Q&A with PUC Chair Stephen DeFrank

Now in his second term as chair of the Pennsylvania Public Utility Commission, Stephen DeFrank is setting his sights on the future of energy in the commonwealth. 

As the head of the commission that regulates public utilities in Pennsylvania, DeFrank is focused on modernizing energy and efficiency systems. City & State spoke with DeFrank, who also chairs the National Association of Regulatory Commissioners’ Committee on Gas, about the state’s grid keeping up with rising demand, extreme weather events, cybersecurity threats and more. 

The conversation has been edited for length and clarity.

What’s behind your push for the advancement of natural gas energy efficiency programs for commercial and industrial spaces?

That was something I was interested in because in Pennsylvania, we don’t have a mandatory efficiency and conservation program for natural gas. We’ve had an electric program for a number of years. In fact, we’ve just passed an order implementing our Phase Five. June 1 of next year, we’ll start our Phase Five program in the mandatory electric energy efficiency and conservation program. We have that in Act 129, but we don’t have anything in natural gas. 

The more we tie these two commodities together, the more we have to realize that conservation of electricity also has to go in tandem with conservation of natural gas. My resolution focused on the commercial and industrial sector. Typically, that’s the lowest-hanging fruit and that’s where you get your biggest bang for your buck. That’s where a lot of efficiency is already occurring, because many of these entities are energy-intensive, so it deals with their bottom line. They’re cognizant of conservation efforts because it makes economic sense. 

One of the things you always hear me say is that the cheapest decatherm or the cheapest watt you’re ever going to have is the watt or a decatherm you don’t use. So conservation is key … That’s the way we handle system peaks, whether we’re talking about an electric system or a natural gas system. You can’t build out and meet peaks. It would be very costly to do that. The way you handle peaks is through the on-demand side, and that’s conservation programs.

In our last gas reliability report in Pennsylvania, over 60% of natural gas was used to generate electricity. The peaks and valleys of a 24-hour low curve – that’s what costs are. So the bigger the range from the peak to the valley, the more costs you have. As you flatten that 24-hour demand curve, you eliminate the cost for rate payers.

How are you prioritizing the expansion of solar energy – and will changing federal priorities impact that?

Certainly, federal priorities have changed in that space, but I will say solar and wind have a foothold. Where you’re going to see the recent changes at the federal level come into play are more in newer technologies – batteries are going to take a hit from that; there’s no question about it – they’re not as developed as solar and wind are. 

Look how long it took for us to get to one gigawatt of installed solar capacity in this state. It took years to get to that – and then it took us 17 months to go from one to two gigawatts. And it’s probably going to take less than 17 months to go from two to three. Solar has played a huge role in the management of our grid. If you just look at our grid emergencies, we have more grid emergencies in the wintertime, yet our load is larger in the summertime. Why is that? That’s the gap solar is filling in. Our renewables may not be based on generation, I’m not saying they are. They’re not dispatchable unless they’re attached to a battery, but they still play a vital role in grid management. We always have new weather terms. It’s a heat dome now, which used to be called a heat wave. So when we had that at the end of June, we had our highest load in PJM in 14 years, and we didn’t skip a beat – that’s because there are two gigawatts just in Pennsylvania alone. They are mass-producing energy. 

I always hear folks talk about, “Well, what happens at three o’clock in the morning when the solar panel isn’t generating?” That solar panel is not generating at three o’clock in the morning, but it’s mass-generating at three o’clock in the afternoon when it’s 95 degrees outside in the middle of July, and that’s where those watts are coming into play and filling that gap. I think the changes in the federal law as it relates to renewables, they’re going to impact solar and wind, but I don’t think it’s going to be as large as some may think.

Is there any concern that the termination of federal tax credits for renewable energy projects could impact ongoing projects in the state?

If you look at PJM’s grid and look at the amount of solar generation coming online and scheduled to come online next year, those projects are still moving. They’re still ramping up – but in terms of what that means for individual projects, I think it’s going to be pretty case-specific.

How is PUC preparing for events such as natural disasters and cyberattacks to ensure the safety of the grid? 

