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Initiative 937 Back in the Cross-Hairs Again – New Scrutiny of Renewable-Energy Rules Coming in House, Senate

State Sen. Doug Ericksen, R-Ferndale, and Rep. Jeff Morris, D-Mount Vernon, point men in the Senate and House for Initiative 937.

State Sen. Doug Ericksen, R-Ferndale, and Rep. Jeff Morris, D-Mount Vernon, legislative point men for Initiative 937.

OLYMPIA, Sept. 16.—Looks like the Legislature’s favorite issue is back again for a new round of battle – the renewable-energy purchasing requirements that have bollixed utilities and have given environmental groups a new cause, and which threaten to force dramatic rate increases over the next seven years for anyone in Washington who pays an electric bill.

At this point, after years of hostilities, it is looking like a matter of trench warfare. Green groups and a far-from-united utility community began digging in years ago, after Washington voters passed Initiative 937 in 2006. Approved when the economy was booming and electricity demand looked it would increase forever, the measure requires utilities to purchase an increasing share of their power from wind farms and other costly sources of alternative energy. Which explains why windmills now seem to dot every hillside from Walla Walla to Ellensburg. Trouble is, demand flatlined in the recession, and utilities don’t need the power. They have to buy it anyway.

Now a new point-man in the House, state Rep. Jeff Morris, D-Mount Vernon, is wading into the fray with as much optimism as those who have come before him, hoping to strike that long-term compromise that might satisfy all players. In the Senate, Energy Chair Doug Ericksen, R-Ferndale, says he wants to bring “sanity” to the issue. His caucus will continue to press for a shorter-term “don’t-buy-before need” fix – an idea that causes environmental groups and wind-farm developers to gulp.

There are other signs of quickening: The Department of Commerce is launching a rulemaking process on modest changes to the law approved last session, and there are hints the effort will become broader — under the direction of the green-minded Inslee administration. On a climate-change task force convened by the governor, Ericksen is asking a few pointed questions about how much good the policy actually does for the environment — consultants are promising to get the answers. And a hearing Monday night by Ericksen’s committee in the Tri-Cities put the spotlight on a new grass-roots ratepayer revolt that has been bubbling and fermenting in south-central Washington – framing the debate as greens versus the poor, and increasing pressure for a legislative fix.

Will lawmakers manage to do something next session, when so many have tried before and failed? Stay tuned.

Consumers are New Voice

Wind turbines churn in the breeze at a Puget Sound Energy wind farm near Vantage.

Wind turbines churn in the breeze at Puget Sound Energy’s enormous wind farm near Vantage.

It is a battle that has played out in policy summits, backroom negotiations and bare-knuckle lobbying beneath the rotunda, yet the only major result so far has been a public meltdown that delayed the adjournment of the 2009 session until legislative leaders finally admitted they couldn’t see a way to reach a compromise. One thing no one seems to dispute: Initiative 937 will increase costs for those who pay the bills – industrial interests, commercial users and ordinary joes who write checks each month to their local electric utility.

Whether voters knew it, that’s what they approved in 2006. The measure, like more than 30 similar laws nationwide, aimed to give an artificial jumpstart to an alternative-energy industry at ratepayer expense. Currently utilities with 25,000 customers or more must purchase 3 percent of their energy from “renewable” sources – and by design existing dams are excluded from the definition. Just around the corner are far steeper purchasing requirements that will require utilities to buy more power than they need to satisfy current demand – 9 percent in 2016 and 15 percent in 2020. Though there would have been a cost to ratepayers in any case, the impact has been exacerbated by the slowdown in the economy and the fact that the power isn’t required. Already Tacoma Public Utilities estimates that it is spending $1.4 million annually for unneeded windpower purchases; that will rise to $4 million in 2016. Such expenses are reflected in the bills consumers pay.

The rules are a longtime and well-understood frustration for most utilities, with the exception of Avista and Puget Sound Energy, which bet big on wind-farm development and have taken a hold-the-line stand. On the consumer side industrial users and business groups have been raising concerns for years. But in the last year a new voice has emerged, channeled by a Tri-City coalition calling itself Citizens for POWER, short for Protecting Our Washington Energy Rates. It makes the argument that that high energy costs hurt the poor. “Our families in the Hispanic community work hard to put food on the table and pay their electrical and other utility bills,” argued Martin Valadez, president of the Tri-Cities Hispanic Chamber of Commerce, at a hearing this year. “So why would we want to raise these electrical rates simply to fulfill a mandate that is sending big dollars to developers and taking money away from our families? While we support efforts to increase renewable energy, we do not want this to be done on the backs of hard-working families.”

