State government have a role in various industries such as electricity. Should a state government be in the business of energy? Let’s look.
Early in 2018 ECC noted that the electric industry is changing and consumer knowledge will support the evolution of the electric industry in the Carolinas. As we end 2018 let’s reflect on a few of the points we suggested to watch in the electric industry:
- Changing government role in the business and energy environment
- More individual control over energy use; more teamwork, too
- Deeper and more thorough understanding of what is “clean”
Over three blogs we will look at each point. Just a glimpse because each point has volumes that can be written. Each blog this week a look at this point in time. We’ll write more about these and other issues in 2019.
The first column –
Changing government role in the business and energy environment
Talk about a hot button issue! It is a big thing: How far state governments should go in the energy space.
In South Carolina there are the ongoing government debates about the terminated VC Summer nuclear project, and what the state should do about the proposed merger with Dominion. The SC Public Service Commission provided its approval of a Scana/Dominion merger on Friday, December 14. PSC meeting discussions ranged from business items such as rates of return, sourcing, company employment guarantees, corporate office locations, and how Dominion would report back to the SC-PSC. Commissioners also discussed whether to say in their order that SCE&G was guilty of concealing information. The PSC adhered to the business-oriented decisions it needed to make.
In North Carolina, climate policy has been center stage. Governor Cooper signed an executive order related to the Paris Agreement so, “North Carolina joins states like Colorado, California and others that have set statewide targets for reducing emissions of gases that are associated with global warming and climate change.” (Source) Executive orders direct the actions of the state government and are not orders to the energy businesses themselves. That is left to the politics of jawboning and Bully Pulpits.
Both states have debated pipelines that would bring additional natural gas into the states. The Atlantic Coast Pipeline and the Mountain Valley Pipeline. Those debates have been playing out in the judicial system.
Pipelines, various ways state government provides preferences for forms of electric generation (think, for example of solar or wind tax breaks), and climate issues will change over time. Influencers will provide their input and have differing levels of success with state policymakers.
A 2017 Harvard Business Review article succinctly strikes the right chord when it said: “Business is essential – in its place. So is government, in its place. The place of business is in the competitive marketplace, to supply us with goods and services. The place of government, aside from protecting us from threats, is to help keep that marketplace competitive and responsible.”
In the electric sector the state government should not be the retailer for electricity, nor throw open the doors for an industry free-for-all.
These issues will continue, as they always have. ECC believes that there are important underlying principles that a state government should follow. ECC has stated those throughout this year.
FIRST: As the energy industry runs headlong into a more competitive environment – including competition for distributed, customer-generated energy – a message from a vintage Harvard Business Review story is worth keeping in mind: To Keep Your Customers, Keep It Simple. State government should work to help consumers face a simple choice in electric service. Do not add complexity. (Our column here)
SECOND: No closed doors. “Transparency is the new objectivity.” That comment from a stellar national business reporter. The takeaway: Transparency builds organizational trust. It improves understanding. Transparency in the present can forestall problems in the future. Consumers’ ability to do their own energy management is increasingly more transparent. Technology opens doors to energy usage, prices, availability, and pro-activity. Management and oversight should keep pace with technology. (Our column here)
THIRD: ECC has written about the role of government, and cited a recent report called, Governors Staying Ahead of the Energy Innovation Curve. The report is clear that governors (and ECC will extend that to state governments) “…can guide and drive measures to help their states prepare for and embrace the rapid pace of energy innovation.”
Clearly in the report, state governments have a role in energy, but the state is not the energy business itself. As ECC noted in one blog, governments, like businesses, are more likely to perform well when they adhere to the role they fill best. (Our column here)
The bottom line is that state governments regulate, but they are not the energy business itself.