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May 4, 2010

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State Regulatory Relations

Commissioner McKinney Named as Subcommittee Chair

Commissioner Jon W. McKinney

NARUC President David Coen of Vermont selected Commissioner Jon McKinney of West Virginia to lead the association’s Subcommittee on Clean Coal and Carbon Sequestration.

Commissioner McKinney replaces former Chairman David Ziegner of Indiana, who was appointed co-vice chair of the association’s Committee on Electricity.

The Subcommittee on Clean Coal and Carbon Sequestration is an affiliate of the Electricity Committee. Through panel discussions and policy resolutions, the subcommittee provides state regulators with an important venue for determining how to promote cleaner coal generation.

“With new limits on carbon restrictions on the horizon, analyzing the role coal can play in our future energy mix is essential,” President Coen said. “This subcommittee plays a critical role in helping define our nation’s energy policy, and I look forward to Commissioner McKinney’s leadership. I also want to thank Commissioner Ziegner for his service to this subcommittee, NARUC members and, by extension, our nation’s utility ratepayers.”

Commissioner McKinney was appointed to the West Virginia Public Service Commission in August 2005. He currently serves on the NARUC board of directors and is the immediate past president of the Mid-Atlantic Conference of Regulatory Utility Commissioners.

“Coal is an abundant natural resource, and if we are going to reduce our carbon emissions, we must find ways to utilize this fuel in a cleaner, more efficient way,” Commissioner McKinney said. “Through this subcommittee, NARUC members can discuss pilot and demonstration projects along with the challenges and opportunities we face. I want to thank President Coen for entrusting me with this opportunity.”


ACC’s Chair Discusses Climate Policy on E&E’s ‘OnPoint’ Program

ACC Chair Kris Mayes

Arizona Corporation Commission Chair Kris Mayes appeared on the influential ”OnPoint” interview program on Wednesday, April 21.

Chair Mayes discussed pending climate legislation in Congress, stressing the point that state utility regulators can play a key role in both protecting consumers and reducing carbon emissions.

The most important element of the climate policy, if Congress pursues a cap-and-trade system, is how emission allowances are allocated, Chair Mayes said. “[W]e're really concerned that we want to make sure that public utilities commissions, like mine, are able to stabilize rates by being able to take some of those carbon credits and use them and pass them on to consumers,” she said.

To watch the video and read a transcript, click here.


Water Utility Energy Efficiency

The California Public Utilities Commission (CPUC) approved pilot programs to improve energy efficiency of water pumping and distribution at CPUC-regulated water utilities.

The decision approves $3.4 million to fund pilot "operational energy efficiency programs" to demonstrate potential improvements in wire-to-water operational efficiency when the appropriate combination of induction motors, pumps, variable frequency drives and control systems are operated at their optimal efficiency levels.

The decision sets a timeline for project evaluation, measurement and verification to be completed by September 2011 to incorporate results into planning for the next round of utility efficiency portfolios.

"I expect that these pilots will demonstrate that significant energy savings are possible from efficiency upgrades at the water companies. But most important is that the water utilities and the energy utilities are now working closely together in a cooperative manner," said Commissioner John A. Bohn.

The approved proposal is available by clicking here.


NASUCA Prepares for Mid-Year Meeting

The National Association of State Utility Consumer Advocates (NASUCA) will hold its Mid Year Meeting June 13-15 in San Francisco, Calif., at the Marriott San Francisco Fisherman's Wharf. Their Annual Meeting will be held at the same time and place as the NARUC Annual Meeting, November 14-17 in Atlanta, Ga. For more information, please visit their Web site.


U.S. Supreme Court Declines to Hear Lawsuit Seeking to Close Canals Connecting Mississippi River to Lake Michigan

On April 26, 2010, the United States Supreme Court announced that it would not hear a lawsuit initiated by the Michigan Attorney General and six other states to separate the Lake Michigan and Mississippi River watersheds in order to prevent the spread of Asian Carp, a potentially devastating invasive species. The lawsuit sought to reopen a 1922 Supreme Court case involving Chicago’s use of a canal system to direct water from Lake Michigan towards the Mississippi River. The Supreme Court did not provide an explanation in declining to hear the case. While additional lawsuits from states and environmental groups are expected, some are calling for a shift in strategy from the courts to Congress and the Obama administration in order to accelerate implementation of measures to prevent the spread of Asian Carp to Lake Michigan.


