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Energy Gang
How US utilities are adapting to a high-growth world for power demand. The head of America's largest electricity industry group explains the critical role played by regulators
00:48:12
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- [00:00]
A
Look, I think that PJM is going to be really the poster child example of a broken market and the customers that are in PJM are the ones suffering.
- [00:12]
B
It's easy to go to the White House and agree a statement and say we want reliability at a low cost. Actually making that happen and implementing that in detail, that's much harder.
- [00:24]
A
Our members represent about 5% of the economy, but it's the first 5% and if that first 5% isn't delivering the power, the economy doesn't work. At the end of the day, we still need more generation and we're not going to be able to tech our way out of more generation.
- [00:48]
B
Electricity use is on the rise across the country and America's electric companies are rising to the challenge. Governed by clear standards, accountable to their communities and committed to their customers, America's electric companies continue to meet the energy demands of today while strengthening the grid for the needs of tomorrow so we can all stay safe, comfortable and connected day in and day out. America's electric companies powering the energy of every day. Learn more@energyofeveryday.com this message is sponsored by the Edison Electric Institute. Hello and welcome to the Energy Gang, a discussion show from Wood Mackenzie about the fast changing world of energy. I'm ID Crooks and on this special show we're going to be talking about the US Power industry, the challenges it faces and some of the possible solutions. And to do that, I'm joined by Drew Maloney, who is the president and chief executive of the industry group the Edison Electric Institute, the EEI as it's generally known. Hello, Drew. Welcome to the show.
- [01:49]
A
Ed, it's great to be with you today.
- [01:51]
B
Yeah, thanks very much for joining us. So, as I said, we're going to be talking on this show about the big challenges and and questions facing the US Power industry today. Before we do that though, we always like to, when we have somebody new on the show, talk to them about their careers in energy, how they first got interested in energy, how they got to the roles they now hold. So could you tell us a bit about your story? What got you into energy and how did you get to that job you now have at the eei?
- [02:18]
A
Yeah, well, thanks Ed, again for having me on today. You know, my career in energy started when I was a young staffer on Capitol Hill. My first job and as as many people know, on Capitol Hill, you sort of divvy out the issue sets in an office. I was a 26 year old kid and one of the issues I was assigned was Energy and electricity. And I was working for a Mississippi congressman at the time, now Senator Roger Wicker. And during that time, I remember part of our territory, we had Entergy and Southern company and they would come in and brief us on all the energy policy. And I sort of just got hooked as a 26 year old on energy policy. Then I moved into multi client work after I left Capitol Hill. Did a lot of work with power companies, oil and gas companies. Then I went to work for one of my clients. This is probably where I first met you, Ed. I worked for Hess Oil and worked on the crude export ban. I have always really been interested in energy. Had a little sabbatical from energy when I went to the Treasury Department and worked with private equity which as we all know today, private equity is doing a lot of investment in energy and energy infrastructure. And then I came to EEI and it's really the dream job for me because it's such an important industry at such a critical time. So it's very exciting for me to be at EI and it's great to be on with you today.
- [03:46]
B
Yeah, that really resonates with me, that story about you getting hooked, as you say, quite early on in your career. Very similar thing happened to me sort of mid career for me. I hadn't been educated or experienced in energy at all before starting to, I started doing, was covering it as a journalist at the Financial Times and that just, it was sort of, I can still remember very vividly the sense of a whole world opening up to me and kind of my mind being expanded by that. Just discovering about it for the first time and seeing as it just what a critical industry it is and just how it, you know, it touches everything in our lives. And so, you know, it's so important, so many different angles to it in terms of, you know, the political, the economic, the scientific, the commercial, all these different factors that play. It's just a fascinating industry to be part of, isn't it?
- [04:37]
A
It's an amazing industry. And you know, at EEI we provide power for 250 million Americans. You know, we're the organization that provides research and advocacy in front of state and federal policymakers. Talk about, you know, what, what does the industry need? How do we, how do we provide that reliable, affordable power? And you know, that's what makes this place unique is, you know, we have members in all 50 states, we have a CEO board, lots of engagement here. In a month from now we're going to have EEI 2026 in Las Vegas, which is Our annual meeting, we have Ruth Porat from Google coming, we have the head of Siemens, we have all of our executive teams will be out there for probably the largest concentration of electricity experts, thought leaders and people that contribute to the environment of our system all in one place. So very excited about that.
