Volume 08-2 ~ March 20, 2008
Topics
Cap and Trade Principles and Study
Arrears Payment Bill Goes to Governor
Disconnection Notice to Cities Moves Forward
New Incentives for CIPs and Renewables
Cap and Trade Principles and Study
The Senate and House are going down different paths in their approach to a regional greenhouse gas emissions cap and trade program. After hearings in four committees, the Senate is looking at reports and studies, without a declaration of cap and trade program principles that must be adhered to. The House, however, is sticking with cap and trade program principles that should be considered (read required), including the auctioning of credits and directing all funds to the State, rather than distributing allowances or a combination of allowances and auctions. We oppose HF 3195 (Knuth – DFL, New Brighton) and accept SF 2818 (Anderson – DFL, St. Paul). Both bills are now in their respective finance committees. SF 2818 contains six key provisions:
· Create the Legislative Greenhouse Gas Accord Advisory Group to serve in an advisory capacity to the Governor’s Midwestern Greenhouse Gas Accord.
· Require the Administration to submit reports to the Legislature on the development, progress, and economic impacts of the Accord. No cap and trade agreement (Accord) can go into effect until approved by the Legislature. The economic impact analysis will evaluate costs and benefits of the proposed model program on the State economy, individual industrial sectors, and consumers. This includes estimated increases in energy prices and their impacts.
· Require the Department of Commerce to submit a report to the Legislature on potential revenues to the State from a cap and trade program and how the revenue could be spent. Here, the projected revenues (that is, taxes collected) should be enormous if credits are all auctioned. There appears to be a major concern that some folks might make a profit from the cap and trade program, as opposed to all money from the program going to the State.
· Study the “options on how decisions would be made on expenditures of possible revenues to the state under a cap and trade program.” In short, if the State is going to receive lots of new funds, then who should help decide how to spend all that new money.
· As part of the economic impact analysis, study the impacts of various types of expenditures, including direct rebates, grants and incentives for conservation and renewables, financial assistance to businesses, investments in worker training, incentives for carbon sequestration, and more.
· Of the abovementioned expenditures, determine the extent this spending will help the State in its transition to the new green economy and will increase the economic gains and reduce the dislocating impacts of the transition. More specifically, the study must assess the extent the spending will meet the environmental and economic development goals of the State with the least amount of disruption and inequities.
A major issue of this debate is, of course, the cost of a cap and trade program. For example, we noted earlier that the electric rate impact for a residential customer at $35 per ton of CO2 would be about $450 annually, that is, about a 40% rate increase. Other utilities would see different figures, and MREA is working with other groups to get a better handle on cost impacts. A recent study by the National Association of Manufacturers estimates that the Lieberman-Warner proposal in Washington would result in Minnesota losing 56,000 – 75,000 jobs by 2030, reducing disposable income $4,500 -- $8,200, increasing gas prices 73 – 140%, and increasing electric rates 124 – 153 percent by 2030. What’s a few percentage points among friends!
MREA Grassroots Days, March 17-18, focused on HF 3537, along with cap and trade and a solar energy carve out. We continue to emphasize the feed-in tariff bill because no bill is really dead until they close the Capitol doors and because this bill ranks as one of the worst energy bills ever offered. The bill is so bad that no Senator will introduce it. After two hearings, the bill was held in the House Energy Committee, leaving uncertainty whether it might reappear – like in an ominous omnibus energy bill. Upon passage of the second committee deadline, March 19, that did not happen. Not even a study. We feel a little better now that the second deadline has passed.
HF 3843 is on the House Floor after passing the House Energy Committee. The Senate companion bill, SF 3528, after many hours of debate, failed in the Senate Energy Committee on a tie vote. We like to think the MREA Grassroots Day had a helping hand in that defeat, along with additional grassroots activity from the municipal utilities. MREA opposed the bill because it requires a small percentage of the renewable energy mandate to be mostly small solar – a very bad, expensive precedent favoring a particular technology. To make the point, one Senator offered an amendment carving out a percentage of the RES for hydrogen.
GRE’s Mark Rathbun, in testifying against the bill, stated that GRE believes that solar PV has a place as a viable energy source, but cannot support a carve out for a technology that is currently not cost effective. We object, he said, to creating niches for technologies that will raise the cost of RES compliance to our members. MREA strongly protested language that prohibited utilities from using the safety valve/off ramp provisions in the RES while achieving the solar carve-out. That sentence was deleted from both the House and Senate bill. We also mentioned to legislators that the incremental cost increase is enormous – over 1000% higher than our current cost. The blended rate increase surely would not be that large, but what about the next carve out? What about the compounding rate increases on top of everything else?