New Jersey Supreme Court Finds Ordinance Authorizing Sale of Municipal Water Distribution System Not Immune From Petition for Referendum

On April 6, 2010, the New Jersey Supreme Court found that the state Municipal Utilities Law (MUL) did not exempt a partial sale of the City of Trenton’s water distribution system from a petition for referendum authorized under the Faulkner Act. The sale involved a transfer of the portion of Trenton’s system serving areas outside of the city to New Jersey American Water Company (NJAWC). Under the MUL, an ordinance authorizing the transfer of a water utility to a non-public entity generally cannot become effective without prior voter approval. However, where the transfer involves a system serving less than 5% of the municipal population (such as the partial sale to NJAWC), a voter referendum is not required and the approval can be made by ordinance, subject to review by the Board of Public Utilities.

After the city passed an ordinance approving the sale to NJAWC, a group of citizens filed a petition for referendum pursuant to the Faulkner Act. The city and NJAWC challenged the petition, arguing it should be declared null and void. Both the Law Division and Appellate Division found that the MUL provision exempting the sale from mandatory referendum requirements superseded the general provisions of the Faulkner Act allowing petitions for referendum. The New Jersey Supreme Court reversed the appellate court, finding that while the MUL provision exempted the sale from mandatory voter approval, there was no evidence that the legislature intended to remove the right of citizens to challenge an ordinance approving such a sale by referendum under the Faulkner Act.


Pennsylvania Department of Environmental Protection Orders Hefty Penalties After Cabot Oil & Gas Fails to Meet Corrective Action Deadline

On April 15, 2010, the Pennsylvania Department of Environmental Protection (Department) modified an existing Consent Order with Cabot Oil & Gas Corporation (Cabot) to require extensive corrective action and assess significant penalties after Cabot failed to meet compliance deadlines in the Order. Cabot failed, among other things, to repair deficient well casing and cementing and to prevent the unpermitted discharge of natural gas from wells to waters of the Commonwealth. The modified Order requires Cabot to plug several wells within 40 days as well as install treatment systems for a number of homes with contaminated drinking water. Cabot was also assessed a $240,000 fine and must pay an additional $30,000 per month beginning in May until the department has determined that Cabot has completed all of its obligations under the Order.

Perhaps most significantly, the department has suspended review of Cabot’s pending drilling permit applications throughout the state. For permitted wells in affected areas where drilling has not yet commenced, the department has ordered that no drilling occur until at least 12 months have passed and the Department has determined that Cabot has completed all of its obligations under the Order. Cabot’s existing Pennsylvania gas operations account for a significant part of the company’s overall gas supply and new drilling permits are required for Cabot’s planned expansion in Pennsylvania’s part of the Marcellus Shale. The aggressive action taken by the department highlights growing concern in the state over the environmental impacts of natural gas drilling operations. The department has announced a meeting next month with oil and gas companies with permits to drill in the Marcellus Shale to discuss the prevention of gas migration from wells and protection of state natural resources.


City of Los Angeles Identifies Water Conservation Program as Culprit in String of Summer Water Main Breaks

A report released by the City of Los Angeles earlier this month identified fluctuations in water pressure resulting from the city’s very successful water conservation program as the cause of a series of major water main breaks last summer. Last year, the use of sprinklers in the city was restricted to 15 minutes a day during the morning or evening hours of Mondays and Thursdays. The resulting fluctuations in water pressure have put too much stress on the city’s aging pipes. Los Angeles had 101 breaks during summer 2009, compared to 42 in summer 2008 and 49 in summer 2007. The city is exploring alternative conservation strategies that will create more stable water pressure.