kind of revolution in electricity. The first thing we have to do is to not accept that the 20th-century structure is the proper structure for the 21st century. Whether it was proper for the 20th or not, we could discuss a long time. But it is not going to be the best solution for the 21st century. It’ll stifle innovation, and it’ll make us very vulnerable to these extreme weather events, as well as cyber attacks and a whole lot of other things, and squirrels, that destabilize the big grid. And we’re very dependent on it. So it’s a big problem when the big grid goes down.
John Farrell: The kinds of things you’re talking about, and I hope we can give maybe some specific examples, but when you talk about decentralizing the grid, we’re trying to move from, as you said, these power plants that are sited hundreds of miles away from where we use the electricity. It creates that big vulnerability about where that power line is. Californians can talk all about that in terms of wildfires, not just from the power lines that are actually damaged by climate change but the ones that utilities are now turning off preemptively in order to avoid damage, or really avoid financial liability, I guess I should say, more than anything. But we’re talking about rooftop solar and things like that, right? We’re talking about energy generation that is located close to where we’re using electricity.
Leslie Glustrom: Yes, exactly. The great news is that more and more people… You don’t have to be some sort of geek. You don’t have to be of this party or that party. You don’t have to be urban or rural. That’s why Jonathan Scott’s movie, Power Trip, which at least for now is available for free viewing at… You can just look at it on your computer screen. It’s great. He goes all over the country. He goes to Georgia and to Nevada and Kentucky and Washington, D.C. He talks to people of all different economic backgrounds, and they all get it, like, “I put these things on my roof. They make electricity. I’m now in charge. My utility bills have gone down.”
Leslie Glustrom: Now, the utility doesn’t like it. So we’re having some really big power trips, big battles over that. But then, if you can add in some storage, if you start to have distributed ledger technology or blockchain things going on where Neighbor A produces but doesn’t need it, and Neighbor B uses it, and then Neighbor C has it a different time, and all of a sudden, you’ve got a big network of exchanges, that blockchain is great or distributed ledger technology is great, all of a sudden we’ve built a much more integrated network system that also distributes both the power generation as well as the control of the system. Instead of one utility with what seems like endless attorneys… And they’re good folk. I appreciate them as people, but endless attorneys to defend the one utility monopoly, you now have all these different things.
Leslie Glustrom: As part of this, I did a little reading on the history of the game Monopoly because I am so not an economist or an economic theorist. So I encourage everybody to read that and realize that actually was a woman who designed the game in the early 1900s, Lizzie… I wrote it down, and now I’ve lost it. But Lizzie Magi, M-A-G-I, and she designed it because she wanted people to understand that when you had a few people controlling all the property, this was a problem. This is 1903, and it’s great fun when you’re a monopoly. We all know from those long summer afternoons or whatever. When you have the monopoly, it’s really fun because you just get to suck all the money out of everybody else, and then you win.
Leslie Glustrom: But, as it turns out, and this is my PhD in economics at work. No, I’m just kidding. As it turns out, if you don’t have the monopoly, it’s not a lot of fun. Again, our utility here in Colorado, our investor-run utility, Public Service Company Colorado, $578 million of after-tax net income in 2019 alone, many of those profits driven by their investments in fossil fuel infrastructure, so making profits out of destroying the only planet we know that supports life. The people are fine, but this system, it’s unconscionable to have this sort of thing still going on. And it’s the misery all over the planet that we’re contributing to, the mudslides in Guatemala and the hurricanes in Nicaragua and the floods in Asia and the dying of the coral reefs.
Leslie Glustrom: As Americans, we have an outside share. We have the largest per-capita emissions and the largest cumulative emissions. So it’s well past time that we did what you suggested maybe we could have done in the 1970s in addition to passing that PURPA act, Public Utility Regulatory Policy Act. In addition to PURPA, we could’ve done many other things. But we can’t turn the clock back. But we can now, in what’s coming to be the third decade of the 21st century, take a hard look at the system we built last century and ask very hard questions about whether it’s really the right system. Is it going to bring us the optimal solutions, the balance of big grid and microgrid sorts of things? Is it going to allow more equitable distribution of income instead of so much going to the monopoly? And how do we do this in the most just and equitable way and the most resilient way?
John Farrell: Leslie, thank you so much for taking the time to talk to me about some of these very specific and complex policies on the road to sustaining life on this one planet we know, as you’ve put it so eloquently so many times during this conversation, and for really helping people understand the structures that are behind it. I think it is challenging enough for people to even grasp the climate problem that we face. And I think it is helpful for folks to understand that some people actually bear some responsibility for it and that we can make rules that make things fairer for everybody.
John Farrell: So thank you for your dedication to this so much that you have been volunteering and probably one of the most experienced and smartest persons that I’ve worked with in the clean energy space. I know you told me that I’d have to eat my shirt for saying that, but I still think it’s true. Thank you for your work. As we mentioned, this report will be out in mid-December. So, by the time you hear this podcast, you should be able to find it at Leslie, really, thanks again for taking the time to talk with me.
Leslie Glustrom: Thank you so much, John.
Jess Del Fiacco: Thank you for tuning in to this episode of the Building Local Power podcast from the Institute for Local Self-Reliance. You can find links to what we discussed today by going to and clicking on the show page for this episode. That’s While you’re there, you can sign up for one of our many newsletters and connect with us on social media. We hope you’ll also be able to take the opportunity to help us out with a gift that helps produce this very podcast and supports the research and resources we make available for free on our website.
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Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.

Audio Correction: This episode was edited by Drew Birschbach. 

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