- [05:39]
B
Right? Absolutely. Yeah. As you say, very interesting. Ruth Pert there, senior executive of Google, going to be speaking at your event. Obviously there are reasons why that is in that particular connection between big tech and the power industry is very critical at the moment. Get onto that in just a moment. Just before I do though, just to that point, that about your membership. So I mean, I think of the EEI as representing investor owned utilities. It's kind of private sector utilities, is that right? Is that exclusive, your membership base? Do you have other members as well?
- [06:06]
A
No, that's exclusively our member base, the investor owned utility.
- [06:09]
B
Got it. And as you say, so 250 million Americans. I can't quite do the mental arithmetic, but that's what sort of 70% of the country.
- [06:18]
A
Yeah, it's over 70% of all Americans get their power from our members.
- [06:23]
B
Fascinating. Exciting industry to be part of. It seems particularly exciting at the moment. I'm always wary about using the word unprecedented. Often things that are described as unprecedented aren't really. There are historic parallels for many things that happen today. But that said, I think it is very fair to say that the demand growth we're seeing in power right now in the United States is certainly unprecedented in our professional lifetimes. In the careers that we've had so far in energy, we haven't seen anything like this. And it's obviously being driven by advances in AI and the excitement over the potential for that, which if you believe the people in the industry who tell you these things will say that is a genuinely unprecedented event in human history. Right. The advances in AI are absolutely dependent on the power system. So that gives the power industry today a uniquely critical importance, I think, in the future of the economy, arguably for national security in terms of technological progress in general. So what does that mean for you when you think about this at the eei, when the US power industry, as you say you're the largest body representing that industry, thinks about that challenge of rising demand. What does it mean to you?
- [07:52]
A
Look, I think if you look back as we're all celebrating America's 250 years, we look back at what were the transformational infrastructure investments over that time period. And you had the interstate highway system, you had railroads and you had the electricity grid. So almost 150 years ago, you had Thomas Edison that created the first power station in lower Manhattan to power Wall street, to power the economy in New York.
- [08:20]
B
I have. Sorry, I've just got to jump in here because I actually made a pilgrimage to that site. Have you been to see it?
- [08:26]
A
I have not been to Pearl street yet.
- [08:27]
B
I have to tell you, it's very disappointing. It's a little parking lot with some garbage strewn across it. It made me think somebody ought to kind of put up a plaque or something, at least, because, as you say, it's a historic site.
- [08:39]
A
It is an historic site, but I think what it demonstrates that at that time, almost 150 years ago to where we are today, we've had to, as an industry, invest and develop in what the most critical engine in America is, which is the electricity grid. 250 million Americans, plus almost every American, depends upon the power in their homes every day. And if you think about what's happened even over the last 20, 20 years, inside of an average home, there are 75 connections to electricity in the home and 21 devices. So if you think of, you know, multiple iPhones, iPads, computers, televisions, et cetera, that number has doubled in the last 20 years, and we've been able to meet that demand. And I think you're right. Over the past, let's say, our working lifetimes, it's been flat growth, and in the last two years, we've seen that double, and it will probably continue to grow. That's why you're seeing throughout the country these innovative solutions to try to figure out how do we make the grid work better, how do we make the grid more efficient? But at the end of the day, we need more generation and more steel in the ground. And that's really what most of our members have been focused on lately, right?
- [10:05]
B
Absolutely. Yes. I think that's very important. We want to come on to talking about some of those solutions and some of those questions about how you get more steel in the ground, as you say in just a moment. Before we do, though, I want to talk about a big issue that a lot of people generally are concerned about, a lot of politicians are increasingly concerned about, which is the question of what this demand growth means for electricity prices. I guess probably you'd say that in the past couple of months or so, gasoline prices have jumped right back up the political agenda again, and they're probably now people's main concern about the cost of energy. But until then, until February, it was definitely rising electricity bills that were dominating a lot of the Political debate. I know for a fact, for instance, it was a very big issue at the White House. It was being discussed a lot there, and a lot of people were sort of drawing this connection and saying, well, look, this is why electricity bills are going up. It's because of all these new data centers that people want to build. And when you see opposition to data centers, which is strong and I think growing across the United States, it's very often the case that, oh, if we build these data centers, they'll push up our electricity bills. That's one of the main concerns that people have. As it turns out, though, that perception is not entirely rooted in reality. I mean, I think it's a complex picture. There's a lot of nuances to it. But let's just start with the basics. Perhaps. How do you see the evolution of electricity bills and how do you explain what's been happening in recent years?
