Article by Erik Smith. Published on Thursday, September 08, 2011 EST.

Benton and Franklin PUDs Push an Uncomplicated Fix for Initiative 937 – Utilities Shouldn’t Have to Buy Power They Don’t Need

Scene at Puget Sound Energy’s enormous Vantage wind farm — much of which has been erected in the last year, as I-937 requirements loom on the horizon.

By Erik Smith
Staff writer/ Washington State Wire

OLYMPIA, Sept. 8.—One of the biggest, nastiest and longest-running debates at the state Capitol – over the state’s renewable-energy law – might be solved with an astonishingly simple fix.

            At least, that’s what a pair of Tri-City public utility districts are saying. All you need is one simple change. Utilities shouldn’t have to buy power they don’t need.

            Make that one little tweak and they say you can settle a debate that has raged ever since Washington voters approved Initiative 937 in 2006. That’s the enormously complex measure that has covered Washington hillsides in windmills, and has required utilities to buy a growing portion of their power from environmentally friendly sources.

            It was supposed to kickstart a renewable energy industry and make Washington green. But now that expensive new requirements are about to kick in, pressure is building for a rewrite. Most players say the rules really don’t work, won’t help the environment, and will cause electric bills to skyrocket.

            Right now the House Environment Committee is launching a comprehensive review of the law – an effort that will assuredly be as complex as the law itself, and which will involve dozens of interests that have proven unwilling to agree on anything in the past. And that’s what makes the Tri-City solution intriguing. It’s a solution so simple that it might make one wonder why no one has tried it before.

            “What we’ve seen in the past is that when there was an attempt to make a wholesale change in 937, because there were so many moving parts, it was very, very challenging, and it has not been successful,” says Jim Sanders, manager of the Benton County Public Utility District. “So we’ve targeted just one element and said, let’s try to get this done again. It seems to make sense to us. Why would you buy something you don’t need?”

            Of course, you can expect the other players to say a thing or two about that.

            Bogging Down on Details

            Lawmakers have been trying to make the law work for years, but every time they have tried to do something, the effort has bogged down on the details. Certainly the law is chock-full of those – purchasing requirements, accounting rules, a controversial definition of renewable energy – making the so-called Energy Independence Act one of the most complicated laws in the history of the state. Just as important, its myriad provisions affect every utility in a different way. Some of them made big investments in alternative energy while others hung back. Many utility interests pushed for a rewrite in 2009, and were opposed by their own. Environmental groups lobbied heavily themselves, and the big ill-defined battle brought the Legislature to a standstill and shut down the statehouse for a day.

            Seemingly half the lobbyists in Olympia went behind closed doors in 2010, trying to hammer out an agreement, but the effort fell apart when business interests couldn’t reach consensus. These days environmental interests might be more interested in compromise – they don’t know if they’ll have a sympathetic governor in office after 2012. But as the House Environment Committee rolls up its sleeves and gets to work on a comprehensive bill, there’s no telling whether this new effort will fare any better.

And that’s what makes the Tri-City proposal radically different than everything that has come before. You can tell just by looking at it. The bill is only five pages long.

A Modest Proposal

The two utility districts went to the Legislature with their measure just before the session ended this year, collecting 28 signatures and signing up as sponsors state Sen. Janea Holmquist Newbry, R-Moses Lake and state Rep. Terry Nealey, R-Dayton. It has been filed in the House as HB 2124 and in the Senate as SB 5964. The bills remain alive next session. 

That process itself is a sign of the complexity of the issue. Normally bills like these come from trade associations, but the state P.U.D. association hasn’t been able to agree on its course.

Yet the bill’s approach is simple. It leaves the energy-purchasing requirements in place. But utilities only have to buy power if they need it – to satisfy growth in electricity demand, or what the industry calls “load growth.”

It represents a big switch from current policy, and it gets at the nub of the problem. The way the law works now, utilities have to buy wind, solar or biomass whether they need it or not. There’s no problem when the first set of standards kick in next year. Every utility with more than 25,000 customers is supposed to get three percent of its power from renewable energy – and all say they comply. But the rules become a big problem in 2015, when the requirement jumps to 9 percent, and even more so in 2020, when it hits 15 percent.

