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Legislative Alert Archive | |
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Issues of Concern for Electric Co-op Members
HB07-1169 Net Metering by Electric Cooperatives
RUS Loans The Office of Management and Budget (OMB) is seeking to undermine consumer-owned electric cooperatives and their historic and successful partnership with RUS. OMB has proposed elimination of Power Supply Loans for electric generation for the remainder of FY 2007 and for FY 2008. This comes at a time when co-ops face a daunting need tobuild new generation to meeting the growing demand for power. It is important that cooperative consumer-owners own their own power supply to protect themselves from monopoly controls imposed by others and to avoid leaving electric consumers vulnerable to volatile and drastic OMB has also threatened to redefine “rural” and limit access to RUS loans to only remote portions of the United States. Electric cooperatives alone would be singled out to meet stringent eligibility criteria that is not imposed on any other sector of the electric industry for their receipt of generous federal tax subsidies. Electric cooperatives realize less revenue per mile of line than do the investor-owned and municipal utility systems by virtue of serving fewer people per mile. This OMB initiative is designed to greatly reduce the scope of the RUS loan program at precisely a time when new investments in electric infrastructure are needed to sustain economic growth and development. The same proposal was rejected by Congress last year because it would dramatically alter the mission of the RUS for providing assistance in building and maintaining essential electric infrastructure. The RUS program needs more funding for loans at this critical time, not less money and more restrictions. A recent Washington Post article attacked electric cooperatives. It is clear that those at the Post are operating under a few misconceptions about electric co-ops. Following is the response from NRECA. In their May 14 front page story “Federal Loans for Coal Plants Clash With Carbon Cuts” The issue isn’t whether or not to reduce carbon dioxide emissions but rather how to achieve reductions with as little pain to both consumers and our economy as possible. That effort includes increasing efficiency and conservation programs, investment in renewable energy, nuclear power, clean coal technology and carbon capture and storage technology - when available, and exploring the viability of plug-in hybrid vehicles. We believe federal policymakers should consider several additional points about the Washington Post’s characterization of electric cooperatives and the role of coal-based generation in meeting the electricity needs of our 40 million consumer owners. Removing Federal Assistance Will Not Cut Carbon; It Will Raise Costs for Consumers The Washington Post: “Government support is a major force behind the rush to coal plants…” This is simply not true. Co-ops are planning to build the most modern coal-based power plants available to meet our significant growing baseload demands. But co-ops are also investing in renewables, natural gas, and even nuclear power to meet our members’ needs, and have a long history of using demand-side management and promoting energy efficiency to keep electric bills affordable. Doing away with the RUS loan program will not change the make up of the nation’s energy supply. But it will lead to substantially higher rates for electric co-op members who would be forced to buy power from more expensive sources. Most major studies acknowledge that coal must play a large role in our future generation mix. According to the Electric Power Research Institute, “Under our technology assumptions, coal retains nearly a 54% share in 2030, even with increased amounts of nuclear and renewable generation. In fact, the amount of coal-based generation goes up in real terms, as electricity demand is expected to increase by 40%.” It is important to note the entire portfolio of co-op owned generating capacity is less than 5% of U.S. capacity. The planned co-op facilities represent only a fraction of the 69 gigawatts currently on the drawing board for the entire electric utility industry. Electric Co-ops Are Smallest Sector of the Electric Industry; Serve Higher Cost Areas The Washington Post: “Many of the areas served by co-ops are densely populated and do not need help.” This statement demonstrates a lack of understanding about electric cooperatives and their consumer owners. The median sized co-op is only 12,000 customers. An analysis using Department of Energy data shows that nearly 70% of co-ops have rates that are higher than their neighboring utility because it costs much more to serve rural areas. Rural