After months of behind-the-scenes arm-twisting, Oregon legislators gave their initial blessing to a compromise bill that lets small, publicly owned electric utilities off the hook – temporarily – for required investments in renewable energy projects.
PacifiCorp and Portland General Electric initially didn’t like that option, as it sets up a two-tiered system for compliance with state mandates and potentially puts them at a disadvantage in attracting energy intensive new customers. But they forced a quid pro quo in the bargain.
Namely, the bill directs state utility regulators to investigate the feasibility of allowing Oregon’s two big utilities to start selling renewable energy to large industrial customers under a green tariff. That green product would otherwise have to be purchased from an independent power producer or energy service supplier.
It’s a complicated, compromise bill, and it was unanimously passed out of the House Energy and Environment Committee with little discussion, in a hurry-up, 21 minute hearing designed to beat Thursday’s snowstorm.
The first half of the bill was designed to head off a hijacking of the state’s renewable energy law, which requires large utilities to serve 25 percent of their customers needs with renewable power by 2025.
It did so by placating Umatilla Electric Cooperative in Hermiston, where surging electricity demand from energy-hungry data centers threatened to push the utility over a threshold in the state’s renewable energy laws requiring major investments in wind and solar farms.
Rather than bear that expense, UEC threatened to declaw the renewables mandates by launching a ballot initiative to allow utilities to count their existing hydroelectric generation as qualifying resources. Since hydro is already 45 percent of the resource mix in Oregon, that would have meant the end of the mandates. Renewable energy advocates didn’t want that. And larger utilities didn’t like it either, as the big investments bring a larger rate base and more profits.
Part A of the compromise bill allows smaller utilities to meet a large percentage of their initial green power requirement with so-called unbundled renewable energy certificates. Those certificates are generated by existing wind and solar farms in Oregon and elsewhere and can be purchased cheaply on the open market.
Dave Markham, president of Central Electric Cooperative in Redmond, told lawmakers that the bill would give small utilities “more flexibility” and “would allow the ballot measure to go away.”
PacifiCorp initially led the opposition to such a compromise, arguing that it would provide an unfair advantage for utilities that didn’t have to bear the expense of complying with the renewable mandates. But the state’s second largest utility was able to get behind the bill if lawmakers were willing to consider a green tariff.
As it stands today, said PacifiCorp vice president and lobbyist Scott Bolton, the utility can only offer plain vanilla electrical service to its customers, powered by its underlying mix of generation, which skews toward coal. Meanwhile, more industrial customers are looking to green up their power supply to demonstrate environmental stewardship or carbon neutrality. As it is, the utility can’t offer that product. PGE tried to develop such an offering for Intel last year, but staff at the Public Utility Commission objected, and it was dropped.
“It’s not a revenue issue. … It’s not something I see us making money on,” Bolton said Friday. “It’s about ensuring the communities we serve that they can compete for the same type of customers, or at least have a process at the (Public Utility Commission) to identify how it might be done.”
In fact, industrial customers can directly access pure green product today by opting out of the utility’s service and purchasing their power directly from an independent power producer or energy service provider.
Those providers are worried that the utilities will leverage their existing monopoly assets to offer a more competitive green product and push them out of the direct access business. Others worry that setting up a separate class of customers with a special rate structure will shift overhead costs, which are embedded in regular rates, onto remaining customers.
“We think this is troubling, because the utility monopoly can exercise its unique assets and stifle otherwise competitive options,” said Robert Kahn, executive director of the Northwest and Intermountain Power Producers Coalition.
The bill directs Oregon’s Public Utility Commission to study the feasibility of a green tariff and implement it on a case-by-case basis. It also contains language that prohibits cost shifting to other customers. The bill now moves to the House floor.