Utility Regulation Archives - Columbia Law Review

Introduction For most Texans, Valentine’s Day in 2021 was far from a romantic ideal. Winter Storm Uri pummeled the state with record-setting ice and snowfall, which triggered cascading failures for the state’s insufficiently weatherized electric grid.[footnote]Kara Norton, Why Texas Was Not Prepared for Winter Storm Uri, PBS (Mar. 25, 2021), https://www.pbs.org/wgbh/nova/article/texas-winter-storm-uri/ [https://perma.cc/L25G-QCKA].[/footnote] Roughly 70% of Texans were without power for an average of forty-two hours.[footnote]Neelam Bohra, Almost 70% of ERCOT Customers Lost Power During Winter Storm, Study Finds, Tex. Trib. (Mar. 29, 2021), https://www.texastribune.org/2021/03/29/texas-power-outage-ERCOT/ [https://perma.cc/L4UH-C8QY].[/footnote] Winter Storm Uri is believed to be responsible for 246 deaths[footnote]Tex. Dep’t of State Health Servs., February 2021 Winter Storm-Related Deaths—Texas 2 (2021), https://www.dshs.texas.gov/news/updates/SMOC_FebWinterStorm_MortalitySurvReport_12-30-21.pdf [https://perma.cc/KPZ7-VQFT]; Patrick Svitek, Texas Puts Final Estimate of Winter Storm Death Toll at 246, Tex. Trib. (Jan. 3, 2021), https://www.texastribune.org/2022/01/02/texas-winter-storm-final-death-toll-246/ [https://perma.cc/XHL8-ZJYG].[/footnote] and $130 billion in economic loss.[footnote]Joshua W. Busby, Kyri Baker, Morgan D. Bazilian, Alex Q. Gilbert, Emily Grubert, Varun Rai, Joshua D. Rhodes, Sarang Shidore, Caitlin A. Smith & Michael E. Webber, Cascading Risks: Understanding the 2021 Winter Blackout in Texas, Energy Rsch. & Soc. Sci., July 2021, at 1, 1 (“Economic losses from lost output and damage [from the freeze] are estimated to be $130 billion in Texas alone.”).[/footnote] While Texas has experienced at least three other severe freezes in the last thirty years, Winter Storm Uri’s devastation was unparalleled,[footnote]Id.[/footnote] and many attribute the storm’s impact to a confluence of magnified climate risk and inadequate grid adaptation.[footnote]See, e.g., id. at 2, 8 (describing Texas’s failure to sufficiently weatherize its electricity and gas systems, as well as the additional strain brought on by climate-change induced extreme weather events).[/footnote] A similar tale looms over Puerto Rico and its experience with Hurricane Maria in 2017. The Category 4 storm[footnote]Michon Scott, Hurricane Maria’s Devastation of Puerto Rico, Nat’l Oceanic & Atmospheric Admin. (Oct. 19, 2021), https://www.climate.gov/news-features/understanding-climate/hurricane-marias-devastation-puerto-rico [https://perma.cc/5F3A-PYKR] (highlighting that while Hurricane Maria “alternated between Category 4 and 5 as it approached Puerto Rico,” the storm made landfall as a “Category 4 storm, although meteorologists have no land-based records of Maria’s maximum winds because the storm damaged most of Puerto Rico’s wind sensors”).[/footnote] was responsible for an estimated 4,645 deaths[footnote]Nishant Kishore, Domingo Marqués, Ayesha Mahmud, Mathew V. Kiang, Irmary Rodriguez, Arlan Fuller, Peggy Ebner, Cecilia Sorensen, Fabio Racy, Jay Lemery, Leslie Maas, Jennifer Leaning, Rafael A. Irizarry, Satchit Balsari & Caroline O. Buckee, Mortality in Puerto Rico After Hurricane Maria, 379 New Eng. J. Med. 162, 162, 166 (2018) (estimating a mortality rate of 14.3 deaths per 1,000 persons at a 95% confidence interval, which implies a total death count for the storm of 4,645).[/footnote] and the longest blackout in U.S. history.[footnote]This record-breaking blackout was also the second-largest in world history. Over 3.4 billion hours of electric service were lost, and the average household was without power for eighty-four days. Doug Criss, Puerto Rico’s Power Outage Is Now the Second-Largest Blackout on Record, CNN (Apr. 16, 2018), https://www.cnn.com/2018/04/16/us/puerto-rico-blackout-second-largest-globally-trnd/index.html [https://perma.cc/S3WQ-PVCF].[/footnote] It took eleven months and $3.2 billion for the island’s only electric utility—bankrupted as a result of the storm—to restore power.[footnote]Frances Robles, Puerto Rico Spent 11 Months Turning the Power Back On. They Finally Got to Her., N.Y. Times (Aug. 14, 2018), https://www.nytimes.com/2018/08/14/us/puerto-rico-electricity-power.html (on file with the Columbia Law Review ).[/footnote] Puerto Rico is no stranger to hurricanes, but many climatologists hypothesize that climate change likely enhanced Hurricane Maria’s ferocity and also has the potential to make similar storms about ten times more likely to occur in the future.