The Groaning Grid

One could be forgiven for thinking that it’s only Senator Joe Manchin who gets to decide these things, but here’s a little-known fact: precisely 201 individuals have an outsize say in the future of our energy system. That’s how many people sit on public utility commissions across all fifty states. These commissions, whose members are either directly elected or appointed by governors, regulate companies with monopolies on certain critical services: water, gas, phone lines, power. If you’ve heard of PUCs at all, it might be because they periodically hold hearings where they decide how much your utility company gets to charge on your electric bill.

According to the Environmental Protection Agency, generating electricity produces about a quarter of all greenhouse gas emissions in the US. In January 2021, just a few days after taking office, President Biden set a target of decarbonizing the electrical grid by 2035. There’s widespread consensus among climate advocates that reaching the US’s goal of net-zero emissions by 2050 will require shifting most of the economy to run on clean electricity instead of fossil fuels, by outfitting buildings with heat pumps instead of gas furnaces and refueling vehicles with a plug instead of filling up at the pump. But achieving this mission to “electrify everything” will require doubling or even tripling the amount of electricity produced by midcentury. Much of the investment needed to ensure that the grid will be ready to handle that additional demand—and to meet it, for the most part, with wind, solar, and batteries instead of coal and gas—will be made by the investor-owned utilities that provide electricity to three out of four Americans.

Monopoly utilities are special creatures in the taxonomy of American capitalism. Where they operate, state laws grant them exclusive control over water, electricity, or phone service, recognizing the steep upfront cost of building all those pipes and wires and the extreme inefficiencies that would result if multiple firms jostled to provide those services. The customers in their service areas, meanwhile, are captive ratepayers: if Atlanta residents want to turn on their lights, they have to buy electricity from Georgia Power. Being a regulated monopoly utility is, in other words, a sweet deal. But it is a deal all the same: to earn their guaranteed rates of return—typically pegged at around ten percent of the value of their total assets—the utility is expected to provide an essential public service. And indeed, in advertisements and speeches, power utility leaders often invoke their sacred trust to “keep the lights on” and supply customers with “reliable, affordable energy.”

Public utility commissioners are hired to act as proxies for the citizenry and guard the public interest. Every few years, regulated utilities must submit “integrated resource plans” (IRPs) to PUCs that lay out the mix of wind, solar, battery storage, natural gas, coal, nuclear, and other power sources they will build, procure, or operate for the next couple decades. Historically, the primary task of PUCs has been to ensure that utilities don’t charge their customers exorbitant rates. But in the era of climate change, these commissions are under increasing pressure to consider the carbon consequences of the energy investments they approve.

On July 21, as much of the Washington press corps was parsing Manchin’s abrupt abandonment of negotiations over President Biden’s signature Build Back Better bill—and a week before the West Virginia senator reversed course to support $369 billion of clean energy measures in the newly christened Inflation Reduction Act—the five members of the Georgia Public Service Commission approved the IRP submitted by Georgia Power, the state’s largest electricity supplier. On its face, there seemed to be much for clean energy advocates to cheer in Georgia Power’s plan: the utility proposed retiring all its coal-fired plants by 2028 and doubling the renewable energy in its portfolio over the next three years, including by adding 2.3 gigawatts of solar. But it also planned to generate 2.4 gigawatts of new capacity by burning methane (also known as natural gas). Georgia Power’s bold strides toward decarbonization look an awful lot like running to stay in place.

Kneecapping the federal government’s authority to regulate power companies’ emissions has been a central goal of conservative think tanks, Republican attorneys general, and the electric utility industry for more than four decades. Their primary tool was the Utility Air Regulatory Group, a secretive trade group that mounted repeated legal attacks on the EPA’s clean air standards and monitoring programs. Those tireless efforts culminated in the Supreme Court’s decision in June to strip the EPA of its ability under the Clean Air Act to force electricity producers to embrace fuel switching, the substitution of less polluting energy sources for coal, in order to reduce their greenhouse gas emissions. While the EPA will retain the power to regulate individual plants, the decision leaves only state legislators and regulators with the broad authority to wring the carbon from utilities’ entire portfolios.

