The Council of the District of Columbia is working on legislation that would take major steps to fight climate change in DC. Melissa Lavinson, Pepco Holdings Senior Vice President of Government and External Affairs, expressed Pepco's commitment to meeting this challenge by advancing transportation electrification and energy efficiency. Read her testimony below:
Testimony of Potomac Electric Power Company
Council of the District of Columbia
Committee on Business and Economic Development
October 29, 2018
Good morning Chairman McDuffie, members of the Council of the District of Columbia Committee on Business and Economic Development, attending Councilmembers and staff. I am Melissa Lavinson, Senior Vice President of Government and External Affairs for Pepco Holdings. We appreciate the opportunity to testify at this public hearing on Bill 22-904, the “CleanEnergy DC Omnibus Amendment Act of 2018.”
Headquartered in the District of Columbia, Pepco is a subsidiary of Exelon Corporation, and delivers electric service to approximately 290,000 customers in all eight Wards throughout the District. We are dedicated to providing safe, reliable, affordable and sustainable service to all our customers and helping to deliver the benefits of a cleaner energy economy to everyone we have the privilege of serving.
Pepco and Exelon are aligned with and support the District’s goals of reducing greenhouse gas emissions by 50% by 2032 and becoming carbon neutral by 2050. As you are aware, Pepco provided testimony regarding Bill 22-904 at the October 9th hearing before the Committee on Transportation and the Environment. We acknowledged the important goals advanced by the bill and noted that the imperative to de-carbonize our communities has become significantly more urgent – even from the time that this bill was introduced last spring. With the warning from the Intergovernmental Panel on Climate Change (IPCC) that the world has just over a decade to get control of climate change, the time to act is now and our actions must be bold, meaningful and lasting.
In my testimony and follow-up exchange with Councilmember Cheh, I expressed the commitment of Pepco to act with urgency to help the District and our customers continue to lead in the fight to cut carbon pollution and make our communities and neighborhoods more resilient to the impacts of climate change.
Accelerate the Transition to Carbon-Free Electricity
One important step we can take is to accelerate our actions and transition to 100 percent carbon-free electricity (which is the cheapest and quickest way to decarbonize). This is a step we can take today. A carbon-free standard – as opposed to a technology-based standard underpinned by long-term contracts – would give both customers and power producers the flexibility to source their energy cleanly and efficiently, take advantage of future innovation, and make the District a leader and model for states and cities across the nation. States such as California have taken steps to move to a carbon-based approach. That said, the District has an opportunity to lead and take holistic action in a way has yet to be advanced.
We recognize that the Council is considering a technology-based standard that transitions the District to 100% renewable electricity over time. A carbon-free standard could complement these efforts and drive down carbon emissions associated with electricity use in the District even faster than what is contemplated currently. We look forward to working with you and others to ensure that the transition is done in a manner that is affordable and maintains the overall reliability and resiliency of the system, for all customers.
Accelerate the Transition to Zero-Emission Transportation
More than 20,000 tons of carbon dioxide are added to the atmosphere every day in the District. Approximately a quarter of this pollution comes from fossil fuels burned in vehicles traveling the District’s streets. Paired with carbon-free electricity, transportation electrification is another initiative that will make a real difference in facilitating a clean energy future in the District -- and doing so affordably. For example, C40 Cities, of which the District is a member, has recommended accelerating the transition to zero-emission vehicles in government and privately-owned fleets, public transit and ride-share. A heightened focus on transportation would have the added benefit of directly impacting public health and air quality for all District residents and could encourage innovative mobility companies to locate in the District.
