Washington Update: A Report from the Front

1. Washington Update:A Report from the Front Sue KellyPresident and CEOAmerican Public Power Association TMEPA 53rd Annual MeetingJuly 11, 2019

2. American Public Power Association—the Basics • We are the national service organization (trade association) for the U.S.’s 2,000 electric utilities owned by units of state/local government • Public power serves 49 million people in 49 states and 5 territories • 1400 plus dues-paying utility members • Located in Crystal City (Arlington), VA (we moved to Crystal City before it was cool!)

3. Our Purpose and Vision • Purpose • Partner with members to promote public power, helping community-owned utilities deliver superior services through joint advocacy, education, and collaboration. • Vision • Shape the future of public power to drive a new era of community-owned electric service.

4. Our Leadership and Staff Board sets policy direction; 35 Board members from all regions of the US and its territories (Jim Ferrell, JEA, is a Region 7 director) Decosta Jenkins (Nashville Electric Service) is Chair; Jolene Thompson (American Municipal Power/OMEA) is Chair-Elect; Colin Hansen (Kansas Municipal Utilities) is Vice Chair APPA has 70 staffers doing everything from lobbying to education to coordinating mutual aid after storms—mutual aid has certainly kept us busy (our thanks to all of you who have sent help!)

5. Legislative Landscape

6. Congressional Agenda • House of Representatives • Appropriations/Budget/Debt Ceiling • Oversight of the Trump Administration • Infrastructure – emphasis on climate change/clean energy • Healthcare • Senate • Appropriations/Budget/Debt Ceiling • National Defense Authorization Act • Reauthorization of Terrorism Risk Insurance Act • Nominations of President Trump’s political and judicial nominees • Retirement savings bill (already passed in House) • Infrastructure – maybe???? Or maybe not….

7. Nominations • The Senate is continuing to process President Trump’s nominees for political and judicial vacancies • Key nominations • Two nominees for Federal Energy Regulatory Commission (FERC) • Current R vacancy due to Kevin McIntyre’s passing • Soon a second vacancy as Cheryl LaFleur departs • But increasingly likely they might just stay with 3 (2 Rs, 1 D)? • Secretary of Homeland Security • Secretary of Defense

8. Infrastructure Legislation • President Trump met with Democratic leadership (“Chuck and Nancy”) in late April – $2 Trillion package floated • In May Trump said he would not work with Democrats until: a) a replacement for NAFTA is approved by Congress; and b) investigations of his Administration cease • No NAFTA replacement imminent and Mueller will testify before two House Committees on 7/17 • Infrastructure (with climate emphasis) still a priority for House Democrats – work will begin at the committee level • What is still unclear? How to pay for a package • Issue of Highway Trust Fund – reauthorization of FAST Act • Unclear what the Senate will do, if anything…

9. Infrastructure Legislation • H.R. 2741, the LIFT America Act – introduced by Energy & Commerce Committee Chairman Frank Pallone (D-NJ) • What it would do – $33B over five years for energy-related infrastructure: • $4B for grid modernization, resilience, security, and efficiency; • $4B for renewables; • $23B for energy efficiency efforts (i.e., retrofitting and weatherizing buildings and funding the deployment of clean energy fuels); and • $2.7B to spur smart communities (which includes $1.4B to support the development of an EV charging network) • Other provisions on healthcare, broadband, drinking water infrastructure, and brownfields • Hearing held in May; energy efficiency provisions likely to advance separately, but timing uncertain

10. Public Power Priorities for Infrastructure Legislation • Hydropower licensing/relicensing reform • All resource agencies with mandatory conditions for a facility need to be required to work together under a designated schedule • Resource agencies need to clearly define the objective of each mandatory condition with an accompanying rationale and disclosure of impacts in an open and transparent manner • Electric vehicles – Association supports Carper bill to provide grants to deploy charging infrastructure along national corridors (public power utilities eligible!) • Energy storage – support RD&D, technical assistance, and grants for energy storage • Grid modernization – support funding and technical assistance for technologies that integrate distributed energy resources, advanced distribution system management

