Why Pennsylvania Utilities Want to Build Public Purpose Microgrids: Legislative Hearing

Two Pennsylvania utilities made a case to state lawmakers this week for public purpose microgrids as concern heightens over the potential for a cyberattack on the electric power grid.

Representatives from PECO Energy and Duquesne Light were among about half dozen industry and government experts, some from national energy organizations, who testified about HB 1412 before the House Veterans Affairs and Emergency Preparedness Committee.

Sponsored by Rep. Steve Barrar (R-Chester/Delaware), the bill paves the way for utilities to build public purpose microgrids – those that serve a societal role, such as protection of power supplied to water, police, hospitals, communications and other critical services during an emergency.

“The focal point of my legislation is to create a pathway for our utilities to develop pilot projects that will deliver highly advanced levels of reliability to serve essential public infrastructure and community services during emergency events,” Barrar said at the hearing.

While storms have been a primary argument for public purpose microgrids in the past, speakers and lawmakers returned to concerns about cyberattack several times during the nearly two-hour meeting.

“In the event of a large storm or even cyberattack, if the grid goes down, a microgrid can start immediately and provide power to the critical infrastructure a community needs,” said Krysia Kubiak, Duquesne Light’s director of state regulatory strategy and government affairs.

With cyberterrorism in the news, worry about the safety of the U.S. grid has heightened, especially since a successful cyberattack on the electric grid would be a black sky event — the power outage would come without warning, leave no time to prepare, and affect a larger area for a longer time than even a severe storm.

Duquesne Light’s microgrid plan

Duquesne Light plans to build a six-building microgrid at its operational headquarters in Pittsburgh, so that it has a command center to get the larger grid up and running should a disaster strike.

“In the case of a black sky event, it is crucial that we can get back to work, that the men and women in our company have a place to meet, get directions, refuel trucks and replenish supplies in order to get the other 600,000 customers back online,” said Kubiak.

“In the event of a large storm or even cyberattack, if the grid goes down, a microgrid can start immediately and provide power to the critical infrastructure…”

The utilities said that they support the bill because it brings regulatory certainty. Today’s industry rules were created before microgrid technology was contemplated, a problem utilities report not just in Pennsylvania, but other states as well.

Pennsylvania law does not define treatment of microgrids and energy storage, said William Patterer, director of regulatory affairs and revenue policy at Exelon, parent of Pennsylvania utility PECO.

In restructured states like Pennsylvania, this leads to disputes over whether microgrids are a form of generation, and therefore operate in the competitive arena, or are part of the distribution system so fall under utility jurisdiction. Others argue that microgrids may fit into a third, yet-to-be defined category.

“These assets are neither purely distribution nor purely generation and our public utility laws do not address these issues,” Patterer said. “Without the passage of HB 1412, even projects that the public utilities commission might approve in the future as in the public interest would be subject to potential legal challenge in the absence of clear statutory structure to govern microgrid and innovative storage investments.”

PECO’s microgrid plan

PECO has about 10 MW of microgrids on the drawing board, which would serve critical facilities in its service territory.

The legislation specifically allows utilities to build pilot projects, pending approval of the public utilities commission. The PUC would script regulations governing utility ownership of public purpose microgrids after reviewing the performance of the pilots. Utilities would be allowed to recover costs through customer rates.

Rate recovery is a sticking point in the debate over utility development of public purpose microgrids. The Retail Energy Supply Association (RESA), which represents companies that compete with utilities to supply electricity to customers, argued that utility development of microgrids is unnecessary because the private sector will develop microgrids

“Many RESA members have made investments to position themselves to be microgrid providers,” said Tony Cusati, director of regulatory affairs for IGS Energy and the chairman of RESA’s Pennsylvania State Electricity Caucus. “Microgrids are being developed by RESA members in many states and on a large scale without EDC [utility] pilots or ratepayer subsidies.”

RESA also argued that allowing utilities rate recovery undercuts the private sector’s ability to compete.

Retail suppliers seek modifications

The organization asked that the bill be modified to include a stakeholder collaborative of utilities, suppliers, consumer advocates and others who would together develop “a program that would be beneficial to the end user and transparent for all participants.”

Cusati added: “We believe working together towards the same end goal where a level playing field is created would be the best outcome.”

Rep. Barrer said that he was considering making changes to the legislation to incorporate the collaborative. The bill was originally scheduled for committee vote June 22, but has been delayed to a yet-to-be-announced date.

John Caldwell, director of economics for the Edison Electric Institute (EEI), said that utilities should be allowed to own microgrids both individually and with third-party partners.

“There should be a level playing field and opportunity for anybody who is able to provide it most efficiently and most economically,” he said.

He listed several benefits of having utility involvement in microgrid development, among them:

• Uninhibited customer recruitment and participation would allow the microgrid to be optimally sized
• Cost savings by avoidance of duplicate wires investment
• Ability to leverage utility’s knowledge and expertise to strategically locate microgrids and maximize overall value to grid
• Opportunity to ensure safe and reliable operation of facilities in a prudent manner

Caldwell also said that when utilities build or operate microgrids they should be allowed “suitable and sufficient avenues for equitable cost recovery.” He noted that various business models are emerging for utility microgrid development throughout the country. For example, in some cases a private partner (such as a data center) would pay for the aspects of the microgrid that benefit its operation, while ratepayers would cover costs for aspects that benefit the larger grid.

Microgrids a fluid concept

Gladys Brown, PUC chairman, advised the committee to consider language that encourages “the exploration of different types of microgrids – each with their own potential – while also allowing the flexibility to address growing and evolving technology.”

Brown described three kinds of microgrid business models: utility-owned, privately-owned and a hybrid of the two. She pointed to successful microgrids in all three categories.

“Microgrids are a new and fluid concept and something that utilities, government agencies, private businesses and communities across the country are actively exploring – so today’s discussion is very timely,” Brown said. “The PUC continues to encourage innovation, especially involving matters that have potential benefits for our citizens and our state, including the exploration of microgrids.”

EEI’s Caldwell noted that microgrids are clearly in a growth phase.

“We’ve seen a remarkable growth in microgrid capacity in just the last few years,” he said. “In fact, microgrid projects, planned, under development or online, have just about tripled in terms of capacity, in just the last four years. And that trend seems to be increasing.”

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