Article by Erik Smith. Published on Tuesday, January 04, 2012 EST.

Gregoire’s Office Announces That It Won’t Seek Changes to I-937 – Other Proposals Afoot at Statehouse

Gov. Christine Gregoire’s office convenes a small-group summit on Initiative 937 Dec. 15. And when a small group needs this many chairs, you know negotiations are going to be a problem.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Jan. 3.—The governor’s office won’t be pushing for changes this year to a controversial ballot measure that requires utilities to buy costly wind and solar power they don’t need. But that’s not going to stop the Legislature from trying.

            Lawmakers and at least some public-utility interests say they will continue to seek a rewrite of Initiative 937, the green-power initiative Washington voters narrowly approved five years ago. The measure requires utilities to buy a steadily increasing percentage of their power from alternative-energy sources – 15 percent by 2020.

            The initiative explains why so many windmills have been sprouting on Washington hillsides over the last few years. The trouble with I-937 is a problem no one seemed to consider back in 2006. What if utilities didn’t need all that electricity? Thanks to an economic slump that is nearing the four-year mark, Washington is about to find out. The power-purchasing requirements already are driving modest increases in some utility bills across the state, and a big hit on customers is just around the corner when the rules get tighter in 2016.

            Yet efforts to fix the measure are just as problematic. The governor’s office announced Dec. 23 that it is giving up on an effort to forge a comprehensive compromise between environmental groups, business interests and utilities. That announcement followed a summit meeting of all interested parties Dec. 15. Not only wasn’t agreement in sight, it took 25 people just to provide a representative sampling of views. The brief email announcement from policy adviser Keith Phillips said Gov. Christine Gregoire will spend the 60-day session focusing instead on “balancing the state budget and creating jobs” – perhaps another way of saying two battles are quite enough.

            House Environment Committee Chairman Dave Upthegrove says he isn’t ready to throw in the towel. Upthegrove says he expects to introduce legislation during the upcoming 60-day session – most likely a complicated package of minor reforms aimed at making the existing rules more workable. Meanwhile there is growing support from public utilities for a much simpler idea, yet one that is sure to face opposition from environmental groups. Their bill says utilities shouldn’t have to buy power they don’t need.

            Your Electricity Bill at Stake

            The bottom line is that if I-937 stays on the books as written, everyone who buys electricity in Washington state, both business and consumers, will pay higher bills without making the air a whit cleaner. The rules were part of a nationwide push by green groups during the last decade to use government regulation to create an alternative-energy industry. In this state the environmentalists went to the Legislature five times until finally in frustration they took I-937 to the ballot in 2006. At a time when voters weren’t thinking so much about their pocketbooks, they passed it 52-48. Washington is one of more than 30 states that now impose some sort of green-power purchasing requirement. In Colorado a similar measure is now being challenged on constitutional grounds as an infringement on interstate commerce, a case that could render the Washington debate moot.

             But assuming the law stands, the important thing about I-937 is that it was written by the side that promoted it, and not by those who were interested in making it feasible. And because it was part of a national campaign, the measure ignored one of the most important facts of power generation in this state. Washington already is the cleanest state around, because 70 percent of its power comes from dams. The initiative doesn’t allow hydropower to be counted.

            The initiative has been a boon to the wind industry, to be sure. Seemingly every windswept hillside in Eastern Washington sports a windmill these days. The idea when the measure passed was that the economy and power demand would keep growing, and alternative energy would take care of the new demand. Instead demand stood still. And so utilities now face the unpleasant prospect of raising rates to buy power they don’t need, with no benefit to the environment or to end users. Actually, what they buy are paper “renewable energy credits” from windmill operators, the sort of concept it takes an economist to dream up. “The only energy that is provided is that you can burn some of them and maybe warm your hands for a few minutes,” says Bob Mack of Tacoma Public Utilities.

