Saturday, October 12, 2013

Colorado's SB-252 Advisory Committee Falls Flat

Upon signing controversial Senate Bill 13-252 which increased the Renewable Energy Standard for Colorado rural electric cooperatives, Governor John Hickenlooper issued an executive order creating an advisory committee to “advise the Director of the Colorado Energy Office (CEO) on the effectiveness of SB13-252.” Specifically, the committee was charged with three goals:
  1. To advise the Director on the feasibility of achieving the twenty percent renewable energy standard by the year 2020, as required by SB13-252;
  2. To advise the Director on administrative and legal considerations related to the two percent consumer rate cap and the impact the rate cap will have on the ability for impacted utilities to comply with the twenty percent renewable energy standard; and
  3. To advise the Director on related legislation for the 2014 session.
Unfortunately, for the reasons I will describe, this was a fool’s errand from the start. The advisory committee was composed of twelve voting and three ex-officio, non-voting members. But, most members of the committee were so poorly versed in the mechanics of Colorado’s renewable energy standard as to render them incapable of informed participation, a situation exacerbated by the CEO’s hiring of a facilitator equally unknowledgeable about any aspect of the RES.

From July through September, the committee met three times in open session. Under pressure from the facilitator, the committee decided that only those recommendations on which it would achieve consensus would be passed on to the CEO. Actually, there didn’t seem to be consensus on this either but given that no one was in charge, the facilitator simply adopted it. The committee’s (or should we say the facilitator’s) second mistake was that only members of the committee would be allowed to participate in the discussion. This left them struggling with understanding important aspects of RES implementation about which there were known and straight forward answers. One such question concerned how the rate cap and surcharge were being implemented by the investor owned utilities. This led to such uncertainty that on one occasion during the second meeting the committee ultimately agreed to allow an unnamed “observer” (yours truly) to explain to the group how the Renewable Energy Standard Adjustment worked.

On September 30, the committee published its final report. While the report describes discussions that took place concerning the feasibility of meeting the RES within the 2% rate cap and other implementation concerns, it is devoid of any consensus recommendations concerning 2014 clean-up legislation. Rather, the report presents five recommendations that were discussed but which failed to receive unanimous support. Only proposals to allow large hydro and energy efficiency to count toward RES compliance received majority support.

The committee did reach consensus in deciding that achieving the 20% by 2020 standard was feasible, but only insofar as the use of purchased RECs was permitted. Other areas in which the committee did reach agreement were that utilities would be allowed to decide for themselves how they would calculate the rate impact and that the rate cap did, in fact, absolve a utility from compliance. The problems with this should be obvious. An additional concern that was not discussed by the committee is the potential in SB-252 for double counting of RECs, which would go against conventionally accepted compliance practices.

Unfortunately, because the committee was isolated from outside input, it also failed to reach consensus on, or even discuss, some common sense changes that would facilitate coop compliance and ameliorate some of the cost impacts. So, I’ll present three of my recommendations which would benefit the distribution coops:

1. Permit thermal RECs to be used for at least 25% of RES compliance. Not only would solar thermal and geothermal heat pump systems facilitate RES compliance, but their inclusion in the list of eligible resources for coops would provide a source of clean energy while also increasing the load factor for the utilities.

2. Rescinding the 1.25 in-state multiplier for Colorado renewable energy systems essentially acknowledged legal concerns that it violated the dormant commerce clause of the U.S. Constitution. But, there would likely be no prohibition against requiring that energy used for compliance be delivered into Colorado (or perhaps even the respective utilities’ service territories). Given that the Colorado grid is, for the most part, an island system, this would provide an alternative way of ensuring that the economic benefits of increasing renewable energy development remain in Colorado. 

3. Focus on increasing hydro power from existing impoundments which would provide a source of clean energy without the environmental impact of building new dams.

These are just three modifications to the RES for coops that would facilitate compliance while making the standard more palatable to Colorado's rural electric utilities. There are ways for coop RES compliance to benefit rural Colorado, but SB-252 was rushed through the legislature without sufficient discussion to enable a complete exploration of the possibilities.

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