- [11:40]
A
Well, Ed, look, you're exactly right. I think there are feelings among the American households of a lot of different expenses going up. And when we look at the data out there, it's clear. Food and grocery prices generally lead that list. We're starting to see gasoline prices as a contributor. Health care is another big one. Housing costs in some areas, electricity bills. But I think, as you well know, it's important to note that electricity prices really vary by region and by state. We recently did a study that looked at all 50 states and what the electricity prices are and found that about 34 states have been able to keep their rates below inflation over the last five years. Now, we are always focused on figuring out how do we provide that reliable, affordable energy. Because as we started, our members represent about 5% of the economy, but it's the first 5%. And if that first 5% isn't delivering the power to customer, to businesses, to data centers, to any other type of business out there, the economy doesn't work. So we're laser focused on this going forward.
- [12:57]
B
Right. And so in terms of, as you say, the impact on bills, then. So we'll be saying there was 30. You say 34, 35 states.
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A
Right.
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B
Where bills have not risen in real terms. Again, no. Or bills have not risen. What, at all? Or haven't risen in real terms?
- [13:14]
A
No, they haven't risen above the. The rate of inflation.
- [13:16]
B
Yeah, okay, gotcha. Yeah.
- [13:18]
A
Right.
- [13:18]
B
And I think, I mean, in fact, as I say, if you look at the picture nationally, the national average, there has been some growth in real terms since 2022. There's a little bump up in 2022, maybe a little bump recently, but actually in real terms, power prices in the US have been pretty flat. They actually fell quite significantly during the 2010s and so I think the narrative that says they're kind of roaring out of control ahead of inflation in other sectors, not really backed up by the evidence, I suppose. As you say though, if you have 35 states doing well holding bills down, that still means there are some states where they are rising in real terms. And I guess probably those places where you're seeing stronger growth in bills, they're the places that will hit the headlines and raise concerns. Do you have a sense of kind of what's working and what isn't in holding bills down? What distinguishes the states that have managed to hold their prices down from the ones where prices are rising?
- [14:24]
A
If you really look at the map across the US and look at where you've seen the price increases over the last couple years, it's largely been in the deregulated markets. So California, pjm, New York, New England area and where in the vertically integrated markets you don't see as much of that price increase. And I think up until that time it was all pretty level. But in a high growth market, I believe that what we're seeing is in the vertically integrated places they can work more closely with their state regulators and put together a multi year plan to figure out what's the generation they need to build, what's the transmission and what's the distribution that they need. You don't have that. And I know there's a lot of focus in the Mid Atlantic on PJM that's totally dependent on capacity markets. The capacity prices have been higher and higher, so customers are having to pay more and more. But our members aren't allowed to build any generation. So we're waiting on the market to determine whether they're going to invest in a new power plant. All the while customers are paying the bill.
- [15:41]
B
Yeah, that's really interesting. I think it is very important to try and think about what are some of the reasons why prices are rising and some of the reasons why they aren't. And I'm sure you're familiar with the Lawrence Berkeley National Laboratory study from October of last year. If anyone hasn't read that and is interested in this subject, I would encourage you to go and take a look at that. It's free to read on the Internet and it's just got a really good kind of breakdown of the factors that could be responsible for increasing electricity bills and whether they are or are not responsible and one of the things, for instance, it knocks out pretty clearly is demand growth. It says that actually, at least in the data that they've got, which go up to 2024, it's not really the case that if demand grows a lot, electricity prices go up a lot. They also note that having a high proportion of renewable energy on the grid doesn't necessarily get associated with increasing electricity bills, although they do say that a mandate to use more electricity does seem to be associated with higher bills as sort of a lot of nuances there. Anyway, as I say, it's well worth going to look at the whole report. But Drew, then, to pick up the point you're making then, so you think that what regulatory structures are playing a significant role in determining whether prices rise or don't?
