In 2006, Cowlitz PUD officials vehemently fought a losing battle against a new energy mandate, arguing that rates would rise if the utility were forced to find expensive new sources of renewable energy.
Now, after investing more than $150 million in two new wind farms, the PUD is fighting to prevent changes to Initiative 937, arguing that, once again, Cowlitz ratepayers could suffer if state lawmakers water down the law.
“To change the law, frankly, is not in our best interest,” Dave Andrew, a Cowlitz PUD lobbyist, said at a recent PUD commissioners meeting.
As early adopters of wind power, PUD commissioners were hoping to get a competitive advantage over other utilities who delayed installation or purchase of renewable energy. If the law is changed dramatically, the market would be flooded with expensive, unwanted renewable energy, costing the PUD millions in potential wind-energy sales.
More than a half dozen proposed bills in the Legislature this year would chip away at voter-approved I-937, which requires large utilities to obtain 15 percent of their total power needs from new renewable energy sources, excluding hydropower, by 2020.
Most are small changes, such as allowing utilities to use conservation measures in place of renewables or delaying deadlines to develop or buy renewable energy credits. But initiative supporters say they worry that the sum total of the bills would hurt early adopters, such as the Cowlitz PUD.
“There’s an increased push to take steps backward on Initiative 937. We are working bill by bill to ensure the state does not turn its back on the $8 billion investment that (utilities) have invested in renewable energy,” Clifford Traisman, a lobbyist for the Washington Environmental Council, said last week.
Cowlitz PUD Commission President Merritt “Buz” Ketcham said the utility has chosen not to “strongly push back” against these incremental changes. He said he’s worried more about extreme ideas from Eastern Washington dam operators to count all hydropower as renewable in the law. This proposal has gained little traction in Olympia because it would gut I-937 by removing demand for more expensive renewables, such as wind.
“Passage of that would be damaging to our (wind energy) sales,” he said.
Big investment in wind
Cowlitz PUD jumped into the wind-energy business shortly before I-937 passed, investing $158 million in two Central Washington wind farms over the following three years.
In 2007, the 205-megawatt White Creek wind farm went online in Klickitat County, the largest public power wind energy project nationwide. The total project cost was $360 million, but Cowlitz PUD and its three partners qualified for $120 million in federal production tax credits. Cowlitz PUD invested $110 million for its share, and $7 million in net wind-energy sales from that project have helped soften rate hikes.
Cowlitz PUD invested an additional $48 million for a share of the 100-megawatt Harvest Wind, which went online in Klickitat County in 2009. The PUD’s share of both projects is enough to power about 20,000 homes.
Although the PUD wants to protect its investment, utility officials have been open to prior efforts to change the law. Last year, PUD officials supported a bill sponsored by 19th District state Sen. Brian Hatfield that classified decades-old incinerators and boilers at pulp mills as renewable energy producers. The change in the law saved Weyerhaeuser Co. and Longview Fibre Paper and Packaging millions in energy costs and allowed the PUD to exceed its 2020 renewable energy requirement.
PUD officials said they backed the bill to encourage job growth in Cowlitz County, but Ketcham also acknowledged the bill undercut the value of the PUD’s wind energy.
Hatfield, a Raymond Democrat, said he doesn’t expect any major changes to the law this year, though most public utilities have told him they favor reform.
“There’s always going to be people trying to tweak it and change it. I don’t see it going away,” he said.
He added that he understands Cowlitz PUD’s concerns about losing return on its investment. “You hear some differing views just in the southwest corner of the state,” Hatfield said.
George Caan, executive director of the Washington Public Utility Districts Association, the utilities’ lobbying group, said I-937 has pitted PUDs statewide against each other, but the group is sticking with its efforts to revise the law.
“The appropriate public policy is not to require utilities to buy resources they don’t need,” Caan said.
Last December, Cowlitz PUD commissioners discussed dropping out the state PUD association altogether because they were concerned the group wasn’t representing their interests, though they ultimately decided to stay.
Cowlitz PUD has already been burned once by shifting renewable-energy markets. In 2011, a California utility abruptly pulled out of a $9 million agreement to buy wind power from Cowlitz PUD to meet that state’s own state renewable energy mandate. PUD commissioners considered suing but ultimately decided the legal costs were too high. Loss of the contract undercut the market for the PUD’s wind energy.
Commissioners said that loss of revenue, coupled with a 7.5 percent wholesale rate hike, compelled them to raise rates by 18 percent in 2011. The rate hike sparked angry public outcry and was a major reason why former Commissioner Mark McCrady lost his seat the next year.
Nevertheless, PUD commissioners say that short-term pain was necessary for long-term gain, now that low-cost hydropower is becoming more scarce in the Pacific Northwest. Wind investments will pay off, as long the basic structure of I-937 remains intact, they say.
By the end of the decade, the Bonneville Power Administration will cut its hydropower sales to Cowlitz PUD by about 11 percent because of increased regionwide demand for power, according to PUD estimates. The BPA’s contribution is currently about 90 percent of Cowlitz PUD’s total load.
To make up for that loss of BPA power, PUD officials estimate they will need to increase the utility’s use of wind power fivefold. Power from its wind farms will be cheaper than buying electricity on the open market, officials say. Also, they say, California utilities are struggling to generate enough renewable energy to meet new renewable-energy laws, potentially opening a huge market for Washington utilities.
“At the end of the decade, I still believe we will look back at these shaky markets and remember we built White Creek to both supply our I-937 requirements and load growth. When other utilities may be scrambling to build resources to meet growth, Cowlitz PUD will already have our resources built at 2005 prices,” Ketcham said.
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