waste-to-energy: Electric Deregulation May Shock the WTE Industry

Marc J. Rogoff

The era of regulated electric utility monopolies clearly is coming to an end. This deregulation will change the way electric utilities generate, distribute and sell electricity and will increase the choices consumers have to purchase their electricity.

In reality, the electric power industry isn't just being deregulated - it is undergoing a major revolution. Significant changes affecting wholesale power transactions already are in effect. The major changes, however, will be coming this year and into the early part of the 21st century.

Electric deregulation has become a hot topic in state houses. Last year, legislation was introduced in 23 states with study commissions established in another nine states. Several states already have pilot programs.

In this light, the owners and operators of waste-to-energy (WTE) facilities are faced with both challenges and opportunities. WTE facilities can capitalize on the restructuring by selling power beyond their boundaries. Soon, municipally-owned facilities may be able to serve their communities or other retail customers using market-based rates and self-service wheeling.

On the other hand, existing WTE plants may have been financed with expectation of electric sales and capacity payments well above future market-based rates. These subsidized rates essentially have been buried within the overall structure of the utility's regulated rates. With deregulation, such subsidized rates may be in jeopardy.

Significant competitive opportunities exist, however, for the WTE industry: * Assess other energy markets: Deregulation will allow WTE facilities to use their electricity internally within a local government through self-service wheeling. Most owners and/or operators have not considered this option or were prohibited by state regs to wheel their power to other community energy users.

For example, it may become feasible to sell electricity generated from a WTE facility to a community's water and wastewater treatment system, airport, administrative complex, municipal lighting district or correctional facility. This would require, however, greater coordination of governmental operations currently not experienced by most communities. In some instances, the cost savings realized may underscore the value of having a WTE plant as part of a community's public works infrastructure.

* Optimize existing system performance: Many electric utilities have informed WTE plants that in the future they may not need the plant's electric production. Consequently, WTE owners and operators will have to find ways to optimize the plant's operation during the utility's peak demand times and scheduling maintenance during periods of low demand.

WTE plant operators will have to find ways to optimize their facilities' performance through additional heat recovery equipment or upgrading controls to maximize system performance. To ensure that they receive their entitled contractual payment levels, facilities should evaluate metering and telemetry equipment.

* Become knowledgeable about your state's energy deregulation debate: Notwithstanding recently-filed Congressional bills, most of the action in energy deregulation, and its impact on the WTE industry, will take place at the state level. The battlegrounds already are drawn in a number of states with several environmental groups over whether WTE is included with other renewable energy generation sources ("Green Power") from which utilities must purchase a minimum percentage of power.

A recent Solid Waste Association of North America (SWANA), Silver Spring, Md., survey suggests that, by and large, the WTE community appears to have little information about the recent Federal Energy Regulatory Commission (FERC) rules and state rulemaking. As a result, states may be making rules without significant input from the WTE industry.

* Work with other WTE facilities: WTE facilities in a region or state could team with one another in bargaining for higher electricity sales and purchase prices. These plants could tie together significant amounts of megawatts and be more attractive to new electric generation purchasers entering the deregulated energy market.

* Find help to pay for MACT plant retrofits: Some state public service commissions are allowing their electric utilities ways to recover stranded costs and eliminate long-term contractual payments to independent power producers using "one time" cash payments. These payments may provide timely financing of capital improvements mandated by the new MACT rules for large WTE facilities.