Regulators reject request to review Bloom Energy tariff (Randall Chase, Washington Times)

This story by Randall Chase, AP ran in the 10/11/18 print edition of the [Wilmington] News Journal with a different headline: "State: Bloom surcharge on Delmarva Power bill will stay"

Delaware utility regulators on October 9 voted (5-0) to deny a petition for review of a deal under which Delmarva Power (DP) ratepayers are forced to pay tens of millions of dollars to a California-based fuel cell manufacturer via the Qualified Fuel Cell Provider (Bloom Energy) tariff that the Public Service Commission (PSC) approved in 2011. The basis for the decision was that the PSC has no authority to change the QFCP tariff so any review of this burden on the ratepayers would be pointless.

State officials offered Bloom Energy (BE) millions of dollars in job-creation incentives in 2011 to build fuel cells in Delaware to generate electricity and help Delmarva meet its renewable energy requirements. They also guaranteed a revenue stream to Bloom through a “renewable energy” surcharge on DP ratepayers, even though BE’s fuel cells are powered by nonrenewable natural gas.

The surcharge has cost DP customers over $200 million to date, and it will last for another 15 years. According to one estimate, it could cost DP ratepayers $700 million or more by 2033.

Initial estimates were that the surcharge would cost the average DP ratepayers between $1 and $1.43 a month, although skeptics predicted it would be much higher. The skeptics were right. This figure is expected to top $5 next month.

“It’s time to look at the Bloom tariff,” said Middletown resident John Nichols, a longtime critic of the deal. Nichols acknowledged that the PSC has no authority to change the tariff agreement between BE and DP (changes can only be made on joint application of these entities), but that a review of the issue could be a “valuable learning opportunity.”

“My hope is that a review will lead the two parties to review the terms of the tariff and perhaps offer relief from the cost of paying for this very expensive electricity,” he said.

State Sen. David Lawson, R-Marydel, supported Nichols’ request, saying BE has failed to meet its obligations under the deal, and that DP customers are being ripped off. “I think we [the General Assembly[ were sold a bill of goods,” Lawson said.

James Geddes, a lawyer for commission staff, said that with the benefit of seven years of hindsight, state officials might have made different decisions. But he said the law gave the PSC no discretion in 2011 to change the terms of the tariff, and it has no such discretion now. “You are in a straitjacket. You don’t have any discretion here,” Geddes told the commissioners

Geddes also noted that BE is not a regulated utility. “How does the commission ask Bloom questions that they don’t want to answer?” he asked.

Drew Slater, the public advocate, noted that even if officials were somehow able to terminate the BE tariff, Delmarva ratepayers would still be on the hook for roughly $500 million in payments to BE, which would be due immediately. Each residential ratepayer would be hit with a bill of about $700. Commercial and industrial customers would pay significantly more.

“Make no mistake, this was a horrible deal for Delmarva ratepayers,” said Slater. He nevertheless said the PSC’s hands are tied because of the way in which former Gov. Jack Markell and state lawmakers structured the deal to persuade BE to set up shop in Delaware.

BE, which raised about $270 million in an initial public offering in July, reported a net loss of $281.2 million for 2017, following a net loss of $336.3 million in 2016. Since its founding in 2001, the company had lost about $2.3 billion as of March of this year.

This report leaves out several noteworthy points:

#The motion to dismiss the petition was filed several days before the hearing, and a draft order assuming approval was posted on the PSC website before petitioner had an opportunity to make his case.

#BE issued a statement of rebuttal shortly after the petition was filed, which was quoted in the press. Among other things, this statement asserted that “Delmarva Power and Bloom Energy continue to deliver clean, reliable electricity with stable and predictable prices per the term of the project, exactly as promised.” Bloom Energy critic seeks to alter agreement that has proved costly for Delmarva Power customers, delawarebusinessnow.com, 10/1/18.

BE was not represented at the hearing, and its arguments were not cited or discussed. Another newspaper contacted BE after the hearing without receiving an immediate response. Commission rejects appeal to review Bloom Energy deal, Matt Bittle, Delaware State News,
10/10/18.

According to the Delaware State News story: "The agreement with Bloom stands as one of the biggest failures by Gov. [Jack] Markell’s administration and is a point of contention for both Republicans and Democrats. Sen. Dave Lawson, a Marydel Republican who was one of the few lawmakers to vote against the bill that essentially authorized Bloom to come to Delaware, said Tuesday that legislators 'were sold a bill of goods.' Rep. John Kowalko, a Newark Democrat, filed a letter of support of Mr. Nichols’ petition with the commission. Bloom did not immediately respond to a request for comment."

#Delaware's Department of Natural Resources and Environmental Control, which played a lead role in crafting and supporting the QFCP tariff in 2011, was not represented at the hearing. DNREC's absence was commented on during the proceedings.

#John E. Greer, Jr., a licensed professional engineer (retired), testified on several aspects of the fuel cell facilities being used to generate electric power for Delmarva Power. Notably, the tariff being charged has run about five times the offsetting revenue realized from selling the electric power in question to the grid at its market value.

#Gary Myers , a former Delaware Deputy Attorney General and PSC hearing examiner, suggested that this petition represented an opportunity for the PSC to take stock of the unusual QFCP tariff arrangement from a ratepayer standpoint. He cited a list of questions for BE that he had filed with the PSC.

#John Nichols had a 15-minute PowerPoint presentation available to explain the rationale for his petition, rebut the BE arguments, and respond to the arguments presented in the motion to dismiss. At the suggestion of the presiding officer (Commissioner Dallas Winslow), however, he presented briefer oral comments (basically as summarized above).

One of the points that didn’t get made was that over 300 people had signed an on-line petition supporting review of the QFCP tariff, i.e., this wasn’t simply the request of an isolated critic.
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