            To comply with the rules in 2016, when the renewable standard hits 9 percent, Benton County Public Utility District estimates that it will have to raise power rates 6 percent. Franklin PUD figures on a 4.6 percent increase. By 2020, Clark Public Utilities projects a 20 percent increase. The main result will be a forest of windmills, and, perhaps, an exodus of manufacturing business. Cheap power is one of the factors that keeps them in Washington, said Tim Boyd, co-chair of the Association of Washington Business energy committee.

            “Cheap reliable hydropower balances some of the other high costs of doing business in this state,” he says, “and if we lose the advantage of those energy costs, we lose that competitive edge, both in terms of recruiting new businesses to Washington and retaining those that are already here.”

            Simple Idea Gathers Steam

            From the Tri-Cities comes a simple solution. Benton and Franklin PUDs are pushing a proposal, introduced as HB 2124 and SB 5964, which essentially says utilities would have to buy green power only when there is demand for new energy. The measures were introduced at the end of the last legislative session, and since then the movement has picked up some steam, winning endorsements from public utilities in Lewis County, Clallam County and the city of Richland. Benton PUD spokeswoman Karen Miller says the governor’s decision to punt may give the bill an additional push. Its simplicity makes it more doable than some sort of comprehensive reform, she says: “It’s all about doing what we can do to keep our customers’ costs from rising.”

            Yet it is an idea sure to raise the hackles of the state’s powerful environmental lobby, which has designated defense of I-937 one of its top three priorities of the year. Under the public-utility proposal, there would be no artificial deadline-driven requirement to purchase power – and so the green-power industry would grow only when it makes financial sense, delaying things perhaps by a decade.

At the governor’s summit meeting last month, environmental lobbyists showed only the slightest willingness to budge. Until now they have maintained that any relaxation of rules ought to be traded for even more stringent deadline-driven purchasing requirements after 2020. “I think we have matured from that message and we are certainly more open to what we can do in the out years,” explained Washington Environmental Council lobbyist Clifford Traisman. To put things simply, the environmental lobby still wants higher standards, but after 2020 it might be willing to allow purchases to be driven by market demand, not by artificial deadlines.

            It also should be noted that some utilities have a stake in making sure the rules remain on the books. Some, like Puget Sound Energy, have bet heavily on costly wind farms that could mean a big payoff down the road.

            Upthegrove isn’t keen on the PUD plan either. “Utilities would save money, but the trade-off is that we put a big pause button on our state’s investments in renewables, and it will face strong opposition from the environmental community, making it very difficult to get passed. I don’t know whether that bill would be part of the solution. I am keeping my powder dry. I’m not ruling it out by any means, but I think it would have a difficult path, and so I am kind of looking for the art of the possible here.”

            Convened Big Meetings

            Upthegrove says he is contemplating a smaller-scale package of reforms – though he hasn’t settled on the details yet. Part of the problem is that 937’s rules just don’t fit Washington state, he said – they don’t account for the fact that the vast majority of air pollution in this state is created by cars and trucks, and not by power generation. He says he would like to find some mechanism to tie power to transportation, give utilities greater credit for conservation, and make some allowance for hydropower, all without undermining the goals of the initiative.

Upthegrove entered the fray last summer when House leaders shunted the issue to his committee for the first time. Until now I-937 has been the province of the Legislature’s energy committees – not that there has been any success there. Ever since the measure passed the negotiations have been taking place in the Legislature’s back rooms. Open warfare broke out during the 2009 session, and it essentially shut down the Legislature for a day just as it was attempting to adjourn. An alliance between environmentalists and supportive utilities ultimately kept anything from passing.

             Since he was awarded the issue, Upthegrove says he has learned it is not the kind of matter over which easy compromises can be struck.    

“I’ve learned why this law was passed by a citizens’ initiative,” Upthegrove says. “The Legislature tackled this issue for years and could never reach agreement. And ever since the initiative was passed, there have been a lot of looks at amending it and folks have never reached agreement. I thought, gosh, maybe a fresh look is all it takes, and I’ve learned it’s a little trickier than that. It’s not as simple as environment versus business. Even within the utility family there are a lot of diverse interests.

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