In this second of two episodes focused on energy affordability, we spoke with Katherine Jereza, an assistant secretary in the U.S. Department of Energy who directs the Office of Electricity, and Joseph Pereira, the director of Colorado's Office of the Utility Consumer Advocate.
This is the second part of a two-part podcast on energy affordability. In our previous episode, we talked with Representative Craig Williams of Pennsylvania and Janine Benner, director of the Oregon Department of Energy.
For this episode, we’re joined by Katherine Jereza, an assistant secretary in the U.S. Department of Energy who directs the Office of Electricity, and Joseph Pereira, the director of Colorado's Office of the Utility Consumer Advocate.
In the worlds of both politics and policy, energy affordability is a hot topic. The U.S. saw largely flat electricity demand from the late ’90s until just a couple of years ago. Increasing demand from both homes and businesses, electrification of cars and trucks, the growth of data centers and other factors have strained the nation's ability to meet demand. Rates have increased and legislators are increasingly concerned that consumers will face more and larger rate increases.
Assistant Secretary Jereza discussed how energy affordability is affected by challenges in both generation and transmission of energy and how data centers offer promise to help run the grid more efficiently. She also discussed resources for states that are trying to keep down energy costs for their residents.
Pereira explained how his office functions as a consumer advocate, how his agency approaches energy affordability, and the concerns he brings to the debate around data centers and how they can affect ratepayers.
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ES: (00:12):
Hello and welcome to Our American States, a podcast from the National Conference of State Legislatures. I'm your host, Ed Smith.
KJ: (00:21):
When we talk about energy affordability at DOE, we're really getting at something pretty down to earth. People should be able to turn on the lights, run the businesses, and live their lives without really worrying that their power bill is going to blow up on them.
ES: (00:41):
That was Katherine Jereza, an assistant secretary in the U.S. Department of Energy who directs the Office of Electricity. She's one of my guests on this podcast, along with Joseph Pereira, the director of Colorado's Office of the Utility Consumer Advocate.
This is the second part of a two-part series on energy affordability. In the worlds of both politics and policy, energy affordability is a hot topic. The U.S. saw largely flat electricity demand from the late ’90s until just a couple of years ago. Increasing demand from both homes and businesses, electrification of cars and trucks, the growth of data centers and other factors have strained the nation's ability to meet demand. Rates have increased and legislators are increasingly concerned that consumers will face more and larger rate increases.
In our previous episode, I talked with Representative Craig Williams of Pennsylvania and Janine Benner, director of the Oregon Department of Energy.
ES: (01:40):
For this episode, I talked with Assistant Secretary Jereza to get the federal perspective. She talked about the challenges in both generation and transmission of energy and how data centers offer promise to help run the grid more efficiently. She also discussed resources for states that are trying to keep down energy costs for their residents.
Pereira explained how his office functions as a consumer advocate, how his agency approaches energy affordability, and the concerns he brings to the debate around data centers and how they can affect rate payers. Here's our discussion starting with Assistant Secretary Hareza.
ES: (02:20):
Assistant Secretary, welcome to the podcast.
KJ: (02:23):
Well, thank you. Very honored to be here.
ES: (02:27):
Well, we certainly appreciate you taking the time to do this. And I wonder to start, maybe you could just tell listeners a little bit about the Office of Electricity in the U.S. Department of Energy and what that does and your role there.
KJ: (02:40):
As the assistant secretary, my role is to lead our work to make sure every home, every business, and every community has power that is affordable, reliable, and secure. Electricity is the quiet thread running through our lives, and OE's job is to protect and strengthen that thread. Our work is really focused on three things, stabilizing the grid where it's under stress, optimizing the system we have today, and growing it to meet the demands of a rapidly changing economy. So that means expanding capacity, modernizing transmission, strengthening reliability, and working closely with states, tribes, regional partners, utilities, and industry. Everything we do comes back to making sure the grid is ready for the moment we are in and the one that's coming.
ES: (03:47):
This podcast and an earlier one we did are focused on energy affordability. And I have learned in talking to a lot of people around the country that different people define energy affordability a little bit differently. I wonder if you could talk a little bit about how DOE defines and also measures energy affordability.