[footnote]Jeff Goodell, The Perfect Storm: How Climate Change and Wall Street Almost Killed Puerto Rico, Rolling Stone (Sept. 12, 2018), https://www.rollingstone.com/politics/politics-features/puerto-rico-hurricane-maria-damage-722570/ [https://perma.cc/24RM-JMBT] (quoting Professor Kerry Emanuel from MIT who emphasized that “Category 5 storms like Maria will go from a one-in-800-years event to a one-in-80-years event” by 2100).[/footnote] Winter Storm Uri and Hurricane Maria are only two of several recent examples where climate change has exposed just how vulnerable the electric grid is to extreme weather. Since many climate experts anticipate that these types of weather events will occur with increased regularity and intensity going forward, it is imperative that utilities identify why the grid is particularly susceptible to climate impacts.[footnote]See U.S. Glob. Change Rsch. Program, Fourth Nat’l Climate Assessment, Impacts, Risks, and Adaptation in the United States: Report-in-Brief 12 (D.R. Reidmiller, C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. Maycock & B.C. Stewart eds., 2018), https://nca2018.globalchange.gov/downloads/NCA4_Report-in-Brief.pdf [https://perma.cc/CD9W-L3R6] (“More frequent and intense extreme weather and climate-related events, as well as changes in average climate conditions, are expected to continue to damage . . . [already] aging and deteriorating infrastructure.”).[/footnote] The most likely answer lies in the fact that the grid—which consists of exposed hardware across large swaths of territory—has been built to withstand historical climate conditions, which, because of climate change, no longer track current or projected future conditions.[footnote]See id. at 38 (“Current infrastructure is typically designed for historical climate conditions and development patterns . . . resulting in increasing vulnerability to future risks from weather extremes and climate change. Infrastructure age and deterioration make failure or interrupted service from extreme weather even more likely.” (citations omitted)).[/footnote] Accordingly, if the grid is to withstand the climate crisis, then utilities “must fundamentally rethink their approach.”[footnote]Romany M. Webb, Michael Panfil & Sarah Ladin, Climate Risk in the Electricity Sector: Legal Obligations to Advance Climate Resilience Planning by Electric Utilities, 51 Env’t L. 577, 579 (2021).[/footnote] Despite the urgent need to act, however, utilities have largely failed to proactively engage in serious climate adaptation.[footnote]Craig D. Zamuda, Thomas Wall, Leah Guzowski, Joshua Bergerson, Janet Ford, Lawrence Paul Lewis, Robert Jeffers & Sean DeRosa, Resilience Management Practices for Electric Utilities and Extreme Weather, Elec. J., Nov. 2019, at 1, 1 (“[T]he practice of planning for and implementing resilience strategies is not yet universal among the Nation’s utilities. In many cases, utilities are just beginning to consider or project how changes in extreme weather and climate will affect their operations, infrastructure, and business future.”).[/footnote] The industry is plagued by a “climate resilience gap,” whereby a significant and growing divergence exists between the current level of protection afforded to critical grid infrastructure and the degree of protection needed to withstand the climate crisis.[footnote]Sophie Marjanac & Lindene Patton, Extreme Weather Event Attribution Science and Climate Change Litigation: An Essential Step in the Causal Chain?, 36 J. Energy & Nat. Res. L. 265, 276 (2018).[/footnote] Utilities, however, are not solely to blame: Their supervising regulatory bodies have also largely failed to prioritize resilience.[footnote]Robert Walton, Are Utilities Legally Required to Plan for Climate Change? ‘The Devil Is in the Details.’, Util. Dive (Dec. 8, 2020), https://www.utilitydive.com/news/are-utilities-legally-required-to-plan-for-climate-change-the-devil-is-in/591744/ [https://perma.cc/S4C9-GS7V] (emphasizing that commissioners “still have not yet confronted [resilience] on a state-by-state regulatory basis”).[/footnote] In the United States, utilities are regulated by federal, state, and local entities, with state Public Service Commissions (PSCs)[footnote]“PSC” is a general term used to refer to the respective utility regulatory commission in a given jurisdiction.[/footnote] typically exerting the closest degree of oversight.