Our new issue, “After Bernie,” is out now. Our questions are simple: what did Bernie accomplish, why did he fail, what is his legacy, and how should we continue the struggle for democratic socialism? Get a discounted print subscription today !

The summit of Black Mountain, Kentucky overlooks a giant mountaintop removal mine in neighboring Virginia. As we stood there with a group of young climate activists a couple months ago, the mine appeared idle. Coal production in Virginia fell 50 percent between 2004 and 2014 and has continued falling, part of a nationwide decline that has driven the largest coal producers into bankruptcy. With the powerful coal industry declining, one might wonder what now stands in the way of a clean energy future for Virginia. The answer, in a word, is Dominion. Dominion is the largest electric utility in Virginia. It is also one of the state’s most politically powerful corporations. Dominion has consistently blocked progress on renewable energy and climate change. The utility currently supplies just 3 percent renewable energy. While a 2013 study showed that investments in renewable energy and energy efficiency would be less expensive than building new natural gas plants, Dominion is planning an aggressive buildout of natural gas power plants — with the natural gas to be supplied via the Atlantic Coast Pipeline, a joint venture between Duke Energy and, of course, Dominion. Meanwhile, Dominion bought up offshore wind leases off the Virginia coast three years ago but has yet to develop them, leading to speculation that the company simply bought the leases to prevent their development. In this year’s legislative session, Dominion successfully lobbied against several bills that would have expanded the market for distributed (rooftop) solar. And last year, Dominion defeated a statewide cap-and-trade bill in the Virginia legislature. All of this is happening in a state that is incredibly vulnerable to the impacts of climate change, from sea level rise to increasing heavy downpours.

Utilities Versus Climate Dominion’s behavior is not exceptional. Electric companies are one of the most powerful obstacles to implementing renewable energy and energy efficiency at the scale and speed needed to address climate change. Although there are some notable exceptions, fighting progress on climate is the norm for utilities: FirstEnergy led the lobbying effort that weakened Ohio’s law requiring utilities to source a certain amount of their power from renewable energy and energy efficiency. Exelon opposes the national wind production tax credit, a major incentive for wind energy development. Duke Energy opposes rooftop solar legislation in North Carolina. Meanwhile, in Florida in 2014, when climate-denying Governor Rick Scott ran for reelection against pro-renewable former governor, Charlie Crist, the state’s utilities (including subsidiaries of NextEra and Duke) donated $3.55 million in support of Scott and $0.5 million in support of Crist. This year, Florida utilities have spent $21 million on an anti-solar ballot initiative in the sunshine state. And American Electric Power and Southern Companies — as members of the American Coalition for Clean Coal Electricity — are suing the Environmental Protection Agency over the Clean Power Plan to reduce greenhouse gas emissions. Some of the largest utilities are choosing to double down on dirty energy. The reason is simple. The largest and most powerful electric companies in this country (NextEra, Southern Company, Duke, Dominion, and American Electric Power, to name the top five) already own fossil-fuel-based electric generation and they want to squeeze as much profit as possible from their own assets. These companies want to keep old and dirty power plants producing profits, so they engage in fearmongering, claiming that renewable energy drives up electricity prices — a claim undermined by actual data from electricity grid operators. In fact utilities, and society as a whole, would benefit from a just transition to clean energy. Here’s a quick primer on how and why so many utilities behave the way they do and block clean energy. There are two business models for owners of electric power generation: regulated and deregulated. In the traditional regulated utility model, vertically integrated electric utilities own power plants, transmission lines, and distribution lines. State public service commissions set rates, based on projected sales, to cover the utilities’ costs plus a profit on the money the utility has invested. If projected sales do not materialize as forecast, the utility can apply for another rate increase, but it is still harmed by the lost profit before its next rate increase goes into effect. The result is a business model in which (a) utilities earn profits based on building and owning infrastructure; and (b) utilities are directly harmed by falling sales. This leads to behavior like Dominion’s: supporting policies to suppress homeowners’ ability to generate their own power and thereby buy less from Dominion, and also thwarting the development of larger-scale projects not owned by Dominion. In states that deregulated their electric industries in the late 1990s and early 2000s the model is slightly different. Vertically integrated electric companies were split into separate companies: generation, transmission, and distribution (though a parent holding company can still own all three types of companies). Only the distribution companies remain under state regulation. The power plants owned by generation companies compete to sell their power in wholesale markets. Electricity generation companies profit when wholesale power prices are higher than their costs of generating power and are harmed when prices are low. So they have a strong incentive to oppose competition from new energy sources and to oppose any initiatives that suppress sales, both of which drive prices lower. Thus, whether or not they are regulated, electric companies want to protect their own generation from competition, as well as opposing conservation and efficiency programs that would make a significant dent in energy consumption. In the United States many utilities are standing directly in the way of the rapid transition to renewable energy and energy efficiency needed to achieve the global goals outlined in the Paris Climate Agreement. And they are a powerful opponent; the market capitalization of the five largest electric companies range from $30 to $55 billion, making all of them larger than coal giant Peabody Energy was back in 2008, when the coal industry was doing well.

