Is Delaware Public Service Commission really serving the public? (John Nichols)

I am going to discuss complicated subjects, so why should Delawareans care? They should care because the subject matter directly affects the bottom line of their electricity bills.

Let us begin with the background needed to understand Regulation No. 56, as now proposed by the Delaware Public Service Commission (DPSC). Please forgive the alphabet soup like descriptions.

Electric power generation was deregulated by Delaware in the 1990s, but in-state delivery charges for the regulated utility, Delmarva Power, must be calculated in accordance with rate schedules and procedures approved by the DPSC.

After deregulation, Delaware joined the Regional Greenhouse Gas Initiative (RGGI), an interstate compact (with Maryland, New York and the New England states). It seeks to limit carbon dioxide emissions from burning fossil fuels for electricity generation.

When the RGGI targets were subsequently tightened, for the purpose of raising the cost of carbon allowances, the Department of Natural Resources and Environmental Control (DNREC) acted administratively (without legislative approval) to accept Delaware’s share of the overall reduction in CO2 emissions.

With the adoption of RGGI, Delaware also enacted their version of a Renewable Energy Portfolio Standards Act (REPSA). It requires regulated electric power distributors (e.g., Delmarva Power) to obtain a growing portion of the electricity distributed in Delaware from so-called renewable energy sources, buying a megawatt hour of solar generation, an SREC, or a megawatt hour of wind generation, a REC, by specified formula, under REPSA. Shortfalls in SREC or REC purchases require an “alternative compliance payment”.

REPSA was amended in 2010 to accelerate the phase-in. The goal is 25 percent renewable energy by 2025; although rumors persist, legislators will attempt to increase the goal during the next session of the General Assembly.

Given concerns renewable energy subsides might be burdensome, if not economically counterproductive, the General Assembly set a 3 percent subsidy cost-cap, or “freeze”, based on the actual cost of electricity supplied. If this cost-cap was exceeded, phase-in of REPSA could be paused until the overage was corrected.

In 2011, the General Assembly again amended REPSA to create a new class of “renewable energy,” namely, electric power produced from a “qualified fuel cell provider” (QFCP) project. This legislation was part of a plan to induce Bloom Energy to build a fuel cell manufacturing facility in Delaware, ignoring the fact the Bloom fuel cells would run on natural gas, and did not represent renewable energy.

The QFCP tariff was approved by the DPSC, and two Bloom Energy facilities were built, to generate a total of 30 megawatts of electric power.

This arrangement has proven considerably more expensive than represented initially, and Delmarva Power ratepayers pay a penalty of $3 million per month for electric power ($180 million since inception), that could be generated by a far less expensive combined cycle natural gas plant, with lower carbon dioxide emissions and the avoidance of hazardous solid wastes produced by the fuel cells.

The operation of the fuel cells produces hazardous solid waste in the form of lead, benzene, chromium, arsenic, and hydrogen sulfide. This hazardous waste was not disclosed when Bloom Energy applied for a permit, through DNREC, to site in the protected Delaware Coastal Zone.

Moreover, Bloom Energy has failed to create the 900 Delaware jobs forecast, with less than 250 hires, based on their October 2016 report.

Because of the Bloom Energy tariff, the renewable energy costs reflected on Delmarva Power bills are now running well above the 3 percent cap — close to 10 percent, if the QFCP tariff is taken into account. Yet Delaware regulators seem intent on excluding the cost of the tariff.

In fact, DNREC issued a regulation at the start of 2016 that would have adjusted the 3 percent cost-cap calculation so it would never be exceeded. Delaware Public Advocate, Drew Slater sued on several grounds, including that the DPSC — not DNREC — had jurisdiction under REPSA. DNREC agreed to withdraw its regulations.

DPSC now proposes Regulation No. 56, which it is preparing to finalize. The cost of the QFCP tariff remains excluded from the renewable energy cost-cap calculation. The rising cost of wind and solar power subsidies would still exceed the 3 percent cost cap, yet it is apparently planned to allow the subsidies to keep growing on grounds that a freeze “may” be imposed, rather than it “shall” be imposed.

This is an artificial interpretation of the statutory intent of the text, which delays relief for ratepayers and invites further litigation.

The DPSC’s position appears to be consistent with the advice of consultants the DPSC hired before the QFCP tariff was approved in 2011. The consultants cautioned a “new administration” might take a contrary view of the matter, however, thereby tacitly acknowledging that their advice was political rather than technical in nature.

I recently contacted one of the consultants to discuss this matter, i.e., why did they advise that the QFCP tariff did not represent “specific payment[s] being made to the Project Company [Bloom Energy] for “fulfilling” Delmarva’s REC or SREC obligations” when that was the precise purpose of the tariff? The response was succinct: “no comment.”

Based on the foregoing, I believe the DPSC should remember whose interests they are supposed to serve — Delaware electricity ratepayers, balanced against the needs of Delmarva Power, not the special interests that benefit from the REPSA provisions — and honor the renewable energy cost-cap the General Assembly saw fit to enact to protect the ratepayers from excessive subsidies.

Public comments on the DPSC regulations are due by Sept. 30. They may be submitted online or mailed to:

Delaware Public Service Commission
861 Silver Lake Blvd.
Cannon Building, Suite 100
Dover, DE 19904

EDITOR’S NOTE: John A. Nichols, of Middletown, is a self-described activist for reliable, cost-effective electricity generation.
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