The Edison Electric Institute’s senior executives briefed Wall Street on Feb. 20 on the state of the utility industry and some of the policies it supports.
The briefing was the first for EEI CEO Dan Brouillette, who joked that many in the audience were expecting former CEO Tom Kuhn, who retired at the end of 2023. Brouillette came to EEI from Sempra Energy after serving as energy secretary under President Donald Trump. As a staffer in Congress, he helped write the Energy Policy Act of 2005.
“This is an exciting industry,” Brouillette said. “And there’s never been a more exciting time to be a part of it. What is happening today, I think, is truly transformational. We talk a lot about the energy transition; we talk about the changing generation sources. There’s even more to it than that.”
EEI members make up 5% of the economy, which Brouillette called the “first 5%” because they contribute to all the other sectors. The utility sector is seeing growth for the first time in years, he said, with residential customers using electricity more and more for heating and transport, and new demand from commercial and industrial customers as data centers expand because of artificial intelligence, battery manufacturing, microchip factories and reindustrialization.
“There are challenges ahead for the next several years,” said Philip Moeller, EEI executive vice president of regulatory affairs. “But it’s a pretty good challenge to have, when you’re looking at the kind of growth that a lot of our member companies are looking at.”
New England, the Midwest and the West have been facing resource adequacy issues in recent years, but with the rapid growth in demand recently, most of the country needs to build more infrastructure to keep pace, he added.
Member utilities have gotten creative in how they approach regulators on how to meet the new demand, bringing in large new customers like data centers to explain what is driving the need, EEI Chief Strategy Officer Brian Wolff said.
“They are starting to get the rhythm of taking those customers in with them to be able to explain what the need is,” Wolff said. “Because as you know, regulators are first and foremost about customer affordability. So, they’ve really got to be able to make the case for that, and there’s nothing better than hearing from somebody else in the community about how important that is.”
EEI is expecting several final rules from federal agencies, especially EPA, to come out this spring, well before the end of President Joe Biden’s term, as they want to avoid the possibility of the next Congress overturning them through the Congressional Review Act, General Counsel Emily Sanford Fisher said. The rules include an update to the Mercury and Air Toxics Standard, which the industry has already exceeded, she said, along with the effluent limit guidelines on water pollution and another rule on coal combustion residuals.
But the big item coming out of EPA is its new rule on carbon emissions from power plants under Clean Air Act Section 111(d). Fisher said EPA successfully implementing the carbon rules affordably and reliably will require it to be flexible in when plants retire, with the transition to clean energy moving faster some years than others depending on the grid’s reliability needs.
That would ensure “that we don’t need to make big control investments in units that will either accelerate their retirement in ways that are unhelpful from a reliability perspective or encourage folks to run those like into the 2040s to recover their investments,” Fisher said. “There’s a happy medium there, and I hope we can land that plane.”
Fisher expects the final rule to use either carbon capture and storage or clean hydrogen as the requirement for clean power plants, both of which offer the industry-needed 24/7 clean energy production.
“We need that 24/7 clean to balance the grid and to address reliability, and the fact that those technologies aren’t available at cost and scale right now is actually one of the contributors to our concerns about resource adequacy,” Fisher said. “If we had more of those technologies available to us, I think some of those concerns would be lessened.”
The industry has wanted to see new permitting laws to help make it easier to build out the infrastructure subsidized by the Inflation Reduction Act and Infrastructure Investment and Jobs Act, but Wolff said not to expect anything until at least a lame duck session after the November elections.
“If we’re not really moving to agree to fund the war in Ukraine, you can imagine how the rest of the oxygen has left the Congress with regards to getting something actually done,” Wolff said. “And at the end of the day, whether you’re a Republican in the House or a Republican in the Senate, you don’t want Joe Biden to be signing one more piece of legislation into law.”
While many Republicans have called for the repeal of the IRA and IIJA, Brouillette said he doubted either would go away entirely if the GOP wins in November. Money from both is flowing to red states, where it often is easier to get a permit to build infrastructure.
“So of course, the money is going to continue to flow to places like that,” Brouillette said. “What that means, obviously, is that there’ll be support for those programs in Congress going forward.”
Some of the programs the law funds, like hydrogen, have been important to the industry and others for years, so they are unlikely to be swept away in a Republican electoral wave. Likely changes could come if Republicans are in charge of the appropriations process for some of the long-term programs under the laws that will need to have future funding approved.
“If Republicans take both the House and the Senate and the White House, you’ll see some changes,” Brouillette said. “But I would dare say that those changes will be largely at the margins, not at the heart of what was passed in the IRA.”