That authority becomes even more important with the passage of the Inflation Reduction Act. The bill, signed into law by President Biden on August 16, is undoubtedly a major leap forward for climate action in the US, and some of the more optimistic forecasts predict that it will reduce greenhouse gas emissions by 40 percent from 2005 levels by 2030. As far as reducing emissions goes, however, the IRA is a bank shot—it works indirectly, with a cornucopia of tax incentives designed to make clean energy less costly for consumers and more lucrative for producers. What the law does not contain is any mandates or penalties.

The central climate plank of the IRA’s now-deceased precursor, Build Back Better, was the Clean Electricity Performance Program (CEPP), which would have given power providers a grant if they increased the clean electricity they supplied to customers by four percent year over year. Those that failed to meet that threshold would have paid a penalty. Last fall, after some large investor-owned utilities came out against the CEPP, Manchin killed that provision. Under the streamlined IRA, utility giants will not be compelled to build more solar arrays or retire their fossil fuel plants sooner, only enticed. So far most are dragging their feet, and some are speeding in the other direction.

Nowhere is the slow-walking of the clean energy transition as determined as in the Southeast. Southern Company, which owns Georgia Power along with monopoly electric utilities in Alabama and Mississippi, serves over four million customers across those three states. As one of the country’s largest investor-owned utility companies, Southern is also one of its leading emitters of carbon dioxide. Over half of the electricity supplied by its subsidiaries comes from burning natural gas, which has steadily eroded coal’s share of power generation over the past fifteen years.

When in May 2020 Southern pledged to achieve net-zero carbon emissions by 2050, some climate and clean energy advocates warily applauded. Given Southern’s coal-intensive production and long record of fomenting climate denial, the pledge seemed to represent grudging progress. But the centerpiece of the plan it released four months later was major new investment in gas-fired power plants. Southern’s is a deus ex machina approach to decarbonization that assumes carbon capture and hydrogen fuels will, fifteen or twenty years from now, be technologically advanced and cheap enough to salvage the gas-fired plants it is building today. “Their goal makes a farce of net-zero goals,” says David Pomerantz, executive director of the Energy and Policy Institute, a utility watchdog. While no investor-owned utility is walking their climate talk, he says, “there is a spectrum and Southern is really at the back of the pack.”

Southern is far from alone in betting heavily on natural gas. Across the region, Duke Energy, Entergy, and other major utilities are collectively planning to increase the share of their electricity produced from natural gas from 47 percent now to 49 percent in 2030. Nationwide, over 52 gigawatts of new gas-fired power is planned, permitted, or under construction. That’s the equivalent of adding nearly one tenth the amount that’s already operating—despite warnings from the International Energy Agency that building new fossil fuel infrastructure will put the Paris climate agreement target of limiting warming to 1.5 degrees Celsius out of reach.

In his capacity as executive director of the Southern Renewable Energy Association, a trade group representing renewable energy companies, Simon Mahan frequently testifies before public utility commissions across the South. Over the past few years he has observed a yawning gap between the decarbonization pledges touted in parent companies’ press releases and the legally binding commitments that their subsidiaries make to regulators. Gauzy net-zero promises earn companies favorable media and good will, and cost them nothing. But to see what a utility actually plans to build—or how many fossil fuel plants they plan to retire, which must happen for emissions to decrease—one has to look under the hood and examine its resource plans.

When independent analysts pore over the investments spelled out in those plans, the carbon math doesn’t pencil out. Researchers at the Southern Alliance for Clean Energy recently reviewed the resource plans of utilities across the Southeast and found they add up to a trajectory that only reduces total carbon dioxide emissions by 15 percent from today’s levels by 2030. Some utilities will take until the end of the century or later to fully decarbonize. “In public relations and investor relations and shareholder meetings, the companies are often very bullish on a net-zero carbon future,” says Mahan, “but when you get them on the witness stands those commitments very quickly fall away. They will often say that’s the parent company’s goal, not our goal.”