- [17:06]
A
Exactly. Ed, if you look at even the LBL study, you look at the Charles river study and look at the drivers in the areas where you've had large increases, increases in rates, California, you have wildfire mitigation costs, right? And that's probably a third of the bill. Now in California, where you have to bury the lines, do other wildfire mitigation. In New England and PJM area, you have capacity markets. There's just not enough generation and they need more generation. And as you have more growth, it's driving the prices because nobody's building that generation right now. And so you really do have to look at this at a state by state level because it's the state PUCs that are also making policies inside those states that are causing the rates to go one way or the other.
- [17:59]
B
Right. And just as a footnote, I think that's something which is often difficult for people outside the United States to grasp fully. And probably even for some Americans, it's difficult to grasp fully just how complicated the picture of electricity regulation is in the United States and how fragmented it is and what a key role the states play. And so, as you say, you do get these very significant differences across the country. So given that, I wonder what is the case for, or is there a case for regulatory reform that if, as you say, some of these competitive markets don't seem to be bringing forward the investment in generation that's going to be needed, does that mean that model needs to change? Do they need to do things differently?
- [18:44]
A
Look, I think that PJM is going to be really the poster child example of a broken market. And the customers that are in PJM are the ones suffering because it's a broken market. And whatever the market signals are aren't signaling enough for New generation to get built. I know that if you've listened to the last FERC open meeting, there was a significant level of frustration by the FERC and the chair ferc, Laura Sweatt. The White House, I think has been frustrated. The governors in a bipartisan way have been frustrated. So I think you're going to see over the next six months or so people offering solutions to try to deal with this because it's not fair to the customer and we have to have more generation. And I think ultimately when the states look at how do you attract businesses, how do you keep people in your state? And one of the reasons for that is low cost, reliable energy. And I think that's why you're seeing a lot of these new data centers move to areas of the country and states in the country where the regulatory environment is such a up that they can quickly get approval and get adequate generation that they need with speed.
- [20:02]
B
Yeah, that's really interesting. And that certainly does seem to be borne out by our data at Wood Mackenzie. When we're following data center projects and where they're being built, there's a lot of interest in building new capacity in pjm, a lot of interest in building new capacity in ERCOT in Texas. PJM of course has, includes Pennsylvania, Ohio, West Virginia, so they've got the gas resources of the Marcellus Basin list. That's very important there. And also it includes Virginia, so Northern Virginia Data Center Alley, traditionally that great center for the data center industry. So you can see why. And of course Texas has great appeal because it's somewhere that it's easy to get stuff built, favorable regulatory climate, low tax and so on. So you can see why people want to build their capacity there. But actually if you look at where capacity is going ahead and under construction, a lot of that does seem to be in those regulated markets. So I mean, just, I just want to be clear about this argument and just kind of walk this through then that the argument is that having a regulated market with a sort of a vertical, a vertically integrated utility where you would have one company that would own generation and distribution and sales to customers that could be superior or would be superior. Because what, what is the argument?
- [21:30]
A
Because they can plan the generation, the transmission and the distribution and look at it over a long 20 year period and they can spread the cost over a 20 year period. If you look at some of the recent announcements that I know Ed, you guys have looked at and have been published lately in Georgia, Alabama, Louisiana, Arkansas, even Indiana, Detroit and Michigan had some recent announcements that when These data centers are coming online and doing deals within their states because most of these states have passed these large load tariff agreements that it has a downward pressure effect on the, on the rates because it's like if you're, if you rent a bus for 100, $100 and there's 10 people on the bus, you split that cost evenly. If you add 20 more people on the bus, you're just spreading out the cost. And that's exactly what we're seeing with a lot of these states that are able to do it right and set up these agreements in order to have a long term lowering cost for the customer. I think we're going to look back, Ed, at this time period as a time where we really were able to build even a more robust and more resilient grid for customers across the country because of these new investment dollars coming in.
- [23:00]
B
But you're saying it's just harder to do that in a competitive market.
