GOP Sweep Impacts Power at State Level

Tuesday’s sweeping Republican electoral triumph likely will see its greatest impact on the power industry at the state level, where governors often appoint state regulators and set state policy on many energy and environmental topics. What happened Tuesday in Pennsylvania and Massachusetts in gubernatorial races illustrates the point.

In Pennsylvania, one of the few highlights for Democrats, Tom Wolf easily defeated the incumbent Republican Tom Corbett for the statehouse. In his campaign literature, Wolf said that under his leadership “Pennsylvania will join the Regional Greenhouse Gas Initiative. He will work with the initiative and other states to set emission caps that are fair to Pennsylvania. Tom will use a portion of the revenue generated from the sale of permits to invest in renewable energy technology.”

In Massachusetts, where Republican Charlie Baker narrowly defeated Democrat Martha Coakley for governor, news accounts suggest that Baker will pull Massachusetts out of RGGI. When New Jersey first elected Republican Chris Christie as governor in 2010, he pulled the state out of the regional carbon market.

Looking at governors’ races prior to the election, UBS Securities analyst Julien Dumoulin-Smith flagged Florida, Wisconsin, Kansas, Michigan, and Massachusetts as close contests with implications for utilities. Republicans won all of those states, reelecting incumbents Rick Scott (Fla.), Scott Walker (Wisc.), Sam Brownbeck (Kan.), Rick Snyder (Mich.), Baker in Massachusetts. That means that changes in state policies regarding utility and environmental regulation are unlikely to change very much in the next several years.

In Michigan, for example, Dumoulin-Smith said that “no matter who wins, we still expect a higher renewable standards and new rate design that favors large industrial and commercial customers. The legislature is expected to take up a new energy package next year that could also eliminate retail shopping altogether and lower industrial rates further in support of economic growth.” The state is moving toward increasing its RPS from 10% to 15% or higher next year.

Reelection of Wisconsin’s Walker means that privatization efforts “will go ahead,” according to Dumoulin-Smith. Walker has been pursuing selling state-owned cogeneration projects such as the 150-MW power plant at the University of Wisconsin, built in 2005 for $190 million. Madison Gas and Electric already owns half of the plant and runs it. Other sales could involve cogen plants at other educational institutions and prisons.

Dumoulin-Smith also predicted that reelection of Democratic Gov. Andrew Cuomo could be good news for ConEd, “with the administration poised to execute and announce on a potential raft of energy policy changes under the new term.” Cuomo was easily reelected. One of the high profile energy topics in New York for several years has been the fate of the Indian Point nuclear station. The Cuomo administration has been pondering the impact of closure on electric rates. Said Dumoulin-Smith, “It’s not clear the state will return to the subject of the Indian Point contingency planning, seeing the governor’s office as particularly sensitive to raising customers’ bills further in the Lower Hudson Valley zone….”