electric cooperatives serve sparsely populated areas, averaging only 7 customers per mile of line compared to 35 for the investor owned utilities and 47 for municipal systems. The federal government has long been a partner in the electric cooperative program, helping build a utility network that covers nearly 75% of the U.S. landmass and maintains more than 40% of nation’s distribution lines. In addition, co-op consumers have household incomes that are 16% below the U.S. average. While the article implies that our consumers are “well-to-do”, even broadly defined “metro” counties contain areas that are very rural and miles from urban centers. A co-op that is fortunate enough to serve a more suburban area is able to help hold down the costs of serving more distressed areas. Co-ops are required to provide universal service and do not pick and choose their members. Co-ops Have Demonstrated a Commitment to Renewable Generation and Efficiency The Washington Post: “Environmentalists…say [federal assistance] removes any pressure for rural coops to promote energy efficiency or aggressively tap renewable resources.” This is incorrect. Electric cooperatives have moved aggressively on both efficiency programs and renewable generation. In 2005, co-op load management programs reduced consumer demand by 2,200 megawatts. And in 2006, the Federal Energy Regulatory Commission found that co-ops lead the electricity industry in providing advanced meters. Moreover, electric cooperatives provided 11% of their aggregate power sales from renewable energy. Nearly 90% of all electric cooperatives provide a portion of electricity to their consumers from renewable energy, and nearly 75% offer green power programs to their consumers. Electric co-ops also support local renewable energy projects, including 120 current and planned ethanol plans, and 38 current and planned biodiesel plants. All Sectors Receive Federal Assistance The Washington Post:…“the goal of providing electricity to rural areas has been accomplished, but the federal government is still making subsidized loans.” All segments of the electric utility industry use taxpayer money to invest in infrastructure. While many not-for-profit electric co-ops receive low interest federal loans, municipally owned utilities issue tax exempt bonds, and the big, investor-owned power companies take advantage of tax breaks like accelerated depreciation and investment tax credits. Conclusion Electric cooperatives believe we must use all the tools available to reduce carbon dioxide emissions not just the economic bludgeon of high rates as a draconian force to reduce consumption. Some see higher rates as the only way to reach reductions. Congress should find solutions that reduce emissions while at the same time ensuring that America keeps the lights on, electric rates affordable and our economy humming. Electric cooperatives will be at the table to help craft a responsible plan to manage and reduce carbon dioxide emissions. Railroads Electric cooperatives are paying the price of railshippers exercising their monopoly control of rail lines. America’s four major railroads are not meeting the nation’s transportation needs. Some rail customers, including electric cooperatives, that are on lines wehere there is no competition do not receive reliable rail service at reasonable rates. The Surface Transportation Board (STB), the government agency charged with supervising the nation’s railroads, is not addressing these crucial rail customer rate and service problems. Legislative reform is required. Because of reliability issues with the railroads, low coal stockpiles last year threatened the reliability of the electric system at several electric co-ops. The situation became so dire that the Federal Energy Regulatory Commission held a hearing in 2006 on the poor delivery record of the major railroads. Some utilities are being forced to buy more expensive foreign coal because they can’t rely on railroad deliveries from the Powder River Basin in Wyoming. CREA Urges Its Members to: Contact U.S. Rep. John Salazar to ask him to sign on to HR 2125 as a co-sponsor. Rep. James Oberstar (D-Minn.) has committed to moving this bill in the next two months. It appears that the process will begin with a railroad subcommittee hearing and then the bill will move to the full Transportation Committee for mark-up within the next two months. Rep. Salazar is on that Transportation Committee. The Alliance for Rural America, which includes several Colorado ag groups, has endorsed HR 2125. The issue of railroad monopolies affects many, many people in rural Colorado as it affects any business that depends on rail service to move its products. CREA Also Urges Its House Members to: Co-sponsor HR 1650, the Railroad Antitrust Enforcement Act introduced