CUB Applauds Oregon Climate Action Program: HB 2020
Posted on February 8, 2019 by Bob Jenks
Tags, Energy, General Interest

CUB’s executive director, Bob Jenks, testified this afternoon on HB 2020, which establishes the Oregon Climate Action Plan (Oregon CAP). Bob provided background information on previously adopted coal removal mandates and other important electric sector policy steps. In addition, Bob provided context needed to evaluate climate action steps in the natural gas sector. As Bob noted in his testimony, no one should be surprised at possible modifications, but CUB supports the general direction of HB 2020.
Building on earlier legislative efforts and extensive interim legislative session research, Oregon CAP charts a course for Oregon to reduce greenhouse gas levels at or below 80 percent of 1990 emissions by 2050. Not only does HB 2020 exceed Oregon’s previous target reduction level for 2050, it includes a nearer-term goal of reducing greenhouse gas levels at least 45 percent below 1990 levels by 2035.
As Oregon’s residential utility customer advocate, CUB’s analysis in this blog focuses on provisions specific to regulated electric and natural gas utilities and is more detailed than Bob’s testimony. However, it is important to note that Oregon CAP, appropriately in our view, takes a comprehensive, economy-wide approach.
(Two quick terminology notes: First, some may call HB 2020 the Clean Energy Jobs bill, the title of previous legislation. Second, HB 2020 considers all greenhouse gas emissions, but carbon dioxide emissions are the major problem. The remainder of the blog will use the shorthand term ‘carbon’. This is consistent with Oregon CAP because the bill’s implementation mechanism involves an ongoing legislative Joint Committee on Climate Action and an administrative Carbon Policy Office.)
Oregon CAP calls for a hard, declining cap on Oregon’s overall carbon emissions until 2050, at which point emissions should be at least 80 percent below 1990 levels. HB 2020 applies to entities that generate at or above an annual threshold of 25,000 metric tons of carbon dioxide. The bill establishes an auction to distribute some carbon allowances and directly provides allowances to other key industries. Emitting industries would provide carbon allowances for each ton of their pollution. Because participating entities would buy and sell allowances on the open market, carbon polluters have an incentive to reduce their emissions. Even if HB 2020 provides an allowance to an entity directly, the entity can sell the allowance if it reduces emissions below its share of the overall cap. As the overall carbon emissions cap declines, the market will lead to efficient pollution reductions.
Since the last legislative session in spring of 2018, CUB has provided input and advice on how to distribute allowances to utilities. We believe that HB 2020 achieves carbon reduction goals while mitigating impacts on residential customers. CUB also supports expanding and improving bill payment assistance and weatherization programs for low-income Oregonians. Doing so is an important corollary to an effective, overall carbon reduction strategy.
The Electric Sector
The electric sector is the only significant source of carbon pollution in Oregon that already faces strenuous mandatory requirements to reduce carbon emissions. CUB supports providing allowances directly to electric utilities since this approach accounts for this sector’s current carbon reduction actions and additional steps to meet HB 2020 carbon emission caps.
Oregon law, particularly SB 1547, the Clean Electricity and Coal Transition Act of 2016, requires our big electric utilities to significantly reduce their carbon emissions:
1. Energy Efficiency mandate: Big electric utilities are required to invest in all cost-effective energy efficiency. Portland General Electric and Pacific Power customers invest more than $130 million per year toward energy efficiency. Since 1990, the average household served by these two utilities has seen their electric usage decline by 20 percent. No other state invests at this level and achieves these results. Without this efficiency investment, Oregonians would have demanded more electricity, which would have required new coal plants in the 1980s and new gas plants in the 1990s and ‘00s. The culmination of that energy efficiency investment, however, ensured those plants never broke ground, resulting in reduced carbon emissions by tens of millions of tons.
HB 2020 will enhance this trend because the carbon emission allowance market adds significant value to energy efficiency. Under Oregon CAP, more measures will become cost-effective, and customers will continue to invest more than $100 million per year to improve the efficiency of our homes and businesses.
2. Eliminate Coal Mandate: SB 1547 requires the big electric utilities to remove coal from Oregon’s power mix by 2030. This means that customers must pay off the remaining investments in these plants and contribute funds for decommissioning. In addition, as this generation is removed, customers must spend billions on replacement energy sources. Since coal is the largest contributor of carbon emissions by electric utilities, SB 1547 will continue to dramatically reduce carbon emissions from the electric sector.
