Oregon’s S.B. 1547, signed into law last Friday by Gov. Kate Brown, has all the hallmarks of top-down, government-directed industrial policy. But when it comes to weighing costs and benefits thoughtfully, as energy and environmental policy require, the measure is sorely lacking.
The measure raises the state’s renewable portfolio standard (RPS) from 25 percent by 2025 to 50 percent by 2040; effectively eliminates coal-fired generation by requiring Pacific Power and Portland General Electric Co. (PGE) to end all out-of-state coal contracts by 2030; and requires utilities to file plans with the Oregon Public Utility Commission to expand infrastructure for electric-vehicle (EV) charging.
With its promise of a half-renewable and completely coal-free electric mix, the measure is long on symbolism. But that doesn’t justify lawmakers’ disregard for sound analytic methods in crafting it. Susan Ackerman, the PUC’s chair, is among those who do not support the bill, citing both its small anticipated impact on emissions and the fact that it may raise prices.
To determine utility-resource portfolios that minimize risk and cost requires modeling all resources based on a utility’s needs. A process already exists to accomplish that objective. In fact, Oregon’s integrated resource planning (IRP) rules are among the best in the country.
IRP rules require utilities to model their risks and uncertainties thoroughly, including fuel-price risks and environmental regulations. Given the complexity and long lead time needed to plan which power plants need to be built and which need to be retired, the IRP process is invaluable. Utilities also use it to determine the type and extent of demand-side programs, such as weatherization and efficient lighting, and to guide decisions about power purchases, such as whether to buy from a wind-farm developer.
Alas, no such modeling was done to demonstrate the mandates in S.B. 1547 are either wise or desirable. Circumventing the IRP process to dictate utilities’ resource portfolios generally increases costs, and Oregon’s law will be no exception. One need only look at the utilities’ IRPs, which show that wind and solar remain too expensive to meet utilities’ capacity needs.
For example, Pacific Power’s 2015 IRP demonstrates that the state’s RPS rules – not market prices or risk – already are the main factor determining how much power the company procures from renewable sources. The same IRP shows that Pacific Power had planned to reduce its reliance on coal to 36 percent by 2030, with new natural gas capacity and demand-side management resources serving to offset the difference. By eliminating coal as an option within 14 years, the legislation likely will raise ratepayers’ costs and intensify utilities’ exposure to risk.
To the extent that there’s concern about the quality of utilities’ IRP analyses, the Oregon PUC already allows the public to be involved significantly in IRP development. Pacific Power and PGE have IRP homepages and conduct stakeholder meetings that offer forums for public involvement. Current rules also allow public intervention to protest a finalized IRP when the PUC evaluates whether it is reasonable.
The provisions dealing with EV infrastructure are a mixed bag. If utilities were able to collect information on the charging behavior of electric vehicle owners and how they respond to different incentive programs, it could lead to better rate designs, offering benefits for grid management and for ratepayers. Given their technical expertise, utilities probably should play a role in advising pilot projects for EV grid integration.
On the other hand, the bill encourages expanded utility ownership of EV infrastructure at a time when the economics of EVs has taken a major hit, given falling oil prices. Utility ownership of public EV infrastructure also could either crowd out competitive investment or serve as an imprudent bridge to a market that is not ready to materialize.
Whether owning EV infrastructure is a role utilities should play is thus questionable, but at least the law retains the PUC’s authority to determine whether it would be prudent to include those costs in a utility’s base rate.
S.B. 1547 was put forward as a way to comply with the Environmental Protection Agency’s Clean Power Plan. Prescribing specific technology and fuel mixes is a needlessly costly way to do that. A far better option would be for Oregon to assess a revenue neutral fee on carbon emissions. This would increase the cost to pollute, and utilities would incorporate that cost into their IRPs to find the best, least risky and most cost-efficient fuel mix.