Oregon Stakeholders Pave the Way for Climate Regulation

CUB is in the midst of some very important and very exciting times. In its 30-year history, CUB has consistently helped to keep Oregon on the forefront of combating climate change by supporting the Energy Trust of Oregon (ETO) and helping utility companies incorporate renewable energy and energy efficiency into their portfolios. Finding cost-effective ways to reduce carbon pollution now will allow customers to avoid the costs associated with carbon regulation in the future.

Because of these and other forward-thinking initiatives, Oregon and CUB are well poised to help address the challenges that the future will hold with the EPA’s newly issued Clean Power Plan, known inside the power belt as ‘draft rule 111(d)’. The Clean Power Plan establishes a carbon emissions baseline from the energy sector for each state in the union, and requires each state to make reductions from that existing baseline.

Carbon emissions within the energy sector come from burning coal and other fossil fuels, and states are required to make significant reductions beginning in 2020 and increasing through 2030. The EPA draft rules recognize that utilities can reduce coal generation by investing in energy efficiency and renewables, and by running existing natural gas-fired power plants more often. The expectations of the EPA are spelled out in technical computationally intensive workpapers, and state agencies, energy companies, and interested parties must come together to decipher just what the rules mean and, just as importantly, decide how to meet those goals. Oregon is working hard to meet those challenges right now.

Since the proposed rule was issued in June, parties have held workshops to discuss emerging issues, potential solutions, and implementation plans. Oregon is unique, with its generous access to hydro power and historical front-of-the-curve deployment of conservation. However, Oregon’s largest utilities have significant generation in other states. That means the effect of this rule on ratepayers will be determined by compliance plans of 10 different states. This opens the door to asking whether a multi-state approach might meet the requirements at a lower cost.

Other issues have arisen due to a factor that seems like it should be simple. The EPA formulated 111(d) by calculating each state’s baseline, or benchmark energy sector carbon footprint. It then went on to calculate a reduction from that benchmark. The benchmark was established at 2012 levels, measured in carbon tons emitted per year. Interestingly, Oregon’s energy sector had a very unique year in 2012. Yield from hydro was unusually high, and Boardman Coal Plant, the only coal plant operating in Oregon, was out of commission for several months. Therefore, the Oregon benchmark is lower than it would have been if calculated in say, 2009, or 2011. When attempting to cull carbon emissions from an already lean year, the task becomes that much more difficult.

The draft rule is pretty complicated, which is necessary to try to reduce carbon using the Clean Air Act, rather than passing a new climate bill through Congress. Despite the complications though, it allows states a great deal of flexibility to reduce carbon through a combination of strategies, with energy efficiency and renewables at the forefront.

A large part of the Oregon 111(d) goals will be met by the closing of Boardman Coal Plant. When CUB got PGE to agree to close Boardman in 2010, the decision saved PGE $500 million that would have otherwise had to be spent on pollution control equipment. It will save customers additional dollars by significantly lowering the cost of complying with 111(d). This is a great example of CUB’s strategy to get utilities to reduce carbon when cost effective opportunities appear. By taking advantage of those opportunities, customers avoid significant costs of carbon regulation in the future.

CUB understands that the EPA’s goal, through the draft rule, is to mitigate climate change by reducing carbon. CUB strongly supports that mission. Carbon regulation is not factored into utility planning today, and this is a serious problem. Oregon utilities are investing billions of dollars that they expect to recover from customers. Many of those investments are going into power plants and transmission lines that will last for up to 50 years. Everyone involved agrees that it’s likely carbon regulation will be developed during the life of these investments, but there is no agreement on what such regulation will look like. This is like starting a sporting event without having developed all the rules of the game. Without knowing the rules, a coach does not know if he or she is putting the best players on the field. The same is true of a utility. Without knowing the rules, they do not know what combination of assets will best serve their customers.

CUB is working with the utilities and state regulators to ensure that customers are at the table as Oregon develops its approach to complying with the rule, and as the utilities develop plans to meet the goals. As always, we will keep you informed as this process continues. Stay tuned to our blog for updates!

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