KJ: (04:06):
When we talk about energy affordability at DOE, we're really getting at something pretty down to earth. People should be able to turn on the lights, run the businesses, and live their lives without really worrying that their power bill is going to blow up on them. When we build new transmission lines, upgrade the grid, or bring on something big like a data center interconnection, the goal is always the same. Don't add unnecessary costs for families and businesses. People should benefit from these investments and not pay the price for them.
ES: (04:49):
When I talk to people around the country and ask them about what's driving the cost of energy in their area, what's putting a strain on energy affordability, I get kind of different answers, and I think it is different in different parts of the country. But I wonder what you see as the most significant drivers from your perch on a national perspective. Is it generation mix? Is it investments in transmission and infrastructure, load growth, the data centers you just mentioned, or something else I haven't mentioned?
KJ: (05:22):
Well, you've mentioned a lot and really, it's a mix. It's a mix of changes all happening at the same time. First, demand is growing really fast. We're seeing more manufacturing, more data centers, more electrification. And NERC is projecting summer peaks could jump more than 15% in the next decade. That's huge. And the grid is feeling that pressure. Second, our resource mix is actually degrading reliability. We're not building new firm generation as quickly as the older units that were retiring. We need more energy addition, not subtraction. That mismatch creates stress on the system. And when the system is stressed, costs go up. Third, we've got transmission bottlenecks. We all know what happens when you try to move a lot of power across the system that wasn't designed for this level of demand. Congestion builds, projects get delayed and costs rise. So finally, we're dealing with an aging grid and compounding weather impacts.
KJ: (06:36):
Modernizing old infrastructure and preparing for severe storms takes real investment. But today, some regions can't even handle a hot summer day. So, when you put all of that together, rising demand, resource inadequacy, transmission constraints, aging infrastructure, it's pretty clear why the grid's check engine light, as I like to say, is blinking. So, the good news is that with focused investment and smarter, faster permitting, we can get ahead of these challenges. We can do more with the help of our state and regional partners to keep electricity affordable for families and businesses.
ES: (07:23):
No news to you that state policymakers are very concerned about data centers, large loads added onto the system. And in fact, just before we began talking, I was reading a story about New York state placing, I think, a one-year moratorium on the development of hyperscale data centers. From your office's viewpoint, what are the most promising strategies to integrate these new large loads while minimizing the impacts on the system and on ratepayers?
KJ: (07:53):
Well, when state policymakers ask us what to do about these huge new loads, especially the data centers, I usually say we should look at them as part of the solution, not just part of the problem. So recently, I've talked about how the load is arriving faster than infrastructure, but I've also said that data centers bring real capabilities that can help us run the grid more efficiently. The Department of Energy's Genesis mission unites DOE national labs, industry, academia, and more to harness AI for breakthroughs in energy dominance, discovery science, and national security. As part of the Genesis mission, we are exploring how to use AI to reduce uncertainty, improve insights and speed processes in grid planning, interconnection, operations and security. This effort aims to enable 20 to 100 times faster decision making and at least 10% improvement in electricity cost and reliability. We also have a whole set of practical strategies that can make a big difference.
KJ: (09:06):
For example, there are grid enhancing technologies, dynamic line ratings, reconductoring, power flow control that let us squeeze more capacity out of the lines we already have. Another piece is fixing interconnection backlog. FERC has made some important moves to speed up studies and reduce upgrade costs. And we're very aligned with that. Faster, clearer processes help everyone, utilities, developers, and communities. At OE, we wrap all of this into our three-piece framework. Stabilize, optimize, grow. Stabilize the grid where it's stressed. Optimize what we already have with smarter tech and grow the system so we can actually meet this new demand without sacrificing affordability and reliability. So yes, the load growth is real and it's arriving fast. But if we're smart and intentional, we can integrate these big new loads in a way that actually strengthens the grid rather than overwhelming it.
ES: (10:23):
I wonder if we could talk a little bit more about the transmission and capacity expansion that's going to be necessary for this. I know that in your previous stint at DOE, you have considerable experience in this. I think it's fair to say you're quite an expert on this matter. So, when you look at the next period, instead of six months, maybe the next five years, what should states expect to see from DOE in terms of looking at both the expansion aspect, but also all the other infrastructure effort that needs to go into the interoperability and those sort of things in the grid? I'm sure people would be very interested to hear from you because you're somebody who knows an awful lot about this.
