BatteryEnergyStorageTechnologyAdoption&ElectricUtilityStructure

Analyzingfactorsdrivingstoragedeploymentacrossutilityownershipstructures

SaraMulhauserSeptember2020

BatteryEnergyStorageTechnologyAdoption&ElectricUtilityStructure|

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|BatteryEnergyStorageTechnologyAdoption&ElectricUtilityStructure

Disclaimer

ThisreportwaspreparedasanaccountofworksponsoredbyanagencyoftheUnitedStatesgovernment.NeithertheUnitedStatesgovernmentnoranyagencythereof,noranyoftheiremployees,makesanywarranty,expressorimplied,orassumesanylegalliabilityorresponsibilityfortheaccuracy,completeness,orusefulnessofanyinformation,apparatus,product,orprocessdisclosed,orrepresentsthatitsusewouldnotinfringeprivatelyownedrights.Referencehereintoanyspecificcommercialproduct,process,orservicebytradename,trademark,manufacturer,orotherwisedoesnotnecessarilyconstituteorimplyitsendorsement,recommendation,orfavoringbytheUnitedStatesgovernmentoranyagencythereof.TheviewsandopinionsofauthorsexpressedhereindonotnecessarilystateorreflectthoseoftheUnitedStatesgovernmentoranyagencythereof.

TheresearchandanalysisforthispublicationwascompletedinFall2018throughSpring2019.

Acknowledgments

ThisreportwascompletedonbehalfoftheNationalAssociationforRegulatoryUtilityCommissioners(NARUC)CenterforPartnerships&InnovationandwasfundedinpartorwholebytheU.S.DepartmentofEnergy,OfficeofElectricity,undercooperativeagreementNo.DE-OE0000818.Fortheirsupportofthiswork,theauthorwouldespeciallyliketothankDanielleSassByrnettandKieraZitelmanoftheNARUCCenterforPartnerships&Innovation.Fortheiradvisingthroughouttheprocess,theauthorwouldliketothankSeverinBorenstein,DanielKammen,LarryRosenthal,DavidAnthoff,GeneRochlin,MargaretTorn,andIshaRay,alloftheUniversityofCaliforniaatBerkeley.Theauthorwouldalsoliketothankherhusband,ChristopherMulhauser,forhispatienceandunderstanding.

Fortheirsupportandinputforspecificsubjectmatters,theauthorthanksclassmatesintheEnergy&ResourcesGroupingeneral,andWillGormanandStephenJarvisinparticular,aswellasAndrewMills,AndySatchwell,andGalenBarbosewiththeLawrenceBerkeleyNationalLaboratory’sElectricityMarketsandPolicyGroup.ThanksarealsoduetoNickEschandMacKellerfromtheSmartElectricPowerAlliance(SEPA),JeremyTwitchellatPacificNorthwestNationalLaboratory,RobertJeffersatSandiaNationalLaboratory,aswellastootherreportreviewersfortheirvaluablefeedback.

Contents

Disclaimer 1

Acknowledgments 1

Figures&Tables 3

Acronyms 4

ExecutiveSummary 5

Introduction 7

TheStateofEnergyStorage 9

UtilityStructures&RegulatoryJurisdiction 9

WhatisDrivingtheGrowthofEnergyStorage? 11

AboutBatteryEnergyStorage 15

BarrierstoAdoption 18

InterventionOptions 21

Findings 26

Question1:Hasbatteryadoptionbeenhigherinterritoriesservedbyverticallyintegratedor

restructuredIOUs? 27

Question2:Havebatteryserviceofferings(i.e.,gridsupportservicesbeyondenergyandcapacity)

beenmorewidelyusedinterritoriesservedbyverticallyintegratedorrestructuredIOUs? 28