- [23:04]
A
In high growth times like we're in now, it is harder. If you look at PJM and you look at the states that don't have the ability to build their own generation, they're struggling with higher costs. You can't plan. I was on a call yesterday with one of our utilities who says their state hasn't had an integrated resource plan in 20 years because they've outsourced the generation. So you can't sit down and say, okay, what do we need for growth in our state to make sure that we can achieve affordable, reliable power over the next 20 years.
- [23:43]
B
I'm sure you'll get some pushback against this then. And you'll hear people say, well, competition generally is what works best for consumers. And allowing different players in a market to compete is the way that you will actually long term drive costs down and deliver people the services they need. Is that not quite a compelling argument? I mean, just in general, as I say, consumers benefit from competition, right?
- [24:14]
A
Absolutely. But the problem, it works until it doesn't. And I think when you have a broken market that isn't sending the right signals, then nobody builds. And I think that's the challenge, at least in the PJM market is whatever signals the generators need to get to build new generation, they're not doing. So there's nothing happening except for generators are going to make more money because of the higher capacity costs. And we need a solution to this because the solution of not building anymore does not work. I'll give you an example. PJM and they have this broad stakeholder process over there. Our members represent I guess about 20% of the shareholder category, but we represent almost 90% of all of the infrastructure in PJM. So the other 80% get to dictate sort of what happens on the different market model. So look, this is going to have to change. I think the governors are frustrated. I think FERC is frustrated, I think the White House is frustrated. There has to be some sort of change that will signal to the generators that they can build and get a return on their investment over the next 20 years.
- [25:41]
B
As electricity demand rises across the country, America's electric companies are rising to meet it. Governed by clear standards, accountable to their communities and committed to their customers, they're meeting the energy needs of today while strengthening the grid for tomorrow, all while keeping energy as reliable and as affordable as possible. Because what they deliver is more than just power. It's what keeps us all connected, safe and comfortable, from the lights in our homes to the hospitals, schools and businesses that our communities depend on. That's why they keep showing up every day working safely and responsibly to deliver the energy that we rely on. America's electric companies powering the energy of every day, sponsored by the Edison Electric Institute. Right. And so if you accept that argument, then to that point about the US system being very fragmented and every state being different and so on, what drives change? Does every individual state have to move? And it's potentially quite complicated. So let's take PJM for instance. I think there's 13 states served by PJM. Different states may have different views about how they want that market to develop and what they want the rules to be. Do they all have to be aligned together and agree what the right path forward is? As you say, those 13 states, their governors went to the White House, they agreed that something has to be done about pjm and they absolutely agree that there are problems in terms of kind of getting that balance right, making sure that you ensure reliability while holding costs down. But I expose what you would say is, or what I would say put it this way, is that it's easy to go to the White House and agree a statement and say we want reliability at a low cost. Actually making that happen and implementing that in detail, that's much harder.
- [27:37]
A
There's no doubt about that. If it was easy, it would have been fixed already. It is hard and it's hard because each of the 13 states is. They all have different structures. Like for example in Virginia, Dominion is vertically integrated. They can build their own generation. They announced new power plants that they're building so they can Address the demand going forward where Maryland, BG and E cannot build their own generation. So they're dependent on either importing from Virginia, Pennsylvania or hoping that an IPP will build a new power plant. And so I think we, we're all trying to work together to try to figure out, all right, what solutions can we come up in the interim in order to get more generation online.
- [28:24]
B
Right. And so what about the role of the federal government then? I mean, as I say, we saw federal government, the White House convening that meeting of the 13 governors trying to get agreement in PJM. You will hear members of the White House National Energy Dominance Council talking about how they want to encourage the power industry to move faster. They're trying to reconcile those competing objectives of wanting to get AI developed as quickly as possible because it's an economic priority and a national security priority, while also wanting to make electricity as affordable as possible for American consumers. Is there anything that the federal government can do again to make these things happen again? Seems like quite a big gap between saying it, kind of seeing what needs to be done and actually making it happen.
- [29:16]
A
Well, look, the federal government really started this process one, by bringing in all the governors, talking about the challenges, convening and sort of raising the profile of this issue and asking for solutions. They also are helping by driving with the ratepayer protection program plan and getting the AI data center companies on board with. And they're all very agreeable, they want to pay their own way. And so the federal government has that ability to convene. But as you said, most of the rate based activity and the regulatory activity is at the state level and at the state PUCs. So that is the challenge. And you've got 13 different states, right.
