CUB to Oregon Legislature: Pass Carbon Bill, SB 1530

We are almost a week into the 2020 Oregon Legislative session. Legislation to reduce statewide greenhouse gas emissions (GHGs) is once again up for debate and CUB urges legislators to pass SB 1530, the “Oregon Greenhouse Gas Initiative”. This bill establishes an enforceable and declining statewide cap-trade-and-invest system to ensure that Oregon’s GHGs decline to at least 80 percent below 1990 levels by 2050. SB 1530 also addresses criticisms directed at HB 2020, the near-miss cap-trade-and-invest vehicle from the 2019 session.

CUB believes that our energy systems need to reflect the realities of a carbon constrained world. The best way to achieve this while protecting consumers is to take a gradual approach. Enacting SB 1530 in 2020 gets Oregon started on a 30-year path to meet the state’s scientifically based goals. If Oregon (or the rest of the world for that matter) waits five or ten years, we will still need to make the same transition, but on a shorter timetable and at higher cost.

This “gradual but get moving” approach has served Oregon consumers well. A decade ago, CUB won agreements with Portland General Electric (PGE) and the State of Oregon to phase out the Boardman coal plant by 2020. Some criticized the decision, arguing that because Boardman was an important baseload generating resource, it would be difficult to replace. CUB disagreed because we felt confident in a gradual economic strategy allowing PGE enough time to secure affordable replacement power. When Boardman closes later this year, few people outside of the energy industry will even notice and while there will be impacts in Morrow County, the community has had ten years to prepare for the closure. The same holds true with 2016’s “Coal to Clean” legislation, SB 1547, which gave us 14 years to remove all coal resources from Oregon utilities’ energy supply mix. PGE and Pacific Power continue to implement SB 1547 requirements with minimal impact on customer rates or utility service delivery.

Similarly, CUB believes that any impacts to customers from SB 1530 will be small and gradual, while still ensuring timely action. And making the transition to a cleaner economy will bring significant economic benefits to Oregon. Here is CUB’s analysis of SB 1530 and potential impacts to different energy sectors.

Electricity: SB 1530 should not have any harmful effects on electricity consumers. Because Oregon law already requires investor-owned electric utilities to eliminate coal from their energy supply mix while investing in renewable resources and all cost-effective energy efficiency, utilities are already on a clear path to meet the GHG reduction goals identified in SB 1530. This bill offers the electric sector emissions allowances consistent with this pathway, resulting in no additional costs to consumers. In fact, electric service consumers will likely benefit from enhanced energy efficiency and other clean energy programs because a price on GHG emissions will improve these programs’ cost effectiveness.

Natural Gas: SB 1530 requires natural gas utilities to introduce new programs offering rebates to partially offset potential customer bill increases, as well as additional efficiency programs, and integration of renewable natural gas (with lower carbon intensity) onto the existing system. The bill creates three communities of gas users, some of whom may see modest and gradual price impacts:

• Low Income Customers - The state will grant natural gas utilities allowances to account for their low-income customers’ gas usage. This protects low-income customers from higher costs associated with the natural gas utilities purchasing allowances.
• Trade Exposed Business Customers - Some Oregon businesses use natural gas as part of their industrial processes. Some of these businesses also sell their products out-of-state where they compete with businesses not subject to Oregon laws. These “trade exposed” business customers are limited in their ability to absorb higher costs associated with GHG emissions allowances, and could potentially move out-of-state if the cost of doing business in Oregon rises. SB 1530 allows the state to grant these businesses allowances equal to their emissions, but requires them to conduct energy audits and implement all energy efficiency investments with a five-year payback period. These businesses would also gain access for the first time to Energy Trust of Oregon energy efficiency programs that will help them further reduce their energy usage. All of these changes will facilitate significant energy efficiency gains for these trade exposed companies, which reduces their emissions while making them more competitive.
• All Other Natural Gas Users - All other gas users will likely experience small rate impacts, similar in size to typical annual variations in natural gas costs. But these will be partially offset by new bill credits, energy efficiency programs, and the development of renewable natural gas.

Gasoline: The biggest change in SB 1530 compared to HB 2020 is a plan to phase in coverage for the transportation sector. This section of the bill would first require allowances for gasoline sold in the Portland metro area. Mid-sized cities would phase in next, and most rural communities would remain exempt. CUB believes this is a reasonable compromise.

Opportunities for transportation sector carbon reduction in rural areas are significantly less than in densely populated urban areas. Compared to their urban counterparts, rural Oregonians drive longer distances and have less access to transportation alternatives, like mass transit and ride share programs, and infrastructure to support electric vehicles (EVs). There are, however, significant GHG emissions reduction opportunities in the Portland metro area. Urbanites enjoy greater access to mass transit, including low-carbon options such as electric light rail and buses. Private and public EV charging infrastructure, while not as robust as needed, certainly exceeds that which exists in rural communities. Thousands of Portland area residents have already and will continue to purchase electric vehicles. CUB estimates that more than six percent of new vehicles being sold in PGE’s service territory are electric.

The authors of SB 1530 embraced significant revisions to address legitimate concerns from rural Oregonians and trade exposed businesses. At the same time, both the GHG emissions cap and timetable to reduce those emissions remain the same as those put forward in HB 2020. CUB applauds legislative leaders’ thoughtful efforts to facilitate the buy-in of vulnerable and important stakeholders, without weakening provisions to drive GHG emissions reductions.

Ultimately, CUB supports this legislation because it will ensure significant and economy-wide GHG emissions reductions in Oregon on a gradual, 30-year timetable while keeping energy affordable for Oregon customers.

Please join us in urging the legislature to support HB 1530, and stay tuned for more legislative updates!

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