How energy policy could affect your bottom line

Bob Barkanic, Senior Director of Energy Policy, PPL EnergyPlus

The state’s open energy market continues to provide businesses significant savings.

Retail choice has been a tremendous benefit to Pennsylvania businesses, and new products and services continuously provide greater benefit. However, businesses — with assistance from their energy supplier — need to monitor legislative and regulatory policies to ensure they maintain the benefits of energy savings and the promising developments in today’s energy markets.

“This is another critical time in our industry and for Pennsylvania businesses,” says Bob Barkanic, senior director of energy policy at PPL EnergyPlus. “Executives need to be monitoring pending policies and develop energy supply strategies to lock in these low energy prices.”

Smart Business spoke with Barkanic about new federal and state regulations and new energy policy opportunities.

What will happen to electricity prices as a result of new federal and state environmental regulations?

Protecting the environment is important to all of us. The challenge is balancing this objective with today’s current economic climate.

Our goal is to educate policymakers and customers to ensure the best decision possible is being made. For our customers, our objective is to explain the potential impacts and risks so they can procure their energy correctly. The proposed environmental regulations are expected to boost energy generation (production) costs, and these higher costs will eventually be passed along to businesses and households.

Environmental policies that potentially will have an impact on electricity prices are:

  • The Cross-State Air Pollution Rule. This EPA regulation takes effect Jan. 1, 2012, and requires 27 states, including Pennsylvania, to improve air quality by reducing power-plant emissions that contribute to ozone and particle pollution in other states.
  • Section 316(b) of the Clean Water Act. The EPA is developing regulations that require that the location, design, construction and capacity of cooling water intake structures at power plants reflect the best technology available for minimizing adverse environmental impact.
  • The regulation of coal combustion residuals. The EPA has proposed federal regulations to govern the disposal of coal ash and other wastes generated by electric utilities and independent power producers, which would potentially make handling more expensive.

These environmental policies are important to Pennsylvania and to our nation. The goal is to implement them correctly — with transparency and with an effective market structure — and to inform businesses of how to prepare for the changes that will result from the policies.

What effect will renewable energy requirements have on electricity prices?

Renewable energy, like environmental policy, is an important component of an effective long-term energy policy. PPL Corp. believes a balanced approach toward energy policy is vital to the economic health of our state and country. A balanced approach would be a prudent mix of nuclear, clean coal, natural gas and renewable energy resources. In addition to these physical assets, demand response, energy efficiency and energy conservation should be included in the mix.

However, a balanced approach is needed for renewable resources, as currently these resources may cost up to four to five times the cost of conventional generation. Most states, including Pennsylvania, have a Renewable Portfolio Standard (RPS) which requires that a certain portion of electricity production come from renewable resources.

As government has provided grants and tax incentives for these resources, more resources have been added than needed by RPS. Therefore, states are looking to increase renewable energy requirements, thus potentially increasing the costs of electricity for businesses.

What effect will the development of natural gas from Marcellus Shale have on Pennsylvania businesses?

The abundance of natural gas in the Marcellus Shale has the ability to keep Pennsylvania’s energy prices low for a very long time. These low energy prices will benefit everyone, by either lowering costs or by offsetting other cost increases in electricity and natural gas bills. In addition, drilling is boosting the local economy by attracting new companies, creating direct and indirect jobs, and generating lease and royalty checks for property owners.

The benefit of Marcellus Shale is meaningful. To ensure these benefits, policymakers, industry and the people of Pennsylvania must develop a well-defined and a properly regulated market structure. We all benefit from Marcellus Shale if done correctly — safely, continuously improving technologies and regulations, and with open communications.

What can policymakers in Harrisburg do to provide greater benefits from retail markets?

Pennsylvania’s open energy market has created a competitive business advantage, but more can be done. Executives and consumers still need to be educated on why they should shop for energy and how to navigate the retail energy markets. The Public Utility Commission is currently holding hearings on improving retail markets. There are many opportunities to improve the current market — modifying utility default service plans to better align with current market conditions, enhancing technologies to improve and increase product and service offerings, improving utilization of smart meters and continuing the education process. Fortunately, business leaders don’t have to wait; they can shop the market and enjoy lower rates today.

PPL EnergyPlus, LLC is an unregulated subsidiary of PPL Corporation. PPL EnergyPlus is not the same company as PPL Electric Utilities. The prices of PPL EnergyPlus are not regulated by the Pennsylvania Public Utility Commission. You do not have to buy PPL EnergyPlus electricity or other products in order to receive the same quality regulated services from PPL Electric Utilities.

Bob Barkanic is senior director of energy policy at PPL EnergyPlus. Reach him at (610) 774-6722 or [email protected]