Demand remains flat, because of recession. So what it means is that utilities will have to replace current power sources with new, green and expensive ones. The part that grates on Washington utilities is that this state is already the greenest around, because some 70 percent of its power comes from hydroelectric dams. The definition of renewable energy in this state specifically excludes dams, unlike similar clean-energy rules that exist in more than 30 other states. So the way most utilities see it, the law is a set of artifically imposed regulations that will displace a clean and cheap form of renewable energy with an expensive one, with no environmental benefit at all. Cheap hydropower will be sold off to other states. Cheaper investments in conservation also will be discouraged. And consumers will get stuck with the bill.

Franklin County P.U.D. estimates that it eventually will have to pay $3 million annually to comply with the rules, meaning a 6 percent increase in power bills. Benton County P.U.D. estimates it will pay $4.2 million a year, driving a 4.6 percent increase.

Says Sanders, “We don’t see a need for additional resources until the 2020s. So why should we acquire resources now or spend money on alternative-energy credits we don’t need? It doesn’t make sense to our customers.”

And when the utilities try telling them why they are going to pay higher electric bills, Sanders says they always ask one question: “What are you doing about it?”

           Building a Coalition

It might make sense that a movement like this one would start in the Tri-Cities, the hub of the state’s power industry, where dams and nuclear power and advanced scientific research in power delivery are a mainstay of the economy. The Tri-City utilities have been doing everything they can to flag the state’s attention. They even held a unusual hearing of their own Aug. 23, bringing together business leaders and political types from the Tri-Cities for a roaring endorsement. For the sake of out-of-towners, they’ve posted it on YouTube.

A typical comment came from Judith Gidley, executive director of Benton Franklin Community Action. “These two bills are simply asking for what any prudent business or family would do,” she declared. “It will keep the lights and heat on for families who can’t pay for electricity now. Electric rates hurt, and when rates go up, low-income families get get hurt when their power is turned off because of the inability to pay. They cannot afford an increase.” 

There seems to be plenty of agreement from the Tri-City interests, all of which trooped in to offer their support. But so far the two utilities seem to have gotten only one endorsement from beyond the Benton and Franklin county lines – from the Clallam County P.U.D.

           The Art of Politics

It’s not that anyone in the public-utility world disagrees with the general concept, says George Caan, director of the state P.U.D. association. “There’s general agreement on the principle that you shouldn’t have to buy power you don’t need,” he said. But not all utilities are convinced the bills are the right vehicle.

And then you have all the other considerations that go into an enormously complicated policy like this one. “That’s called politics,” explains Dave Upthegrove, chairman of the House Environment Committee.

You have other utilities that have spent heavily to comply with the requirement – primarily those in the urban Puget Sound area, where green is a more popular color. Change the rules and they’ll be stuck with costs the others don’t face. There’s the windpower industry, which will make a fortune if the rules remain intact. And at least up until now, the state’s environmental groups have stood right by its side, arguing that big utility investments in green energy should remain steady even as the economy slumps.

The Northwest Energy Coalition, promoter of the initiative, did not return a call in time for this story.

Upthegrove said things are never as simple as they appear. He’s not calling the Tri-City bill dead on arrival. But more likely it’s just one idea that will be thrown into the mix.

“If it were part of a larger comprehensive package, that would make more sense,” he said. “I’ve been meeting with all the utilities and I have been cautioning them not to put all their political eggs in one basket, because there are political challenges with it.”

You have to remember, even the tiniest tweak in a law like this one can have a big ripple effect on every interest group, Upthegrove says. And he says you just can’t deal with one issue without dealing with all the other technical points.

“I don’t want to take anything off the table,” he said. “I know I sound like a politician here, but our focus is on trying to find a solution that balances interests rather than a bill-by-bill, piecemeal approach. So we’re trying to find a comprehensive solution. If we don’t get there, there may be small incremental steps we can take. But right now the focus is on trying to address more than one issue.”

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