11. Infrastructure/Privatization • We continue to look out for attempts to push for privatization of public infrastructure in infrastructure legislation or other legislative/regulatory vehicles • “Infrastructure recycling”– sell existing public infrastructure to private operators to get money for new public works • Approach de jour – incentivizing the sale/transfer of utilities to public pension plans (operated by private third party) • The Trump Administration appears willing to facilitate this model – see IRS 2018 public pension plan guidance • We expect language will be included to promote public-private partnerships—but details are important

12. Municipal Bond Modernization/Infrastructure • Our bond modernization agenda, which is shared with the Public Finance Network and Municipal Bonds for America coalition, includes: • Restoring advance refunding bonds – H.R. 2772, Investing in Our Communities Act* • Stopping the sequestration of tax credit payments to Build America Bond issuers • Increasing the amount of the small-issuer exemption (current limit is $10M)* • Making common-sense changes to private-use rules to make them less complex and punitive toward public power • Starred items could be included in infrastructure legislation

13. Energy Tax Legislation • Simple extensions of expiring energy-related provisions (e.g., electric vehicle charging infrastructure) have passed House committee and been introduced in Senate • Bicameral interest in further changes to energy-related tax provisions • House Ways and Means Committee Chairman Richard Neal (D-MA) recently committed to consider legislation to prevent phaseout of wind and solar tax credits • Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Committee Member Ron Wyden (D-OR) formed task forces – including energy task force – to consider long-term solutions to temporary tax provisions • Primary limit to any substantive changes is cost

14. Energy Tax Legislation • S. 1288, the Clean Energy for America Act (Senator Wyden) (Association supports) • Create uniform subsidies (technology neutrality) • Create a comparable incentive for public power utilities that cannot take advantage of energy-related tax incentives – “Clean Energy Bond” • H.R. 2704, the Renewable Energy Transferability Act (Rep. Earl Blumenauer (D-OR)) (Association supports) • Investor owned utilities need because tax liability reduced substantially under the Tax Cuts and Jobs Act of 2017 • As drafted would provide only partial relief to public power, but APPA working with Blumenauer staff to resolve

15. Electric Vehicles • APPA supports S. 667 by Senator Tom Carper (D-DE) to establish a grant program for public entities (including public power utilities) to receive funds for EV charging infrastructure and hydrogen fueling along designated federal alternative fuel corridors • Legislation was introduced in the House and Senate to repeal EV tax credit and impose a user fee on alternative fuel vehicles, to fund the Highway Trust Fund (H.R. 1027 and S. 343)(Barrasso/J. Smith) • S.1484/H.R. 2764, the Zero-Emissions Vehicles Act – would amend the Clean Air Act to require that all car sales be zero-emissions vehicles by 2040 (Levin/Merkley)

16. Environment—House Action • Addressing climate change remains a top priority for House Democrats • There have been more than a dozen hearings on the issue in multiple committees. • In early May, the House passed H.R. 9, the Climate Action Now Act, to prevent the President from pulling the U.S. out of the Paris Climate Agreement (no action in Senate) • The focus remains on efforts to reduce CO2 emissions through a variety of means, including policies to promote: • Renewables • Electric vehicles • Distributed Energy Resources • Energy storage • Energy efficiency

17. Environment—Senate Action • The Senate Energy and Natural Resources Committee has held five hearings focused on climate change (utility efforts to reduce emissions, energy innovation, and energy storage) • Senate Environment and Public Works focus is on how to develop and use technology to reduce emissions • Senate passed S. 383, the Utilizing Significant Emissions with Innovative Technologies (USE IT) Act, as part of the National Defense Authorization Act (NDAA) • H.R. 2597 / S. 1359, the Clean Energy Standard Act of 2019 (Senator Tina Smith (D-MN) and Rep. Ben Ray Lujan (D-NM)) • Sets a CES to achieve net-zero emissions by 2050 • Technology neutral approach includes advanced nuclear reactors, carbon capture and storage, renewables paired with long term storage