But Oregon needs to do more by placing a monetary value on carbon reductions. HB 2020 will add an additional incentive for the electric utilities to close coal plants.
3. Renewable Mandate: The big utilities must increase the qualifying renewables in their portfolios to 27 percent by 2025, 35 percent by 2030, 45 percent by 2035, and 50 percent by 2040. These actions require investing billions of dollars in new renewable resources and represent new qualifying renewables, not legacy hydro power. The level of non-carbon producing clean energy is greater than 50 percent.
But Oregon needs to do more and HB 2020 will incentivize utilities to go beyond their SB 1547 renewable requirements.
No other segment of Oregon’s economy has carbon reduction mandates anywhere close to the scale required by SB 1547. Much of Oregon’s early carbon reduction will come from these mandates. But these mandates will cost utilities and their customers billions of dollars.
Some have suggested that requiring electric utilities to purchase allowances at auction would be preferable to providing a direct allocation. CUB disagrees. Customers already pay billions to decarbonize our utilities due to current mandates. Requiring these utilities to purchase allowances will raise rates but will do nothing to further incentivize decarbonization. For example, if the value of a carbon allowance for a ton of carbon is $20, then utilities will save $20 for every ton of carbon eliminated from their system, regardless of whether the utility had to pay for the original carbon allowance.
Electric utilities are regulated monopolies. If my utility’s rates go up because it has to buy carbon allowances, I do not have the option of going to another, cleaner utility. I simply have to pay the higher rates. Because utility rates will already include billions of dollars associated with decarbonizing the utility, there is no value to adding an additional price signal to penalize the customer for the utility’s fuel mix. This approach is particularly important in Pacific Power service territory which includes many of Oregon’s rural, economically challenged, and increasingly climate-vulnerable communities.
The Natural Gas Sector
CUB also represents customers of natural gas utilities. In terms of HB 2020, the following three ways in which natural gas utilities are different from electric utilities are pertinent:
1) Natural gas utilities do not face the same mandates to invest in all cost-effective energy efficiency, to eliminate dirty fuels, and to increase clean energy. Gas utility customers do not face billions of dollars in mandated spending to reduce carbon emissions as is the case for customers of Oregon’s big electric utilities. Natural gas carbon reduction programs are voluntary.
2) There are substitutes for natural gas. While all our modern homes and businesses require electricity, less than half of Oregon homes and businesses have natural gas service and there are alternative options to meet those service needs.
3) Natural gas prices are at a historic low. Prices are half of what they were in 1980. This contrasts with the electric sector, which in Oregon has residential electric bills, when adjusted for inflation, that are roughly the same as in 1980. In other words, affordability issues are different among the electric and natural gas sectors.
Oregon CAP would provide natural gas utilities with an amount of direct allowances attributed to the load of low-income customers. The value of these allowances can be used to offset costs to low-income customers, or support programs such as weatherization, allowing customers to avoid future compliance costs.
Natural gas utilities will have choices to make. They can buy carbon allowances to offset their carbon emissions, or they can increase investments in energy efficiency and renewable natural gas to decrease their emissions. Absent existing mandates akin to SB 1547 for gas utilities to reduce carbon emissions, Oregon CAP is needed to ensure that the natural gas sector reduces emissions in a timeframe commensurate with the electric sector.
CUB’s Reaction
CUB is generally pleased with HB 2020 – though we recognize that opponents with a range of perspectives will raise concerns and propose amendments. As Bob testified, the bill will change as the legislative session progresses. CUB, however, is prepared to work with both proponents and critics to improve and pass Oregon CAP. Climate change is real. Oregonians can plainly see and feel the effects. There is little doubt about the need for carbon regulation. With electric and natural gas utilities already investing billions of dollars to serve Oregon customers, it is prudent to establish Oregon CAP in 2019 to ensure consistent investments with carbon reduction commitments elsewhere. HB 2020 does this, while offering critical protections for electric utility customers and low income gas utility customers.
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02/08/19 | 0 Comments | CUB Applauds Oregon Climate Action Program: HB 2020