Georgia Magazine - November 2024 - 30

COOPERATIVE Concerns
By David Gattie
Preserving Georgia's
competitive advantage
E
lectricity was delivered to rural America because America
understood that electricity shouldn't be treated as just
another market commodity constrained by forces of
economics such as scarcity and supply shortages. Rather,
America installed electricity as a necessity of modern society,
firmly committed to the prospect that an America powered by a
reliable grid would be more prosperous, more competitive and
more secure.
However, in the early years of the U.S. electric utility
industry, retail market competition revealed unique challenges
in delivering a just-in-time product for which supply must
match demand instantly with no overproduction or undersupply.
As individual providers built power plants and
distribution systems to connect plants to consumers, the
redundancy of electrical wires presented safety issues and
exposed an inherent inefficiency. While utilities competed in a
fixed market, power plant size was constrained, and utilities
were unable to achieve scales of efficiency to distribute
electricity at lower rates. No utility was responsible for overall
system reliability because the priority was competition for
market share. This competitive, unregulated market was
inefficient, unsafe and incapable of ensuring reliability; and it
didn't align with America's vision of electricity as a necessity
and an economic and national security asset.
A novel approach would be required to distribute
electricity efficiently, safely and affordably to every American
with no supply shortages.
The solution was to integrate power generation, transmission
and distribution assets under a single utility, or group of
related utilities, and provide them with a guaranteed market.
This vertically integrated structure was established to achieve
scales of efficiency. The tradeoff for being granted a guaranteed
market was that the utility's retail rates would be regulated by a
governing body, not market forces alone, and the utility would
be held accountable for reliability.
Since the Georgia General Assembly adopted the Georgia
Territorial Electric Service Act in 1973, Georgia has remained
committed to the fundamental principle that electricity is a
necessity, not a commodity, and to the vertically integrated,
regulated structure. It has improved upon it with long-term
integrated resource planning, allowing the state to look ahead
20-30 years and ensure energy resource diversity and grid
reliability.
Georgia is the only state in the country offsetting a reduction
in baseload coal with natural gas, nuclear and renewables
while keeping rates below the national average, reducing carbon
emissions and maintaining grid reliability. In contrast, states
that have deregulated their electricity markets have residential
rates that are higher than the national average and far more
30 Georgia Magazine Novmeber 2024
On Sept. 13, 2024, Gov. Brian Kemp announced that Georgia has been
named the No. 1 state for business for the 11th consecutive year by
Area Development magazine.
volatile. Reliability has become a casualty in deregulated states
such as California and Texas and in the northeastern U.S.
Georgia is in a unique position at a pivotal moment for
U.S. energy policy.
For the first time in more than 20 years, the U.S is experiencing
increased demand for electricity, largely because of the
reshoring of industrial manufacturing and the proliferation of
data centers. This comes at a time when the U.S. is debating a
proposal to transition away from fossil fuels to a greater
dependency on renewables. This upward pressure on demand,
downward pressure on reliable fossil fuels and political pressure
to rely on weather-dependent renewable resources represent
uncharted territory for America. If these competing pressures
continue, it will create a perfect storm for electric power sectors
nationwide.
However, Georgia has a legacy of pragmatic energy policy.
State legislators, the Public Service Commission and memberelected
boards of directors for electric cooperatives all clearly
understand that diversity of energy resources is imperative for
grid reliability. The state's electric power providers-Georgia
Power, electric cooperatives (together with Oglethorpe Power
and Georgia Transmission) and municipal utilities (via the
Municipal Electric Authority of Georgia, known as MEAG)-prioritize
reliability and are committed to long-term integrated
resource planning. This approach has led to Georgia's current
diverse energy portfolio of coal, natural gas, nuclear, hydro, solar
and biomass. While these electricity providers may compete for
large commercial and industrial customers, when it comes to
reliability, they're all on Team Georgia.
This legacy is Georgia's competitive advantage, and it's
anchored to Georgia's vertically integrated, regulated market
structure. And it will be Georgia's most valuable asset for
managing the state's power sector in that uncharted territory
should that perfect storm arrive.
David Gattie is an associate professor of engineering at the
University of Georgia (UGA) in Athens and a senior fellow with
UGA's Center for International Trade and Security.
Georgia Magazine - November 2024

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