KJ: (11:03):
Well, thank you for that. I think about this a lot, and it's certainly been quite a pleasure to be so involved for so long. So, when people ask how transmission expansion affects affordability, I usually like to say it is one of the most powerful tools we have to actually lower cost over time. So, when you upgrade or build transmission, you create more paths to unlock access to generation. You ease congestion. You make the whole system run a whole lot more efficiently. And that lowers costs and it all shows up in people's bills because that's what we want. And if the path fills a generation gap, the avoided blackout saves lives and erect economy. So, the challenges, of course, is that transmission has traditionally been slow, expensive and really hard to permit, but that's changing through our Coordinated Interagency Transmission Authorizations and Permits Program or CITAP.
KJ: (12:14):
We give developers a coordinated, transparent federal permitting pathway. So, critical transmission infrastructure can come online faster and at a lower cost. CITAP provides a unified, coordinated federal environmental review and permitting process when a project requires federal authorizations to site a proposed facility that crosses federal lands. But CITAP is not the only tool in our toolbox. We continue advancing several efforts to make transmission environmental review and permitting faster, more predictable, more affordable for developers and communities. And we're not stopping at just process improvements. Through our speed to power initiative, we're working to accelerate the development timeline for large scale infrastructure projects, both transmission and generation. So, this initiative will help ensure the United States has the power it needs while continuing to meet growing demand for affordable, reliable, and secure energy.
ES: (13:25):
A few interesting technologies have come up over the course of a year or so on some energy podcasts I've done. And I wonder what your perspective is on things such as demand response and virtual power plants. Do you see much promise in these?
KJ: (13:42):
I do. So, when we talk about keeping costs down, I'd like to say we have more tools at our disposal than people might think. I've talked about how the smartest thing we can do is to get out of the grid we already have through reconductoring or things like what you were talking about with the dynamic line rating. How can we use those software tools to take advantage of conditions in the grid so that we're not limited to a standard capacity limit, but we can actually put more capacity through the grid when conditions arise. So, if there's more wind and the lines are cool, we can put more power through it. So, I think that is a great tool that's in our toolkit. So, another high-powered OE tool that we have is also the American Made Prize Program. So, this is a program, not necessarily a tool for the grid, but it's a program that fast tracks innovations by turning bold ideas into real energy solutions through prizes, collegiate competitions, vouchers and opportunities to collaborate with the nationwide network.
KJ: (14:58):
The program energizes and empowers innovators, entrepreneurs, and everyday Americans to accelerate science and technology solutions. We move them faster, further and into the marketplace. Grid enhancing technologies, I was talking about the dynamic line rating for example. They have a lot of potential. Those also include advanced power flow controls and reconductoring. It can open up a lot of capacity on existing power lines and save customers real money. And the key is they're reducing congestion by improving how power flows across the system. And another technology that is often associated just with renewable generation, we're finding that it's a great tool for improving the economics of a system. So, energy storage, it's playing a much bigger role in managing peaks to smooth out the load curve and keep reliability strong. I must talk about AI. There's a lot of hype around it, but I think there's an awful lot of promise that we're actually starting to see today.
KJ: (16:08):
So, AI enabled tools, systems that help operators see the grid more clearly and make smarter, faster decisions. That's something I really enjoy and I'm just so excited to be a part of the AI revolution. This technology can really improve the visibility, which will improve the response that operators need when there's disturbances on the grid. And more importantly, if there's an actual disruption, it can improve restoration. And all of that will improve affordability.
ES: (16:42):
Our audience, of course, is legislators, legislative staff, others interested in state policy. And as we close up, I wonder if you could give them a little advice, talk to them about what kind of resources, technical assistance, funding opportunities that they might find through DOE, and help them address these affordability challenges.
