Kathleen Davis, Associate Editor
According to the Department of Energy (DOE), Secretary Abraham established the Electricity Advisory Board (EAB) in November 2001 to provide Abraham and the DOE with essential independent advice and recommendations on electricity policy issues. Specifically, the EAB will address issues concerning the department's electricity programs; current and future capacity of the electricity system; issues related to production, reliability and utility restructuring; and coordination between the DOE and state and regional officials and the private sector on matters affecting electricity supply and reliability.
The EAB currently has two subcommittees: the subcommittee on transmission grid solutions and the subcommittee on electricity resources capitalization concerns. (A third subcommittee on standards of conduct and corporate practices was approved at the Sept. 20 meeting but has yet to be officially "off the ground.")
In late September, EL&P spoke directly with Rick Green, the chairman of the board for Aquila and the chairman of EAB's subcommittee on electricity resources capitalization concerns.
EL&P: The EAB has formed only two committees so far, yours and the transmission subcommittee. Why is capitalization such an important and immediate issue?
Green: I think it's very clear in the stormy markets that we've seen in 2002 that there is a real issue around capital investment in this industry, and, therefore, capitalization becomes an issue that needs to be addressed and talked about to bring certainty into the marketplace so we can attract capital.
EL&P: How big of an issue is the general area of capitalization in the energy industry today?
Green: I would say it's the #1 issue because without capital this industry really can't move forward to build the infrastructure and supply the energy needs of this nation. And, so, it really does become the #1 issue. Until we bring that kind of clarity and confidence in the industry, it will not be possible to meet the future energy needs of the country.
EL&P: What convinced you to join the EAB as chairman of this particular committee?
Green: I have been working on developing the new energy market since 1986 or 1987, and I've been trying to make sure that we define this marketplace and get the rules that are needed for this marketplace to work. And, a lot of advances have been made, but it's still a work in progress. With Secretary Abraham taking the initiative to form this board—which is a board of diverse players interested in energy—there was a great opportunity to continue to clarify the rules and the needs of the energy marketplace in this country.
It's purely about helping the industry along. Obviously, Aquila is a company within the industry, so we want the industry to do well. But, we have always believed that unless there is a good strong market and industry, the future of all the companies will be less successful going forward. So, the more we can do to bring about a well-defined market and a stronger industry will be in everyone's best interest.
EL&P: The draft report that your committee recently released (" Competitive Wholesale Electricity Generation: A Draft Report of the Benefits, Regulatory Uncertainty, and Remedies to Encourage Full Realization Across All Markets") supports a repeal of PUHCA and a reform of PURPA. Is such drastic action really necessary, and do you expect your recommendation to be acted upon?
Green: I think these two reforms are not really drastic. They are issues which have been discussed for years, and they are both regulations that have served their purpose. Now it's time to move and structure around what's needed for the future in the marketplace. So, I think as we repeal PUHCA, there are probably some things that need to go in its place, and I think, clearly, the PURPA issue is now behind us and we need to refocus on the future of the marketplace.
EL&P: What do you see in PUHCA's place, or has the subcommittee thought that far ahead?
Green: Just in a general way, and this would point to discussion that actually happened within the subcommittee. The way the subcommittee looks at this: It is the repeal of PUHCA, and the replacement of PUHCA in the sense of making sure that we have consumer protections in place. Specifically what those are and more details around that have not been developed. But, that intent is the general consensus of the subcommittee.
EL&P: You're right; those PUHCA/PURPA issues have been talked about in the industry for a number of years. Do you think your subcommittee's recommendation will have enough push to actually get these reforms done?
Green: I definitely think it will be helpful. And, since we're in the middle of conference on the energy bill now, perhaps this recommendation is something that will push the acceptance over. It's hard to tell, but I think the strength of the subcommittee and the EAB's recommendation comes from the diversity of their make-up—in having corporate types, environmental types, etc., all coming together and agreeing on these factors. This should speak loudly.
EL&P: The draft report also spends a significant amount of time arguing the benefits of a competitive market. Is this issue still a bone of contention within the industry, or is that section aimed more at the general public and/or government agencies?
Green: The reason for the section was to simply state what has happened and to make sure there is clarity around the fact that real benefits do exist. Now, going forward, I am sure there are still different opinions and things which need to be worked out, but we thought it was important that we state the benefits which have happened. And, by the way, there was no discussion against the fact there have been benefits. Additionally, there was no discussion other than continuing to move forward to finish the deregulation of energy markets. To have that kind of unanimous view of the subcommittee, I think, was reassuring and very positive.
EL&P: If you had to pull one major point from the draft and hold it up as your #1 personal recommendation, what would you choose?
Green: The word that leaps to my mind is certainty. We have talked about that off and on throughout this interview, but that really is the major point, in my opinion. This has been a market in transition since the mid 1980s, and to be able to finish writing the rules (and, therein, giving certainty) will then start to give that same confidence to investors who provide the capital. This allows the industry to move forward. It is very important, as we've started to see earlier this year with the President's focus on a national energy policy, that we continue to address those needs. If we don't, we're going to see our energy infrastructure across the country be unable to supply the power that's needed to keep this economy going forward.
The draft report from Green's capitalization subcommittee can be viewed at EAB's Web site: http://www.eab.doe.gov/Documents/ERCC_Rept091102.pdf.
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Representing the fourth generation of his family to serve Aquila Inc. and its predecessor, Missouri Public Service Co., Richard C. (Rick) Green, Jr. was elected CEO in 1985 and chairman of the board of directors in 1989. Since Jan. 1, 2002, he has continued to serve as chairman.