- [30:05]
B
And just for people who might not have heard of it, the ratepayer protection plan, that was an agreement between the White House and about eight or so of the leading tech companies, hyperscalers, AI companies that. Well, it had, I think there were five principles, weren't there? What exactly did it say?
- [30:22]
A
Well, I mean, essentially the bottom line was that they do not want ratepayers to have the burden of new data centers. And as we've talked about earlier, you know, when it's done right, and what we've seen about, I think there's about 22 states now that have these large load tariff agreements that it can have sort of a downward pressure on rates. And you know, one of the premises of their, of their pledge was, you know, you got to bring or buy your own power, so you Know, that's what we're working with these data centers on right now in a lot of these areas, you know, is how do we procure the power that's needed in order to provide them what they're going to need? And can there be flexibility within. And we're seeing a lot of that with the data centers. We're talking about where they have flexibility. If they need to curtail their power in a time of peak demand, they can do that. So, I mean, we're all in this fight together and we're all trying to figure out ways we can the most efficiently get things done while keeping the grid as reliable as we can and keeping rates as affordable as possible, as you say.
- [31:34]
B
So there's been a lot of talk, particularly recently, about data centers providing their own power. Bring your own power is a common slogan you'll hear people use. There seems to be increasingly talk about data centers trying to go off grid because they don't think they can get a grid connection in time. They're moving on these very, very short timescales. They want to be up and running very quickly because the AI industry is moving so fast and nobody wants to be left behind. And so because it seems to be slow to get on the grid, they're talking about having on site generation to actually cover the entirety of their demand. People talk about being power islands. So you're, you're just generating your own laboratory and being completely cut off from the grid. Do you think that's going to end up being the way the industry goes? I mean, how do you and your members feel about that? I mean, it seems like there are some pretty obvious drawbacks to that approach and certainly drawbacks from the consumer's point of view, the point of view of the data centers themselves. And the grid has lots of advantages in terms of creating reliability and holding down costs, making electricity supply more efficient. But what about from the perspective of the power industry? How do you view that?
- [33:00]
A
Well, it's a great question and I would say it's more of a narrative out there than what's happening in reality. And I think the reasons for that are that it's not very economic to be off grid because you have to have a duplicative system in order to really fully power at 100% of the time your power plant. Because let's say one, you've got to build the data center and that takes a whole lot of zoning and working with the community to build that data center. So then you're going to build more than likely a natural gas plant or maybe do some solar farms and backup batteries. So then, then you're spending a lot more capex than what you're doing just on the data center itself and you're losing that reliability. Because what happens when the natural gas plant goes down or it has to go for some sort of maintenance issue and you don't have access to the grid, you don't have enough backup power or you have to build two gas power plants. So I think what we're finding out there is that the majority of majority of the data centers want to be grid connected. Now that doesn't mean that some of them aren't looking at a hybrid approach where they are bringing their own power in this interim step with the idea that that power will be connected to the grid because they know long term they want that grid reliability, they want that smoothed out cost. They don't want to be totally dependent on one source of power, they want it blended throughout the system. I think that's ultimately where we're going to go. The other thing that I would say that I think most people goes under reported is when you go off grid, you're taking away power, you're taking away a labor force, you're taking away that connection from the grid that benefits all customers out there. And I think we don't want to do that ultimately we want to make sure that interstate highway system of the electrical grid is as powerful and resilient and as reliable as possible. And that's why it's best to have sort of everybody interconnected to that and have the investment all going to that.
