Sub-national utility regulation and policies affecting renewable energy
This chapter addresses the role of state and provincial utility regulators in nations such as the United States, Canada and Australia in impacting renewable energy development. Regulatory bodies commonly known as public utility commissions (PUCs) have long-standing roles in regulating utilities’ rates and services. PUCs operate under objectives specified in state and provincial laws that typically require them to balance fundamental goals of affordability, cost recovery and fairness. They make critical decisions that can impact the success of renewable energy projects.
Foundational concepts of PUC regulation emerged over a century ago to curb potential monopoly abuses. Delivering electricity to end users required large, capital-intensive networks of wires and equipment. High barriers to entry for new companies created natural monopoly conditions, making it more efficient for one utility to produce and deliver electricity than for several companies to compete to do so. From the start of electrification, most utilities were vertically integrated monopolies that generated electricity, operated the transmission and distribution wires and systems and sold electricity to consumers in a given territory.
PUCs regulate most monopoly utilities’ rates and services, but municipal and cooperative utilities are often excluded. They establish tariffs (schedules of rates and terms and conditions of service) and control some or all of the important decisions which national regulators perform in other nations (see Chapter 4). PUCs in the United States set rates for electricity sales by utilities to residential, industrial and commercial consumers. Section 5.2 illustrates the rate regulation process and how...
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