KJ: (17:03):
Well, I like being a resource. I think that the Office of Electricity, one of the things that drew me to this office is the fact that they have such smart people with long, deep experience in the industry, and they love to be able to work with states and the legislators. And so, affordability being top of mind, we think about how do we do this in a way that comes from building smarter, faster, and with the partners at every level. So, it has to be local, state, federal, regional, national even. So, one of our key examples is the Community Microgrid Assistant Partnership Program, also known as CMAP. It provides funding and technical assistance to energy providers and partners to build, operate, and enhance microgrid systems that improve the affordability, reliability, and security of electricity in remote areas of the United States, especially in Alaskan communities. CMAP gives rural leaders access to the expertise they need to build affordable, reliable energy systems to transform isolated communities into places where businesses and families can grow and thrive.
KJ: (18:23):
I really like to talk about how energy is core to economic development. It's part of our wellbeing. We need the lights on, but we also need it to cool and heat our homes. Another area that we're focused on is this Grid Resilience State and Tribal Formula Grants Program. It's designed to strengthen and modernize America's power grid against wildfires, severe weather, and other natural disasters. The program distributes funding to states, territories, and federally recognized Indian tribes, which then award these funds to a range of projects with priority given to efforts that generate the greatest impact on affordability and reliability. Program timelines and application periods evolve over time. So, we always encourage states and partners to check the most current information from DOE as they explore these opportunities. And finally, I think that our team, it's probably a daily endeavor, but we like to meet with states as much as we can through forums like the National Conference of State Legislators and other venues to talk about regional needs, local needs, transmission planning, and where DOE can provide hands-on support.
KJ: (19:48):
So, these conversations are where we learn the most about what states need in real time. So, whether it's funding, technical expertise, permitting help, or just rolling up our sleeves with the states and regional partners, we're really focusing on giving states the tools they need to keep energy affordable for the people they serve.
ES: (20:10):
Assistant Secretary, thank you so much for taking the time to share your perspective with us, and I really appreciate it. Take care.
KJ: (20:17):
Thank you.
ES: (20:20):
I'll be right back after this short break with Joseph Pereira from Colorado.
Speaker 3 (20:30):
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ES: (21:50):
Joseph, welcome to the podcast. Great to have you.
JP: (21:53):
Thanks. I appreciate the invitation.
ES: (21:56):
Joseph, to start out, why don't you tell us a little about your office there and how it fits into the energy picture in Colorado? What's its role?
JP: (22:04):
Sure. Well, I'm the director of the Colorado Office of the Utility Consumer Advocate. And so, we are a small, independent agency within a broader regulatory agency within the state. Our role is to represent the public interest before the Colorado Public Utilities Commission, federal agencies, and the courts. This generally translates to mean we represent residential, small business and agricultural customers in regulatory energy and telecommunications forums.
ES: (22:41):
We're of course talking with legislators and legislative staff here. And a lot of these policymakers are less familiar with consumer advocates as compared to utilities, regulators, state energy offices, that kind of thing. In the actual utility proceedings and energy affordability discussions, where do you guys sit? What kind of role do you have there?
JP: (23:00):
Well, if you'll indulge me, I think let me go back a bit to the origins of consumer advocate offices. So, our office was established in 1984. This was on the heels of the U.S. energy crisis. And the reason our office and offices across the country were established was legislatures across the country were seeing some price increases or massive price increases due to unchecked monopoly issues, the regulation of nuclear power. And so, offices like ours were established to play the counterbalancing role to utilities in regulatory proceedings. And so, we take up the charge for customers and make the argument about what is fair for customers to pay relative to the broader regulatory utility process.
ES: (24:04):
I live here in Colorado, and I certainly see lots of news stories about Xcel and utility costs and that sort of thing. And I wonder in those kinds of conversations where utilities are trying to recover costs from customers, what are the kinds of questions that advocates ask? What do you focus on?
JP: (24:24):
Well, our charge in the state is to focus broadly on a wide range of issues. So traditionally, consumer advocates are tasked to focus on rates and charges. But here in Colorado, we have a broad decarbonization policy mandate. So, we are actively moving toward a decarbonized electric and gas sector. With that, the legislature has charged us with taking up just transition issues as we close coal plants here and the impacts to those communities. And then also issues like environmental justice to make sure that energy issues don't negatively impact disproportionately impacted communities. And so, we're trying to weigh all of those issues in our advocacy. Generally, I simplify it by saying we're trying to find the most affordable path to implement the state's policies. And so, we're asking questions about does utility spending, their programs and their actions conform with a path that would meet our state's goals?
