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January 31, 2007

PGE Renewable Power Program Is Well-Designed & Successful

We are not ones to hold back our criticism of Portland General Electric (critiques of PGE are all over our website, particularly in General Utility Regulation). That being said, we disagree strongly with the Oregonian's criticism of PGE's voluntary renewable power program. The Oregonian cites the percentage of each dollar that goes into marketing, but fails to point out that the reason the percentage appears high, is because the cost of the green power itself is so low. Oregon's green power programs are well-designed, and allow customer to purchase 100% of their power from new renewable sources of energy for a cost that is lower than other utilities in the country. By joining with others to purchase renewable power, participating customers are sending a clear and effective signal to developers to build more renewable resources in the Northwest.

The Oregonian Is Just Plain Wrong

First, we must point out that the Oregonian's main criticism is simply wrong. The Oregonian article says that Oregon's is one of the most expensive nationally when it comes to marketing. The Oregonian has it exactly backwards. The administration and marketing costs of PGE's program are significantly less than those of similar programs around the country.

An average participating PGE customer pays an additional $8 per month to ensure that 100% of his or her power comes from new renewable resources. Around the country, other utilities charge an average of $24 per month for similar programs. PGE's administration and marketing costs are 56% of the additional monthly payment, or about $4.50 per customer. The federal Department of Energy cites a figure of 29% marketing for other utility programs. 29% of $24 per month works out to about $7 per month. By our math, $4.50 is less than $7.

The real question the Oregonian ought to have investigated is why Oregon is able to supply 100% of a customer's power with green energy so much more cheaply ($8/month) than other states ($24/month). The answer is that Oregon's program is well-designed, carefully regulated, uses competitive bidding, does not allow for utility profit, and strives to keep costs down.

A Little History

In the late 1990s Enron and PGE, big power marketers, industrial customers, and free-market ideologues were pushing electric deregulation. Their idea was to get rid of traditional monopoly power companies, and instead require that all customers purchase their power from a wide open retail marketplace. In many states, Enron was joined by advocates of renewable power who believed that there was a market for renewable energy, but that utilities were not serving that market.

CUB responded to the concern of renewable power advocates by proposing that we simply require utilities to offer renewable power to customers under a regulated system. Advocates of deregulation argued against CUB's proposal, claiming that a deregulated market would bring the necessary marketing to reach customers who want green power. We responded by including marketing in Oregon's regulated green power programs. Thus evolved CUB's proposed model that we have today.

Not only was CUB instrumental in stopping Enron-style deregulation in Oregon, but we devised a way to bring renewable power options to Oregonians, while continuing to protect customers in a regulated electric system.

The Process For The Renewable Power Programs

Currently, a committee overseen by the Public Utility Commission (PUC) designs the criteria for the renewable power products to be offered to customers. In addition to criteria for the power itself, the committee includes requirements ensuring that the renewable products are adequately marketed. The utility puts these products out for bid in the wholesale market, selects the lowest-cost provider, and offers these choices to customers. The utilities do not earn a profit on these products. The PUC oversees the entire process to ensure that customers who pay for renewable power are getting high-quality, reasonably-priced renewable power. (More information about the administration of the renewable program can be found in a previous blog entry, Oregon Leads the Way in Voluntary Support for Renewables.)

This renewable program design has worked well. Oregon has proven that, through wholesale bidding, we can make renewable developers and marketers compete against each other to offer Oregonians renewable power at a low price.

Renewable Programs Jump-Started NW Renewable Industry

At the time we started the renewable power programs, we were frustrated that we had been unable to get utilities to invest in renewable power. Developers of renewable projects in the Pacific Northwest were struggling to survive. It is not a leap of faith to claim that Oregon's voluntary enrollment renewable power programs helped to jump-start the renewable power industry in the Northwest, and helped developers through some tough times.

Oregon's voluntary renewable power programs have also shown the utilities that customers support investment in renewables. The programs not only helped to change the marketplace, they have also had a significant environmental impact. In 2005, through these programs, Oregonians purchased enough renewable power to serve 44,000 homes. This reduces CO2 emissions by approximately 350,000 tons -- the equivalent of taking 60,000 cars off the road.