by Rep. Tammy Baldwin (D-WI). Support proposals for investment in rail infrastructure only if the proposal targets investments to meet domestic capacity needs, addresses the current lack of competition, increases accountability ad reduces unrestrained monopoly power. CREA Urges Its Senators to: Co-sponsor S. 772, the Railroad Antitrust Enforcement Act, introduced by Senators Herb Kohl (D-WI), Norm Coleman (R-MN), Russ Feingold (D-WI), David Vitter (R-LA) and John Rockefeller (D-WV). Cosponsor S. 953, the Railroad Competition and Service Improvement Act, introduced by Senators. John Rockefeller (D-WV), Larry Craig (R-ID), Byron Dorgan (D-ND) and David Vitter (R-LA). Support proposals for investment in rail infrastructure only if the proposal targets investments to meet domestic capacity needs, addresses the current lack of competition, increases accountability and reduces unrestrained monopoly power. Hydropower We urge Congress to continue the federal partnership with the electric cooperatives and public power entities by providing the funds necessary to revitalize the aging federal hydropower system. Taking this action will increase their value as an essential part of the national strategy for addressing global climate change. The Administration is focused on raising PMA rates without the consent of Congress. CREA Urges Its Members of Congress to: Fully fund the rehabilitation of federal hydropower facilities producing clean renewable electricity. These costs will be fully recovered through electricity rates. Oppose the Administration’s “Agency” rate proposal for WAPA, SEPA and SWPA. Oppose the Administration’s plan to accelerate federal debt repayment for the Bonneville Power Administration. Clean Renewable Energy Bonds Electric cooperatives cannot utilize the PTC or solar investment tax credits because they are not-for-profit and therefore have no federal tax liability from which to deduct the tax credit. To address this inequity, the Energy Policy Act of 2005 established a ground-breaking, comparable tax incentive tailored for electric cooperatives and municipal utilities— the Clean Renewable Energy Bond (CREB). In essence, a clean renewable energy bond provides electric cooperatives and public power systems with interest-free loans for financing renewable energy generation otherwise available to for-profit entities through the PTC and solar investment tax credit. The CREB program will expire January 1, 2009, along with the PTC. CREA Urges Its Senators to: Support efforts by Senators Max Baucus (D-MT) and Charles Grassley (R-IA) to provide an annual authorization of $1 billion with $375 million set aside for electric cooperatives in the pending energy tax legislation. CREA urges its House members to: Cosponsor H.R. 1965 by Reps. Ron Lewis (R-KY) and Earl Pomeroy (D-ND) to fund CREBs at $1 billion per year, with $375 million each year for co-ops, through January 1, 2011. Climate Change No “silver bullet” technology exists that will magically solve the issue of climate change. In fact, a wide array of new technological advances will be required if the nation is going to constrain CO2 emissions without serious negative economic implications. Electric cooperatives generate half of their power needs; more than two-thirds of this power is generated from coal. Cooperatives serve some of the poorest areas of the country (nearly 400 co-ops have service territories with poverty levels above the national average), and most cooperatives’ rates are higher than the rates of their neighboring investor-owned utilities. Coal must remain in the fuel mix as new technologies are developed in order for the electric supply to remain reliable and affordable. CREA urges its members of Congress to: Give electric cooperatives the technological tools needed to meet new carbon standards by providing significant, long-term, dedicated funding for research and development in any climate change legislation that is enacted. Provide not-for-profit electric cooperatives equitable incentives to deploy technologies such as advanced clean coal technologies; carbon capture and sequestration; advanced nuclear power. Support climate change legislation that covers emissions from all sectors of the U.S. economy, not just electricity generation. HB07-1169 Net Metering by Electric Cooperatives The Senate State Affairs Committee passed House Bill 1169 (Net Metering for Electric Cooperatives) on Monday,May 16, on a 3-2 vote, without amendments. The bill now goes for a full Senate vote, which could happen at any time. Please call all state Senators and ask them to oppose this bill. CREA supports net metering, but we continue to adamantly oppose this bill as it passed the House because of the huge subsidy it will force co-op members to pay. CREA has submitted a proposal