Question3:Whichpolicymechanismshavebeenusedandeffectiveatspurringbatteryadoption,

andhowisthatdifferentinstateswithverticallyintegratedorrestructuredIOUs? 31

Recommendations 32

AppendixA:Methodology 34

ExistingLiterature 34

Hypothesis 34

Methods 35

DataSources 36

AppendixB:DetailedFindings 43

DescriptiveStatisticsandAnalysis 43

DetailedRegressionandAnalysis 46

Bibliography 54

Figures&Tables

Figure1:ElectricUtilityOperations 9

Figure2:RegulatedComponentsofVertically

Integratedvs.RestructuredUtilities 10

Figure3:ElectricityRestructuringbyState 10

Figure4:RegionalTransmissionOrganizations 11

Figure5:EnergyStorageTechnologyPower

andDischargeRanges 12

Figure6:EnergyStorageTechnologyPower

andDischargeRanges. 16

Figure7:BESRangeofServicesand

InstallationLocations 17

Figure8:IllustrationofValueStackingina

CaliforniaGrid-ScaleBESProject 18

Figure9:InterventionsDrivingBESAdoption

andTheirTargetedAudience 22

Figure10:Top15StatesbyNormalized

BESPowerCapacity 27

Figure11:Top15StatesbyNormalized

BESEnergyAvailability 28

Figure12:UniqueBESServiceOfferings

inVerticallyIntegratedIOUs 29

Figure13:UniqueBESServiceOfferingsin

RestructuredIOUs 29

Figure14:BESAdoptioninIOUTerritory,

byYear 36

Figure15:ShareofCompetitionforRetail

andGeneration,byState–3categories 38

Figure16:ShareofCompetitionforRetail

andGeneration,byState-2categories 39

Figure17:GMIScoreFactors 41

Figure18:Top15StatesbyNormalized

BESPowerCapacity 42

Figure19:Top15StatesbyNormalized

BESEnergyAvailability 42

Figure20:SummedPowerandEnergy

AvailabilityandNormalizedCapacity

byStructure(3) 44

Figure21:SummedPowerandEnergy

AvailabilityandNormalizedCapacity

byStructure(2) 44

Figure22:UniqueBESServiceOfferings

inVerticallyIntegratedIOUs 44

Figure23:UniqueBESServiceOfferingsin

RestructuredIOUs 45

Figure24:NormalizedPowerCapacity

byDriver 45

Figure25:NormalizedEnergyAvailability

byDriver 46

Figure26:Power&EnergyOutcomes

byStructure 46

Figure27:NormalizedPowerCapacity

byStructure,WithControls 47

Figure28:NormalizedEnergyAvailability

byStructure,WithControls 48

Figure29:ProjectLevelBESServiceOfferings

byStructure 48

Figure30:StateLevelBESServiceOfferings

byStructure 49

Figure31:NormalizedPoweronPolicy

Mechanisms,forVerticallyIntegratedOnly 51

Figure32:NormalizedEnergyonPolicy

Mechanisms,forVerticallyIntegratedOnly 51

Figure33:NormalizedPoweronPolicy&Market

Mechanisms,forRestructuredOnly 52

Figure34:NormalizedEnergyonPolicy&Market

Mechanisms,forRestructuredOnly 52

Table1:PotentialImpactsonNear-Term

DERDeploymentLevels 25

Table2:BESDatabaseAdoption

ModificationsafterDataCleaningEffort 38

Table3:StateRestructuringDesignations 41

Table4:RangeofBESServicesandDriver

MechanismCorrelation 50

Table5:DriverMechanismCorrelationto

BESAdoption 53

Acronyms

ACES

AdvancingCommonwealthEnergyStorage(Massachusetts)

AMI

AdvancedMeteringInfrastructure

BES

BatteryEnergyStorage

BTM

Behindthe(electricity)Meter

CPUC

CaliforniaPublicUtilityCommission

C&I

CommercialandIndustrial(retailcustomers)