Today, utilities across the region are investing in renewable resources. Seven large wind farms have been developed in the Northwest since October 2005, producing enough power to serve more than 230,000 homes. Washington and California have passed laws requiring utilities to purchase renewable power for all their customers. Oregon's legislature will soon be considering such a law for our state.

Oregonians should be proud of their extremely successful and inexpensive renewable power programs. These programs are the envy of utilities around the country, their environmental impact is real and measurable, and their contribution to the development of the renewable power industry in the Northwest is admirable. We encourage everyone to sign up.

Bottom Line is Green

In summary:

1) Customers paying for the renewable option are responsible for putting up to 100% of their power usage in the form of renewable energy onto the system.

2) Both in terms of the overall costs of the renewable option and the amount spent on marketing, Oregon's program costs less than similar programs around the nation.

3) By participating in these programs, customers are having exactly the effect they hope: that is, expanding the development of new renewable energy and greening up a distressed planet.

Posted by Oregon CUB at 04:01 PM

January 24, 2007

The Good the Bad and the Climate: CUB Responds to the SOTU

The Good News about President Bush's State of the Union address last night was that he actually acknowledged "global climate change" and called it a "serious challenge." The Bad News is that his proposal to address the serious challenge sounded not all that serious, a 20% reduction in gasoline usage over 10 years. This reduction, according to Philip Clapp of the National Environmental Trust, would still allow for overall growth of greenhouse gas emissions by 14%. And of course, the Climate is still changing.

Don't get us wrong. We're happy that the words "climate change" came from the President's mouth, and we're happy he's suggesting taking some action. But the proposal he has put forward leaves us unimpressed.

For one thing, it deals mainly with transportation-produced greenhouse gases, which is hardly the only source of global warming pollution. Within that somewhat incomplete focus on transportation, Mr. Bush has narrowed the pool of solutions further to include solely automobile-related ideas, with an emphasis on biofuels -- particularly ethanol. Again, incomplete. Perhaps Mr. Bush should visit Portland, OR (our fair city) to take a look at other possible ways to reduce transportation-related greenhouse gases, such as public transit, bike lanes, ride-sharing, walkable neighborhoods, buying local, etc.

Beyond transportation lies the 40% of global warming pollution that is produced by the nation's electricity production (and consumption, of course). For our electrical grid, Mr. Bush has almost nothing to say about the rapidly growing industry of renewable energy sources and the vast gains that stand ready to be made in the areas of conservation and energy efficiency. At last year's Institute of Science in Society conference in the United Kingdom, the Rt. Hon Michael Meacher, M.P. said this: "I think the evidence is absolutely clear. Renewables are set to become the dominant energy source of the 21st Century; plus determined energy conservation for economic as well as climate change reasons..." Mr. Bush offers us instead only passing mention of renewable energy (at least it made the list), a nod to clean coal (which is still a fossil fuel and still in the pilot stage), and the "Global Nuclear Energy Partnership, aimed at reducing proliferation risks while expanding availability of clean, safe, climate-friendly nuclear energy." Right.

What's missing, perhaps most notably, was any discussion of federal carbon dioxide regulation. (And don't even mention the international standards of the Kyoto Protocol -- oh, that's right, he didn't.) Without that crucial link, the rest of it may sound nice but offers no real plan for effectively dealing with perhaps the greatest crisis humanity has yet encountered. Without federal regulation of carbon, it becomes even more important that states continue to take the lead on combating the causes of global warming.

Well, you can't expect a pig to talk like a duck, or a leopard to change its spots, or President Bush to put forward much beyond the "Cooperation with Private Industry" plan that he has offered the American people this year. What's amazing is that giants of industry are actually ahead of the Bush Administration on this issue: a Call to Action was issued last week by Alcoa, General Electric, and Dupont (among others) calling for national legislation which would cap greenhouse gas emissions. They understand how much stands to be lost to global warming, even if the current Administration does not.

