Perspective
The Utility As Civic Partner:
Casualty of Competition?
June 15, 2000
By James L. Creighton, Ph.D.
There was
a time when utilities sat down with neighbors to listen to local concerns.
Let's bring
it back. When was the last time your local utility held an open house
to talk about its latest project, or how it might affect the community?
During the 1980s
and early 1990s, many leading utilities learned to engage the public through
open meetings whenever the siting of a new facility might prove controversial.
Florida Power & Light used advisory groups to help select routes for transmission
lines. Kansas City Power & Light conducted an open house on electric and
magnetic fields (EMF) that drew more than 1,000 participants--with staff
serving as baby-sitters while parents participated! Cincinnati Gas & Electric
even sponsored a national conference on public participation.
Utility associations
got into the act as well. Edison Electric Institute (EEI) sponsored a
public participation guide. EEI, the American Public Power Association,
and the National Rural Electric Cooperatives Association all scheduled
training courses on public involvement. Public concerns about possible
health effects associated with EMF led EPRI and the Tennessee Valley Public
Power Association to offer training courses and guides on communicating
with the public about those possible risks.
But sometime during
the 1990s, public involvement disappeared. The utility industry became
focused on issues related to deregulation. Many of the siting issues that
drove them to work with the public were put on the back burner. Now utilities
that once had extensive public participation programs have been out of
that practice for five years. Many have "down-sized" and, in the process,
lost staff with expertise in public participation.
But wasn't that
at least one of the reasons for deregulation: to get away from all the
bureaucracy that slows projects and raises costs? Some argue that in the
new deregulated environment, utilities will not be able to use the open
deliberative processes they used in the 1980s. They will need to move
more quickly to compete with unregulated companies. And, they say, competition
increases the need to keep business plans confidential.
I would argue
that they're dead wrong. In fact, public interest in vitally every aspect
of utility operations makes the need for public involvement more important
than ever. Not only will we see utilities return to engaging the public
in their plans, but we'll see them take a more direct, consensus-seeking
approach. Utilities will forgo the town square meetings of yesterday in
favor of working with local governments and immediate neighbors directly
to solve problems.
NIMBY:
Now More Than Ever
Pacific Gas &
Electric hadn't done any public participation in several years when, with
California's deregulation laws finally in place, it began siting new facilities
once again. Two new substation projects immediately ran into problems.
After meeting with major local controversy on one project, PG&E set up
a neighborhood group to consult on site selection. For awhile, PG&E thought
it had come up with a better solution, but it found it had just shifted
the problem to a new neighborhood. Eventually, PG&E found a way other
than building a substation to solve its problems.
PG&E successfully
sited another substation, but only after a time-consuming process of consultation
with neighbors ordered by the California Public Utilities Commission.
Meanwhile, plans for a PG&E transmission line into the heart of energy-hungry
Silicon Valley face a lawsuit from the mayor of San Jose, who wants to
force undergrounding.
But PG&E is a
regulated utility, so such scrutiny is to be expected. Certainly the unregulated
energy companies don't face these problems? Fat chance.
In March, the
Indiana Utility Regulatory Commission ordered a halt to a $68 million
peak power plant under construction in Henry County by a joint venture
between unregulated affiliates of Cinergy Corp. and Duke Energy Corp.
The commission said it wanted to discuss the project further with local
policymakers. That decision followed a seven-hour public hearing in which
citizens offered complaints not just about the project, but also the alleged
failure of the companies to talk about it with local officials and neighbors.
In the face of such opposition, other would-be builders of merchant generation
have abandoned plans in Indiana. LSP-Columbus Energy and Duke Energy each
have withdrawn petitions to build, respectively, a peak power plant in
Bartholomew County, Ind., and a 640-megawatt plant in Delaware County,
Ind.
What is ironic
is that both Cinergy and PG&E once were leaders in engaging public participation.
Cinergy has experienced public participation practitioners sitting on
the regulated side of the business, while PG&E lost many of its public
participation experts through downsizing and staff reassignment.
These may seem
like isolated examples. But as other companies return to siting new facilities,
they are reporting similar experiences. The political climate that once
required public participation hasn't gone away. It just went underground
while the utility industry was off coping with deregulation.
In fact, I would
argue that the need for public participation in virtually all utility
operations is increasing, and may be even greater than it was during the
1980s.
