A red state template for 100% renewables? Utah bill unites Rocky Mountain Power, cities and activists

Source: By Herman K. Trabish, Utility Dive • Posted: Wednesday, March 18, 2020

Utah has done what some thought impossible — getting approval from an 80% Republican legislature to move more than one-third of the state’s population to 100% renewables by 2030.

House Bill 411 was shaped through unprecedented collaboration between Pacificorp subsidiary Rocky Mountain Power (RMP) —  the state’s Warren Buffett-owned electric utility — and clean energy activists. It will allow nearly 37% of the state’s energy load to choose a jointly-designed 100% renewables program that will meet customer demand for choice and allow utilities to replace coal generation with lower cost renewables.

“Rocky Mountain Power could have said, ‘We’re not interested in a path to 100% renewables,’ and that would have set up a battle in the legislature or for municipalization,” Park City Environmental Sustainability Manager and bill co-author Luke Cartin told Utility Dive. “But they wanted to help drive this change. If they didn’t want to be a partner, things would be very different.”

HB 411 is a big step for Utah, which gets 80% of its energy from fossil fuels, and for coal-dependent RMP, which serves 80% of state load.

Recent polling shows Utahns want a bigger transition to cleaner energy and cleaner air, and a new roadmap toward that transition now being debated by lawmakers suggests 411’s collaborative “Utah way” approach has opened new possibilities for the state.

Utah’s breakthrough may also show how other coal-dependent red states can begin their own transitions, though some stakeholders say the 100% program must have a stronger provisions that new renewables are built to serve it to ensure emissions reduction gains are real.

U.S. EIA. (2019). “Utah Net Electricity Generation By Source, November 2019” [graph]. Retrieved from https://www.eia.gov/state/?sid=UT#tabs-4.

The story behind HB 411

Nine state level jurisdictions, 159 communities, and many major utilities have 100% renewables commitments, and at least 15 states are working toward them, according to Sierra Clubs’ Ready for 100 project.

But Utah’s 80% Republican legislature presented a challenge. It passed a joint resolution in 2010 calling climate science “questionable” and those concerned about CO2 emissions “alarmists.”

In the last five years, however, Utah has changed. In 2016, Salt Lake City Mayor Jackie Biskupski renegotiated the city’s franchise agreement with RMP and began talks for a 100% renewables program. And in 2018, a youth movement got a historic resolution through the legislature calling for climate and air pollution action, environmental activist Piper Christian told Utility Dive.

By then, Park City and other communities and environmental activists had joined Salt Lake City’s 100% renewables talks with RMP. Under those talks, RMP seemed to realize that supporting the cities’ transition would allow it to take advantage of low-cost renewables to meet growing customer demand, Utah Clean Energy Renewable Energy Program Manager Kate Bowman told Utility Dive.

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The utility brought Rep. Stephen Handy, a Republican leader on energy issues, into the talks in the summer of 2018, he told Utility Dive. HB 411 was drafted by Park City’s Cartin, in consultation with lawmakers, utility and community leaders, and environmentalists. Many described the collaboration as “the Utah way.”

Because RMP “was at the Capitol and walking the halls for HB 411, things went well,” Rep. Joel Briscoe, D, told Utility Dive.

Christian also applauded the utility’s role. “If you are one of the biggest contributors to the problem, you definitely need to be at the table when we’re talking about the solution,” she said. “Efforts to change our energy sources that exclude our utility would be fruitless.”

With the addition of a key opt-out guarantee for customers who do not want to participate, Rep. Handy led HB 411’s passage in March 2019.

The bill directs Utah’s PSC to implement a 100% renewables plan for communities and their customers who opt into the final program. It also provides legislative guidance on options for customer participation, opt-out privileges, rate-setting, billing and renewable energy procurement.

Other provisions instruct the PSC to include stakeholders in planning and procurement decisions and to recognize and compensate benefits and costs of resources “that offer load balancing or peak demand reduction benefits,” he added.

23 cities and counties made the preliminary commitment to participate before the December 31, 2019, deadline, showing wide interest, Utah Clean Energy’s Bowman said. Now, participants and RMP must agree on the program the utility will file with regulators.

One major issue the PSC will face is ensuring the program does not shift costs or benefits onto non-participating customers, she added. “But the utility and the communities know that avoiding a cost shift is critical and the application is likely to address it.”

The filing will likely come by early 2021, with PSC approval by mid-year, Cartin speculated. Communities must then pass individual ordinances making participation official. During a subsequent 60-day trial period and three billing cycles, customers can opt out without a termination fee. After that, RMP will begin procuring renewables.

RMP will continue to work with communities through the complexities of designing the renewables procurement plan, obtaining PSC approval, and soliciting bids from private sector providers, RMP spokesperson Dave Eskelsen told Utility Dive.

Communities will work with the utility to set a “reasonable” premium rate for renewables, but one of the many complexities to be resolved is keeping the premium low enough to limit opt outs, Cartin acknowledged. “No one has ever tried this. If it works, it will show that cooperation can avoid cost shift disputes.”

HB 411 represents an especially big ambition for a state that currently has a 20% by 2025 renewables mandate. And, like the existing mandate, the bill requires procured renewables be cost-effective.

Will it work?

The preliminary proposal has already achieved some success, Rep. Briscoe said. “We thought four or five cities would sign on, but it was phenomenal to have 23 cities and counties sign on, including two of the five biggest cities in the state.”

