Testimony Before the Senate Business and Transportation Committee in Support of SB 656, SB 657, and SB 659

Testimony of John A. Charles, Jr.

President & CEO, Cascade Policy Institute

Before the Senate Business and Transportation Committee

In support of SB 656, SB 657, and SB 659

April 3, 2017

The Public Purpose Charge (PPC) was originally authorized by the legislature to run for 10 years: from March 2002-March 2012. It was anticipated that subsidies for conservation, renewables, and market transformation would no longer be necessary after that time.

The chart below shows that the original forecast was correct. PPC administrators are running out of things to do. The low-hanging fruit for retrofits has been picked, and newer homes have been built to stringent energy codes. The mission has largely been accomplished.

Therefore reducing the PPC from 3% to 2%, as called for in SB 657, is appropriate. In 2019 you should drop it by another percent, and then phase it out entirely in 2021.

Keep in mind that the Energy Trust receives additional ratepayer funding through the “increment” allowed under SB 838. During 2017, that increment will more than double the amount of money that ETO will receive from the basic PPC. Therefore, the Trust would continue to have significant funding regardless of what you do with these bills.

Ratio of Energy Benefits (kWh saved or generated) to Expenditures

All PPC Administrators

2003-2004 2005-2006 2007-2008 2009-2010 2011-2012 2013-2014 2015-6/2016 % change, 2003-6/2016
ETO Conservation 5.7 6.6 6.7 4.4 4.5 5.3 3.4 -40%
ETO Renewables 13.8 4.0 33.5 1.6 1.4 2.0 1.6 -88%
School   districts 0.8 0.6 1.0 0.5 0.5 0.3 0.4 -50%
OHCS low-income 1.3 0.9 0.7 0.5 0.8 0.4 0.6 -54%
Self-direct (conservation) 7.2 3.2 4.3 5.2 3.0 2.5 3.8 -47%

Source: Biennial reports to the Legislative Assembly on PPC expenditures, all years. 

Since the PPC was first authorized in 1999, it has escaped scrutiny by the legislature. The oversight called for in these bills is long overdue and I encourage your support.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Policy Picnic – February 23, 2017

Please join us for our monthly Policy Picnic led by

Cascade Policy Institute’s

Research Associate Lydia White


The Seen and Unseen World of Solar Net Metering

Environmentalists claim residential solar energy is the solution to fulfilling our energy needs, but they often overlook its unintended consequences. Looking through the lens of Frédéric Bastiat’s “That Which is Seen, and That Which is Not Seen,” Lydia will address the flaws of solar net metering. The “Seen” paints a rosy picture of sustainable green energy captured by our greatest renewable resource, the sun. But, the “Not Seen” reveals the unreliability and unaffordability of net metering and the inequity this program creates.

Admission is free, but reservations are required due to space limitations. You are welcome to bring your own lunch; light refreshments will be served.

Reserve your free tickets here.

Cascade’s Policy Picnics are generously sponsored

by Dumas Law Group, LLC

dumaslawlogo 80percent

Renewable Energy Certificates Don’t Turn on Your Lights

By Allison Coleman

Over the past two decades there has been a large push for environmental policy initiatives.

Unfortunately, some of these policies do nothing for the environment. The sale of so-called “green power” by electric utilities is one example. More than 60 Northwest utilities market green power products to consumers through monthly subscriptions, in which consumers think they are buying electricity from clean and renewable sources. Utilities promote these at different levels, ranging from platinum to silver, depending on the amount a customer spends.

However, customers are not actually buying renewable energy. Instead, they are buying “Renewable Energy Certificates” (RECs), which simply offer them the bragging rights associated with renewable power produced somewhere. The electricity may be sold to a homeowner in Montana, while the REC associated with that power is sold to a consumer in Oregon.

The REC itself is not a unit of electricity. In fact, it doesn’t even exist; it’s just an electronic number.