CCA

CommunityChoiceAggregator

DSIRE

DatabaseofStateIncentivesforRenewables&Efficiency

DOE

DepartmentofEnergy

DER

DistributedEnergyResource

DRP

DistributionResourcesPlan

eGRID

Emissions&GenerationResourceIntegratedDatabase

EIA

EnergyInformationAdministration

EPA

EnvironmentalProtectionAgency

FERC

FederalEnergyRegulatoryCommission

GHG

GreenhouseGas

GMI

GridModernizationIndex

IPP

IndependentPowerProducer

ISO

IndependentSystemOperator

IRP

IntegratedResourcePlanning

IOU

InvestorOwnedUtility

LCOS

LevelizedCostofStorage

NETL

NationalEnergyTechnologyLaboratory

NEM

NetEnergyMetering

NERC

NorthAmericanElectricReliabilityCorporation

PJM

Pennsylvania-Jersey-MarylandInterconnection

PV

PhotovoltaicCells(solargeneration)

PPA

PowerPurchaseAgreement

POU

PubliclyOwnedUtility

PURPA

PublicUtilityRegulatoryPoliciesAct

RTO

RegionalTransmissionOrganization

RPS

RenewablePortfolioStandard

SGIP

Self-GenerationIncentiveProgram

SEPA

SmartElectricPowerAlliance

SAIDI

SystemAverageInterruptionDurationIndex

SAIFI

SystemAverageInterruptionFrequencyIndex

TOU

TimeofUse(rates)

VRE

VariableRenewableEnergy

ExecutiveSummary

Changingcustomerloads,externalitiesfromfossilfuelgenerators,andrapidinnovationofnewtechnologieshavecontributedtoalarge-scale,ongoingtransformationoftheelectricgrid.Successfulcommercializationandintegrationofadditionalnewtechnologieswillbecriticaltomeetingfurtherchallenges.

Electricutilitystructurehaspotentialtoimpacthownewtechnologiesareadopted.Electricutilitiesareoftenagatekeeperfornewgrid-connectedtechnologies.Becauseoftheirregulatedmonopolystatus,utilities(especiallyverticallyintegratedones)oftenhaveawiderangeofdiscretionaboutwhetherornotitisintheirinteresttoadoptnewtechnologies,potentiallycreatingbottlenecks.Electricutilitiescanbemajorpurchasersofnewtechnologiesortheymaychoosetobecompetitorsbydevelopingtheirownofferings.Theregulatoryenvironmentwithinwhichelectricutilitiesoperatealsoinfluencesutilitybehavior–verticallyintegratedutilitieshaveadifferentrelationshiptothesupplychainoftheelectricpowerindustrythanrestructuredones,andmayhavedifferentincentivesimpactingtheirengagementwithnewtechnologies.Thenatureoftheseinteractionsisanimportantconsiderationfortheviabilityofanynewtechnology’scommercialization.

Anydecision-makerscontemplatingpolicyinterventionsormarketmechanismstoencouragecommercializationofnewtechnologiesneedtoconsidertheimpactoftheelectricutilitystructureintheirprocess.Evenseeminglyunrelatedratedesignorlegaldesignations1canhaveanimpactontheviabilityoftechnologiesortheirpathtomarket.

Thispaperbeginsanexplorationoftheextenttowhichthestructureofinvestor-ownedutilities(IOUs)(i.e.,inverticallyintegratedandrestructuredstates)mayinfluencethecommercializationofthecriticalnewtechnologiesneededtotransformtheelectricgridintoasystemthatemitsfarlesscarbonfortheelectricityitproduces.Theanalysisfocusesontheinteractionbetweenthegrowthofbatteryenergystorage(BES)inverticallyintegratedandrestructuredstatesasarelevanttestofthehypothesis.

BESgrowthhasbeennearlyexponential,with148.8MWinstalledinthefirstquarterof2019,representinga232percentincreaseoverfirstquarter2018(Morehouse,2019b).Theincreasedadoptionofbatteryenergystoragetechnologyisdueinparttotechnologicaladvancementbothofbatteriesandnewerintermittentrenewablegenerationsources,inpartduetoutilityratedesignsthatpurposefullyorinadvertentlyencouragearbitrage,andinpartduetofederalandstatepoliciesthatencouragedeeperpenetrationofrenewableenergy.Inadditiontoshiftingloadsandstoringrenewableenergyforuseatdifferenttimes,BEScanprovidearangeofgridservicesthatmightbebeneficialtothegrid.