- [35:15]
B
Yeah, I think that makes a lot of sense. As you say, I've heard the grid described as humanity's greatest invention, which may be slightly overstating it, but still, as you say, it is an amazing thing. It is extremely complex and very difficult to make it run and a lot of work goes into it. But as you say, it also has these enormous advantages in terms of efficiency and reliability. And if you start trying to go off grid, you very quickly I think get, get a deeper appreciation of what those advantages of the grid are. So I wanted to go back to something else again about the question on federal authorities and the role they can play. So what about ferc? Federal Energy Regulatory Commission. So that's got a new chair. Laura Sweat, you mentioned earlier, and there are calls from the administration for FERC to play a stronger role in getting larger loads connected to the grid. And there's this new policy, new rule they've been working on where FERC would kind of directly regulate getting large loads connected to the transmission grid. That seems like it might be part of a broader push from the administration to get FERC to do more, to kind of expedite connections of large loads, generally help the system become more efficient. Laura Sweat was speaking the other day. She gave a speech, I think, at a conference where she talked about going up to the very edge of precedent in terms of doing what she thought was right in order to make the system work better. So potentially a pointer there to some sort of innovation from her and creativity in terms of the policy solutions that FERC might be looking for. What are your expectations for that? How do you expect FERC parser will play out and what's your view on this as a plan to have FERC take responsibility for connecting large loads to the transmission grid?
- [37:23]
A
Well, as you know, I mean, FERC has a very delicate balance act because, you know, much of this is regulated at the state level. So they have to figure out, you know, how, how far. And I think that's exactly what Chair Sweat is trying to do, is figure out what, what can they do to be helpful to the markets that they need to be helpful with. I would say if you listen to what she said and some of the other commissioners, they seem to be very focused on markets that are not working. They will readily say that a lot of the things are already working in certain areas of the country. Right now we're seeing large loads get, get connected. We're seeing 22 states with large load tariffs. So I think there's no one size fits all. And I think she said that. The other commissioners have said that as well. So I think what you're going to see out of FERC is a focus on certain areas of the country that aren't moving as fast or that have more complicated market rules. And they'll try to figure out what can they do in that space in order to get those rules that FERC can do in a better place. And I think again, probably it's going to come back to BJM and maybe a little bit of New England is the focus.
- [38:41]
B
Right. So what kind of powers and authorities then does FERC have to intervene in a market like that?
- [38:47]
A
Well, look, I think that's something that Chair Sweat's trying to review and we'll have to wait to see. Largely they have authority over the RTOs and over interstate transmission. And I think she's going to seek out what other types of information and look at these markets to figure out what more can they do in this space. I think it remains to be seen, but I fully expect in June at their next large open meeting that they will have some announcements and I think they forecasted that some announcements to sort of look at, see what they need to do in these markets that are broken.
- [39:26]
B
Oh, that's a very interesting. That's definitely going to be something to watch then. Another question about federal policy we always have to ask about is permitting reform does seem to be now potentially rumbling around in Congress, possibly some new momentum there. Talk about bipartisan agreement being forged on permitting reform that would help investment in energy infrastructure of all kinds. Do you have a sense of that? I mean, how do you read what's going on in Congress? Would you be hopeful of some kind of legislation passing?
- [40:02]
A
Well, I'm very hopeful. If you look at the challenges that we have right now in the United States, it can take us more than a decade to site a transmission and get a transmission line built, to get generation built, where if you look at, on a global competitive basis, it can take China one to two years. And the cost, with the delay of taking nearly a decade to build this is up to 25% of a cost increase on these projects, which is all borne by the consumers. And I think for America to continue to be leading in competitiveness and try to attract businesses, attract data centers, keep our rates reliable and affordable, we are going to have to do a better job on siting and permitting. You know, I've been doing this a long time, Ed. I think about 30 years. And I've never seen a collective effort from outside groups as focused as they are on trying to get permitting reform done. Right now, Now I don't, I don't know if that means it'll get done or not. I'm optimistic. I know we're sort of running out of legislative days. I'm hoping that they can get something done by the summer. But even if they can't, I'm hopeful that maybe in lame duck they'll get something done. We just met yesterday and did our own little competing podcast with Chairman Westerman of Natural Resources and Congressman Peters, who've worked together on permitting, and they have worked very closely and believe that this is the time to do it. So, so I think there's general agreement and we're all very hopeful it can get done.
- [41:42]
B
Right. And to your point, then, about, as you say, outside groups being supportive, there is this very, very broad industry and business coalition. Right. So you have, I mean yourselves, you have, the oil industry is supportive of reform. The renewables industry is supportive of reform. I guess the nuclear industry hadn't looked, but I'm sure they would be as well and so on. So this, this is kind of, and I guess presumably beyond energy as well, manufacturing, a lot of other sectors as well are also supporting this.
