Aggregating Energy Since 2006
The Senate Energy Committee is preparing to debate whether it will beef up the Renewable Energy Objective (requiring utilities to make good faith efforts toward providing x% of their power from renewable technologies) or a Renewable Energy Standard (mandating utilities provide x% of power from renewable energies).
These bills will be discussed in Room 123 of the Capitol at 3:00 on Thursday, 18 Jan, 2007.
According to the Senate Energy Committee schedule they will discuss S.F. 4 and S.F. 74 as well as S.F. 145 and S.F. 129. I have not had a chance to review the 2 latter bills, they appear to be more all-encompassing bills that will establish either a standard or objective while dealing with many other issues as well.
Currently, there are 3 RES/REO-only bills under consideration although 2 of them appear identical to me. I stared at S.F. 4 and S.F. 113 for a good 10 minutes and could not detect any difference between them. Both bills create a RES. The 3rd bill is S.F. 74 and that would beef up the REO.
The Senate bills each change the requirements on small hydro. Previously, hydroelectric generation had to be below 60MW in order to count toward the REO. The new REO or RES would change that to hydroelectric sources below 100MW. The REO and RES both do not count Xcel's mandates from the Prairie Island deals as progress toward the requirement. This remains a signficant additional burden on Xcel which is already the largest purchaser of wind power in the U.S.
The existing statute told the Public Utilities Commission (PUC) to weight different renewable energies (so 2 solar credits might equal 1 wind credit) but that will be scrapped in any impending legislation. The PUC found those instructions cumbersome and lacking proper direction.
The bills revise Minnesota Statute 216B.1691. Let's look the beefed up REO first - S.F. 74.
The new REO requires 5% from eligible sources by 2010. From there, 11% is required by 2013, 15% by 2015, and 25% by 2020.
As before, the PUC has the authority to excuse a utility from meeting the REO if it would cause major problems (like increase rates too much).
The commission must delay or modify the standard for an electric utility if it finds that
compliance with a standard is not in the public interest because compliance will either
produce undesirable impacts on the reliability of the utility's system or on the utility's
ratepayers or if it finds that compliance is not technically feasible.
Subdivision 7 covers the compliance issue:
The commission must regularly investigate whether an
electric utility is in compliance with its standard obligation under subdivision 2a and if
it finds noncompliance must order the electric utility to construct facilities or purchase
credits to achieve compliance. If an electric utility fails to comply with an order under
this subdivision, the commission must impose a financial penalty on the electric utility
in an amount of five cents for each kilowatt hour the electric utility is out of compliance
with its standard obligation.
5 cents per kilowatt hour seems a fairly steep penalty. I could have sworn I heard 5 cents per megawatt hour in an energy committee meeting, but there it is in text. The difference between this new REO and an RES seems minimal given the financial penalty for not meeting. However, there is certainly more room to maneuver under the language of "good faith effort" rather than the RES demands.
The other major bill for consideration is S.F. 4, establishing a Renewable Energy Standard. If I am reading this correctly, it essentially maintains the REO until 2010, then uses the "thou shall" language instead of the "good faith effort" language after that to meet the same goals as above - 11% is required by 2013, 15% by 2015, and 25% by 2020.
As with the REO, the RES ends with a 5 cent per kilowatt hour penalty for each that it is out of compliance.
Given the similarity of the bills, I expect that the debate in the Senate Committee and later on the floor will be over why an RES is necessary when the current REO appears to be working and the new REO will nearly have the same penalties as the RES will.
Update: The RES thread continues with this post.
Thanks Jesse, I've been trying to follow what you all are doing out there as well. At a committee hearing, a deputy commissioner from the Department of Commerce said the $.05 per kw/hr was becoming a standard more or less for the standards.
We also have the offramp provision in some RES bills, I'm trying to write an article about that now.
Thanks for the update on RES efforts in Minnesota, Christopher. I'm actively involved in working on crafting and passing an RES in Oregon (the bill will go to committee in the Oregon Senate in a week or two), and it's interesting to see what other states are doing.
As for the 5 cents/kWh (or $50/MWh) penalty being a bit steep, I think that is pretty standard for states that have adopted penalties (as opposed to alternative compliance payments, or other options for dealing with utility shortfalls). In Oregon, we are considering a $45/MWh penalty, although that may give way to an alternative compliance payment, or ACP instead (or both might be included in the bill, under the assumption that utilities will never actually pay the penalty, the ACP being the more attractive option.
(An ACP allows utilities to pay into an escrow fund instead of facing penalties if they are short in their compliance efforts. The ACP would be set at some incremental amount above the market rate of renewables, say 125% of the average cost per MWh of the most recent contracts acquired by the utility, so as to make it the least attractive option for compliance. It would thus only be used when utilities' good-faith efforts to acquire renewables fail. The escrow funds would be controlled by the PUC and would be used to fund future projects for the utility's compliance, or to fund other renewables projects).
Also, I was interested to see that the proposed REO allows the PUC to move or waive compliance targets for utilities. We considered that option in Oregon, but thought that such a provision would create giant loopholes in the RES. Plus, we'd have to trust the PUC to be strict about it's interpretation of what was "not in the public interest." We instead opted to include a specific cost cap offramp provision that lets utilities off the hook if the combination of the above market costs of acquiring renewables (either power or renewable energy credits), or paying the ACP, would equate to 4% above the utilities total revenue requirement - that's all pretty 'wonky' I realize, but essentially the provision would prevent rates for any utility from increasing by more than 4% due to the RES, unless the utility wanted to do so voluntarily (and got PUC approval). We found that writing an explicit cost offramp into the bill was preferable to leaving it up to the PUC.
Anyway, great to see that not only are more states adopting Renewable Energy Standards, but states with existing RESs are also expanding and strengthening them (i.e. California, Texas, Arizona, and now hopefully Minnesota). Cheers,
Jesse Jenkins