In 2019, during hearings on the company’s previous IRP, Georgia Power’s director of resource policy and planning, Jeffrey Grubb, was asked if Southern Company could meet its carbon reduction goals if Georgia Power didn’t accelerate its own emission reductions. He acknowledged that it could not, but then noted that “carbon in and of itself is not a driver in the decisions we’ve made here.” Georgia Power, he added, was not going to “self-regulate.” When I asked Georgia Power whether cutting carbon had become more central in its resource planning since 2019, a spokesman for the company did not address the question but instead referred me to a press release about the recent approval of its latest IRP. (The release doesn’t mention Southern’s net-zero pledge or carbon emission reductions.) “It’s either the right hand not talking to left hand, or somebody’s lying,” says Mahan. “Those are really the two options you’ve got. There’s not a lot of wiggle room between them.”

For those aware of Southern Company’s checkered history on the issue of climate change, it’s difficult to give the firm the benefit of the doubt. Over the past forty years, most journalistic and legal scrutiny of corporate climate denialism has been aimed at oil and gas companies like ExxonMobil and trade groups like the US Chamber of Commerce. Electric and gas utilities, meanwhile, have tended to fly under the radar. Yet for decades Southern Company was a driving force behind corporate efforts to sow doubt about climate science.

In June the Energy and Policy Institute released a report chronicling that sordid history, which unfolded despite the company’s own internal studies and detailed understanding, dating back to the 1950s, of how their pollution was warming the planet. In 1964 Southern’s president was a technical reviewer of a White House report examining the effects of carbon dioxide on the climate, and a Southern executive was part of a 1985 panel that noted the concerning impacts of methane as a warming agent, as well as the need to invest in renewables. By the late 1980s, with a clear view of what the science of fossil fuel combustion portended, the electric utility industry faced a choice. They could either clean up their operations—embrace more nuclear, energy efficiency, and low-carbon alternatives—or act like the problem didn’t exist.

In 1989 Southern chose to become a founding member of the Global Climate Coalition, an organization created and funded by large corporations from the oil and gas, electric, automotive, plastics, chemical, and appliance manufacturing industries with the express purpose of stalling legislative action to reduce greenhouse gas emissions. (Southern had already been a member of UARG, the legal team fighting air pollution limits, since 1978.) The GCC quickly became the leading disseminator of climate disinformation. In 1991 Southern led a nationwide advertising campaign to “reposition global warming as theory” and dispute the growing scientific evidence that carbon dioxide from fossil fuel combustion was driving planetary warming.

Fourteen years later, Southern’s leadership hadn’t much changed its tune. In 2015 Southern was revealed to be the largest single donor to discredited scientist Willie Soon, who had published dozens of papers attributing global warming to sunspots and other factors beyond human influence. (Other major Soon funders included ExxonMobil, the American Petroleum Institute, and the Koch brothers.) As late as 2017, the company’s CEO, Tom Fanning, averred on CNBC that carbon dioxide was not the main cause of climate change.

As outright climate denial has fallen out of fashion, the utility industry has pivoted to a rhetorical embrace of clean energy while preaching a cautious approach to decarbonization. Denial has morphed into delay. When asked in December 2020 if President-elect Biden’s goal of decarbonizing the power sector by 2035 was feasible, Fanning replied that “society benefits as a whole if you allow enough time for technology innovation to take place to make the transition safer and more economic than if you rush headlong into a 2035 goal.”

“I think there are other solutions that could achieve similar objectives and perhaps with less disruption to society,” he said, which sounded reasonable enough until he elucidated what that meant in practice: building more natural gas power plants.

Most utility executives’ stance on renewables is reminiscent of the old line about Brazil: “It’s the country of the future, and always will be.” They helpfully point out that the sun does not always shine and the wind does not always blow, ignoring the advances made in battery storage over the past decade. Such concerns about “intermittency,” not having enough dispatchable power capacity to keep the lights on during cloudy or windless days, would be legitimate for a utility that gets more than half its power from wind and solar. But less than 10 percent of electricity generated in the Southeast comes from renewables, compared to the national average of 20 percent.