From 2011-2015, Multnomah County spent $230,000 on RECs. In 2016, the City of Beaverton spent $29,282. In 2015, Metro spent $104,539.

Every dime of that money was wasted. Taxpayers received no green power, or power of any kind.

Individual consumers are free to spend their own money on worthless junk. Elected officials spending tax dollars should be held to a higher standard.


Allison Coleman is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization. 

Surprise! Renewable Energy Mandates Are Actually Fossil Fuel Mandates

By John A. Charles, Jr. and Lydia White

The Sierra Club and other environmental groups are objecting to PGE’s plan for new, natural gas-powered generation to help replace the electrical output that will be lost when PGE shuts down the Boardman coal plant in 2020. What these groups should admit is that they are the ones responsible for that decision.

Last March, the Oregon legislature adopted the Oregon “Renewable Portfolio Standard” (RPS), which requires PGE to procure 50% of its retail load from designated renewable energy sources by 2040. This requirement, enacted with few public hearings in the rush of the one-month session, was demanded by environmental groups as a way to burnish the state’s mythical green power credentials.

The RPS is essentially a mandate for more utility-scale wind and solar power. These are known as “intermittent resources” because wind farms don’t generate any power about 68% of the time, while solar goes dead about 71% of the time. Being forced to rely on randomly-failing generators means that utilities must have back-up sources (known as “spinning reserve”) in order to preserve grid reliability.

Electricity cannot be stored like other commodities. As soon as electricity is fed into the grid, it travels at the speed of light through many pathways until it is consumed almost instantaneously by a household, factory, or some other end-user. Supply and demand have to be matched at all times in order to avoid grid failure, or “blackout.”

Right now, wind and solar only account for about 5.69% of Oregon’s electricity supply. As lawmakers keep ratcheting up RPS mandates towards 50%, the need for spinning reserve will go up as well. The only practical fuel is natural gas.

These new gas-fueled plants will be running even when not used, in order to be ready when the windmill blades stop turning or the sun goes down. This will result in wasted fuel and increased air pollution.

If utilities must have spinning reserve, can we predict the need for it? This question was the subject of a paper recently published by the National Bureau of Economic Research (NBER). The researchers found that a 1.0 percentage point increase in the share of fast-reacting fossil generation capacity in a country is associated, on average, with a 0.88 percentage point increase in the long-run share of renewable energy.

In other words: more wind and solar = more fossil fuel use. Oregon legislators rushed through the RPS law so quickly that they forgot about the law of unintended consequences.

PGE and PacifiCorp will both be turning to increased natural gas generation over the next 20 years because they don’t have a choice. Customers want their electricity 100% of the time, not 30% of the time. If environmental groups are offended by the use of more natural gas, they should admit that the 50% RPS requirement was a mistake and ask legislators to repeal it.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. Lydia White is a Research Associate at Cascade. This article originally appeared in the Portland Business Journal on January 12, 2017.

Portland’s 100% Renewable Energy Claim Is “Greenwashing”

By Allison Coleman

In 2001, the Portland City Council declared that by 2010, all electricity used by city agencies would come from renewable energy. However, by 2010, only 9 percent of Portland’s power was renewable.

Undeterred, in 2012 Portland leaders again declared that city agencies would achieve 100 percent renewable energy. This time around, the city managed to get up to 14 percent.

Today, Portland has magically declared victory, claiming that municipal electricity use is 100% renewable. However, this is a blatant case of greenwashing. Portland is currently generating only 9 percent of its electricity from city-owned biogas and solar facilities. Another 15 percent is claimed from “green power” sold by Portland General Electric.

The remaining 76 percent of city use comes from a conventional mix of coal, gas, nuclear, and hydro. Portland then pretends to offset this by purchasing so-called “Renewable Energy Certificates” (RECs).

Unfortunately for consumers, an individual REC is not a unit of electricity; it is simply is a certificate claiming to represent the “environmental amenities” associated with one megawatt-hour of electricity generated by sources such as wind and solar. You cannot charge your phone or cook dinner with a pile of RECs because they don’t actually exist.