ThisreportidentifiesbarrierstoadoptionofBES,includingcost,externalities,institutionalbarriersassociatedwithamonopolyutility,marketdesigns,innovationbarriers,regulatoryuncertainty,andpoliticalfeasibility.Duetosomeofthesebarriers,BEStechnologyhashistoricallybeenlargelydependentonsomesortofpolicyorsubsidysupport,thoughfutureprojectionsindicatethatthissituationmightrapidlychange.Thisreportalsocategorizesandsummarizesgovernmentinterventionsdirectedatutilities,independentpowerproducers,andretailcustomers.

Theanalysissharedinthisreportaimstoidentifythepolicyandmarketdriversofadoption,andtheextenttowhichthosedifferdependingonIOUstructure.Thespecificquestionsthispaperattemptstoanswerare:

Todate,hasbatteryadoptionbeenhigherinterritoriesservedbyverticallyintegratedorrestructuredIOUs?

Oneexampleofalegaldesignationimpactingtechnologypath-to-marketisclassificationofbatteryenergystorage.Sincethistechnologyprovidesservicesattimeslikeagenerator,atotherslikeaload,andstillotherslikeatransmissionordistributionmanagementasset,itdoesnoteasilyfitintotraditionallegaldefinitions.Ifarestructuredutilityisprecludedfromprocuringnewgenerationassets,forexample,technologyproviderscannotaccessthemarketthroughtheutilities,andmaynotbeabletosellasmanyservicesasthetechnologycouldprovide.

Todate,havebatteryserviceofferings(i.e.,gridsupportservicesbeyondenergyandcapacity)beenmorewidelyusedinterritoriesservedbyverticallyintegratedorrestructuredIOUs?

Whichpolicymechanismshavebeenusedandeffectiveatspurringbatteryadoption,andhowisthatdifferentinstateswithverticallyintegratedorrestructuredIOUs?

Thisresearchdemonstrates,quantitatively,thatinbatteryenergystorageadoptiontodate:

StateswithverticallyintegratedIOUshavethesamenormalizedadoptionofbatterycapacity(ratedcapacityrelativetostatesize)intheirIOUterritoryasstateswithrestructuredIOUs.

Batteryadoptionispositivelycorrelatedwithrenewableportfoliogoalsandstandards,andhighersystemreliability(fewerminutesofoutages)instateswithverticallyintegratedIOUs.

Batteryadoptionispositivelycorrelatedwithhigherpenetrationofrenewableenergygeneration,storagemandates,andmarketsforcapacityanddemandresponseinstateswithrestructuredIOUs.

BatterystorageprojectsdevelopedinaverticallyintegratedIOUterritoryareobservedtoprovidemoregridservices(servicesdirectlybenefitingthebulkpowersystem),whereasthoseinarestructuredIOUterritoryareobservedtoprovidemorebehind-the-meter(BTM)services–thisissuggestiveofthepotentialtovalue-stack.

StateswithrestructuredIOUsareobservedtoadoptmoreuniquebatteryservicesoverall,whichsuggestsahigherwillingnesstoexperimentwiththetechnology’scapabilities.

ForstatesinterestedinincreasingBESbatteryenergystorageadoption,thefollowingrecommendationsfollowfromtheanalysis:

StateswithVerticallyIntegratedIOUs

StateswithRestructuredIOUs

ConsiderexpandingpoliciesthatencouragevaluestackingofBTMservices(third-partyassetownershipofBESassetsisparticularlyeffective)

ConsiderdevelopingpoliciesthatencourageawiderrangeofBESservicesatthegridscale

Evaluateintegratedresourceplanning(IRP)requirementsforopportunitiestoencourageBESconsideration

ConsideradoptingBEStargetsormandates,and/orexpandingrenewableenergytargets

ConsiderdevelopingpoliciesthatencouragevaluestackingofBESservicesatthegridscale

ConsideradoptingBEStargetsormandates

WorkwithwholesalemarketorganizationstoenablecompetitionforgridservicesthatBEScanqualifytoprovide