“If you look at any utility’s portfolio, if wind or solar is not making up more than 10 percent, they have an opportunity to save tons of money by integrating those things,” says Chaz Teplin, an energy analyst at RMI, citing a 2019 study in which he and colleagues analyzed eighty-eight proposed gas-fired power plants and found that 80 percent would be costlier than pursuing some alternative combination of wind, solar, storage, and efficiency. In 2020 another study, by researchers at Lawrence Berkeley National Laboratory and UC Berkeley, found that US utilities could achieve 90 percent zero-carbon electricity by 2035 without building any new gas-fired power plants, and indeed 70 percent of existing gas generation could be retired—all while lowering rates by 10 percent for their customers. Today the economics of wind and solar look even better in comparison. The year the study appeared, natural gas prices were at their lowest levels in decades, as a glut of supply met Covid-suppressed demand. Since then, largely thanks to Russia’s invasion of Ukraine, natural gas prices have surged to levels not seen since the early days of the shale boom in 2008. Economists don’t expect them to come down again soon.

“You don’t need to build new natural gas plants for any reliability or dependability reasons,” Amol Phadke, the lead researcher, told me when the study came out. “There’s enough existing gas and cheap storage available.” In short, there’s no justification at this point for building new plants. Yet Fanning and many of his fellow utility executives still insist that the path to a zero-carbon electric grid runs through the fracking fields of Appalachia and the Permian Basin.

“A lot of folks rightly believe renewables are the future and the technology is ready and here and good to go,” says Mahan. “But what they don’t often understand and think about is [that] the utilities themselves are not clearly incentivized to go after those opportunities.” Due to the way they’re regulated, the more expensive the assets that they build and own, the more money they make. A gas power plant is simply costlier to build than a solar farm.

One would also think that an electricity provider would see an opportunity in switching more devices and appliances to run on electricity. But Georgia Power supported House Bill 150, passed in May 2021 by the Georgia General Assembly, which preempts the authority of towns and cities to prohibit the use of natural gas and mandate electric connections for heating, cooling, and cooking devices in new buildings. Perhaps the fact that Southern Company also owns natural gas utilities that serve four million customers across the South, as well as a gas wholesaler that supplies its power plants, had something to do with that support.

It’s easy enough to see why these companies aren’t going out of their way to “self-regulate” and live up to the clean energy paeans in their press releases. What’s harder to explain is why utility commissions don’t rein them in. Recent geopolitical events demonstrate just how vulnerable power providers and their customers are to the volatility of natural gas prices—the bulk of the risks are faced by customers, while the returns go to investors and executives.

The clearest measure of these commissions’ power is how much ingenuity utilities pour into their efforts to influence them, or control who gets to serve on them—a phenomenon known as “regulatory capture.” Examples abound of electric utilities engaging in outright corruption to influence the elections of both PUC commissioners and the state legislators who write the laws that delineate commissions’ authority. In Ohio, FirstEnergy has admitted to bribing the state’s Republican speaker of the house with $60 million in return for passing a law that provided billions in subsidies to bail out the utility’s nuclear power plants (while halving the amount of renewable energy that the state’s electric utilities were required to purchase). FirstEnergy is also under investigation for paying $4.3 million to a consultant just weeks before he became chairman of the Public Utilities Commission of Ohio (which regulates FirstEnergy). Recent investigations by journalists and prosecutors have also revealed how Florida Power and Light, the state’s biggest power company, paid millions to an Alabama-based consulting firm to bankroll independent “ghost candidates” who would draw votes away from challengers to utility-friendly Republican lawmakers; funneled cash to online news outlets with the aim of securing favorable coverage; and operates a secret invite-only bar in its Tallahassee office where it plies lawmakers with free drinks.

Such covert maneuvers, undertaken with ratepayers’ money, have prompted criminal investigations. But utilities also spend large sums to sway elections out in the open. In many states, contributions to commissioners’ campaigns and political action committees are legal, even if unsavory. Troutman Sanders, a law firm that represents Georgia Power before the GPSC, has contributed many thousands to the past campaigns of its chairwoman, Tricia Pridemore. Tim Echols, another Georgia commissioner, has received campaign contributions from more than a dozen executives at Southern Company Gas, including the CEO.