Arrears Payment Bill Goes to Governor
HF 3368 has passed both houses and is on its way to Governor Pawlenty. The bill requires utilities, including co-ops, to consider a customer’s financial situation when offering a payment arrangement for arrears. The bill also provides that no additional deposit can be charged “to continue” service to a connected customer who enters a payment arrangement and is reasonably on time with payments. The bill does not prohibit the use of a security deposit to “restore” or “reconnect” service. Other provisions in the bill apply to regulated utilities only.
Disconnection Notice to Cities Moves Forward
SF 2775 is on the Senate Floor and its companion bill, HF 3229, has one more committee to go through. Upon written request from a city, on October 15 and November 1 of each year, a report from a utility, including co-ops, must be made available to the city of the address of properties currently disconnected and the date of disconnection. Upon written request from a city between October 15 and April 15, daily reports must be made available of the address and date of any newly disconnected properties. Disconnection notice applies only to addresses that do not request shut off and are not reconnected within 24 hours. A data privacy provision is included to hold utilities harmless. As mentioned in the last report, this bill is in response to the home foreclosure crises and certain cities wanting to prevent water damage to disconnected houses.
New Incentives for CIPs and Renewables
Sometimes aggressive mandates just are not enough. An added incentive is to count certain conservation practices and small renewables toward our conservation spending requirements (CIPs). For example, HF 2946/SF 3089 provides that for a limited time the strategic planting of trees and shrubs on property of a retail customer is eligible as a CIP expenditure. Both bills are on their respective floor. Also on each floor is HF 3857/SF 3698, which allows utilities to count qualifying solar energy projects as CIP expenditures and as kwh savings above one percent. Utilities may also use up to 5% of their CIPs spending on various distributed generation projects, including qualifying solar energy projects.
In addition to expanding CIPs, low-interest loans and tax incentives are also being proposed. The Governor’s local renewable energy initiative is one example, HF 3334/SF 2949. The bill creates a microenergy loan program within the Department of Commerce to issue low-interest, long-term loans to local units of government. Local governments, in turn, would use the funds themselves to finance small-scale community renewable energy projects or would provide money to individuals or small businesses for assistance with the costs of small renewable projects. SF 2657, by Senator Dan Skogen, (companion HF 3177) is an example of a small wind income tax credit up to 35% of the total cost of installation, but no more than $2,500. And SF 3741/HF 4064 provides property and income tax incentives for green economy businesses. A green economy business is one whose primary business activity increases the use of renewable energy, increases energy efficiency, reduces greenhouse gas emissions, monitors and protects the quality of surface waters, and expands the use of biofuels.
If HF 3995/SF 3601 passes, it will be a gross misdemeanor to assault and harm a utility employee or contractor while conducting utility business. HF 3995 is on the House Floor awaiting action. We are curious if this bill might apply to utility lobbyists at the Capitol.
The Legislative Electric Energy Task Force (LEETF) was created more than a dozen years ago primarily to watch over power supply issues. Environmental issues were added as the years wore on. Time for an update? SF 3605/HF 3729 abolishes the LEETF and creates a Legislative Energy Commission (LEC). A legislative commission has higher standing and authority than a task force. The legislative composition will be the same, ten from each side. Its duties will be considerably broader in scope. The LEC would study, analyze, and make legislative recommendations on (1) the generation, transmission, and distribution of electricity, (2) the reduction of greenhouse gas emissions, (3) the conservation of energy, (4) the availability and development of alternative energy sources, (5) and the economic development potential related to all of the above.
· Ask the Governor to prepare a response plan to meet the challenges of Peak Oil, that is, the current or upcoming period of declining oil supplies and increasing prices. HF 995/SF 1948.
· Grant GRE a personal property tax exemption for its proposed natural gas peaking plant in Elk River. HF 3883/SF 3546.
· Omnibus Tax bill, which will undoubtedly include an increase in the utility property tax class rate and a deletion of the generation exemption from the statewide property tax. HF 4103/SF 2869.
· Greenhouse gas emission plans, work groups, transformation task force, coordination with economic development, and resolution on cap and trade principles. HF 3978/SF 3695, HF 3998/SF SF 3540, HF 3999/SF 3539.
· Exemption from PUC certificate of need requirements for wind and solar facilities if the PUC determines after notice and comment (not a formal proceeding) that the facility is reasonable and prudent. The IOUs like this because it is the first step to a petition for automatic cost recovery. HF 3977/SF 3758.
· County and city authority to be engaged in renewable energy projects on a wholesale basis, not retail or for end use. HF 3368/SF 3081.
· Tenants rights to pay utility bills of landlords. SF 2909/HF 3428.
It was not a lobbyist, but Dilbert quoting his boss: “Teamwork is a lot of people doing what I say.”