Introduction

Theelectricindustry,andthegriditself,isundergoingrapidtransformation.Technologicaladvancementsarebeingdevelopedandcommercializedbycompanieswithinandoutsidethetraditionalelectricindustryorbit,aimedatofferingnewservicesforutilitiesandforcustomers.Thenatureofsomeofthesenewtechnologiesnowinteractingwiththegridallowsnewentrantstomarketdirectlytoelectricitycustomers(e.g.,rooftopphotovoltaics,smarthomecontrols,Internet-of-Thingsdevices).Reachingtruescaleofcommercializationwiththesenewtechnologiesnonethelessrequiresinterfacewiththeotherdominantelectricindustrystakeholder:theelectricutility.

Thispaperexaminesonerecenttechnologicalinnovationanditsadoptionthusfar:batteryenergystorage(BES).BESisinterestingforseveralreasons:

BESisonetechnologicalsolutiontothechallengesposedbyintermittentrenewablegeneration,andnotablyemitszerocarbondioxideemissionsduringuse;

BEShasbecomemorefinanciallyviablerecentlybecauseofinnovationspilloversfromotherindustries,namelylithiumionbatterytechnologydevelopedforpersonalcomputing,smartphones,andelectricvehicles;

BEScanbeclassifiedasagenerationasset,aloadsource,oratransmission/distributionasset,whichcreateschallengesfortraditionalregulatorymodels;and

BESisattractingagooddealofinvestmentwithsizableprojectionsforfuturegrowth.

ThispaperwillnotengageinanyoftheinterestingdebatesaboutwhetherBESisameritorioustechnologicalsolutiontointermittencychallenges,orwhoshouldbeallowedtosell,own,oroperateBESassets.Thispaperinsteadseekstounderstandfactorsinfluencingtheadoptionofthistechnology.Thepaperfocusesoninvestor-ownedutilities(IOUs)2intheUnitedStatesandseekstounderstandifthevariationinthestructureandregulatoryenvironmentoftheseIOUs(verticallyintegratedversusrestructured)hasanyobservablecorrelationwithvariableBEStechnologyadoptionoutcomes.ThisanalysisalsoseekstobetterunderstandthepolicyandmarketdriversofadoptionandtheextenttowhichthosedifferdependingonIOUstructure.Thespecificquestionsthispaperattemptstoanswerare:

Todate,hasbatteryadoptionbeenhigherinterritoriesservedbyverticallyintegratedorrestructuredIOUs?

Todate,havebatteryserviceofferings(i.e.,gridsupportservicesbeyondenergyandcapacity)beenmorewidelyusedinterritoriesservedbyverticallyintegratedorrestructuredIOUs?

Whichpolicymechanismshavebeenusedandeffectiveatspurringbatteryadoption,andhowisthatdifferentinstateswithverticallyintegratedorrestructuredIOUs?

Nearlythree-quartersofutilitycustomersgettheirelectricityfrominvestor-ownedutilities.

ReverseSalients

ThomasHugheschroniclestheevolutionoftheelectricindustryinseveralbooks.Oneimportantconcepthediscussesintheseworksisthatofthereversesalient–asubsystemofalargersystemthatexperiencesgrowthordevelopmentatalowerratethansurroundingsubsystems,eventuallyslowingthegrowthordevelopmentofthesystemasawhole.Becauseofthesubsystem’snegativeimpactonthesystem,thesubsystembecomesafocusofefforttoovercomewhateverishamperingthatsubsystem’sadvancement.Hughespointsthereaders’attentiontovariousengineeringproblemsthatwere,inhindsight,reversesalientsforthedevelopmentoftheelectricgrid,andthereforetheindustry.Thephysicallimitationsofelectricaldistributionintheearlydirectcurrentgenerationanddistributionsystemwereareversesalientthatspurredtheinventionofthealternatingcurrentgenerationanddistributionsystem,whichwasabletogrowveryquickly(Hughes,1983).

