Recently in Initiative 937 Category

I-937 Updates: New Legislation and New Administrative Rules May Alter Washington's Renewable Portfolio Standard

April 7, 2014

As a result of both legislative and administrative action, several notable changes to Washington's Initiative 937 ("I-937", also known as the Washington Energy Independence Act) are on the horizon. While rejecting large-scale reform, the legislature made significant course corrections related to treatment of conservation and conduit hydro projects under the initiative. Those changes, and possibly several others, will be addressed in ongoing rulemaking proceedings at the Washington Department of Commerce and Washington Utilities & Transportation Commission ("UTC").

Two changes to I-937 were enacted in the 2014 session of the Washington Legislature. First, HB 1643, popularly known as the "conservation smoothing" legislation, allows utilities that achieve conservation in excess of specified targets to credit the excess toward future compliance periods, within limits. As originally enacted by the voters in 2006, I-937 required all covered utilities to obtain all "achievable cost-effective conservation." This mandate was carried out in a two-year process, which requires utilities first to identify conservation targets, then to adopt a plan to achieve those targets. In carrying out this mandate, many utilities, especially smaller utilities, found that conservation is not achieved in neat blocks, but instead is often achieved in major increments that may exceed specific biennial conservation targets. In these circumstances, I-937 both denied utilities the benefit of conservation achieved above biennial targets and created a perverse incentive to delay these conservation achievements.

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Getting a CLEW About Climate Legislation: Report to Governor's Climate Workgroup Suggests Future Course of Greenhouse Gas Regulation in Washington

October 18, 2013

Earlier this week, Leidos (formerly SAIC International) delivered its final report evaluating greenhouse gas ("GHG") reduction policies from other jurisdictions to the Climate Legislative and Executive Workgroup ("CLEW"). The CLEW was created by ESSB 5802, the first piece of legislation sponsored by Gov. Jay Inslee, which is intended to establish the future legislative agenda for climate issues in our state. Leidos was retained as the CLEW's technical consultant. This week's Leidos report aims to help the CLEW quantify both the need for new climate legislation and the effectiveness of several approaches taken in other jurisdictions. The CLEW is scheduled to release its final report and recommendations at the end of 2013.

The Leidos report incorporates the GHG emissions reduction targets adopted by the legislature in 2008. Those targets are: (a) to reduce Washington's GHG emissions to 1990 levels by 2020; (b) to reduce GHG emissions to 25% below 1990 levels by 2035; and, (c) to reduce overall emissions to 50% below 1990 levels by 2050, or 70% below the state's expected emissions in that year. Evaluating current policies at both the state and federal level, the report concludes that existing policies (for example, Initiative 937 and policies encouraging energy efficiency) will achieve substantial reductions in Washington's GHG emissions, but will fall well short of the 2008 targets.

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Revised Draft I-937 Rules Suggest Significant Changes in Energy Conservation Compliance

October 8, 2013

On October 4, the Washington Department of Commerce's Office of Energy issued a "Stakeholder Discussion Draft" of revisions to the Washington Administrative Code provisions governing compliance with Initiative 937 ("I-937") for Washington's consumer-owned electric utilities. While many of the revisions are intended simply to update the regulations to reflect recent statutory changes, the Office of Energy also proposes several changes that could complicate compliance for utilities attempting to demonstrate that they have met I-937's strict energy conservation requirements. Comments are due on the Stakeholder Discussion Draft by October 25 and a workshop will be held on October 29. Although no specific deadline has been set, it is anticipated that final regulations will be issued by the end of 2013.

In addition to creating a Renewable Portfolio Standard for all Washington utilities with more than 25,000 customers, I-937 also requires those utilities to identify all "achievable cost-effective conservation potential," and to publish a plan every two years that identifies a conservation target and achieves that target. Washington's consumer-owned utilities must then submit to periodic audits demonstrating that they have achieved their conservation targets. The proposed regulations, if adopted, would create two potentially far-reaching changes to the regulations governing calculation of conservation goals and achievements.

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A Fair Wind Blows: Washington Supreme Court Rejects Challenge to Whistling Ridge Wind Project

August 30, 2013

Yesterday the Washington Supreme Court rejected a challenge to former Governor Christine Gregiore's approval of a 35-MW wind farm in Skamania County proposed by Whistling Ridge Energy, LLC. Gov. Gregoire approved the project following a lengthy administrative process conducted by the state's Energy Facility Site Evaluation Council ("EFSEC") and EFSEC's favorable recommendation to the Governor. The Court's decision is important because it helps define what energy developers must do to mitigate impacts when a project is located near, but not in, a protected area and has potential spillover effects on the protected area. In addition, the decision is important to renewable energy developers in Washington because they have the option of using EFSEC to obtain project approval, which may be especially important where strong local opposition is at odds with state and national goals regarding renewable energy development. The decision is also important to many other types of energy facilities subject to EFSEC jurisdiction, including electric and natural gas transmission projects, LNG facilities, nuclear plants, and large thermal power plants.