JP: (25:42):
Are those actions prudent? Are they providing a high-quality product to customers? And are they responsive to the state legislature, to regulators and to the needs of their customers?
ES: (25:58):
Energy affordability, of course, the focus of this podcast, depends on different factors. And in different parts of the country, those factors vary quite a bit. And I wonder first, how your office defines energy affordability. At what point do you look at the metrics you're using to evaluate the situation and determine whether customers are having real affordability challenges?
JP: (26:25):
It's a tough question and it's a bit amorphous. We look at metrics like in the inflation rate. We look at metrics of cost increases relative to the last proceeding. We look at mandates from the legislature and how those translate to spending and cost increase. And so, there is a metrics and definitional component to that and to our advocacy. But as you mentioned, energy affordability is also a relative question. And so, as I mentioned, we're charged with advocating for the public interest. And so, this is a broad mandate, and it doesn't silo energy costs into the only consideration. Here in Colorado, we're facing lots of affordability challenges. Some like housing are due to large influxes of new residents from other states. We also have federal mandates. We see inflation in lots of consumer products. And so, we have to look at all of those metrics in considering, is this increase affordable?
JP: (27:45):
One thing I think about, and when we're directing our office in advocacy, is the energy bill is what we call the top of the stack type of bill. So, when a household is looking at all their bills and making all their payments and obligations, the energy bill is the first one they pay. We need electricity, we need heating, we need cooling here in Colorado. And so, increases to those bills have a downward effect on all the other obligations that a household makes. And so, if we're looking at major impacts with that bill, then it has a broader affordability impact on families. And so, we're really trying to make that broad consideration in conjunction with all of the other affordability issues households are dealing with.
ES: (28:43):
So, you're really taking a holistic view that the higher energy bill then affects the grocery bill and the car payment and the mortgage and all that sort of thing. That's interesting. Let me ask you, in Colorado, certainly in Georgia, the things that drive energy costs are one thing. In Washington state, there's something else. How about in this region and in Colorado? What do you see as the drivers that really affect affordability?
JP: (29:12):
The two major drivers that we see are investment and particularly what we call capital bias, which is the incentive a utility has to build and own things and then in turn earn returns based on those capital investments. And this is kind of the fundamental underlying premise with cost-of-service regulation. So, investment is the first and then profits and benefits that the utility sees from investment in other optimization that then are delivered to shareholders. And this is in contrast to, in our state, right. We're decarbonizing and we know that wind and solar and renewable energy are lower cost than traditional fossil fuels. And so, on one side of the ledger, we have reduced fuel costs, which is great for consumers, but those investments in things like transmission and distribution are outpacing the savings that we see on the fuel side. And so that capital bias, the incentive for utility to build and then earn profits is really what's driving the affordability issue in our state.
ES: (30:41):
I'm going to ask you a question you probably are asked a few times a day and you probably know what's coming. And that is large load capacity, data centers. Legislators across the country are increasingly discussing this issue and wondering what kind of maybe specialized large load tariffs they should impose on utilities or pardon me, impose on these large load places. What's the thinking there in your office in terms of how the costs are shifted onto residential customers and how to try to avoid that happening?
JP: (31:13):
Well, you're right. This is a huge question that I'm faced with multiple times a day. This is a complicated issue. I think as a representative of customers and similarly, or probably overlapping with legislators and their constituents, what we're hearing a lot is customer concern around what will large loads do to our bills? What will that mean for our communities? Are we comfortable with these data centers as neighbors? And so, it's a very complex issue. And so, I think we start with this idea that first, we need to ask the question around permission for large loads. And this is largely a legislative question as representatives for customers, but first is, are decision makers comfortable with larger loads and data centers in our community? And until we define that, it's a difficult question for us to take up as consumer advocates. If we assume that there's some permissive environment for this, then our office has to look at customer protections.
JP: (32:34):
And traditionally, the energy system is built around residential customers with businesses and large loads added to that basic structure. What we're going to see is really that flip where a handful of customers will then become the center or the driver for how the system is built, how energy is provided. And this is really a fundamental shift and is going to change the way customers that I represent interface with the system. And so, we have to ask our legislators to focus on small customer protections as a fundamental requirement. I think what we're hearing across the country and getting momentum for is first, large load customers pay the full share of investments that are needed to support their business, of incremental costs that occur to provide more generation, and also provide additional community benefit payments as a good neighbor and recognizing that small customers have built this system that now you're benefiting from.