Morris Looks to Long Term

Enter Jeff Morris, the chairman of the House Trade and Economic Development Committee. He takes on a job most recently assigned to Environment Chairman Dave Upthegrove, D-Des Moines, who appears headed for King County Council in this year’s election. Last week Morris began meeting with utility interests, environmental groups, alternative-energy developers and other stakeholders. He says he thinks the logjam can be broken – but he says it makes sense to focus on what happens after the requirements take full effect seven years from now.

“I think having a discussion about the next iteration of I-937 and our portfolio standards might be the pathway to do that,” he said. “I think that for a long time the environmental groups have held all the cards in blocking changes to I-937. They passed it on the ballot, and so there was no interest in negotiating unless there was clearly something in it for them on some of the issues.”

It’s not the first time such a thing has been suggested. Gov. Christine Gregoire’s policy staff two years ago floated the concept of an even higher renewable-purchasing requirement that might be imposed after 2020, in exchange for some relaxation to the current rules. It went over with a thud. While most utilities say the current rules are troublesome enough and balk at the idea of a higher standard, environmental groups and windpower developers had no reason to budge on the rules that already are in place.

The thing about I-937, though, is that it is probably the most complicated policy ever passed by Washington voters in the form of an initiative, with intricate rules for purchasing renewable-energy credits from alternative-energy providers and mechanisms for requiring conservation investments. Morris says revisions to those rules present an opportunity.  He says he leans against a higher standard for this state; he notes academic research at Berkeley that shows purchasing requirements may not be the best way to accomplish pollution-reduction goals. He says his bias is toward cost-effectiveness and some sort of long-term mechanism that would encourage greater investment in conservation and smart-grid technology – not that he has a specific proposal yet. Environmental groups and alternative-energy providers appear amenable to the conversation, he says, but as always with the issue, the details are key.

Public utilities “could probably accommodate their growth through efficiency and conservation much more cheaply than they can through purchasing renewables, and both of those are clean outcomes,” he says. “I think the environmental community would agree with that. It is just how you fold that into version two going out past 2020 that is really the key to unlock this conundrum that the Legislature has been in for the last eight years.”

Morris says other new wrinkles to the issue next session will be provided by the issue of third-party power generation – solar-power installations that transmit power back to the grid, a possibility not contemplated by current law — and by debate over continuing a tax credit for solar power that is due to expire in two years.

Senate Favors ‘Don’t Buy Before Need’

Focusing on the post-2020 world? Ericksen says it makes more sense to focus on the here and now. In the Senate, the Majority Coalition Caucus will continue to push for legislation that gives utilities a greater incentive to pay for conservation, generally acknowledged as the most cost-effective and least-polluting means to meet energy demand. Indeed, conservation used to be the top priority for environmental groups, until they struck their alliance with windpower developers a little over a decade ago. One possibility might be a “smoothing” bill that would allow conservation investments made one year to count toward requirements in the next. But Ericksen says there also is plenty of support on his side of the aisle for a “don’t-buy-before need” bill that by some means would eliminate the artificial incentives to build more windmills at consumer expense.

“I think one of the places where the conversation gets high-centered is where they talk about providing some leniency today in return for strict restrictions later on,” he says. “That is not a good proposition for the taxpaying public, obviously, so we’ll be taking a hard look at it. It won’t be easy – people spent a lot of money to pass that initiative for good reason, and now they are reaping the rewards of it. So they will have no interest in trying to change the pathway.

“The other complicating factor, I believe, is that there are investor-owned utilities that made rather large investments under Initiative 937, and now they find themselves in a difficult position should we bring some sanity back to the process.”

To underscore the point, Ericksen’s Energy, Environment and Telecommunications Committee held a hearing Monday night in the Tri-Cities that aimed to outline the unanticipated consequences of I-937.  It is going to take a sense that it is more than a utility issue to alter a policy that has become a touchstone for green groups statewide and their supporters on the Democratic side of the aisle, Ericksen says. “I think there might be some momentum building behind the effort again this year,” he says. “This is going to have to be a grass-roots effort because there are entrenched special interests in Olympia that will be fighting against it. Hopefully we will see people coming together to support the reforms that are necessary to stem the increasing cost of electricity in Washington state.”

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