18. Distributed Energy Resources/Energy Storage • S. 1142/H.R. 2096 – tax credits for energy storage technologies and battery storage technology (Heinrich/Doyle) • S. 1602, BEST Act – research, development, and demonstration program for grid-scale energy storage systems at DOE (Collins) • S.1593/H.R. 2909, the Promoting Grid Storage Act of 2019 (Smith/Casten) – energy storage research program and a technical assistance and grant program at DOE – Association supports the bill • Also bills on net metering and combined heat and power

19. Energy Efficiency • S. 1245/H.R 2664, the All-of-the-Above Federal Building Energy Conservation Act of 2019 (Hoeven/Manchin and Carter/Veasey), was reintroduced: • Would repeal a legacy efficiency requirement that all new and existing federal buildings phase out fossil fuel-generated usage by 2030 • Would replace the fossil fuel ban with more reasonable energy reduction goals, and other measures to implement energy efficiency measures if they are deemed to be cost-effective  • Association supports this bill

20. Energy Efficiency • In spring 2019, several energy efficiency bills were introduced to provide cash rebates for energy-efficiency retrofits to homeowners; increase funding for the Department of Energy’s (DOE) Weatherization Assistance Program; and promote new technologies in smart buildings and water systems • A legislative hearing was held in early April on these measures and the Energy Subcommittee approved them in May • Some of the bills are also included in text of the LIFT America Act

21. Grid Security • There is continued strong interest in cybersecurity issues on the Hill—in both houses, by many committees • The Association supports H.R. 359, the Enhancing Grid Security through Public-Private Partnerships Act (could be marked up in full committee in July): • Introduced by Representatives Jerry McNerney (D-CA) and Bob Latta (R-OH) • Senators Cory Gardner (R-CO) and Michael Bennet (D-CO) expected to introduce a companion bill • Would require DOE to establish a program to facilitate and encourage public-private partnerships to promote and advance the physical and cybersecurity of (smaller) electric utilities • Modeled on APPA’s current Cybersecurity for Energy Delivery Systems (CEDS) cooperative agreement; we are working to extend it

22. Power Marketing Administrations • President Trump’s FY 2020 budget proposes to sell off transmission assets of PMAs and TVA and/or change the cost-based rate structure for the PMAs • Letters sent to the House and Senate pushing back on the proposal • Joint APPA/NRECA Letter sent to OMB • House FY 2020 Energy and Water Appropriations bill (passed by committee on May 21) rejected the Administration’s PMA proposals • Other threats lurk: • Efforts by third parties to allow energy savings performance contracts at federal hydropower facilities; these threaten preference power and are unnecessary • Monitoring efforts on the 2020 Water Resources Development Act bill to prevent skimming of funds from the PMAs for the Inland Waterways Trust Fund

23. Wholesale Markets • APPA continues to educate policymakers on developments in wholesale electricity markets and on problems in the Eastern RTOs with public power’s ability to self-supply capacity resources • It is unclear what, if anything, Congress will do on wholesale markets issues outside of oversight of the Federal Energy Regulatory Commission

24. Pole Attachments • In September 2018, the Federal Communications Commission (FCC) adopted a report and order (R&O) preempting state/local laws or requirements governing access to public rights-of-way (ROW) and publicly owned infrastructure within the ROW, including rates, terms, or conditions of pole attachment agreements, using sections 253 and 332 of the Communications Act • Went into effect Jan. 14, 2019 • APPA challenging R&O in Ninth Circuit—initial brief filed • Rep. Anna Eshoo (D-CA) introduced a bill (H.R. 530) to repeal the R&O as well as other related report and orders; Association supports her bill • STREAMLINE Small Cell Deployment Act (S. 1699) reintroduced by Senators Thune (R-SD) and Schatz (D-HI) – legislatively enacts what FCC trying to do in its R&O, so Association opposes it

25. Telephone Consumer Protection Act (TCPA) • The TCPA is a statute governing telemarketing • There have been several proceedings on the TCPA at the FCC, as well as litigation • Broad reading of term “automated telephone dialing system” results in applicability of TCPA liability to almost all phones • Utilities are covered by the statute – it is unclear whether public power utilities are covered • The Association requested the FCC clarify whether state and local governments are covered – that petition has not been acted on • Several bills have been introduced to amend the law • S. 151 by Senator Ed Markey (D-MA) – approved by the full Senate to provide regulators with more time to prosecute scammers and increase penalties for violations • H.R. 946 by E&C Committee Chairman Frank Pallone (D-NJ)