Last year, Portland spent $104,539 purchasing 74,671 RECs to create the image of 100 percent green power consumption. Every dollar spent buying those RECs was wasted money. Portland taxpayers should demand an end to this green power charade.


Allison Coleman is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Money

Will the PUC Make Oregon’s Solar Energy Incentives Equitable?

By Lydia White

In accordance with House Bill 2941, the Public Utilities Commission (PUC) is making recommendations to the Oregon State Legislature to ensure Oregon’s solar energy incentives are equitable, efficient, and effective.

One recommendation is to modify the compensation method for solar energy, net metering. Under net metering, solar owners consume energy their panels produce. When energy produced is insufficient, solar owners purchase additional energy from traditional sources. When excess energy is produced, solar owners sell energy. Solar owners are compensated at above-market rates and are exempt from paying their portion of incurred costs. Such costs include operation and maintenance of the grid and “spinning reserves,” the alternative power source utility companies run continuously in case solar produces less energy than projected. The state’s incentive structure shifts costs from solar owners to non-solar ratepayers. As the number of solar owners increases, ratepayers bear higher costs. The PUC is recommending these costs instead be shifted to taxpayers. While the PUC proposal’s efforts to alleviate inequity are commendable, their proposed recommendations still constrain Oregonians.

Although solar owners are double-dipping into the taxpayer pot—once when receiving heavily subsidized (and therefore low-cost) solar systems and again when receiving above-market compensation—the solar community is vehemently protesting. Despite the outcries, the PUC should pursue its recommendation to transition from net metering while also rejecting subsidies from ratepayers and taxpayers alike. By doing so, the PUC’s recommendations could relieve Oregon’s ratepayers from substantial burden.


Lydia White is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Electric Utilities Should Call the Bluff of Green Radicals

Two committees of the Oregon Legislature will hear presentations this week on a legislative proposal to eliminate the use of coal in Oregon’s electricity grid by 2035. Coal is the source of power for 33.4% of Oregon’s electricity consumption.

According to news reports, Portland General Electric and PacifiCorp have agreed to this proposal in order to head off a possible ballot measure that would impose even more onerous requirements if passed in November of this year.

The biggest problem with the proposal is that the two renewable technologies most preferred by radical environmental groups – solar and wind – are intermittent sources that randomly fail to provide any electricity to the grid. During the winter months when utilities must provide the highest levels of reliable power – the so-called “peak periods” – wind and solar combined supply only about 5% of the necessary electricity.

This means that ratepayers will be forced to spend billions subsidizing uneconomic renewable power facilities, and then pay a second time for gas-fired generators that will be necessary to back up the unreliable wind and solar plants.

Utility lobbyists should be ashamed of themselves for agreeing to this deal, and legislators should soundly reject it in the February legislative session. Instead, they should call the bluff of the radical greens and let them put their measures on the ballot. Few Oregonians would willingly support a “freeze in the dark” policy if given a chance to vote.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Is It Possible to Power an Export Facility Entirely by Renewable Energy?

The Portland Sustainability Commission recently recommended that the City Council approve a $500 million propane export facility proposed by Pembina Pipeline Corporation. However, as part of its approval, the Commission is requiring that 100% of the electricity used at the export facility be generated by Oregon renewable energy sources.

This is an impossible standard to meet. We know it’s impossible because Portland has already tried it. In 2001, the City Council publicly committed that by 2010 all electricity consumed by city bureaus would come from renewable energy sources. Yet, despite great efforts, Portland never came close to meeting the goal by 2010.

Notwithstanding this failure, in 2009 the City pledged to meet the 100% goal by 2012, with a new aspiration of supplying 15% of the total electricity load from self-generated green power. By the end of 2012, the City had only reached 9% self-generation, and total green power reached just 14% of all consumption.