that goes beyond the current net metering statute for electric cooperatives to provide 25 kW (kilowatts) at a retail rate. This would still create a subsidy, but it is small enough to be acceptable to our members. For loads above that size, we believe each electric co-op should be able to develop its own policies so it can manage the impact on its member-owners. Providing 25 kW at retail is very reasonable. It’s enough to power five average size homes as well as offset some or all electricity usage for small commercial and agricultural purposes. Forcing co-op members to subsidize loads larger than that amount doesn’t make sense. It’s simply not right to force co-op members to subsidize large wind and solar developers or big box stores. Unfortunately, we are not getting any indication that CREA’s proposal will be adopted. As a result, we continue to oppose House Bill 07-1169 as it passed the House and we urge you to do the same. Please contact Colorado’s state Senators (see list below) and tell them to vote “No” on House Bill 1169. Tell them:
Colorado Rural Electric Association Supports Net Metering Up to 25 kW at Retail Rates How Much Is 25 kW of Power? 25 kW (kilowatt) is a reasonable electric load to net meter. It accommodates residential, small commercial, agricultural and other customers who want to offset some or all of their electricity usage with renewable energy. To give you an idea of how much electricity can be generated at 25 kW, consider that a 25 kW system can provide enough electricity for five average size homes. At 25 kW, customers who want to net meter can take advantage of many different types of renewable resources including solar photovoltaic (PV), wind, geothermal, biomass and hydropower. If the intent of net metering is to offset personal usage, 25kW is more than adequate for most Colorado electric co-op customers. Net Metering 25 kW at Retail Creates a Subsidy A net metering policy that requires electric co-ops to allow up to 25 kW at a retail rate does create a subsidy, but it is manageable. Co-ops can absorb the extra costs without having to change rates or their billing structure. The subsidy exists because House Bill 1169 requires customer-generators to be compensated at a retail rate, rather than the avoided cost or wholesale rate. The subsidy is created because:
The exact amount of the subsidy is impossible to determine in advance. It depends on the number of customers who net meter, the size of the loads involved, how much energy is “banked,” etc. In addition, it will vary by co-op because each co-op has its own unique characteristics. Example Analysis of subsidy created by net metering for a 25 kW load at Retail No Excess Energy Generated Beyond Load Assume a 25 kW load with a 60% average monthly load factor. kWh consumed per month 10,950 Typical Retail Rate Customer Charge — $/Cust/Month 35.00 Energy Charge — $/kWh 0.0900 Total Monthly Billing without Generation 1,020.50 Self Generated kWh (10,950) Credit to billing created by Net Metering kWh Genereated x energy charge (985.50) Avoided Cost (Energy component of Tri-State power bill) — $/kWh 0.240 Actual Avoided Cost (262.80) Subsidy (Excess Credit provided to customer) (722.70) Annual Subsidy (Annual Excess Credit) (8,672.40)
CRES Action Alert on H.B. 07-1169 Fact vs. Fiction
The Colorado Renewable Energy Society (CRES) has issued an electronic “call to action” on House Bill 07-1169 that contains many misleading or inaccurate statements. Here are the facts: CRES Fiction: H.B. 07-1169 will “allow farmers and ranchers to invest in on-site renewable energy generation.” FACT: While this is true, this bill goes way beyond allowing farmers, ranchers, and residential customers to net meter. It would require electric cooperatives to net meter 1 or 2 megawatt facilities (1 megawatt equals 1000 kilowatts). An average residential home has a monthly peak demand of 3 to 5 kilowatts; a typical irrigator has a monthly peak demand of 100 kilowatts or less. Large commercial and industrial customers are the ones that use one megawatt or more. CREA does not believe co-op member owners should be forced to heavily subsidize large commercial and industrial customers. CRES Fiction: H.B. 07-1169 will “lift the arbitrary cap on solar and wind generation.” FACT: There is NO CAP in the existing law! Electric cooperatives have the discretion to determine what size systems to net meter, and the appropriate payment to net metered customers. Every cooperative is a distinct utility with unique characteristics, and the current law recognizes that each system should have the ability to determine what is best for all of its members. CRES Fiction: H.B. 07-1169 will “not cost an iota. An economic analysis by the Iowa Supreme Court recently found that net metering does not affect