The benefits of rapidly transitioning to lower or zero-emission transportation go beyond those related to climate change. Efforts in this area can have direct and significant impacts on public health for all District residents. According to the American Lung Association, transportation sector air pollution emissions are a leading source of nitrogen oxide (NOx) and particulate matter (PM2.5) emissions within the District metropolitan area. In a report released earlier in 2018, the Union of Concerned Scientists found that “investing in increased vehicle efficiency; a transition to electric cars, buses and trucks; and a shift to cleaner fuels, Northeast and Mid-Atlantic states can:
- Cut climate damaging CO2 pollution from on-road transportation by 37% by 2030 and 78% by 2050;
- Reduce consumer spending on gasoline and diesel fuel by more than $1 trillion by 2050;
- Improve air quality, leading to more than $3 billion in cumulative avoided health impacts by 2030;
- Save billions of dollars in environmental damages region-wide by 2050.”
The measure before the Council could do more to accelerate the transition to zero-emission vehicles, including in public transit and fleets, which would address climate change and bring real public health and local air quality benefits to all District residents, including setting bold targets for private and government fleets and directing the build out of a public charging network. This sentiment was echoed by the Natural Resources Defense Council, the Environmental Defense Fund and the Center for Climate and Energy Solutions in comments submitted in the October 9th hearing docket. We look forward to working with the Council and others to advance policies that will help transform the transportation sector in a manner that benefits all District residents and serves as a model for urban mobility for others to emulate.
Accelerating Innovative Infrastructure Investments and Enhancing Resilience
We must also take steps to accelerate investment in microgrids, solar generation, storage and energy efficiency, resulting in a cleaner, more dynamic, more efficient and more resilient energy system, able to integrate and enable clean, distributed energy technologies. These proposals are not in conflict with the bill’s stated goal of achieving 100% RPS by 2032. To the contrary, they make this goal more attainable by increasing grid capacity and resiliency to enable the introduction of additional solar and other distributed energy resources in the District. Making the transition to a decarbonized, distributed, diverse and democratized energy system cannot happen without a modern grid and a reliable, safe and coordinated electricity platform that serves everyone.
At Pepco, we have made significant investments to modernize our infrastructure, making it more resilient, better able to integrate distributed energy resources, and increasing overall reliability to top decile performance among our peers. That said, we recognize that more needs to be done, particularly in the face of a changing climate and the need to enhance resilience.
The District is a participant in the “100 Resilient Cities” program and has done extensive work and research through “Resilient DC.” Findings from initial work indicate that District residents will experience more extreme and frequent, disruptive weather events, such as extended heatwaves, wetter-windier weather, and flooding. It also found that certain communities and neighborhoods will be disproportionately impacted by these events and will have challenges responding.
We must do more to reduce energy usage, harden assets, enhance resiliency options and build redundancies in communities that have the fewest resources and the potential to be the most impacted. Aligning future investments with the District’s long-term clean energy, air quality and resilience goals is critical to making the transition affordably and efficiently. Pepco recognizes the important role we have today and the even greater role we can play in building and delivering resilience, and facilitating this transition in a way that brings the benefits of these new systems and grid technologies to all eight Wards. And, while we do this, we must ensure that the investments that are made align with air quality and other environmental goals of the District, including those related to NOx and particulate matter. For example, proposals that have fossil-fired generation as a core component, as opposed for emergency purposes only, must be carefully considered and vetted in the context of localized public health and noise impacts.
We should therefore focus, now, on ways to build resilience in these communities that align with the District’s broader objectives and to advance and expand programs and partnerships, like the recent one between Jubilee Housing, Pepco, and New Partners Community Solar, which pairs battery storage with community solar at an affordable housing property in Columbia Heights. These types of partnerships should not have to be reliant on charitable resources.
Building Energy Performance Standards and Energy Efficiency
The proposed building energy performance standards and benchmarking requirements represent an important component of this legislation. Pepco recognizes the importance of these provisions to achieving the District’s long-term greenhouse gas emissions reduction goals and appreciates their inclusion. We also recognize that the implementation will primarily fall on the building sector and, as such, encourage the District Government to continue to work collaboratively with the commercial sector and building industry in pursuit of our common goal of reducing emissions and increasing the efficiency of the built environment, as expeditiously and affordably as possible.