If Portland has consistently failed to meet the 100% goal over a 14-year period, it should not impose the same requirement on a private facility.

The PUC Is Right: Some Conservation Projects No Longer Make Sense

The Energy Trust of Oregon (ETO) is a nonprofit organization funded by taxes imposed on utility ratepayers. Most of the tax money is spent on subsidies for energy conservation programs.

While energy efficiency is a good idea, not all projects pencil out. State law requires that specific measures, such as installing additional attic insulation, be “cost-effective.” That means that installing the measure makes more financial sense over the long term than having the utility simply provide more energy. Projects that are too costly are disallowed.

Now that the country is experiencing a glut of natural gas, many conservation measures no longer meet the legal requirement; but the Energy Trust wants an exception in order to continue funding its energy efficiency programs. Proponents argue that energy conservation is always cheaper in the long run than building a new power plant, but clearly this is not the case. According to the Energy Trust itself, some of their efficiency measures only return two dollars of benefits for every five dollars spent.

The staff of the Public Utilities Commission is recommending that some conservation measures preferred by the Trust be disallowed in order to protect ratepayers from excess taxation. This is the proper recommendation to make, and the Commission should support it.

When natural gas prices are low, ratepayers should be rewarded, not punished by continued taxation for projects that no longer make sense.

Are You Being Scammed on Your Electric Bill?

During the past decade, it has become popular for individuals, businesses, and universities to brand themselves as “green power” supporters. Some have done this by installing actual generating facilities such as solar panels. However, for most people, this is too costly, so a new option has arisen for them: renewable energy certificates (RECs).

A REC is not a physical thing. It is simply an accounting mechanism purporting to represent the “environmental amenities” associated with one megawatt-hour of electricity generated at certain qualifying facilities. Every time a megawatt-hour of power is produced, the electricity is sold as one commodity, and a REC is created as a separate commodity. The two are not necessarily sold at the same time, or to the same buyer.

What are these “environmental amenities”? No one actually knows. To take a hypothetical example: If you bought a REC associated with a new hydroelectric facility, a potential environmental benefit would be the lack of air pollution from that facility. But the hydro dam probably would have several environmental “disamenities” such as fish mortality and loss of recreational opportunities to river users. The net effect might be zero environmental gain, depending on how one values the trade-offs.

The question becomes much more complicated for intermittent sources such as wind and solar. Since those generators don’t produce any useful output most of the time, they must be continually backed up by other sources (known as “spinning reserve”). This is a requirement of the electrical grid, where electricity demand and supply must be in equilibrium at all times to avoid blackouts.

If wind and solar facilities must be backed up, then in order to quantify the “environmental amenities” of an individual REC, we would need to know exactly where the back-up came from. In order to learn more about this last year, I assigned a number of bright college students the task of identifying specific RECs (by the unique number assigned each one) and then investigating what sources (if any) were being used as spinning reserve. It turns out that finding such information is impossible. We asked electric utilities, REC brokers, and state utility regulators. All denied our requests.

The contrast between the green energy field and the “sustainable agriculture” industry on this point is stark. If you walk into almost any fine restaurant or supermarket and ask where the produce or beef came from, the information will be readily available. In fact, managers are likely to launch into an extended dissertation about the virtues of “local sourcing,” “organically grown” crops, and “humanely raised” animals.

However, if you ask similar questions about the qualities of a REC you just purchased, you will hear the sound of silence.

The evidence shows that RECs are actually a fake commodity, created out of thin air, and that consumers who purchase them are being bilked. This is all documented in a Cascade report released in May.

As a follow-up to this research, Cascade has asked Attorney General Ellen Rosenblum to investigate the REC market for fraud under the terms of the Oregon Unfair Trade Practices Act. As of this writing she has yet to respond.

In the meantime, consumers would do well to steer clear of the REC scam. A prominent circus promoter once claimed, “A sucker is born every minute.” There is no need to be part of the evidence that proves him right.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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