Last year, Mr. Bush admitted that "America is addicted to oil" and the admission caused a stir. During the resulting year, however, his Administration did little to address the oil issue beyond a continued push to open the Arctic National Wildlife Refuge to drilling. And, of course, our soldiers remain enmeshed in Iraq. This year he offers us a modest and voluntary plan to reduce emissions, with ethanol in the starring role and ANWR no doubt waiting in the wings. Even when he speaks of raising vehicle mileage standards, he wants his Administration to keep control of the standards rather than Congress legislating them, but how much conservation credibility has this Administration earned?

We are fortunate that the new leadership of Congress is poised to take serious action on climate change. A new House Committee has been formed by Speaker Nancy Pelosi to study issues related to climate change. And the McCain Lieberman bill on climate change is back, with Sen. Barack Obama as a new cosponsor. More importantly, we in Oregon live in a state that wants to lead. CUB, the Governor, and many others are pursuing an ambitious Renewable Energy Standards agenda in the Legislature. We hope to decrease our own emissions while at the same time armoring ourselves against the future changes and losses that are expected to result from global warming.

America is behind the times on this issue. Again, from the U.K.: "Science shows that only significant and substantial cuts of greenhouse gas emissions (by as much as 60% by 2050) can achieve stabilisation at low levels in the atmosphere. The recent Intergovernmental Panel on Climate Change report has also shown that the greater the reductions in emissions, and the earlier they are introduced, the smaller and slower the damages." This president is going to do what he's going to do. That is why we are really going to have to run with the '70s adage to "Think Globally, Act Locally." Let's get with it, people.

Posted by Oregon CUB at 02:02 PM | Comments (0)

January 17, 2007

Double Header Victories for Customers and the Environment

CUB had a big week, snowstorm aside. Two hotly contested cases resulted in Orders from the Public Utility Commission and CUB feels good about the outcome of both.

First out of the gate was the Commission's decision on PGE's general rate case. PGE asked for an increased Return on Equity (ROE), or profit margin, of 10.75%; they got a decreased ROE to 10.1%. We feel this is reasonable, the PUC having recognized that the ROE should only be high enough to attract shareholder investment, not high enough to gouge customers.

The other big issue in the case was whether to institute a Power Cost Adjustment (PCA), and if so, what should that look like. PGE suggested a PCA that would have required customers to pay 90% of all costs that went basically even a dollar above the forecast level, and would have returned money to customers if costs were lower than expected (a more unusual turn of events). For CUB, this was a non-starter. Instead, CUB suggested a PCA that includes a deadband, or allowable variation, of about $24 million above cost or $12 million below cost before triggering the PCA process. This represents the normal variation of costs utility shareholders are expected to absorb; managing this normal variation is why we pay the company a profit margin. CUB's PCA also included an earnings deadband that required the change in costs to result in a change of at least 100 basis points to PGE's ROE, or about $16 million, before any change would flow to customers' rates. The Commission chose to adopt CUB's PCA, only changing the sharing band outside the deadband to be 90/10 (customers responsible for 90% of extra costs) rather than CUB's suggested 50/50 sharing split.

The combination of the lower profit margin for PGE and the PCA based on CUB's model will save customers a good deal of money over the next several years (the last general rate case before this one was in 2000-01).

You may remember hearing some media flurry about this case with regard to a Standard & Poor's credit report. That report was used by PGE to support their argument for a PCA. Since CUB and the PUC Staff were supportive of using a PCA as well, although a substantially different version, we don't feel the publicity exposing PGE's influence over the report-writing process had a large impact on the case. It did, however, ensure that CUB will be continuing to monitor utility influence on credit reports and how they are used in the regulatory process.

The Second big decision came yesterday, when the PUC sent out the following announcement:

"Today the Oregon Public Utility Commission rejected PacifiCorp's request to conditionally approve a plan to seek bids to build two coal plants in order to meet growing energy demands. The Commission found that the company failed to justify the need to acquire the amount and type of energy resources sought...

"A coalition of customer groups and others had opposed the plan because it included coal generation.

"In its decision, the Commission declined to resolve issues related to CO2 risk at this time. However, the Commission has opened a separate proceeding to review CO2 risk related to the expected cost, risk and uncertainties of coal resources."