[footnote]Jim Lazar, Regul. Assistance Project, Electricity Regulation in the US: A Guide 3 (2d ed. 2016), http://www.raponline.org/wp-content/uploads/2016/07/rap-lazar-electricity-regulation-US-june-2016.pdf [https://perma.cc/UHE9-GRY4].[/footnote] These state commissions review and must ultimately approve some of the critical elements of a utility’s business, ranging from rates and service terms, to capital projects and resource strategies.[footnote]Id.[/footnote] When conducting these duties, a PSC typically considers whether a utility’s business plan complies with principles of (1) prudence, (2) least-cost, and (3) used and useful.[footnote]Id.; see also Webb et al., supra note 14, at 610–20 (identifying that the three key ratemaking components are “the prudence standard,” “the least cost principle,” and “the used and useful test”).[/footnote] Together, these three ratemaking components require the utility to make reasonable efforts to meet energy demand by providing reliable service to customers at the lowest possible cost .[footnote]Lazar, supra note 19, at 174 (highlighting that utilities are required to ensure “reliable service at [a] reasonable cost while [also] meeting societal goals,” a process that “involves balancing the interests of utility investors, energy consumers, and the entire economy”).[/footnote] A critical failure, however, stems from the fact that PSCs, despite their influence over utility behavior, have not updated the ratemaking principles to reflect the new climate reality. As a result, PSCs have continued to validate utilities’ use of historic climate data in the infrastructure design process, even though such data is an increasingly unreliable predictor of future weather patterns.[footnote]U.S. Glob. Change Rsch. Program, supra note 12, at 30–38.[/footnote] Thus, by applying prudence, least-cost, and used and useful in a manner that does not incorporate observable shifts in baseline weather patterns, PSCs have largely failed to introduce climate resilience into the ratemaking process.[footnote]Webb et al., supra note 14, at 610–24.[/footnote] To combat this problem and compel climate resilience, this Note offers an original proposal advocating for the injection of an explicit, forward-looking mechanism into the utility regulatory regime. To provide this prospective focus, this Note looks to other areas of the law before ultimately pinpointing tort’s foreseeability principle. In tort law, foreseeability is the standard by which liability attaches to a defendant: An actor, owing a duty of care to another, is negligent if he knew or should have known of certain foreseeable risks but nonetheless fails to take reasonable precautions.[footnote]Restatement (Third) of Torts: Liab. for Physical & Emotional Harm §§ 3–7, 29 (Am. L. Inst. 2010); see also Fowler V. Harper, Foreseeability Factor in the Law of Torts, 7 Notre Dame L. Rev. 468, 469 (1932) (“[T]he foreseeability factor is essential to liability . . . . [W]hile one may not be held legally responsible merely because the harm caused was to be anticipated, he is never held liable unless it was, in some sense, foreseeable.”).[/footnote] Mapping this construct onto utility ratemaking, foreseeability will apply a prospective valence over prudence, least-cost, and used and useful to require utilities to study future climate risks and take necessary precautions ex ante to avoid environmental harms ex post. Thus, relative to the existing scholarship in this area which tends to treat regulatory and tort law as separate, siloed legal channels, this Note instead emphasizes that the two disciplines should commingle in order to catalyze forward-looking resilience planning across the utility sector. This Note proceeds in three parts. Part I contextualizes the climate crisis as it relates to electric utilities and provides an overview of resilience and utility regulation. Part II unpacks the core problem this Note seeks to address, namely, that utility and regulatory inaction has generated a resilience gap that exposes the electric grid to foreseeable climate risks. Part III offers a solution, suggesting that tort’s foreseeability principle can be woven into utility ratemaking as a legal mechanism capable of compelling forward-looking climate planning.

Utility Regulation

WATT ABOUT IT: CLIMATE RESILIENCE IN THE ELECTRIC UTILITY SECTOR—HOW STATE REGULATORS CAN APPLY TORT’S FORESEEABILITY PRINCIPLE TO COMPEL CLIMATE RESILIENCE

FIGHTING FIRE WITH FIRE-HARDENED HOMES: THE ROLE OF ELECTRIC UTILITIES IN RESIDENTIAL WILDFIRE MITIGATION