Whenphysicalreversesalientsareidentifiedinaphysicalsubsystem,thenatureoftheirlimitationsarequantified,newoperationalparametersdefined,designed,andprototyped.Eventually,trial-and-errorexperimentationwithnewsubsystemdesignsisperformeduntilanew,andsometimesrevolutionary,solutionresults.

Areversesalientcanalsobeorganizationalinnature.ThispaperbeginsanexplorationoftheextenttowhichthestructureofIOUsmaybeareversesalient,ofsorts,tothecommercializationofthecriticalnewtechnologiesneededtotransformtheelectricgridintoasystemthatemitsfarlesscarbonfortheelectricityitproduces.

HowthisPaperisOrganized

Thisreportstartswithabackgroundofutilitystructuretypesandtheirhistoricalcontext,regulatoryframeworks,thedemandforBEStechnology,andabriefbackgroundonthetechnologyitself.ThereportthenoutlinestheeconomictheorybehindbarrierstoadoptionofBEStechnology,andthetypeofinterventionsthatcurrentlyexisttoovercomethosebarrierstoadoption(includingsomeunintentionaldriversofadoption).Thisreportthenoutlinesthefindingsoftheanalysisandconcludeswithrecommendationsforregulators.Detaileddescriptionsofdatagatheringandanalysismethodologiesareprovidedin

AppendixA

.

AppendixB

containsmoredetaileddescriptionsofthefindings,withregressiontables.

TheStateofEnergyStorage

UtilityStructures&RegulatoryJurisdiction

Electricutilityoperationsgenerallyfallintofourhighlevelcategories:

Generation:Transformingfuelintoelectricityforsale.Largegenerationfacilitieshavetraditionallybeenlocatedawayfromurbancenters.

Transmission:Highvoltagecapacitylinestransportelectricityfromgenerationfacilitiestourbancenters,orloadcenters.

Distribution:Attheloadcenters,highvoltageelectricityissteppeddowntoalower,safervoltage,anddistributedtothepointofconnectiononanenduser’sproperty,frequentlyreferredtoas“themeter.”Electricitycanalsobegenerated

Figure1:ElectricUtilityOperations

Source:CamroseEnergy

“behindthemeter”atauser’sproperty(e.g.,solarphotovoltaicpanels),whereitiscalleddistributedgeneration.

Retailing:Thisreferstotheoperationsassociatedwithsellingelectricityasacommoditytoendusers,whichincludesellingretailpowertocustomers,invoicing,etc.

Electricutilitiesmaybeownedbypublicentities(suchasafederalorlocalgovernment),byitscustomers(ruralcooperativesarethecommonformofthistypeofownershipintheUnitedStates),orbyshareholdersasfor-profitcorporations.Thislasttypeisknownastheinvestor-ownedutility(IOU).

IOUsservethemajorityofcustomersintheUnitedStates(72percentin2017;EIAAugust19,2019),andarethefocusofthisstudy.TraditionalIOUsareverticallyintegrated,meaningtheyholdmonopolyfranchisesforpowergeneration,transmission,distribution,andretailingservicesfortheirterritory.Inexchange,theseutilitiesarerequiredtoprovideserviceat“justandreasonablerates”toallcustomersintheirterritory.Theratestheyareallowedtocharge(“retailrates”)areregulatedbyastatepublicutilitycommission,andtheopportunitytoearnrevenue,whilelimitedbythisbody,isguaranteed(R.Hirsh,1999).

Intraditionalrateofreturncalculation,thepriceforelectricityallowedissetbycalculatingtheamountofrevenueautilitymustreceiveinordertocovertheircostsandreturntheallowableprofit.Theformulaforcalculationtypicallylookslikethis:(Jamison,2007)

RR=B*r+E+d+T

Where:

RR=revenuerequirement

B=ratebase,ortheamountofcapital/assetsdedicatedtoprovidingservice

r =allowedrateofreturn(profit)

E=operatingexpensesd=annualdepreciationT=taxes

StartingwiththeenactmentofthefederalPublicUtilityRegulatoryPoliciesActof1978(PURPA),thewidespreadconsensusthatelectricitygenerationwasanaturalmonopolybegantoerode(R.Hirsh,1999).Inlinewithunbundlingofservicesinthenaturalgas

andtelecomindustries,startinginthelate1990s,manystatesbeganarestructuringeffortfortheelectricindustry,whichhadthreebasicelements(seeFigure2):

Competitionforgenerationservices

Competitionforretailingservices

Independentoperationoftransmissionresources

Thefirsttwoelementswereintendedtoreducethecostofelectricityforcustomers,andthethirdwasthoughttobenecessarytoensurefaircompetitionbyloweringbarrierstoentry(Borenstein&Bushnell,2015).