CUB had intervened in this case, along with Northwest Energy Coalition and Renewable Northwest Project, among others, and was leading the fight against the PUC approving any new pulverized coal plants to serve Oregon customers. If approved, these coal plants would have been producing significant amounts of carbon dioxide, a major global warming pollutant, for decades to come, and customers would have been responsible for any future charges due to carbon regulation (such as has been adopted in the European Union).

We are very happy that the Commission has instead directed PacifiCorp to look at filling their energy needs for Oregon using energy efficiency and renewable energy sources. This not only makes sense for filling the needs of the moment, but also, as the Commission noted, gives a few years of breathing room for the utility to investigate the "new" coal technology called IGCC which could eventually allow for carbon sequestration, a much cleaner way to use coal for power production.

This decision highlights the difference in outlook between PacifiCorp's two largest states, Oregon and Utah, and leaves the company in an awkward position. Toward the end of 2006, Utah's Commission directed the company to produce more power, and lots of it, to meet the needs of a quickly growing population and an increase in household usage of electricity. By contrast, Oregon's household usage of electricity is not rising and, overall, the Pacific Northwest philosophy seems more open to conservation and renewables.

However PacifiCorp is able to reconcile these two viewpoints, we are excited to see the Oregon Commission drawing a line at building more traditional coal plants. In our (not so) humble opinion, this is the only sane policy: When you're in a hole, you stop digging; when you're directly threatened by the global climatic shifts associated with the burning of fossil fuels, you stop building coal plants.

A good week, all in all. And the powdery snow and hot chocolate was good, too.

Posted by Oregon CUB at 03:15 PM | Comments (1)

January 04, 2007

Here Comes the Year of Clean Energy!

Well, 2006 has been called the Year of Living Globally (by eweek.com), the Year of You (by Time Magazine), and The Year of the Democratic Woman (by lots of people, from The Nation to The National Review). The year 2006 could (and has) also been called the Year of Global Warming. Last year gave us thousands of showings of An Inconvenient Truth, the Second Meeting of the Parties to the Kyoto Protocol in Nairobi, the evacuation of one island (off of India) due to rising sea levels, and today saw a cartoon by Jack Ohman of the Oregonian suggesting that Endangered Polar Bears could lead to Threatened Bush Junk Science. The denial is melting as fast as the ice sheets, it seems.

If 2006 was the year the U.S. began to acknowledge global warming, then 2007 will undoubtedly be the year we start to deal with it, right? Well, with the Chinese New Year coming up (February 18th) and China growing in importance to international discussions of finance, politics, and (yes) global warming, we also offer this description of those born in the upcoming Year of the Pig (or Boar): "Fire Pigs breathe new life into everything they do. These Pigs are vivid, motivated individuals who cannot be deterred from a goal once they have set it."

Cue the opening of the Oregon State Legislature. CUB and its allies, particularly those who are members of the Fair & Clean Energy Coalition, will be moving forward with a Clean Energy Agenda that has been fine-tuned and spit-polished, ready to take to Salem next week.

Our goals include:

1) We will work to create a Renewable Energy Standard for the State of Oregon that requires that 25% of Oregon's electricity come from renewable sources by the year 2025.

2) We will work to increase the amount of money available to help low income Oregonians pay their electric bills, from $10 million to $15 million.

3) We will work to remove the current sunset provision on the funding for the hugely successful energy efficiency and renewable projects managed by the Energy Trust of Oregon.

4) We will explore additional investment in those successful energy efficiency and renewables programs.

5) We will work to earmark one percent of new public buildings' budgets for installing solar technology.

6) We will work to improve building standards so that we achieve a 15% increase in energy savings in new buildings.

7) We will work to expand clean energy technology credits so that homebuilders and others will have an incentive to install solar power systems or energy efficient appliances.

8) And finally, we will work to increase our energy efficiency standards for appropriate appliances to reflect other energy-saving standards being adopted around the country.

This list has been carefully crafted by those within CUB and our network who know the affected laws currently in place (and in some cases helped write them) and know how to work for maximum impact going forward. We believe that everything on this list is eminently achievable.

In fact, we are feeling rather Boar-ish. Watch out, Salem -- here comes CUB.

Posted by Oregon CUB at 04:59 PM | Comments (2)