Power
Plants: Fish Wars and Price Signals
On the generation
side, issues as diverse as plant siting, hydropower, and plant closures
draw passionate interest from public groups.
For instance,
new gas-turbine generating plants pose a significant challenge to the
much larger centralized generating plant of the past. The new gas-turbine
generating facilities are modest in size, and aesthetically are not markedly
different from a small industrial facility. Many probably will be below
the size threshold for facilities requiring approval by a state regulatory
agency, and that will mean fewer public hearings before state regulators.
However, utilities may no longer have the option of appealing to a state
public utility commission to overrule local authorities if a project becomes
so controversial that local permits are not granted. Companies that are
good at working with local communities may have a competitive edge in
getting their permits.
Hydropower faces
two significant challenges: (1) costs to restore fisheries harmed by prior
dam construction, and (2) a new generation of permits due for renewal
at the Federal Energy Regulatory Commission.
Several major
U.S. river systems have seen a dramatic drop in the number of fish returning
to breed and restock the fisheries. Many attribute these declines to instream
dams that block the natural flow of fish up and down the river. While
considerable evidence suggests that dams play a role in the declines,
dams also are likely to be the focus of political efforts to address the
decline in fish stocks because (1) it is always easier to go after a single,
highly visible contributor to a problem than thousands of smaller contributors,
and (2) hydropower companies have revenues that can be tapped to pay for
projects.
Utilities are
likely to be heavily involved in the "fish wars" for some time to come.
To date, the most effective approach has not been to oppose or resist
addressing the decline in fish stocks, but to work in active partnership
with regulatory agencies to help solve the problem. This process often
involves extensive public participation.
FERC relicensing
is an issue for a growing number of utilities as the 50-year license period
ends for plants built to accommodate the economic growth that followed
World War II. Hydro relicensing is an opportunity for the public to raise
questions that the utilities have not been forced to address for years
(e.g., concerning late summer operations that can leave neighbors with
a view of a mud flat). Fish and wildlife agencies also may force consideration
of impacts on fisheries that were not recognized at the time the license
was granted. That can result in conditions or operating regimens that
can materially affect the value of the facility.
Plant closures
are another issue of public interest. One implication of deregulation
is that many older plants will be shut down because they are no longer
economic. That holds the potential for public controversy in two areas.
First, communities for whom generating plants are a significant source
of employment will be concerned about economic implications. Second, plant
closures often force utilities to rush the process of cleaning up toxic
discharges or other environmental hazards. It is not unusual for new environmental
problems to come to light during closure. Local governments will be fearful
of getting stuck with cleanup costs or an unusable site.
The closure of
nuclear plants, in particular, raises some thorny issues. The Nuclear
Regulatory Commission has identified these potential challenges, including
stranded costs for decommissioning plants shut down before the end of
their licenses, funding for decommissioning deregulated facilities, and
plant safety after shutdown.
Regulators are
speculating more about plant safety in the deregulated world. They worry
that less regulation coupled with competitive prices will cause some utilities
to operate plants less safely. As much as utilities complain about the
costs of regulation, regulation often provides a "Good Housekeeping Seal
of Approval" behind which they can hide. If regulations no longer provide
safety assurances, utilities may find themselves having to deal with the
public more directly on these issues.
In deregulated
markets, environmental impacts such as air quality are supposed to be
addressed by "price signals" reflecting the cost of meeting certain environmental
standards. At a fundamental level, most environmentalists do not accept
the philosophy of the unrestricted market, and are unlikely to accept
that price signals alone can protect the environment.In
particular, it is extremely unlikely that environmental groups will drop
their demands for some form of priority for renewables.
Transmission
Lines: EMF Is Still Out There
Few issues generate
as much public debate as those related to transmission. Among the hot
topics are health effects associated with EMF, the need for new projects,
and environmental impacts.
The construction
of new transmission lines during the '90s was slowed significantly by
controversies over possible health effects from exposure to EMF associated
with electric facilities. The EMF issue has been quiescent for the past
few years for two reasons: (1) major reports--notably studies conducted
by the National Research Council/National Academy of Sciences--appear
to be creating a scientific consensus that exposure to EMF is not a problem;
and (2) nobody has been building anything. Once utilities return to building
facilities, the controversy likely will start anew.
