Presentation at 2011 Northeast Regional Meeting of the Energy Bar Association by Seht Kaplan of the Conservation Law Foundation

1. The Changing Shape of System Planning: “When the facts change, I change my mind. What do you do, sir?” Seth Kaplan Vice President for Policy and Climate Advocacy Conservation Law Foundation Energy Bar Association Northeast Chapter Annual Meeting “Options for Meeting Emerging Reliability Needs and Public Policy Initiatives in the Northeast” June 7, 2011 1

2. Context 2 “. . . When you have over 90% of the world’s scientists who have studied this stating that climate change is occurring and that humans play a contributing role it’s time to defer to the experts. Climate science is complex though and we’re just beginning to have a fuller understanding of humans’ role in all of this. But we know enough to know that we are at least a part of the problem. So looking forward, we need to work to put policies in place that act at reducing those contributing factors.” NJ Gov. Chris Christie, May 26, 2011. Environmental imperatives and low gas prices = farewell to coal Rise of Demand Resources (Efficiency and Demand Response) as important player Unbundling continues: new products and services emerge like Frequency Regulation With this much change you are either adapting or fighting the future – question is how and how quickly we will change (decarbonize, etc…) not if it will happen . . .

3. Planning for a very different future . . . 3 A sketch of the exterior of Edison’s Pearl Street station. Courtesy: Photographic Services of the Consolidated Edison Company of New York, Inc. http://www.ieeeghn.org/wiki/index.php/Pearl_Street_Station Illustration taken from slide created by Alan Friefeld of Viridity Energy, who seems to have taken it from iTeres

4. While Inertia is strong, many forces pressing for change 4 Emissions Reduction – Public Health Water Use/Discharge Climate: electricity is the “hinge” sector Diversification /Reliability Japan shows wind can help keep the lights on Self sufficiency, independence Zero fuel cost resources – price stability Every place has indigenous renewable & demand resources (unlike fossil fuels) Jobs, attract employers, jobs, local property taxes, jobs and of course jobs Popularity should matter in a democracy

5. Legal Issues 5 Existing legal and regulatory structures are legacies from a very different world: Even ones that were progressive in their time can impede progress now – PURPA is prime example, mandated purchase of power from renewables and other “Qualified Facilities” (“QFs”) at “avoided cost” now crashing into state net metering and feed-in tariffs Open Access Transmission Tariffs – blew open the system, made gas and wind IPP industries possible but the concept now limits development of dedicated lines. That creaking noise you hear is the sound of state-federal balance shifting What is federally regulated “transmission” and what is state regulated “distribution”? For some technical purposes the line is kind of bright – but a lot of complexity here Section 201(b) of FPA provides FERC with jurisdiction over "the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce" and section 205 prohibits unreasonable rates and undue discrimination "with respect to any transmission or sale subject to the [Commission's] jurisdiction.“ – does this give FERC jurisdiction to the toaster? When is electricity NOT in interstate commerce? Queasiness over FERC action at retail level – is that horse out of the barn? FERC ability to approve “gap RFPs” and compensate (and regulate) retail resources is well established and foreshadow fundamental change in the Fed – State balance. Unsurprisingly, money is biggest issue – what resources get paid (Non-transmission alternatives?) and who pays (cost allocation – state/regional/national)