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April 12, 2011

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State Regulatory Relations

NARUC Summer Committee Meeting Registration Now Open

Registration for the 2011 NARUC Summer Committee Meetings is now open. The Meetings will be held July 17 - July 20, 2011 at the JW Marriott at LA Live in Los Angeles, California.

With utility issues, from pipeline safety, new environmental rules, consumer protection, and nuclear-waste, making front-page news, you will not want to miss this important conference. You will hear from federal officials, State regulators, consumer advocates, and industry experts about how new policies and current events are impacting your jobs.

Online registrants will guarantee themselves a hotel room and save on registration fees. Online registration is open through July 1.

For more information and to register, please click here.



NARUC Creates New Environmental Protection Agency Coordinating Committee

Commissioner Erin O’Connell-Diaz

Commissioners Erin O’Connell-Diaz of Illinois and Jim Gardner of Kentucky will lead a new panel that will help coordinate NARUC’s activities on proposed federal environmental regulations.

The Environmental Protection Agency Coordinating Committee is an advisory board to the NARUC Executive Committee and will assist in managing the Association’s efforts in responding to new rules proposed by EPA.

NARUC President Tony Clark of North Dakota appointed Commissioners O’Connell-Diaz and Gardner as Co-Chairs of the group. He also appointed Vice Chairs from each of the most relevant NARUC committees— Consumer Affairs, Electricity, Energy Resources and the Environment, Gas, and Water—as members. The Vice Chairs tapped for the committee are: Commissioner Jack Betkoski of Connecticut (Consumer Affairs), Commissioner Matt Baker of Colorado (Gas), and Commissioner Robert Powelson of Pennsylvania (Water).

Commissioner Jim Gardner

Commissioners Gardner and O’Connell-Diaz represent the committees on Energy Resources and the Environment and Electricity, respectively.

The NARUC Executive Committee established the panel to replace the Task Force on Climate Policy, though its mission is distinct. President Clark said the new group will support the efforts of the Association’s standing committees by coordinating joint sessions at NARUC meetings, organizing educational efforts within the Association, and acting as a resource for leadership on relevant matters.

“With the EPA moving forward on a host of environmental proposals, the Executive Committee believed we needed to restructure how NARUC will address these issues,” President Clark said. “The EPA Coordinating Committee will spearhead efforts to integrate these important issues into the work of our committees and provide leadership with regard to disseminating critical information and educational resources to our members. I am grateful Commissioners O’Connell-Diaz and Gardner agreed to serve and I look forward to working with all of the members of this new panel.”

“As Co-Chairs of the EPA Coordinating Committee, we will work closely with our standing committees to ensure that NARUC’s best interests are served,” said Commissioners Gardner and O’Connell-Diaz. “Environmental regulations will have a significant impact on the work of public utility commissions over the next several years. We want to ensure that Commissioners and their staffs are getting the information they need to help them make sound decisions.”

NARUC created the Task Force on Climate Policy in March 2007 to develop and lead its advocacy as Congress moved forward with climate-change legislation. The Task Force authored several resolutions and issue briefs, and organized a series of educational Webinars for NARUC members, which can be accessed on the NARUC Website.

The Task Force interacted with Congress, particularly the House Energy and Commerce Committee and the Senate Environment and Public Works Committee, as lawmakers attempted to pass comprehensive climate legislation.

Commissioner Rick Morgan of the District of Columbia chaired the panel until July 2010, when he stepped down and was succeeded by Commissioner Ron Binz of Colorado.

“The Task Force on Climate Policy served an important purpose for this Association,” President Clark said. “I want to thank all those who served since its inception. We are all indebted to Commissioner Morgan’s tireless work on this issue for us, as he oversaw our main advocacy before Congress. We also owe Commissioner Binz a great deal of gratitude for initiating the latest round of educational webinars on the EPA rulemakings and how States are responding.”


Illinois Governor Appoints New ICC Chair

Chairman Doug Scott

Doug Scott was appointed by Governor Pat Quinn as chairman of the Illinois Commerce Commission (ICC) effective March 3, 2011. His term expires January 20, 2014.

Prior to his appointment Chairman Scott served as director of the Illinois Environmental Protection Agency from 2005 to 2011. During those years he chaired the Illinois Governor’s Climate Change and Advisory Committee and was a member of the Midwestern Governors’ Association panel charged with developing a regional cap-and-trade system. He was a member of the Air Committee for Environmental Council of States (ECOS) and the USEPA Environmental Financial Advisory Board. He served as chairman of The Climate Registry Board of Directors and co-chair of the Keystone Foundation Energy Board.

He was elected and served as mayor of Rockford, Illinois from 2001 to 2005. As mayor he held leadership positions in the Illinois Municipal League, United States Conference of Mayors and the National League of Cities. He also served as president of the Illinois Chapter of the National Brownfield Association.

Chairman Scott was elected a state representative from the 67th district in 1995 and served in the General Assembly until 2001 when he became mayor. Chairman Scott also served the city as city attorney.

Chairman Scott received his undergraduate degree with honors from the University of Tulsa in 1982 and a juris doctorate with honors from Marquette University, Milwaukee, WI in 1985.


California Governor Appoints New Commissioner

California Governor Jerry Brown recently appointed a new Commissioner to the California Public Utilities Commission.