utility rates.” FACT: ALL net metering laws that require net metering at a retail rate (as opposed to an avoided cost or wholesale rate) create subsidies. Under this bill, co-op member owners who do not net meter will have to subsidize those that do to cover the fixed costs associated with ensuring that everyone has reliable electric service. The amount of the subsidy will vary depending on the number of net metered customers and the size of the load. As for the recent decision by the Iowa Supreme Court, the Court found that an Iowa electric cooperative was not required to pay its customer the retail price for power; the decision did not discuss impacts on utility rates. CRES Fiction: H.B. 07-1169 “would eliminate the ability of cooperatives to opt out of the net metering requirements.” FACT: There is no “opt out” provision in the current net metering law. All electric cooperatives are required under the current law to make net metering services available to any “customer-generator” under certain conditions. CRES Fiction: “Net metering has the backing of the National Association of Rural Electric Cooperatives in Washington, D.C., which is a strong advocate for distributed renewable energy systems.” FACT: The National Rural Electric Cooperative Association (NRECA) supports distributed renewable energy systems which do not result in large cross-subsidies between customer classes. CREA has spoken with officials at NRECA about H.B. 07-1169, and the consensus is that this bill goes well beyond the net metering programs adopted in other states, and is in fact a radical departure from typical net metering legislation. It is completely misleading for CRES to suggest that NRECA supports H.B. 07-1169; that is just not the case. The further suggestion by CRES that many cooperatives are already engaged in net metering programs around the country ignores the simple fact that the net metering programs in those states are limited to small loads, unlike the one and two megawatt loads that would be net metered under H.B. 07-1169. The facts are clear: H.B. 07-1169 will create large subsidies that will allow large developers and commercial enterprises to profit at the expense of co-op member-owners. That’s not fair! We urge you to oppose H.B. 07-1169! Background on HB 07-1169: “Net metering” is a system that allows customers to generate their own electricity (usually from a renewable energy source) and to add back onto the utility’s electric grid any excess power generated. In 2002, Colorado electric cooperatives came together and asked the General Assembly to adopt a comprehensive net metering statute (HB 02-1415) which requires electric cooperatives to offer net metering programs (up to 25kW) to their customers. The current law gives each system the flexibility to devise its own program and determine the appropriate value of the electricity generated by a customer. This works for electric cooperatives since each of them has different characteristics. Provisions of HB 07-1169: Repeals and re-enacts the 2002 statute supported by Colorado’s electric cooperatives with one of the most radical and aggressive net metering bills in the country; Removes the flexibility for each cooperative to design and implement its own net metering program with a state-mandated, one-size-fits-all net metering mandate; Dramatically increases the size of net-metered generation systems that the co-ops must accommodate on each of their systems to the following: Up to 500 kW (or 20 times current law) per customer-generated system for co-ops with 10,000 or fewer retail meters; Up to 1 MW (or 40 times current law) per customer-generated system for co-ops with 10,001 to 40,000 retail meters; and Up to 2 MW (or 80 times current law) per customer-generated system for co-ops with more than 40,000 retail meters.
HB 07-1169 sets up a scheme that may result in well-funded wind and solar developers making profits at the expense of residential and agricultural consumers; Requires cooperatives to purchase and install more complex and expensive meters in order to comply with the bill; Does not allow electric cooperatives to control or phase-in the number of net-metered systems being forced onto a single cooperative’s system; Requires that cooperatives make fundamental and costly changes to their rate and billing systems; Strikes from current law safeguards that were adopted by the General Assembly to protect the safety, reliability and affordability of electricity to rural consumers.
Proponents of HB 1169 claim this bill will standardize and simplify net metering in Colorado. In reality, HB 1169 will benefit some electric cooperative customers, but result in significantly higher electric bills for other electric cooperative customers.
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