Ideas, but no consensus on 252 committee

The Colorado Statesman

It appears that there won’t be any formal recommendations on changes to the law created by Senate Bill 13-252. The advisory committee charged with coming up with recommendations failed to come to consensus on any of the suggested changes proposed during the committee’s Sept. 4 meeting.

In their first meeting July 10 the group decided that any formal recommendations had to be approved by consensus; any opposition meant the recommendations would not go forward.

And that’s how things were left on Wednesday. The representatives of the rural electric co-ops and Tri-State Generation & Transmission made a handful of suggestions that were opposed by the environmental reps, and the suggestions made by the renewable energy industry member also failed to gain consensus.

The law requires rural electric providers and co-operatives that provide service to 100,000 meters or more to increase their use of renewable energy resources from the previous 10 percent standard to 20 percent by 2020. Providers must do so without raising renewable rates by more than 2 percent per year.

In June, Gov. John Hickenlooper signed SB 252 into law, but said the bill was “imperfect.” He issued an executive order, charging a 12-member taskforce with deciding if the law was feasible, whether changes ought to be made to improve it, and to advise the director of the Colorado Energy Office on administrative and legal issues related to the 2 percent consumer rate cap.

In the August meeting, the two impacted utilities, Tri-State and the Intermountain Rural Electric Association, said they could meet the standard in the timeline allowed by purchasing Renewable Energy Credits (RECs), primarily from Xcel Energy, which has a surplus of RECs. However, committee members acknowledged that using only RECs to meet the standard would not meet the spirit of the law, which was sold to the General Assembly in part on economic development, in the form of generating more renewable energy projects. Tri-State already has several projects in the pipeline. Using only RECs also didn’t sit well with Jerry Vaninetti of RES Americas, the committee’s renewable energy industry member.

During Wednesday’s meeting, members began debating a tentative agreement that stated meeting the 20 percent standard and staying within the 2 percent cap would be feasible, assuming that RECs would be part of the resource portfolio. For IREA, however, RECs are the only way they can get to the 20 percent standard, according to Mike Kopp, IREA’s government relations manager.

It didn’t take long to see that the lines drawn when SB 252 went through the General Assembly have not changed since the bill was signed.

Committee members were asked by the group’s facilitator to identify issues that could be dealt with through legislation in the 2014 session.

“The legislation is pretty weak,” opined Vaninetti. While he didn’t have a specific recommendation, he asked for a discussion on the purpose of buying RECs for compliance, given that most members had previously agreed that it was not in the spirit of SB 252.

Kopp suggested that the co-ops should be able to use any renewable source of energy, including hydroelectric projects of any size. Hydroelectric, while not exactly a renewable source, does not generate greenhouse gas, and in previous discussions it was noted by co-op members that small hydro was a more feasible source of energy on the Western Slope.

Bruce Driver, representing Western Resource Advocates and one of the authors of SB 252, did not make a recommendation, although he agreed with Vaninetti that the legislation was “weak.” Commissioner of Agriculture John Salazar disagreed, stating that the bill “creates a marketplace for unused energy credits” and he told Vaninetti that it would help drive renewable energy projects in the future. “My recommendation? This legislation remains as is. It’s a win-win for large energy projects,” Salazar added.

“My perspective is that it’s cost mitigation,” said Kent Singer of the Colorado Rural Electric Association. “I get concerned when we get legislation that ties us to certain resources,” not knowing what kinds of resources will be available in the next decade, he explained.

Fred Menzer of Climax Molybdenum, representing large energy users, said he would prefer to see a sunset on the 2 percent rate cap.

Pete Maysmith of Conservation Colorado did not have a recommendation, stating he was interested in seeing how the legislation “plays out. Let’s do some creative thinking on what this will look like after 2020… What’s the next step beyond this?”

Marc Arnusch of Arnusch Farms said he agreed with many of the suggestions made by the agriculture and co-op members but said he also wanted to see the timeline for implementation stretched out, perhaps to 2025, a recommendation supported by Dave Lock of Tri-State. Lock also agreed with the use of hydro and other “non-emitting resources.” He noted that extending the timeline might also include a requirement for a higher percentage on the renewable energy standard.

Lock also said that people are concerned that using only RECs to meet the standard “won’t have the beneficial impact to the environment.” But utilities may have no other option to comply with the standard except by buying RECs, given the six-year timeline for meeting the standard, Singer noted. New projects won’t be done by 2020, he explained. With more time given, wind projects will come down in cost, there will be more efficiencies and better cost mitigation if the deadline is extended.

Arnusch noted that a transmission line in Weld County is now eight years into the process and isn’t done. “Simple math will tell you if it takes eight years to build, we can’t meet the requirement. Extending the timeline makes the practical possible.”

It’s not a matter of timing; there are no customers in Colorado willing to buy the wind power, Vaninetti said. “This legislation creates customers,” and he was not interested in seeing SB 252 further watered down. Maysmith added that the question of timelines was debated during the legislative process, and at one point there was an agreement to go to 2022, but then people “walked away from that… I don’t support moving [the timeline] back,” and Maysmith said he disagreed that there would be no new renewable projects built. RECs will be purchased, but projects will too, he said.

