The availability of reliable, affordable electricity is an often taken-for-granted aspect of modern life. We expect our lights to turn on when we flip a switch. But what happens in the millisecond between when the switch gets flipped and the lights come on is something few ever think about: the source fuel, the engineering behind the generation plants, the transmission and storage of energy, the wiring of buildings. Yet, local governments cannot afford to wear the blinders many of us do; they play a key role in the delivery services that modern society requires – including those services they don’t deliver themselves.
Even though the vast majority of electricity in the United States is generated by private companies, the service is one that residents expect regardless of the source, and like local governments, private energy utilities increasingly rely on open dialog with their customers to carry out their business. The customer-base; however, is complicated. There is the individual customer who consumes this electricity, there are the businesses that require specialized adaptations, but there is also, at a higher level, the municipalities who represent the community and provide the customer base through contracts with the private utilities.
Arizona Public Service (APS), the largest electric utility and highest taxpayer in Arizona, recognized the complicated nature of their business, navigating the concerns and needs of the customers, both individuals and local governments. To help steer this complex relationship, in 1990 APS hired a former local government administrator, Evelyn Casuga, to work in their Economic Development Department. Today, she serves as the General Manager, Customer Service for APS. Having worked as an administrator in local government ( three towns in CA and AZ) as well as with a regional economic development organization in Arizona, Evelyn was able to provide us unique insight into the operations of investor-owned utilities and the impact they have on local governments and their constituents. Our conversation focused on a few major areas, including APS’ current energy sources, alternative technologies, what energy efficiency means to them, and a unique perspective on the relationship private utilities have with local governments. Below, we have summarized the major themes of our discussion with Evelyn and present them to you in an interview format:
Energy Sources: As consumers we don’t generally think about where our electricity is coming from, so can you talk a little bit about power generation from APS’ perspective?
Different technologies are used to generate electricity, each with its own set of benefits and challenges. A generation portfolio that allows customers to receive reliable, affordable electricity with minimal impact to the environment requires taking into account the different tradeoffs of each technology.
In the past, APS’ generation portfolio was divided into thirds: one-third nuclear, one-third coal and one-third natural gas. The Palo Verde Nuclear Generating Station, which we operate and co-own with several other utilities, is located 50 miles west of Phoenix. Our coal generation comes from power plants in northern Arizona and western New Mexico. Our natural gas production is scattered throughout Arizona. Today, renewable energy and energy efficiency play an increased role in meeting the energy needs of customers. By 2025 APS will have 15 percent of the energy going to customers coming from renewable energy sources. Let me going into a little detail about some of the different sources of energy APS provides to customers.
Nuclear is a reliable, clean and cheap source of electricity for our customers. APS operates and owns (with several other utilities) the Palo Verde Nuclear Generating Station. Because we expensed the capital cost at front end to build Palo Verde the cost to customers for the energy that is produced at Palo Verde is low. While nuclear requires significant amounts of water, APS worked with local municipalities to acquire waste water for the plant. Challenges for current nuclear plants in the ongoing conversation about spent fuel. Where do you store it and for how long?
Coal is abundant, and like nuclear, it provides customers with cheap and reliable electricity. Once a plant is up and going, they’re fairly inexpensive to run. Burning coal does create air quality concerns. APS is working closely with all of the monitoring agencies (federal or local) to address these concerns. APS owns several coal plants, one in northern Arizona and one in northwestern New Mexico.
Today, natural gas is inexpensive and is relatively clean. Gas plants can be built closer to customers, helping to reduce the cost of transporting the electricity. They also are much cheaper to build than a coal or nuclear plant, and require less lead time to construct. But there’s the volatility of prices and a growing concern regarding the impacts of drilling. APS owns multiple natural gas power plants located across Arizona.
Wind and solar are clean sources of energy and do not require the purchasing of fuel. Because of the inconsistency of these resources, they cannot be depended on to provide electricity when customers need it. This translates into APS procuring additional backup generation from natural gas plants.
Solar thermal, which uses the sun’s heat to create electricity, has technology available today to help overcome this challenge. By storing the heat in molten salt, electricity can be generated when needed, not just when the sun is out. The other type of solar, photovoltaics, uses light from the sun to create electricity. While batteries could store the power created from this type of solar, the cost makes it prohibitive. Photovoltaic panels are what you see on houses across the valley. APS uses both types of solar to provide energy to customers.
How is APS embracing and leveraging the notion of Energy Efficiency and onsite renewables. Some people say that soon we will have photovoltaic windows, that someday soon customers will be able to generate their own energy. What is your response to that?
As I stated, renewable energy, energy efficiency will continue to play an important role is helping APS meet customer’s future energy needs. I should also add, it looks like more natural gas is probably in our future as well.
Energy efficiency, today, is the cheapest source of energy we can provide to customers. After all, the cheapest power plant is the one we don’t have to build. On site renewable, also called distributed energy, can help individual customers reduce their monthly energy bill. APS continues to support both.
As I said, our mission is to keep the lights on. We have to plan for that from a financial as well as a construction and planning perspective. As a company we plan and prepare for a 3 percent growth rate in customer energy needs. Energy efficiency and distributed energy have some important challenges for its inclusion in our long-term planning horizon. Both require some sort of customer participation.
We are not going to impose anything on you. Changing light bulbs (fluorescent or LED), installing a better thermostat, or in taking advantage of federal, state and APS credits, are ways consumers can stay efficient, but they have to take the action. The same with adding distributed energy.
For both we are very supportive of the possibilities. But at the same time, we have to have the power available when customers need it.
Working in both small local governments and a large multi state utility, what is the difference in the cultures between the two?
The nature of my job is still working in the space I am comfortable with. I continue the networks with local government and the people I professionally “grew up with” in the public sector. The relationship between APS and our Local Governments are pretty much tied at the hip. Whether a city is trying to deliver water, wastewater, or electricity, there isn’t much of a difference – we are all essential utilities. There’s still the same customers, the same citizens, the same body of people. Now the transition going from a local government to a private sector entity was a change, to say the least. In local government – especially as the town manager – you are recognized, you are up close and personal with the policy makers, you are a part of the public process. Although at APS we have a publically elected regulatory body, what I do with the company is within a larger bureaucracy. The upside is it afforded me more flexibility in what kinds of things I could choose to do…as a team we could choose the kind of activities we wanted to engage in and thought most effective.
From the municipal perspective, local governments need to be in tune with what is going on with power utilities. APS has franchise agreements with most of our municipalities where we operate, which is a formal agreement for use of municipal rights-of-way. These franchise agreements are typically 25 years. We enter into conversation with city staff and ultimately the City Council, who approves the opportunity for the citizens to vote on the franchise. While I no longer work in local government, I still feel a strong connection to the community. As I said, APS may not be a public entity, but the service we provide is decidedly public.
The generation of electricity never takes a day off. Electric utilities must generate, transmit and deliver their product simultaneously and continuously. In that respect, they are constantly connected to every citizen, every local government. Much like public safety, utilities are a round the clock operation. Whether it is a private or public utility, the entire process is impacted and affected by the end user. Evelyn’s unique experience as a local government practitioner and now employee of APS provide her an opportunity to participate in the multiple levels of those relationships, successfully advocating for APS and the community at-large. §