The dispute arose because the Whistling Ridge project is near, but not in, the Columbia River Gorge National Scenic Area. The environmental petitioners object to Whistling Ridge primarily because it may be seen from some parts of the Scenic Area, and therefore may interfere with the aesthetic values that the Scenic Area was designed to preserve. In response to these concerns, EFSEC reduced the number of windmills allowed at the project from 50 to 35, and required "micro-siting" to further reduce the aesthetic impacts of the project. With these mitigation measures, EFSEC recommended that Gov. Gregiore approve the project. Gov. Gregiore followed this recommendation.

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Washington's Attorney General Will Address I-937 Conservation Requirements

July 17, 2013

Yesterday, the office of Washington Attorney General Bob Ferguson issued a notice that it will provide a formal opinion on several legal questions that are critical to determining how Washington utilities comply with Initiate 937's requirement that they acquire all "cost-effective, reliable and feasible" energy conservation. Those wishing to comment must notify the Attorney General by August 14.

In addition to the more well-known requirements for utilities to meet specific targets for the purchase of renewable energy, I-937, also known as the "Washington Energy Independence Act," requires utilities with more than 25,000 customers to plan and implement energy conservation programs on a two-year cycle. Beginning in 2010, and every two years thereafter, a covered utility must publish a plan identifying its "acheivable cost-effective conservation potential," set a target for conservation for the two-year period, then implement a plan to achieve the conservation target.

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State Energy Office Concludes Non-Utility Conservation Can Be Used for I-937 Compliance

June 13, 2013

The Washington State Energy Office (which operates within the Department of Commerce) recently issued an Advisory Opinion of considerable importance to utilities required to meet Initiative 937's energy conservation targets. The Advisory Opinion concludes that a utility may count documented and cost-effective energy savings toward I-937 conservation targets even if the utility has no direct involvement in carrying out the conservation measure.

Passed by Washington voters in 2006, I-937 (also known as the Washington Energy Independence Act) is well known for imposing a Renewable Portfolio Standard that requires covered utilities to purchase an increasing amount of qualified renewable resources, ultimately requiring 15% of their portfolios to be supplied by renewables by 2020. Less well know, but equally important, I-937 also requires covered utilities to develop and carry out plans for acquiring "all available conservation that is cost-effective, reliable, and feasible." The Advisory Opinion answers some important questions for utilities carrying out this conservation mandate.

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New Washington Energy Legislation: Legislature Continues to Wrestle With Questions Raised by Renewables

May 6, 2013

Reflecting new Gov. Jay Inslee's strong interest in renewable energy and climate change, these issues were hot topics during this year's legislative session. With the conclusion of the regular session at the end of April, the fate of most energy-related bills has now been decided. Because Gov. Inslee has called an executive session to address unresolved tax and budget issues, the final story has not yet been written. But a number of bills important to electric utilities, renewable energy developers, and others in the energy industry have now become law.

As has become routine in recent years, Washington's Renewable Portfolio Standard, Initiative 937 ("I-937") continues to be a flashpoint for controversy. Although comprehensive reforms reflecting a "grand bargain" between environmental and industry interests once again eluded the legislature, three important changes to I-937 were enacted. These are:

SB 5400 (signed April 23): This legislation allows a utility subject to I-937 to count wind energy imported from states where the utility has retail customers toward the utility's I-937 compliance obligations. The bill provides a limited waiver from I-937's requirement that renewable power must come from the Pacific Northwest. For reasons we have previously discussed, this provision is, at best, constitutionally suspect. It is also probably counterproductive because California has used similar territorial restrictions to limit access to its renewables marketplace, causing havoc in the Pacific Northwest renewables industry. As a practical matter, the result of the bill is somewhat limited, allowing PacifiCorp to count otherwise-excluded Wyoming wind resources toward its I-937 compliance obligations.

HB 1154 (signed May 1): This bill amends I-937's prohibition against double-counting of the environmental benefits of renewable generators so that biomass and biogas producers can sell carbon offsets attributable to the destruction of methane (a powerful greenhouse gas), while still receiving credit for renewable energy production under I-937. This change will allow dairy digesters, landfill gas generators, and similar renewable generators to participate in emerging carbon-offset markets like those in California. These markets promise a potentially substantial revenue stream for operators of biomass and biogas facilities. This legislation may therefore kick-start construction of such facilities in Washington.