In addition to the building performance and benchmarking standards, the Council should consider taking additional steps to expand access to energy efficiency programs and well as to accelerate activity among all District residents. According to the American Council for an Energy Efficiency Economy (ACEEE), the District ranked 12th in its 2018 State Scorecard, receiving high marks across many categories. The ACEEE Scorecard is a well-respected benchmark and the District’s performance is notable. An area in which the District scored lower than other leaders, such as California, Massachusetts, Michigan, and Minnesota, was in utility programs. A recommendation in the report was to “adopt policies to encourage and strengthen utility programs designed for low-income customers.” As the District moves to ensure the promise of a clean energy future benefits everyone, this is an area in which Pepco believes it could play an important role, as other utilities across the country are doing. We encourage the Council to consider advancing provisions that align with this recommendation.
Although the CleanEnergy DC Omnibus Amendment Act of 2018 has very important and impactful elements, we believe that some should be reconsidered. For example, as drafted, the bill would require the provider of standard offer service as well as retail electric suppliers to enter into long-term power purchase agreements for a certain percentage of renewable energy that is procured for use in the District of Columbia. We have studied this proposal and concluded that mandating long-term power purchase agreements – particularly for the SOS provider – could be harmful to District of Columbia customers and disproportionately serves to benefit energy suppliers outside of the District of Columbia, by shifting the risk of the energy supply contracts from corporations to District residents.
For example, Standard & Poor's Ratings Services “views power supply agreements (PPAs) in the U.S. utility sector as creating fixed, debt-like, financial obligations that represent substitutes for debt-financed capital investments in generation capacity.” Therefore, a utility that has entered into a PPA has ostensibly contracted with a supplier to make the financial investment on its behalf. Consequently, PPA fixed obligations require inclusion in a utility's financial metrics as though they are part of a utility's permanent capital structure and are incorporated into the utility's assessment of creditworthiness. Changes to credit ratings can have a direct impact on the cost of raising capital for all investment needs.
By entering into these long-term contracts, energy suppliers have a guaranteed income stream and are thus able to shift their financial risks onto customers who will be locked into prices that many experts and technology providers agree will continue to decrease in price. Contracts not only lock-in a price, but also a specific type of technology and prohibit the District from benefitting from cost reducing advancements in renewable electricity generation over the length of the contract.
A 2017 report from Lazard shows how the cost of energy from utility-scale solar plants — plants that produce electricity that feeds into the grid — has seen the biggest price drop of electricity generation resource over the past decade: more than an 80% decrease since 2009. This includes a drop in the levelized cost of energy for utility-scale solar photovoltaic (PV) of approximately 6% over a one-year period in 2016, along with a similar drop in prices form onshore wind technologies.
At the same time, while potentially locking customers into higher prices, customers could be locked out of advances in technology that otherwise move at the pace of innovation. For example, as the cost of energy storage declines, the pairing of these intermittent resources could offer new opportunities that have yet to be realized. For these reasons, we respectfully submit that the requirement for long-term power purchase agreements should be removed from the legislation, as it warrants further review and analysis in terms of the best, most affordable manner to meet the bill’s stated objectives. It is a complicated issue with broad financial, cost and innovation implications.
As the Council advances the transition to a 100% carbon-free future, we look forward to working collaboratively to ensure that it is done in a manner that is affordable and maintains the overall reliability of the system. We should also increase and improve the resilience of the electric grid, invest in targeted resilience activities in at-risk communities, and align regulatory policies to encourage these future investments.
Pepco stands ready to work with all stakeholders to advance holistic policies that accelerate and equitably facilitate the deployment of clean energy technologies, increase energy efficiency options for all customers, enhance climate resilience, reduce carbon pollution and improve public health.
Thank you, Chairman McDuffie and the Committee, for this opportunity to provide our thoughts on this legislation as well as the broader issues we addressed, and we are available to address any questions you may have