Cracks in the Business Model But the electric utility business model is threatened. Deregulated generation companies are already in a precarious position because of several years of low wholesale power prices, driven by low natural gas prices, relatively flat electricity demand, and increasing penetration of renewable energy. (Despite the incumbent power generators’ desire to protect their own assets from competition, deregulated markets and falling costs for renewables have allowed rapid growth of wind in some regions of the country). This has led some utilities, such as Exelon and FirstEnergy, to seek ratepayer subsidies for their deregulated coal and nuclear power plants that are struggling to remain profitable. And neither utility business model — regulated or deregulated — works well in an environment of flat, or worse, declining sales. From a climate activist perspective, flat or declining sales of dirty energy are good — they result in fewer asthma attacks and less climate change. However, flat or declining sales depress wholesale electricity prices for deregulated generators and also result in lower revenues for regulated utilities. In the last decade, electricity consumption in the United States grew only 1.5 percent. PJM, the regional transmission operator for the mid-Atlantic region, projects only 4 percent growth in electricity sales over the next decade. This marks a radical departure from the past (consumption in the 1990s, for example, grew 24 percent). With the pie no longer growing like it used to, new power sources are in more direct competition with existing ones. Or, as the Wall Street Journal put it in 2014, “Sluggish electricity demand . . . presents utilities with an almost unprecedented challenge: how to cope with rising costs when sales of their main product have stopped growing.” This weakness is leading utilities to fight back against technologies that have the potential to make their sales outlook even worse. A primary target of ailing utility companies is rooftop solar. The installed cost of rooftop solar has steadily fallen by 6 to 12 percent per year since 1998 and is projected to continue declining. International experience suggests that prices could still decline significantly; in Germany, which has a much higher penetration of rooftop solar than the United States, installed costs are less than half of the US cost. Electricity generated from distributed solar has increased 74 percent in just the last two years, according to the US Energy Information Administration. In 2013, the Edison Electric Institute (an electric utility trade group) released a report describing the long-term financial challenge faced by the electric industry in the face of “disruptive challenges,” stating that “the threat to the centralized utility service model is likely to come from new technologies or customer behavioral changes that reduce load.” The threat of consumers supplying their own power through renewable energy technologies “raises the potential for irreparable damages to revenues and growth prospects.” The report explains that, even though regulated utilities are in the position to seek rate increases to cover lost revenues, this could result in a “death spiral” as more and more customers choose to go solar as electricity rates go up, ultimately leaving the electric utility with significant stranded costs. A progressive response to the increased demand for solar would be to see it as a wake-up call on the need to provide renewables for a public that is concerned about climate change. But this isn’t the response most electric companies have taken. Instead, the EEI report is being used as a call to arms, encouraging utilities across the country to block customers from going solar. Since the report was released, utilities have had legislation introduced in nearly two dozen state legislatures to weaken policy support for distributed solar. While not all of these bills have passed, utilities have also brought cases to state regulatory commissions around the country seeking to redesign rate structures to impose greater costs on customers who choose to go solar. For example, in Arizona, one of the country’s largest solar markets, utility company Arizona Public Service has just proposed to cut the price that it pays customers for rooftop solar-generated electricity from 12.8 cents/kWh to 3 cents/kWh. In Nevada, a similar effort by utility Nevada Energy was successful and resulted in a more than 95 percent drop-off in customers seeking to go solar.