JP: (34:03):
So, we're asking legislators to keep that existing customer in mind when you're creating a permissive environment for these new customers to come on and grow their business. We also have a long-term protection or vision that we need legislators to support. And that is right now, the customers that are bringing large loads on the system are in competition. They're all trying to develop a business model and there will be winners and there will be losers in that competition. And so, if we build and support losers in that competition, that is going to mean that we have built assets that support businesses that aren't around in five years, 10 years, 15 years. And so, we need protections built in from those stranded assets and understanding that in this competition, small customers, existing customers can't be the ones holding the bag for this competition.
ES: (35:08):
Where is the state in terms of interest in having these large load customers provide their own generation? Is that something going on in Colorado? How does your office see that?
JP: (35:21):
Here in Colorado, this question is yet to be defined. We're in a very early stage. And so, there are, I believe, something like 50 data centers operating in Colorado already, but this is, I guess, of a normal ilk. We haven't yet seen these hyperscalers. And so, we are now seeing proposals from very large loads looking to come on the system. And the speed at which they want to come on is different than the regulatory process and the process that the utility can build. And so, this question about can we bring our own generation has come up. But the Public Utilities Commission and the legislature have not defined what those processes are yet. And in addition to that, and I've mentioned the utilities capital bias earlier, is we operate here in a vertically integrated monopoly system. And so, the utilities themselves have an incentive to keep generation and other assets within their purview.
JP: (36:43):
And so that's a long way of saying we don't yet have a definition. I think that Colorado broadly has an interest in large loads bringing clean firm generation to the table. This means things like if a large load can be innovative around geothermal power, for example, that there will be a pathway for them to bring that on board. It seems like the environment for a large load bringing more diesel generation or natural gas generation or coal, I guess, in an extreme case, would not likely be well received in our environment.
ES: (37:31):
Let me ask you, as we close up here, you are talking about the long term here, which I think is something I've heard from a number of other people. In that sense, can you talk to legislators a little bit as we finish up about the role of the consumer advocate and how you see that long term? I think you've hit on some of this, but where do you see in say over the next decade here in Colorado that the role of your office is going to be?
JP: (37:58):
I think our role will be multifaceted. Of course, we will still continue to advocate on behalf of our customer classes before the PUC, but we're also seeing is that there's a greater need for education, both with customers and with legislators around what is happening in the energy sector and the pace of change. And so, I think we will be filling that niche a lot more. In addition, I think broadly for legislators here in Colorado, but across the country is to understand that in a lot of ways, the regulatory process is a bit of a rent seeking process. That the utility is coming to the commission saying, "These are the things that we need and that we want." Other types of interested parties, environmental, large business, energy product manufacturers are all coming to the commission and saying, "This is the thing we want, or this is the thing we want to attach to, to benefit our stakeholder group." And that's okay.
JP: (39:15):
And that's how the process is built. Consumer advocates, because of our statutory charge and who we represent, play a bit of a different role. When I enter a proceeding, I'm not saying I'm going to extract everything I can to the benefit of a residential customer. Rather, I'm representing the interest, the broad public interest of those customers. And so, in that way, we can provide a bit more of a neutral perspective or a broader public interest perspective, which I believe legislators are also looking to fulfill. And so we have a different role and can provide a different perspective or a more neutral perspective as legislators are often bombarded from all sides and all interests about, "Hey, I want this piece of legislation to look like this, or the piece of legislation should really benefit these people." And so, I think here in Colorado and broadly, consumer advocates can be a resource for that neutral or that broader public interest perspective.
ES: (40:34):
Well, Joseph, thanks so much. I think it's a really interesting perspective from the Consumer Advocate Office there, and I appreciate you taking the time to fill us in. Take care.
JP: (40:44):
Ed, I appreciate the invitation. It's a pleasure.
ES: (40:50):
I've been talking with Assistant Secretary Katherine Jereza and Joseph Pereira from Colorado about energy affordability. Thanks for listening.
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