But there are signs that regulators are starting to regret, or at least question, their longstanding deference to the companies they oversee. Some are taking a more skeptical view of natural gas investments, which have the potential to become stranded assets—facilities shut down long before the end of their normal lifespan—when it becomes more expensive to operate them than to build new wind and solar. The utility commission in North Carolina rejected Duke Energy’s latest resource plan because it was based on rosy estimates of future natural gas prices. In early August, members of Louisiana’s public utility commission—spurred by hundreds of complaints from angry citizens over rate hikes on their electric bills—faulted Entergy Louisiana for becoming too reliant on now-costly natural gas (despite the fact that they had approved those investments themselves). The utility generates 85 percent of its power from natural gas; only 3 percent comes from renewables. While lamenting that the utility hadn’t invested more in wind and solar years ago, one commissioner opined: “Entergy doesn’t like solar until they figure out how to own the sun.”

Such scrutiny should only intensify with the passage of the Inflation Reduction Act, which is larded with tens of billions in incentives for utilities to invest in renewables and storage technologies. Those tax credits should further tilt the cost-benefit analysis away from gas, if commissioners choose to hold utilities’ feet to the fire. And yet the IRA also includes a major concession to utilities in the form of generous subsidies for carbon capture and sequestration (CCS) projects, which continue to underperform expectations even after decades of research and investment. Those tax credits are likely to prolong the lifespan of existing coal- and gas-fired power plants and justify the construction of new ones, even as they threaten to drain finite investment dollars away from mature renewable energy technologies that are ready to deploy more widely and cheaply.

To date, the highest-profile failure of commercial-scale carbon capture and storage was a Southern Company project. The Kemper CCS project was launched in 2010, the same year Fanning took the helm at the company. It was designed to showcase the promise of “clean coal” technology, by turning lignite coal into a mixture of gases that could be refined and burned to generate electricity, and then capturing most of the resulting carbon dioxide and pumping it underground. The technology never worked as intended, and in 2017, after mounting costs and scandals over Southern Company’s and Mississippi Power’s alleged concealment of the project’s problems, Southern and its Mississippi regulator agreed to shut it down.

If the various concessions in the IRA are to actually quicken the transition to zero-carbon energy, regulators will have to ramp up their scrutiny of any new proposals to build new fossil fuel plants or prolong the life of existing ones. That, in turn, will require much more pressure from citizens and corporate customers of firms like Georgia Power. There have been some small, encouraging signs that more citizens and institutions are learning the importance of showing up. In this year’s review of Georgia Power’s resource plan, the city governments of Atlanta, Savannah, DeKalb, and Decatur offered testimony for the first time, because those cities can’t meet their own voluntary or binding decarbonization goals if Georgia Power won’t sell them more solar and wind power.

Yet in some cases, even as the need for wider involvement grows, it’s getting harder for the general public to participate in PUC proceedings. On August 1 the Georgia Public Service Commission announced that it would henceforth be restricting access to what had always previously been open hearings. (After the first hour devoted to public comments, “anyone not a party to the case being heard will be asked to leave the hearing room.”) In many states, registering to intervene in a PUC’s rate case or IRP proceeding favors large organizations, and can be daunting or time-consuming for individual ratepayers. In others, PUCs lack the staff, resources, or wherewithal to educate citizens about how to navigate their complex dockets, or to accommodate wider public participation in hearings.

Despite such roadblocks, citizens can still make a difference. Mahan used to live in Lafayette, Louisiana, a small city which owns its own municipal power utility, for which the city council and the mayor function as the public utility commission. In 2016 he noticed a single line item in Lafayette’s proposed budget for a new $120 million gas-fired power plant. As an energy expert, he had read the utility’s IRP and knew to look for that line item; as a Lafayette citizen, he rallied thirty of his friends and neighbors to organize petitions and speak at hearings held by the city council, recommending they look at cheaper, cleaner alternatives. After the plan was rejected, the utility came back with a revised proposal to buy 300 megawatts of solar instead, as well as close an existing coal plant.

These victories don’t make headlines, but this is where the fight for clean energy is shifting now—away from Washington and closer to home, in our communities. The pace of decarbonization going forward will depend to a large degree on whether those citizens who care about where their power comes from refuse to simply assume that the IRA has solved the problem. “I know plenty of folks who know Congressional representatives’ phone numbers by heart but they can’t name their own city council member or they don’t know that the PUC even exists,” Mahan says. “These are additional levers that can make huge differences in your daily life that are not being pulled.”