26. Public Power Key Messages to Federal Policymakers • Remove barriers to infrastructure investment • Modernize municipal bonds to support electric system investments • Strengthen partnerships for a secure grid • Protect the federal power program • Make wholesale electricity markets work • Public power is reducing its CO2 emissions to address climate change

27. Environmental Protection Agency (EPA)

28. Affordable Clean Energy (ACE) Rule • In August 2018, EPA released the proposed Affordable Clean Energy (ACE) Rule • Heat rate improvements would constitute the best system of emissions reductions (BSER) for coal-fired power plants • Proposed revisions to new source review (NSR) applicability • Proposed revisions to implementation regulations for this and future Clean Air Act§112 (d) actions, including extending the regulatory and compliance timelines • EPA issued final ACE rule on June 19 • Heat rate improvements constitute BSER: states have 3 years to submit plans; can look at factors like unit’s remaining useful life • NSR revisions to be considered in separate rulemaking • Court review already underway • EPA Asst Administrator Bill Wehrum has stepped down

29. Mercury and Air Toxic Standards (MATS) Risk and Technology Review/Cost Finding • In December 2018, EPA proposed required risk and technology review (RTR), but also proposed to reconsider its underlying 2016 Supplemental Cost Finding • Proposes that it is not “appropriate and necessary” to regulate hazardous air pollutants (HAP) emissions…but does not propose rescinding existing§112(d) MATS rule • Association filed comments on proposal in April 2019; Association, other utility trade associations, and labor organizations sent letter to EPA in March 2019 supporting keeping MATS regulations in place, because industry has largely already complied, spending $18 Billion • EPA is currently reviewing comments received

30. County of Maui Case • County of Maui v. Hawaii Wildlife Fund, Sup. Ct. No.18-260; Question presented is whether the Clean Water Act (CWA) permitting requirements apply to pollutants that originate from a point source but are conveyed to a Water of the US by nonpoint sources such as groundwater (9th Circuit says they do) • Outcome affects Tennessee Clean Water Network, et al., v. TVA • APPA and industry coalition supported court review (will be heard by Supreme Court in November); argued that CWA permitting requirements don’t apply here but other laws do, including • State groundwater laws • Federal laws such as the Safe Drinking Water Act, the Resource Conservation and Recovery Act, etc.

31. Coal Combustion Residuals (CCR) • EPA finalized changes to its 2015 CCR rule in July 2018 (“Phase I, Part 1”) but then asked for voluntary remand in light of intervening Court decision on original rule; changes still pending at agency (decision increases pressure to use lined impoundments or remove CCR) • Phase II Rulemaking addresses beneficial use of CCR (now at OMB—to come out later this summer?) • State permit programs authorized under the Water Infrastructure Improvements for the Nation Act (WIIN Act) • EPA can review and approve state permit programs and step in if state programs insufficient

32. Federal Energy Regulatory Commission (FERC)

33. Transmission Cost Concerns • Rising transmission costs continue to be a concern for our members in various regions of the country—includes regions with Regional Transmission Organizations (RTOs) and non-RTO regions • Transparency and opportunities for stakeholder participation in the transmission planning process are lacking • Crucial that FERC implement and enforce transmission planning and cost recovery policies that ensure reasonable rates

34. FERC Notices of Inquiry • Two FERC Notices of Inquiry (NOIs) issued in March 2019, requesting comment on: • FERC policies for determining the allowed return on equity (ROE) to be included in cost-based transmission rates (Docket PL19-4) • FERC’s policies on transmission rate incentives (Docket PL19-3) • Any policy changes resulting from NOIs could impact transmission costs (more likely to increase than decrease) • APPA commented extensively on NOIs, as part of larger coalitions seeking close scrutiny of costs

