Title: Navigating Power Allocation and Customer Choice in a Regulated Landscape
Speakers: William Droze and Kadeisha West
William Droze (00:07):
Hey, Kadeisha, it’s good to see you today.
Kadeisha West (00:10):
Good to see you too, William. I know that you have represented utilities in the power allocation space where there’s contested rights to serve customers. Could you tell me a little bit about that?
William Droze (00:22):
Sure. We’ve all heard the phrase, “The customer is always right.” And generally, that’s good marketing. But unfortunately, when you’re dealing with a rate regulated utility, you want to make sure that you don’t duplicate transmission lines and nobody wants to see five sets of transmission lines or three sets of distribution poles in their neighborhood. And so what the Public Service Commission does in Georgia and other states is regulate the way that power is being distributed to various customers. So it’s what we call the territorial act in Georgia, but other states have a similar type of way of allocating power so that you don’t have the duplication of service, but at the same time, you have good coverage that’s available to every customer, whether they be residential or industrial. So that’s the reason we sort of have this Customer Choice Act. And generally what that means is the customer doesn’t have a choice.
Which is to say the customer is served by whatever utility happens to be assigned to the territory in which they locate. But there are certain circumstances where you find that the customer could be potentially served by more than one particular utility. Sometimes you have transmission lines where territories are very close to one another, or something they call corridor rights, which means that there are preexisting lines that run up into another utility’s territory. And so for those reasons, the law looks at certain special circumstances and usually it looks at the load that’s being served by a particular customer. So we’re not talking about mom and pop shops. We’re talking about large grocery store type operations that at least under the Georgia Act is 900 kilowatts or larger. And those particular customers, if they are new service, are allowed to have a choice about how they want to go about providing those kinds of services.
Kadeisha West (02:19):
Why is it important for utilities and businesses to be thinking about customer choice as it relates to their electric service supplier?
William Droze (02:28):
I’m really glad you mentioned both utilities and businesses, because we’ve represented both. In the utility space, there are often disagreements between the utilities about who has the right to serve. And so there are different standards that come up that are applied. A lot of times we’ll advise utilities when they’re going into a marketing effort to determine whether or not this is a potential customer choice load or not. Or if it’s in their territory, to help them say, “This is our load. You can’t serve it.” So we can help them in that way. But then sometimes after there is a customer choice decision made, a dispute arises out of that choice. And we can sometimes be involved in helping businesses who are the customer, because what happens is that they inevitably get drawn into these disputes.
Usually it’s on behalf of the utility that they want to serve their load. So it’s sort of two against one. Sometimes we have the business, sometimes we don’t. But sometimes we also represent the business individually. And it’s ironic in the small world department that we actually had a case back when you were serving as a law clerk for a judge in this area. So you’ve now seen it from both sides — from what it’s like to manage one of these cases and also working as an associate at Troutman Pepper on those types of procurement cases. So why don’t you give us a sense of what the nuts and bolts of this kind of practice look like?
Kadeisha West (04:05):
Sure. Some of the things that you touched on — the load requirement for customer choice being 900 kilowatts or greater — those issues come up when you’re building a new property and you have to estimate that your load is going to meet the 900 kilowatt requirement to actually be able to decide who your electric supplier is. Those are the types of issues where you’ll estimate, but the customer does not actually in practice use 900 kilowatts of power. And of course, the utility that’s servicing that area — that may not have been selected by the customer — is going to want to be able to service them, because in fact they are authorized to do so under the law. So those types of issues arise. You also see issues with grandfather rights.
Under Georgia’s Act, and I’m sure other similar states have something similar, current suppliers of electricity to certain premises get to exclusively service those premises regardless of the territory that they’re in. Issues can arise there because there’s an exception to that grandfather right where if a property has been destroyed, dismantled, and not reconstructed in substantial kind, then that customer now has the choice again. So those grandfather rights do not apply in those situations. Whether something has been dismantled and destroyed and not reconstructed in substantial kind is a fact-specific inquiry, of course. And the good thing is that the Public Service Commission, which has jurisdiction over disputes regarding customer choice, has over the years reviewed a lot of cases and made a lot of decisions that have helped to clarify that area of law and explain what it means to actually be reconstructed in substantial kind and when those exceptions actually do apply.
So those are the types of issues that we’re seeing. How can Troutman Pepper help utilities and businesses as it relates to customer choice?
William Droze (06:19):
Well, it can take a couple of different forms. One way would be when a utility is looking at serving a new customer and trying to figure out whether it is a customer choice load or not. We’ve got very strong energy lawyers who can look at the questions of load profiles. For example, we have situations where a lot of customers now are using robotics and other kinds of heavy electric draw equipment. And even now we’re looking at the question of whether or not you can assemble a load like EV charging stations, putting batteries together — does that reach that threshold of 900 kilowatts? So we can help in advising utilities as to whether or not they should try to compete for a load or not. And then if for any reason that load goes to another utility, we’re able to work with them.
And you described the procedure of the Public Service Commission. You typically start before a hearing officer and then you would take an appeal of that, if you were not successful, to the full Public Service Commission. You can then take that appeal to Superior Court, which is where you were a law clerk.
Kadeisha West (07:30):
That’s right.
William Droze (07:31):
And from there, you can even go to the appellate courts, and we’ve handled those kinds of matters all the way up that chain from hearing officer through the Georgia Supreme Court in some cases. So we can really work with clients in making sure that they not only understand their rights on the front end, but can best position themselves to either get a load or protect that load if they were selected by the customer. And lastly, we can always help clients defend that position in court if it becomes necessary, because those litigation skills are readily transferrable. And we work as a team between the energy lawyers and the litigation lawyers to make sure we’ve got both the subject matter expertise for energy and the trial skills necessary to succeed in the courtroom.
Kadeisha West (08:15):
That’s awesome. Thank you.
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