February 20, 2014

Compromise Bill to Protect Renewable Energy Mandates Passes Oregon House

The Oregon House of Representatives unanimously passed a bill Tuesday that would make it cheaper for small utilities to comply with state renewable energy mandates and potentially allow large utilities to sell renewable power to industrial customers under a special green tariff.

Call it the data center bill.

House Bill 4126 is the result of months of haggling among utilities and interest groups on how to accommodate the spike in electricity demand from new data centers without saddling small utilities with major costs for renewable power purchases or setting up a system that disadvantages larger utilities.

Oregon’s renewable energy standard requires the state’s largest utilities to serve 25 percent of their retail demand with renewable power by 2025, with lesser targets for smaller utilities. The law is a sacred cow for environmental groups, renewable energy advocates and the governor’s office. But it became a target of a few publicly owned utilities when growing electricity demand from energy intensive data centersthreatened to push them over the large utility threshold in the law and impose major obligations to build or buy power from wind and solar farms.

Umatilla Electric Cooperative in Hermiston didn’t want to make those investments, so it threatened to run a ballot initiative that would have gutted the renewable standards by including existing hydroelectric generation as qualifying resource. Gov. John Kitzhaber responded by setting up a task force to deal with the issue.
The compromise bill allows smaller utilities to use unbundled renewable energy certificates that they can buy cheaply from existing wind and solar farms to meet their initial RPS requirements.

Larger utilities didn’t initially like that option, arguing it would set up a two-tiered RPS system that left them with higher costs. Renewable energy advocates, meanwhile, were wary of an expensive ballot campaign that put the entire standard at risk.

The quid pro quo for utilities: the bill directs the Oregon Public Utility Commission to study the prospect of allowing larger utilities to sell renewable power to industrial customers under a special green tariff, and to implement such tariffs on a case-by-case basis. Independent power producers and energy service suppliers who offer those products today are opposed to the special tariffs, as they believe monopoly utilities will be able to leverage their existing assets to cut them out of the market.

Ted Case, who was lobbying on behalf of rural electric cooperatives, said the bill found a sweet spot among the various parties.

“Everybody gave a little something in this process,” he said. “This provides very targeted relief for what we considered to be an unintended consequence of the RPS. No one thought about these data canters back in 2007 and they scrambled the numbers, certainly for Umatilla.”

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