GenerationTransmission

Distribution

GenerationTransmission

Distribution

Competition

ISO/RTO

Retailing

Customers

Retailing

Customers

Competition

RegulatedUtility

Somestatessuccessfullyimplementedallthreeelementsandtodayhavecompetitiveretailelectricitymarkets,competitivelyownedandoperatedgeneration,andtransmission-owningutilitiesthataremembersofaRegionalTransmissionOrganization(RTO)(sometimesreferredtoasanIndependentSystemOperator,orISO).TheRTO/ISOmanages–butdoesnotown–transmissionresources,dispatchesgenerationassetstoalignsupplyanddemand,

Figure2:RegulatedComponentsofVerticallyIntegratedvs.RestructuredUtilities

and,inmostcases,runswholesalemarketsforelectricityandsomeimportantgridservices

VerticallyIntegrated

Restructured

RegulatedUtility

(Borenstein&Bushnell,2015).IOUsstilloperateinthesestates,buttheyare“restructured”andonlyoperatethedistributiongridplussomeretailing.TheyarenolongerverticallyintegratedinthewayIOUsweretraditionallyacrossallfourcategoriesofutilityoperations.

Somestatestriedtorestructure,butexperienceddifficulty.California’selectricitycrisisof2000and2001,dueinparttomarketmanipulationsfollowingtheinitialrestructuringeffort,causedthatstatetoreversesomeofitsactions,whichslowedorstoppedtherestructuringprogressofotherstates(R.Hirsh,2017).Nonetheless,someofthesestatestodaydostillexperiencesomecompetitionforwholesaleelectricitygeneration,aswellasforretailservice.SomestateshaveIOUsthataremembersofRTOs.InCalifornia,theISOplaysasimilarroleastheRTOsforotherregions.ItmaynotbeaccuratetocalltheIOUsinthesestatesrestructured,butneitherisitaccuratetodescribethemasverticallyintegratedinthesamewayIOUswerebeforethe1990s.3

Figure3:ElectricityRestructuringbyState

Source:BrattleGroup&EIA

AsshowninFigure3,somestatesmadenochangestothestructureoftheirIOUs.AndalthoughtheIOUsinthesestatesareaccuratelyreferredtoasverticallyintegrated,someoftheIOUsarenonethelessmembersofRTOs(seeFigure4).

See

AppendixA

:Methodology–DataSources:UtilityRestructuringStatusbyStateforfurtherdiscussionondatasourcesandmethodsusedinthisanalysistodeterminewhethertheregulatoryenvironmentofaparticularstateisverticallyintegratedorrestructured.See

Table4

inAppendixAforacompletelistofdesignationsbystate.

Figure4:RegionalTransmissionOrganizations

Source:FERC

IntheUnitedStates,theFederalEnergyRegulatoryCommission’s(FERC)jurisdictionovertheelectricitygridismostlylimitedtooversightofinterstatetrade.ThisjurisdictionstemsfromArticle1,Section8,Clause3oftheU.S.Constitution,whichgivesCongressthepowerto“regulatecommerce…amongtheseveralstates,”commonlyreferredtoastheCommerceClause.CongresscreatedtheagencythatexercisesthatpowerintheFederalWaterPowerActof1920.FERChasthusmostlybeeninvolvedinissuesrelatedtowholesalemarkets,large-scalegenerators,andtransmissionlines.FERCisalsooccasionallyinvolvedinissuesassociatedwiththeDormantCommerceClause,whichrelatestostatesenactingrulesthatdiscriminate