This is “just the beginning,” Salt Lake City Department of Sustainability Senior Energy and Climate Program Manager Christopher Thomas told Utility Dive.

The process of setting a rate structure will be “complicated,” RMI’s Eskelsen agreed. Factors like the resources communities select, contract terms for delivery of the energy, and interconnection requirements could add to utility costs. It is not clear new resource procurements will be needed, but non-participating customers must “be held harmless if costs impact utility rates.”

But while support for the bill has been larger than initially expected, not everyone sees it as necessary.

Co-ops serve about 20% of Utah’s load but were not part of the HB 411 debate. The co-op structure requires them to respond “if members want more renewables and are willing to pay for that,” Utah Rural Electric Cooperative Association Executive Director Jeff Peterson told Utility Dive.

Though Utah is “a predominantly red state, we are not climate change deniers,” he added. “But the changing climate is a global problem.” International agreements “allow developing countries access to affordable, reliable power that creates emissions to continue developing, and a lot of places in rural Utah still need that same type of development.”

The cost of renewables is falling, but co-op rates, based largely in coal generation, “are near the lowest in the state,” and “it would be difficult for intermittent renewables to match them,” he said. The marketplace should drive a transition to renewables, “not government mandates that could adversely impact rural areas.”

Utah Clean Energy’s Bowman disagreed. “Rocky Mountain Power sees the financial risk of owning older fossil plants and the advantage of building new renewable resources,” she said. The question the PSC proceeding must answer is “how to manage the mechanics of a smooth financial transition to renewables from resources that are no longer cost-effective.”

Utah voters support accelerating that transition away from coal by 53% to 33%, according to December 2019 polling commissioned by Western Resource Advocates (WRA).

A related challenge for the program is assuring it will change the resources RMP procures, WRA Clean Energy Program Senior Attorney Sophie Hayes told Utility Dive. “There is nothing in the legislation that commits the utility to emissions reductions.”

It is possible the emissions-free generation that comes from RMP’s existing commitment to 60% renewables by 2030 will be attributed to Utah’s participating communities and its fossil fuel-generation will be attributed to non-participants, she added. RMP is unlikely to increase its renewables procurement as a result of HB 411 unless its current planning “does not include enough renewables to meet these cities’ 100% by 2030 needs.”

But HB 411 does prevent “existing assets from being reassigned” and requires RMP to procure new assets, Cartin said. Language in the bill “calls it out directly” by specifying that RMP provide “incremental” renewables, though Hayes’ concern about verification is left to the PSC.

With solutions to the cost and additionality challenges available, the remaining question is whether a program that serves only 36.7% of Utah’s 2019 customer load is a way forward for Utah and other red states.

It does not completely eliminate Utah’s air pollution or emissions, but it is “an example of innovative clean energy progress from a coal-heavy state,” Sierra Club Senior Organizing Representative Lindsay Beebe told Utility Dive.

A roadmap for red states?

People “in conservative states like Idaho, Montana, Kentucky and Pennsylvania, dominated by utilities with fossil fuel-heavy resource mixes, often say they can’t drive change,” Sierra Club Ready for 100 Campaign Representative Drew O’Bryan told Utility Dive. “HB 411 proved a local and voluntary approach works.”

WRA’s Hayes disagreed. “It cannot be a template for other states if it does not change anything for PacifiCorp except potentially in the way it dispatches.”

HB 411 might have more appeal in Utah than in a heavily coal dependent state like Wyoming with a diversified economy, Sierra Club’s Beebe acknowledged.

But bill proponents have received inquiries from stakeholders in southeastern states and western states, including Montana, Wyoming and Idaho, Park City’s Cartin and Rep. Handy reported.

The most attractive arguments for those states are the inclusion of customer choice and the fact that the utility and communities agreed on it, Cartin said.

The concept of renewables as an economic alternative for rural communities that have suffered from coal bankruptcies or natural gas boom-bust cycles is also appealing, he added. “Those communities see in it an opportunity for renewable generation to be sited where new jobs and tax benefits balance those impacts.”

Finally, the opt-out provision allows conservative policymakers to back out if detailed planning shows the bill won’t deliver economic benefits, Cartin said. “But they can say they tried.”

HB 411 “is part of the overall fundamental change happening in the utility business and in PacifiCorp’s long-range planning,” Eskelson said. “Economic and reliability modeling done for the 2019 IRP at stakeholders’ requests has led to discussions for retirement of coal units that are more expensive for customers than other resources, including wind, solar and battery storage.”

That “fundamental change” is moving forward in Utah.

The 2019 legislature authorized “The Utah Roadmap” on climate and air quality by the University of Utah’s Gardener Policy Institute. Though tempered by cautious “Utah way” language, its seven recommendations call for a “statewide” 80% emissions reduction by 2050, zero-emissions transportation and clean air initiatives, and economic justice initiatives.

House Continuing Resolution 11, introduced Feb. 11 by Rep. Briscoe, proposes endorsement of the roadmap’s recommendations, though it may not win approval in the current session, Briscoe said. “There seems to be a sense that it needs more work and more data.”

But HB 411 and the roadmap show Utah is “moving in the right direction, and it is not a matter of if, but when,” Christian said. “We have activists who are pushing the limits and activists who are collaborators and are bringing new people to the table who can make the inevitable happen in my lifetime.”