SB5297 (Governor's signature pending): This bill is follow-up legislation to the complex legislative package passed in 2011 to facilitate the transition of the Centralia Steam Plant from coal to natural gas. Part of the 2011 legislation allowed utilities to purchase long-term "coal transition power" contracts from Centralia to provide the financial assurances necessary for the refueling of the plant. This bill helps facilitate contracts for "coal transition power" by permitting utilities to purchase coal transition power without threatening their eligibility for I-937's "safe harbor" for no-growth utilities. The "safe harbor" provision allows utilities with no load growth to comply with I-937 by spending 1% of their retail revenues on eligible renewable resources, even if that spending does not achieve otherwise-applicable portfolio requirements for renewable resources.

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Gov. Inslee's Climate Change Study Bill Is The First Energy Legislation to Clear the Washington Legislature

March 26, 2013

On Monday, the Washington House of Representatives passed ESSB 5802, which creates a "Climate Legislative and Executive Work Group" to study the state's options for achieving significant reductions in greenhouse gases. The bill, which is the first of Gov. Inslee's legislative requests to pass both houses of the legislature, will set the stage for more substantive legislative action on climate change in next year's legislative session.

ESSB 5802 is intended to jump-start the debate on greenhouse gas reduction in the 2014 legislative session by delivering a set of recommended policies to the legislature by the end of 2013. The first step in this process calls for the Climate Legislative and Executive Work Group to retain a politically neutral consultant to carry out a comprehensive study of the policy options for reducing Washington's greenhouse gas emissions, including a baseline assessment of current GHG emissions by sector, a review of programs adopted by the federal government and by other states and neighboring provinces of Canada, and an analysis of the costs and benefits of the various policy options. The study must also examine a range of specifically-designated policies, including, for example, a Renewable Fuels Standard, emissions performance standards, and policies to encourage greater energy efficiency. This initial evaluation will be delivered to Gov. Inslee by October 15, 2013.

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FERC Proposes Changes to Small Generator Interconnection Process Designed To Encourage Solar, Distributed Resources

February 4, 2013

Responding to a petition filed by the Solar Energy Industries Association last year, the Federal Energy Regulatory Commission ("FERC") at its January meeting issued a Notice of Proposed Rulemaking ("NOPR") soliciting comments on changes to its rules governing interconnection of small generators. Citing the rapid growth of solar photo-voltaic ("PV") systems and expanding state renewable portfolio standards, FERC argues that changes in the Small Generator Interconnection process are necessary to keep up with changes in the industry. The proposed changes are aimed at encouraging distributed generation by streamlining the interconnection process, especially for generators with capacity of 5 MW or less. Comments on the NOPR are due June 3, 2013. FERC will hold a technical conference on the proposals prior to that date.

Under the current process, small generators (defined as generators with no more than 20 MW of capacity) may interconnect with FERC-jurisdictional transmission utilities by following the pro forma Small Generation Interconnection Procedures ("SGIP") and signing a pro forma Small Generator Interconnection Agreement ("SGIA"). Under the existing SGIP process, small generators with a capacity between 2 and 20 MW are required to follow the "Study Process," in which they file a request for a study with the interconnecting utility, which then carries out system impact studies to identify any reliability or safety problems that might be created by the new generator and the system upgrades that the generator must pay for to remedy these problems.

Rather than going through the Study Process, generators under 2 MW of capacity go through the "Fast Track Process." The Fast Track Process relies on a series of "technical screens," rather than studies, to identify potential safety and reliability concerns. If no problems are identified, the generator can then sign a SGIA and interconnect. If problems are identified, then the interconnecting utility generator can work through options with the interconnecting utility to resolve those problems. Finally, very small generators, with 10 kW of capacity or less, can interconnect using the "10 kW Inverter Process," which allows them to interconnect if they use a certified inverter designed to avoid safety and reliability issues and pass the "technical screen" process.

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Northwest Renewable RFPs: Seattle City Light Issues RFP For Renewable Resources, Portland General's Is Due Soon

September 18, 2012

In what has become an annual autumn ritual, Seattle City Light recently issued a Request for Proposals ("RFP") seeking up to 150,000 MWh of renewable energy or Renewable Energy Credits ("RECs"), with delivery to begin in 2020.