- [42:12]
A
Absolutely, absolutely. It's something that's been talked about for more than a decade and I think there's now a general recognition on a bipartisan basis that we have to do something and now is the time to do it.
- [42:27]
B
Right. And that's very interesting, I guess, particularly in the context of the history of the past 10 years where there has been a lot of political polarization over energy and very strong positions on either side staked out pro and anti fossil fuels, pro and anti renewables and so on. If there can be that broad based agreement. Yeah, that's a very interesting development. Definitely. Very significant development.
- [42:53]
A
Yes, yes. So I think we all need to stay tuned. We are very focused on that. We are talking to people on the Hill every day about this. We're talking to the White House about it. So we are very hopeful something can get done and then we'll build off of that in the next Congress. But something has to change.
- [43:13]
B
We're almost out of time. We should wrap it up soon. But just thinking about that point about change, I came in saying that the industry is facing its most dramatic period of change for many decades. I think is true. As we've just been talking about, there are a lot of very significant moves happening across the country in different ways in regulation, in technology, in investment, in business. What is your expectation about where this is taking us then? I mean, if you were to jump ahead, let's say 10 years maybe, by which time, who knows, maybe artificial general intelligence will be with us and the entire world will be transformed. But certainly the world will be different in a lot of ways. What do you think the US power industry will look like 10 years from now? Or put it another way, how would you like it to be different? What do you think are the goals that people should be aiming for as they're making decisions today?
- [44:19]
A
Look, I think you go back to where we started. This conversation is when the industry all started nearly 150 years ago and to what it is today. We are constantly evolving as an industry to meet the demands of what's happening in our environment. Right now we have this high growth driven by a combination of data centers of more electrification out there, reshoring of manufacturing and just devices like there's more electricity that needs to be provided at the home. So we're meeting that demand, we're going to meet that need just like we have for the last 150 years. I think you're going to continue to see a level of innovation and a level of technology that we're applying to our systems that are going to make them operate even more efficiently and more reliably over the next decade. And I think when we look back at this inflection point that we're at now, we're going to say to ourselves, this was the time that we built even a more robust and resilient grid that is going to meet the demands for the future. And I think this investment over the long term will help keep that energy rate lower over the long term. I mean, if you look at like Energy Wallet, Ed, Energy Wallet's at like 1.3 cents right now of what people spend on electricity. It feels like it's more because a lot of other costs are going up. But our goal is to keep that as low as possible. But as a reminder that, like when you go home and you flip your light switch on, you turn your air conditioning on or your heat on, or you plug in your phone, you expect that to work. And it does. And I think that's our commitment is to keep doing that and use the technologies and use the innovations to deliver that to people affordably and reliably.
- [46:16]
B
Right. And I mean, for instance, just as an example of the technologies, we've been talking a lot about the challenges created by AI because of its power demand. There's a lot of opportunities that can be unlocked by using AI on the grid on systems. Right. Within the electricity industry.
- [46:36]
A
Absolutely. And we're already seeing usage of that, of looking at different demand, like growth. And certain parts of the day need certain amount of electricity, sometimes they don't. And you can study all that, use AI and all these things are being used now, these grid enhancing technologies, all this is developing and innovating our system. But I will say, at the end of the day, we still need more generation and we're not going to be able to tech our way out of more generation.
- [47:13]
B
Right, That's a great point as well. As you say, it's not an instead of, it's an and what is it? It's not a no, it's a yes. And yeah, that's a great point. Yeah, absolutely. So unfortunately though, we do have to leave it there. But it's been fantastic talking to you, Mary. Thanks, Drew.
- [47:32]
A
Ed, great seeing you again. Thank you for having me on.
- [47:35]
B
Absolutely. I hope you'll come back in 10 years and we can look and see what was achieved, possibly even sooner than that.
- [47:41]
A
Sounds great. Happy to do it.
- [47:43]
B
Thanks very much to our producers, Stuart Duffy and Molly Merwin. And above all, as ever, many thanks to all of you for listening. We really value your feedback. Please do keep that coming and we'll be back very soon with all the latest news and views on the future of energy. Until then, goodbye.