By Amelia Schlusser, Staff Attorney
The Oregon legislature is currently considering a bill that
aims to reduce the generation and
use of coal-fired electricity in the state
and replace coal with clean energy by 2025. The bill’s sponsors, Senator Chris
Edwards and Representative Tobias Read, introduced the proposed legislation as S.B.
477 in the Oregon Senate and H.B.
2729 in the Oregon House of Representatives. The introduced bill requires an
“electric company” to “(a) Reduce the allocation of electricity from
coal-derived generating resources to zero on or before January 1, 2025; and (b)
Replace those coal-derived generating resources with clean energy.” This post discusses
the bill’s applicability and specific requirements.
PGE and PacifiCorp own shares in the Colstrip Generating Station, a coal-fired power plant in Montana |
The Bill’s
Applicability and Primary Mandate
The bill applies to electric companies that sell power to
Oregon consumers. However, many electricity providers in Oregon don’t qualify
as “electric companies” under Oregon law. The introduced bill uses the existing
definition of the term found in ORS
757.600, which defines “electric company” as “an entity engaged in the
business of distributing electricity to retail electricity consumers in this
state, but does not include a consumer-owned utility.” In other words, the bill
only applies to Oregon’s investor-owned utilities (IOUs), including PGE,
Pacific Power, and Idaho Power. It does not apply to consumer-owned utilities,
including municipal electric utilities, public utility districts, or rural
electric cooperatives.
So under the introduced bill, Oregon’s three investor-owned
utilities (IOUs) must “[r]educe the allocation of electricity from coal-derived
generating resources to zero on or before January 1, 2025.” But what does this
mean? Each of the IOUs operating in Oregon (PGE, Pacific Power, and Idaho
Power) own or partially own coal-fired generating resources. Presumably a
portion of the power from these plants is “allocated” to the utilities’
customers in Oregon. The bill requires these utilities to “reallocate” their
coal-fired power to their customers outside of Oregon. In other words, the bill
prohibits the IOUs from selling the coal-fired power they generate to Oregon
consumers after January 1, 2025.
However, the bill “[d]oes not apply to market purchases of
unspecified power.” This presumably means that the bill’s requirements don’t
apply to wholesale sales of coal-fired power from third party generators to
IOUs selling power in Oregon’s retail market. In other words, Oregon’s IOUs
could still purchase coal-fired power on the wholesale market and sell that
power to Oregon consumers. This distinction has legal significance, because the
Federal Energy Regulatory Commission (FERC) has exclusive jurisdiction over
wholesale electricity markets and the Commerce Clause of the U.S. Constitution
restricts states’ from regulating commercial activity outside of their borders.
I will explore this issue further in a later post. For now, I think it’s
important to note that the bill would not create a total barrier to coal-fired
power consumption in Oregon.
The Bill’s Secondary
Mandate: Replace Coal-fired Power With Clean Energy
The bill ultimately requires Oregon’s investor-owned
utilities (IOUs) to stop allocating (i.e. selling) electricity they generate
from coal to Oregon consumers by 2025. In the meantime, the bill requires the
Oregon Public Utility Commission (PUC) to direct the IOUs to “develop a
least-cost plan” to reduce their allocations of coal-fired power. These plans
must include “a comprehensive accounting” of the utilities’ coal-fired
generating resources. Plans must also include an analysis of the costs each
coal-fired power plant will incur over the remainder of the plant’s useful life
and an analysis of whether a coal-fired power plant will become “uneconomical
before the end of the plant’s useful life.” In addition, utility plans must include
a “least-cost, least-risk analysis of the order in which the electric company
will reallocate electricity generated by [coal-fired power] plants.” This
presumably means that each IOU must evaluate different options for reducing
sales of coal-fired power in Oregon and replacing that lost generation with
power from other, “cleaner” resources, while minimizing costs and risks to
ratepayers.
In addition to producing a “least-cost plan” to reallocate
their coal-fired power, the bill directs each IOU to “identify the quantity and
type of supply-side and demand-side resources that will replace the
coal-derived generating resources.” The utility then must “identify the
least-cost method of achieving a mix of energy resources that is at least 90
percent cleaner than the coal-derived generating resources being replaced.” So
each IOU must determine which resources are available to replace their
coal-fired generation, and identify the combination of resources capable of
replacing coal power at the lowest cost to consumers. These replacement
resources must be “at least 90 percent cleaner” than the coal-fired resources
they replace. In addition, utilities must “give preference to resources that
allow electricity to be transmitted to this state on a real-time basis without
shaping, storage or integration services,” so long as the resource is not more
expensive or less reliable than alternative resources. This means that
utilities may only replace their coal-fired generation with variable renewable
resources, such as wind and solar power, if these variable resource options are
less costly than other options and do not compromise the reliability of the
grid.
Unanswered Questions
The bill, as introduced, aims to achieve an important and
admirable objective. Coal-fired power pollutes
our air and water, emits
more carbon dioxide than any other source in the U.S., and destroys
our national landscape. Oregon’s proposed legislation strives to protect our
air, land, water, and climate by eliminating this resource from the state’s
energy supply. While this is a commendable goal, the proposed bill creates some
significant questions. First, it does not define “90 percent cleaner,” and this
ambiguity could leave the bill vulnerable to legal challenge if it becomes law.
Second, the bill explicitly disfavors replacing coal-fired power with a
combination of wind or solar power and energy storage. Given the bill’s
least-cost resource mandate, this preference for non-variable resources is a
little befuddling. And finally, the bill would repeal Oregon’s existing greenhouse gas emission
standards for investor-owned utilities, which limit carbon dioxide
emissions from all generating resources, including natural gas plants.
In addition to these textual ambiguities, the bill raises
some interesting legal questions regarding state energy regulation. I’ll
explore these issues in greater detail in next week’s post.
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