35. Transmission Rate Incentives Notice of Inquiry • FERC asked 105 separately-numbered questions on virtually every aspect of FERC incentive policies • Could result in increased use of costly ROE “adders” that will increase transmission rates • On the other hand, FERC might limit some incentives (e.g., the ROE adder for RTO participation) • Could have implications for transmission planning, public power joint ownership, adoption of new technologies, etc. • APPA organized joint comments filed June 26 with member utilities, consumer advocates, state PUCs and industrial customers; reply comments are due August 26

36. ROE Notice of Inquiry • FERC asked dozens of questions regarding FERC policies for calculating the allowed ROE (profit) included in rates for interstate transmission service • FERC recently proposed changes to its ROE method in an ISO New England case • ROE NOI asks for broader industry comment on the new proposed method and other issues • New method could result in higher ROEs, but good arguments exist against most problematic aspects • APPA coordinated with NRECA, TAPS and industrial customer groups on June 26 comments which included affidavits by experts; reply comments due July 26

37. Storage and DER—FERC Jurisdictional Creep • FERC issued Order No. 841 on participation of electric storage resources in RTO/ISO markets in Feb. 2018; denied rehearing in order issued May 2019 • FERC continues to defer action on non-storage distributed energy resources (DERs) • Key issue for APPA is state and local authority to address rate, operational, and safety issues DERs present (including distributed storage) • Association argued FERC should allow retail regulators (including public power) to opt out of allowing DER participation in the wholesale markets • Association is likely to appeal storage order to court of appeals; other utility trade associations may do so as well

38. Mandatory Capacity Markets • Association continuing to hear concerns by members in RTO regions with mandatory capacity markets (PJM, ISO NE) about undue restrictions on their right to self-supply their own loads with own resources; members in other RTO regions do not want to see such rules imposed on them • FERC “paper hearing” on PJM capacity construct • APPA submitted initial and reply briefs late last year seeking self-supply exemption from “minimum offer price rule” (MOPR) • FERC has yet to rule on case; 2/2 split might be affecting timing of decision

39. APPA Resources You Can Use

41. Updated Retail Rate Comparison • Deregulated vs. Regulated States – EIA data between 1997 and 2018 • On average, states that adopted retail choice did not achieve lower retail rates in comparison to those that remained regulated • Rate reductions achieved through retail restructuring primarily have benefited commercial and industrial customers • Residential rates in deregulated states have increased 0.3 cents more than they did in regulated states despite increase in residential participation in retail choice in recent years

42. Behind-the-Meter Energy Storage Report • Released March 2019 • Educates members on current market for BTM energy storage, customer economics, utility value and impacts, recent state and federal developments, and utility examples • APPA developed with technical assistance from NewGen Strategies & Solutions, LLC

43. Rate Design Compendium • Rate experts detail their vision of the future of rate design as the industry transitions to incorporate more DERs and electrification of end use technologies • Mark Beauchamp (Utility Financial Solutions) • George Chen (LADWP) • Ahmad Faruqui and Mariko Geronimo (Brattle Group) • Jim Lazar (Regulatory Assistance Project) • Ashley Brown (Harvard Electricity Policy Group)

44. Electric Vehicle Resources • Electric Vehicle Interest Group • Quarterly webinar meetings featuring guest speakers • Creating an Electric Vehicle Blueprint for Your Community: Public Power Strategies • A Public Power Guide to Understanding the U.S. Plug-In Electric Vehicle Market • Public Power EV Activities Tracker

45. Coming Soon--Electric Vehicle Fleets Report • Report to cover topics such as motivations for fleet owners to go electric, considerations for transitioning to electric, the potential role for utilities, and case studies • APPA is developing with technical support from Burns & McDonnell • To be released prior to the Public Power Forward Summit in Nashville, TN to be held November 21-22, 2019

46. Cybersecurity Scorecard

47. Association Holding Two Summits this November in Nashville • Cybersecurity Summit, November 18-20: https://www.publicpower.org/event/cybersecurity-summit • Public Power Forward Summit, November 21-22: https://www.publicpower.org/event/public-power-forward-summit