Extending the timeline would open up the legislation again, a “political nightmare,” said Salazar. “I would recommend we leave it as is.”

And Driver noted that if the co-ops and Tri-State don’t meet the standard, there is no real enforcement authority that will come down on them. The Public Utilities Commission, which regulates Xcel and other investor-owned utilities, was given no additional regulatory authority over the impacted utilities in the law. “If Tri-State cannot meet the standard by 2020,” Driver said, “they tell the PUC [through] a report [that says] this is where we are, and we will try to do [the following] to get there in the next year or thereafter.” Driver said Tri-State could use RECs and “keep working on it. It seems reasonable to me.”

It was clear that the committee was at an impasse and questioned whether they could include in the report that a majority of committee members supported certain recommendations, even if there was no consensus. “The only way for consensus is a ‘grand bargain’,” noted Josh Epel, commissioner of the Public Utilities Commission. But “there is no grand bargain. There’s no appetite for opening this bill. We’re just not going to go any further and we should acknowledge that. We should accept that there will be no proposal or consensus and move on.”

“There are many issues that SB 252 raises, and I don’t have a problem discussing them outside this room,” said Driver. He disagreed with Ebel that there was no opportunity for a grand bargain.

“We’re not going to get consensus on SB 252,” added Singer. “Just that we don’t like it,” said Kraft.

Several committee members spoke to The Colorado Statesman later in the evening and on Thursday, to discuss next steps and just what came from the meetings. Several said the consensus-based approach was a good idea in the beginning, but once the lines were drawn, that approach made it impossible to agree on any changes.

“We weren’t expecting a lot of direction coming from the committee because of the disparate interests,” Lock said. “It’s not surprising that there was no consensus agreement.” For Tri-State, the next step is figuring out how to comply with SB 252 and keep the costs to their 18 Colorado member co-ops under the 2 percent rate cap. As to the “grand bargain” suggested by some members, “we should have had that discussion before SB 252 was introduced. We could have come up with a product that was a lot better than SB 252 if we had had an opportunity to sit down with the proponents before it was introduced.

Lock also said that much of the discussion on Wednesday showed a certain amount of what he called “issue fatigue” from going over issues that had been dealt with during the legislative session.

Chip Marks of Agfinity said members would have been more satisfied if they could have recommended something concrete to the Colorado Energy Office. But he also noted that forming a group to deal with legislation after it’s been signed was “unprecedented. We had a good spirited debate, but in the end, the scope was limited and we addressed what we were asked to address,” he said. “We accomplished what we could, but going back and retroactively trying to fix [the law] may not be realistic.” Marks said he did not believe that nothing was accomplished. “There was vigorous debate, and hopefully it will cause some reflective consideration for legislation.”

“Given the dynamics we had to work with, the outcome was what we expected,” said Geoffrey Hier of CREA. “There was no incentive for real negotiation and discussion.” If the group had been formed before the bill was introduced, there would have been more incentive to compromise, he said. As to the future, Hier said his organization is in the same place as before the committee started, and that they will work with their members to continue to provide reliable and affordable electricity, and to do so in an environmentally friendly manner.

Vaninetti had a different view of the meetings’ outcome. He said he believed that the meetings “ended well. We went into the process thinking there was a lot of controversy and confusion.” The legislation wasn’t perfect, but Vaninetti said everyone is “satisfied. It’s a good piece of legislation that we can work with. No one wants to throw the baby out with the bathwater.”

However, Vaninetti said there is likely no impact for his industry from SB 252. “We have more clarity on what’s going to be required for the co-ops” and they will watch to see how Tri-State and the co-ops comply with the legislation. “We trust them to do the right thing.” Vaninetti also noted that most of that attention would be on Tri-State, which has the option of building new renewable projects. IREA doesn’t have that option because they buy their electricity from Xcel and will be held to Xcel’s standards, at least through 2025, Vaninetti explained.

Kopp said if the group had done the recommendations by majority vote instead of consensus, the Colorado Energy Office might not like what came forward. Of the 12 voting members on the committee, five represented rural electric providers and four came from agricultural interests or large rural electricity consumers.

Kopp said the final report should reflect the weighting of the committee and should have shown how people voted on issues, which he said would serve the public. But “this has been run too much like a retreat… and it feels like a process designed to appear as though we’re doing work that we’re not actually doing.”

The lack of a formal recommendation from the committee doesn’t mean that the Colorado Energy Office will not know what happened. Jeff Ackermann, director of the Colorado Energy Office, told The Statesman that while he believes consensus is the epitome of good process, if consensus is not possible they should go back to “the next best thing” — the ideas generated by the discussions.

The executive order laid out three objectives, Ackermann noted: to determine if the standard is feasible, to advise the director on issues related to the 2 percent rate cap, and determine how to improve the legislation for 2014. On improving the bill, “we are looking for ideas on whether you change the bill or improve it. Of interest to me as the recipient of the report is the whole plethora of ideas. Given those ideas, we don’t necessarily need consensus. We’re looking at how to improve this.”