While City Light promises to consider a broad range of proposals, including proposals in which City Light would take equity ownership, there are several important conditions: (1) the energy and/or RECs must be from "eligible renewable resources" as defined in Initiative 937, Washington's voter-approved renewable portfolio standard; (2) project proponents must demonstrate that they are sufficiently creditworthy to deliver the promised energy or RECs; and, (3) City Light prefers baseload resources to complement its existing generation portfolio, which is heavily weighted toward hydropower. Although City Light probably would have issued the RFP in any event, it is worth knowing that City Light previously contracted for purchase of RECs from Exergy Development Group's recently-terminated wind projects in Idaho, which would have had a total capacity of 116 MW.

Notices of Intent to Respond are due October 1 and full proposals are due October 15. City Light aims to complete contracts with developers chosen in this RFP by February of next year.

Meanwhile, Portland General Electric continues to move forward with its RFP for renewable resources. The draft RFP will be reviewed at the Oregon Public Utility Commission's September 25 meeting. Barring a major setback for PGE, the final RFP should be issued in the near future.


FERC Claims Jurisdiction Over Renewable Energy Credits

June 11, 2012

The Federal Energy Regulatory Commission ("FERC") recently issued an order claiming jurisdiction over certain transactions involving Renewable Energy Credits ("RECs"). FERC reasoned that its jurisdiction extends to the terms and conditions of wholesale energy sales moving in interstate commerce and that REC sales, if "bundled" with a sale of electric power, are jurisdictional because the REC price materially affects the jurisdictional sale. On the other hand, FERC concluded, unbundled REC sales, which are not coupled with a sale of power, are not subject to FERC jurisdiction.

RECs are the product of state Renewable Portfolio Standard ("RPS") laws requiring that electric utilities produce a certain percentage of the power they sell from renewable resources. Most RPS laws allow utilities to purchase RECs as a means of complying with RPS requirements. Thus, a utility that does not need physical power may purchase a REC, which documents that it has acquired the environmental attributes of a renewable generation project, while allowing the unneeded power to be sold separately to other buyers. For example, the Washington RPS statute, Initiative 937, allows utilities to meet their RPS targets entirely through the purchase of RECs. On the other hand, California's recently-passed RPS legislation, SBX2, places stringent limits on the use of REC-only transactions for RPS compliance. RPS laws are now in place in 29 states, plus the District of Columbia and Puerto Rico. In addition, eight more states have RPS goals. Hence, REC sales, both bundled and unbundled, have become increasingly common.

The FERC order has important implications. Bundled REC sales contracts must now recognize that such contracts are subject to FERC jurisdiction, which may give rise to a host of legal consequences. For example, the sale may be subject to price caps if one or both parties to the transaction have not been granted authority by FERC to charge market-based rates. Similarly, a bundled REC contract should also include a "Mobile-Sierra" or "Memphis" clause to govern the standard for review should be transaction be challenged at FERC.

FERC's expansion of jurisdiction also carries with it an implied roll-back of state powers because the Federal Power Act gives FERC exclusive jurisdiction over matters within its domain. In other words, because the order establishes bundled REC transactions as an area of exclusive FERC jurisdiction, it necessarily implies that state laws extending into this area of exclusive jurisdiction are preempted. Hence, the order raises the question whether state-level rules governing the interstate movement of renewable energy contracts, such as the rules recently enacted by California governing importation of renewable energy into the state, are preempted by FERC's action.

New Legislation Modifies Initiative 937

June 1, 2012

This year, the Washington Legislature finally cracked the I-937 nut, if only in a modest way. Passed by voters in 2006, I-937 requires Washington utilities to adopt all cost-effective conservation measures and also requires utilities to provide specific percentages of their power portfolios from "eligible renewable resources" (3% this year, rising to 9% in 2016, and reaching 20% in 2020). As soon as I-937 was open for legislative amendment in 2008, extensive amendments to the Initiative were proposed in each legislative session. This year, two bills finally made it through the legislative logjam.

The first, SSB 6414, is particularly important for Washington's consumer-owned utilities. If there is doubt about whether a project qualifies under I-937's conservation or renewable energy standards, a consumer-owned utility now has the option of applying for an advisory opinion from the Washington Department of Commerce. If the Department concludes that the project qualifies and the utility's elected board adopts that conclusion in an open hearing, the conclusion is binding during the I-937 audit and enforcement process. With passage of the new legislation, consumer-owned utilities now have a mechanism to remove a significant source of uncertainty arising under I-937.

The second bill, ESB 5575, allows certain "legacy" biomass plants, built before 1999, to be counted as "eligible renewable resources," so that the utility purchasing output from those plants can count the power produced towards its I-937 renewable targets. The legislation primarily benefits existing forest products facilities with associated generators fired by wood waste and was viewed largely as a means of supporting struggling industrial facilities, especially in Washington's rural counties. It also modestly expands the choices available to utilities to meet their I-937 targets.