Commissioner Mark Ferron was appointed to the CPUC on March 22, 2011. Most recently, he was a senior partner at Silicon Valley Social Ventures and is a board fellow of the New Teacher Center. From 2001 to 2009 he worked as chief operating officer for the Global Markets Division of Deutsche Bank in London, where he had responsibility for all operational activities globally across fixed income, currency, commodity and equity markets. Before joining Deutsche Bank Commissioner Ferron was a vice president at Salomon Brothers from 1994 to 1996, and was a vice president at Bank of America from 1986 to 1994. Commissioner Ferron holds a B.A. in mathematics from the University of Notre Dame and a master’s degree in economics from Stanford University



NARUC Board Appointments

Commissioner Robert F. Powelson of Pennsylvania has been appointed as a member of the NARUC Board of Directors for a term ending Oct. 31, 2014.


Three Utilities Agree to More Water-Risk Disclosure

Dominion, Southern Company and PPL agreed to significantly expand reporting and disclosure on water availability risks and plans for mitigating those risks, according to Ceres, a coalition of investors and public interest groups, which works with companies on sustainability issues.

The agreements were made in response to shareholders' resolutions filed several months ago asking them to evaluate and disclose their strategies on water risks, including low flows, thermal impacts and emerging regulations. The resolutions were withdrawn recently after the utilities' agreements.

The three agreements were among 29 filed with 19 US electric companies in the 2011 proxy season on environmental issues, Ceres said.

"Water scarcity is a growing risk to many public utilities and investors want to know how companies are preparing for increased competition for supplies, emerging regulations and potential revenue losses from shortages," said Mindy Lubber, president of Ceres and director of the $9.5 trillion Investor Network on Climate Risk.

In response to shareholders' requests, Southern Company, based in Atlanta, agreed to prepare a comprehensive "water action report," describing its water management philosophy, water use and consumption by generation type, discharges and risks.

"We have asked Southern Company to be mindful of these issues, and are pleased that the company has given shareholders the assurance it will integrate these considerations into its long-term planning," said Denise Nappier, Connecticut state treasurer, whose office manages $24.6 billion in assets and was the lead filer of the shareholder resolution.

In response to a shareholder resolution filed by private investor Ann Anundson, Dominion, based in Richmond, Virginia, committed to respond to the Carbon Disclosure Project's water survey, which asks companies to report their water use and risks associated with changing water availability. The non-profit UK-based group acts on behalf of 551 institutional investors holding $71 trillion in assets under management. The global water risk survey, now in its second year, was sent to 400 global companies that operate in water-intensive sectors, ranging from electric utilities to beverage companies.

PPL, based in Allentown, Pennsylvania, agreed to report on the water intensity of its generation, its water resources, cooling system types and water rights of major facilities. "We are pleased with PPL's willingness to discuss water issues with investors this year," said Luan Steinhilber, analyst and director of shareholder advocacy at Miller/Howard Investment, the lead filer on the shareholder resolution. Miller/Howard has $1.9 billion in assets under management.

Power plants account for 40% of the US' freshwater withdrawals, requiring 136 billion gallons daily for generating and cooling turbines, according to Ceres.

A single nuclear generating unit can use as much as 1.1 million gallons of water per minute, Ceres said. If water levels fall below the intake structure, lowering the structure can cost upwards of $200 million for a single nuclear or coal plant. Installing a less water-intensive cooling system can cost more than $1 billion.

Drought and growing water demand have placed increasing stress on water supplies and added to the challenges facing utilities in many regions. During the 2007-2008 drought in the Southeast, Southern was forced to buy $33 million in fossil fuels to replace lost power in Atlanta when hydropower declined by half, according to Ceres.


Massachusetts DPU Adopts New Merger Approval Standard

In an Order issued on March 10, 2011, the Massachusetts Department of Public Utilities announced that henceforth it would apply a “net benefits” standard, rather than a “no net harm” standard, in determining whether a proposed merger or acquisition is “consistent with the public interest.” Joint Petition for Approval of Merger between NSTAR and Northeast Utilities, D.P.U. No. 10-170. The change was vigorously opposed by the utility petitioners (as well as certain other parties), who contended that the “net benefits” test was “inherently ambiguous,” would stifle potential business combinations and preclude transactions that would otherwise improve utility operations, and was contrary to the interests of customers in the long-run. In response, the DPU sought to downplay the significance of its action, suggesting that, as a matter of recent practice, it had consistently looked for evidence of public benefits and had nearly always required a demonstration that a transaction’s benefits outweighed its costs. Notably, the DPU rejected the Massachusetts Department of Energy Resources’ proposal that merger partners be compelled to establish the likelihood of “substantial net benefits.”


South Carolina Court Reverses Rate Order

The South Carolina Supreme Court, in a decision released on March 28, 2011, reversed and remanded for additional proceedings an order of the South Carolina Public Service Commission denying a water utility’s requested rate increase. Utilities Services of South Carolina, Inc. v. The South Carolina Office of Regulatory Staff, 2011 S.C. LEXIS 101. In so doing, the Court identified a number of errors that, in its judgment, had operated to deny the utility’s due process rights:

The PSC may determine that an expenditure is suspect and should be disallowed even if the expenditure has not been challenged by the PSC’s prosecutory staff or any other party. However, in such circumstances, the PSC must give the utility applicant notice of its concerns and an opportunity to gather and present data in response.

The PSC may rely on the sworn testimony of non-party protestants that a utility’s water quality has not improved to overcome the presumption that a utility’s capital expenditures are prudent and reasonable. However, such testimony cannot be used to justify the disallowance of other expenditures that were not called into question.

The PSC may not question, or disallow the recovery of costs based solely on the fact that the rates proposed are higher than those charged by neighboring entities, absent a showing that those entities are sufficiently similar to the utility in question to allow a meaningful comparison.

An application for a rate increase must stand or fall on its own merits. A recent rate increase provides only a baseline for determining whether a utility’s rate base or expenses have increased and not a justification for denying a subsequent rate request.