Last week, President Obama nominated Ron Binz to succeed Jon Wellinghoff as chair of the Federal Energy Regulatory Commission. Binz, a former state regulator from Colorado, has some big shoes to fill, and is more than up to the challenge.
Binz has a history of progressive leadership from his time on Colorado. Notably, he helped orchestrate Xcel Energy’s transition away from coal power and toward much cleaner alternatives, including wind and natural gas. This shift will improve Coloradans’ public health while continuing to serve them with affordable, reliable power.
In his role as FERC chair, though, Binz will have less influence over these types of transactional issues. Instead, he will be a key part of the national energy policy leadership. In this role, he will focus more on national issues like transmission policy and maintaining grid-wide reliability as the country follows Colorado away from coal and towards low-carbon alternatives.
Binz has shown that he is up to this challenge of big-picture thinking. Since leaving the Colorado commission, he has embarked on a study of how regulatory models need to change to meet future challenges. Utility regulation as practiced today is a web of perverse incentives and outmoded goals based on assumptions about energy that are no longer true, which has led to Binz to conclude that, “Utility regulation needs to shift from backward-looking focus on costs to forward-looking emphasis on value and societal outcomes.”
I could not agree more with this sentiment, and look forward to seeing how Binz works to affect these changes as Chair. To be clear, we likely won’t see a FERC Order 3000 that redefines the role of regulators by fiat. FERC doesn’t have that authority. Instead, this shift will be evident in cost allocation decisions, potential shifts in methodologies to calculate returns on equity, and rulings on how distributed generation should be compensated for the value it provides. (Admittedly, these details are excruciatingly dull. We’ll try to keep highlighting why these things matter, just like we’ve done with Order 1000.)
Pro-consumer clean energy advocates should be optimistic about Binz’s tenure. But, I think we make a mistake by putting too much emphasis on the role of regulators, since regulators’ influence over electricity may be declining. Regulators only oversee industries over which they have been given jurisdiction. In this case, electric utility regulators — either state or federal — have jurisdiction over electric utilities. The issue is that many of the businesses that provide new energy technologies (like rooftop solar or battery storage) aren’t electric utilities. So, the regulatory role of consumer protection and ensuring service standards doesn’t happen in the same way when people switch to these new service providers.
Policymakers need to account for the shift out of the regulated energy space and into the unregulated energy space. Most important, policymakers should ensure that the unregulated energy space is defined by robust market competition with transparent data for consumers.
President Obama has made a fantastic choice for FERC chair. But, nominating Ron Binz is not enough. Congress, the President, and state policymakers all need to be thinking about not just the changing role of regulators — a conversation that Binz can lead — but also the changing nature of regulated industries.