One of our core functions is ensuring we deliver power safely and securely at affordable rates. That’s the primary charge of the PUC. We’re seeing more frequent and severe weather events. The No. 1 cause of outages still, each and every year, is trees, trees, trees. When you’re talking about those natural disasters and rebuilding our distribution grid, oftentimes, the culprit is our trees. 

When you talk about emergency preparedness, we’re part of the two primary agencies in Pennsylvania, the Black Sky Steering Committee – it’s us and PEMA. We typically do tabletop exercises and see what happens when everything goes out. We do Black Start exercises where everything goes out. We see: “How do we get the grid back up and running? What comes up first?” As legislators have been talking about extreme weather events, and I’ve been talking to them, microgrids come into play. If you have a microgrid in place attached to separate generation, you’re able to bring key facilities up in the community quicker while you’re dealing with the rest of the outage.

We’re updating our cyber regulations right now. We have a pending rulemaking on that to make sure our regulated utilities are as safe as possible and safe from cyber vulnerabilities. We’ve put out about five or six secretarial letters in the last three to four years advising our utilities about issues in the Middle East – you saw the attack by Iranian cyberterrorists in our water sector. 

We advise all of our water sector, all of our regulated entities that, if you have equipment from certain manufacturers, you’re going to want to watch it. We’re always staying up on that. Our Office of Cybersecurity, Compliance and Oversight was designated as a bureau-level position here; we were one of the first commissions to do that nationally. 

We get thousands of threats a day. You have to be perfect because if one gets through, it could be catastrophic. A .990 batting average doesn’t help. It’s got to be a 1.000 batting average. You got to be perfect. We stress that to our utilities all the time. Obviously, we’re never perfect, but it’s about how we deal with these incidents when they happen and how we isolate the problem and make sure it doesn’t spread. 

Why are water systems more of a target than others?

If you’re a cyberterrorist, you’re obviously going to target water. It’s the only utility that we ingest in our bodies. In Pennsylvania, we’re a restructured state for electricity and for natural gas. Our water companies here are the only utilities we have that still produce something. Everyone else has a delivery system right there. You’re picking your electric supplier and PECO is delivering it to you. You can choose a natural gas supplier, and PECO or PGW is deliver it to you. They’re not securing it and making it. Our water companies still have to manufacture safe drinking water. That’s a sector that’s likely going to be targeted frequently because of that.

What else will PUC be focusing on going forward?

The load growth that we have now going on is AI-driven and data center-driven. I often get asked, “Why are we seeing all this data center proliferation?” And I always tell people, I had to swap out my router earlier this year. If you ever want to know why there are so many data centers, swap out a router, and you’ll quickly find out why. You don’t realize how many things you have connected to that router – you’re constantly accessing everything. 

The decisions we make over the next five to seven years in how we make energy, how we produce it, how we deliver it, and how we use it, is going to impact us for the next 70 years. That’s what’s so exciting about this transition time, because it’s a human transition. It’s not just the transition of an industry or of load growth. We rely on these every day. We rely on these for national security. We understand what can happen when someone else controls information. It’s important that we develop that here in this country, and Pennsylvania stands as the keystone to this, just like Pennsylvania was a keystone during the canal era, during rail expansion, during energy production with oil wells and during steel production. We’ve been an industrial powerhouse for this country for hundreds of years, and I believe that we stand to be in the same position for data centers. 

We have excess electric capacity. We have a ton of fresh water that’s needed to cool these centers. We are expanding our digital infrastructure. Our Broadband Development Authority just announced $1 billion going out to serve unserved and underserved areas. We’re geographically located near a large portion of the country’s population, and we’re also geographically located in the center of the key net access points of New York, Columbus, Ohio and Northern Virginia. Data centers can have resiliency and have multiple connections because of where we’re located. And then finally, we have a very attractive tax structure here in this state. So all those things position Pennsylvania to be the keystone of this industrial revolution, this informational revolution, which is the same as an industrial revolution. It’s just the next step.

They’re multibillion-dollar facilities. And the reality is, they are large users of energy. Don’t get me wrong, I understand that concern. I appreciate it. But the reality is that we’re the generator in PJM, and if that center goes to New Jersey or goes to Maryland, it’s still Pennsylvania power feeding it. So why wouldn’t we want a multibillion-dollar development here in the state?