Even though the
science now suggests that EMF is not a health problem, EMF will remain
a political problem. So long as power lines are ugly--and only engineers
believe they are not--people will object, claiming their objections are
based on concern about health effects. Health concerns are a far more
potent political argument than aesthetics. The new scientific evidence
may give local officials more backbone in the face of controversy. But
some people will continue to be genuinely concerned about health effects,
others will continue to exploit the issue for political advantage, and
some local officials will genuinely or cynically embrace EMF as an issue.
Whether a new
project is needed at all is always debated. People don't want to talk
about alternative routes unless they're convinced the project is needed.
In the past, state regulatory bodies provided a certificate of need. It
is not clear whether that will continue. If the industry is really going
to be put on a free-market basis, then the market may decide whether there
is a need.
Applying this
same market logic to transmission, state regulators conceivably could
say that it is unnecessary to issue a certificate of need for transmission
lines. The utility may be free simply to decide to invest its own money
at its own risk. The good news is that that would reduce regulatory costs.
The bad news is that the public, unused to letting market economics decide
whether a transmission line is needed, may spend more time challenging
project need. If the state bows out of determining project need, local
land use plans will continue to be in force. Utilities siting lines soon
may need to deal with a plethora of local entities, all of which have
veto rights.
Environmental
studies are a different matter. In most states requiring the preparation
of environmental impact studies and reports, these requirements do not
go away because of deregulation. Except in the rates and marketing arena,
FERC and the state PUCs do not have the authority to remove most of the
environmental regulations that require participation and provide public
access to information.
Deregulation?
It's No Excuse
Under deregulation,
rates and services presumably will be more market-driven. The need for
extensive rate hearings could be eliminated. On the other hand, large
public purchasers of power, such as city or county governments, may subject
companies to extensive public processes in order to choose suppliers.
Price may be the major determinant, but the reputation of the supplier
also may be a factor.
Utilities now
are embroiled in two areas of public controversy related to operation
of existing facilities: (1) watershed management plans, and (2) the Environmental
Protection Agency's Right to Know Act.
A number of utilities
are developing watershed management plans as a tool for protecting water
quality in reservoirs created by hydropower dams. Many utilities are recognizing
the need to consult with the public on these plans, because they raise
thorny environmental issues and could result in curtailment of existing
land uses such as grazing or some forms of recreation.
Further, under
new EPA rules, utilities now come under the provisions of the Right to
Know Act and will be required to release far more information to the public
about air emissions and the discharge of toxic or chemical materials.
This requirement is likely to engender new controversies that will require
working with communities.
Building
Consensus: Never Out of Fashion
Based on this
analysis, I predict several trends. First, as mentioned, public participation
will continue to be needed in the deregulated environment; if anything,
its strategic importance may be greater. But there will be a movement
away from large public hearings toward more direct, consensus-seeking
approaches to public participation.
Many of the requirements
for formal public hearings will be reduced, although requirements for
public hearings associated with environmental impact studies may continue.
Hearings may have made sense in the regulatory setting, where the greatest
concern is visibility and equality of treatment. But without those requirements,
the utility's greatest concern will be solving problems in ways that are
acceptable to local governments and immediate neighbors. Most people in
the public participation field recommend interactive approaches like advisory
groups, coffee klatches in neighbors' homes, workshops, open houses or
door-to-door visitation.
The goal shifts
from satisfying procedural requirements to getting the political consensus
needed to proceed with the project. This shift necessitates a different
kind of public participation, as shown in the table, "A New Approach to
Public Outreach."
Finally, in coming
years utilities will develop organization-wide public participation strategies
and skills-building programs. Utility management will begin to see public
participation as a management issue, not just a siting concern. When they
do, they will find that they have lost much of the expertise they once
had, and will need to train staff and hire new staff with the skills needed
for effective public participation.
Although public
participation initially will be seen as a necessary but unfortunate requirement
of doing business in deregulated markets, management may soon find it
to be an important competitive tool. As staff become more attuned to public
expectations and needs, they will be better able to anticipate public
concerns and develop products that address those needs.
James L. Creighton,
Ph.D., is president of Creighton & Creighton Inc. in Los Gatos, Calif.
He has been involved in designing and conducting public participation
programs for more than 50 utility industry projects. Creighton is the
author of EEI's "Public Participation Manual," and co-author of EPRI's
"Sourcebook for Utility Communications on EMF." Contact Creighton at jim@CreightonandCreighton.com.
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