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Testimony for House Bill 3155House Environment and Water Committee

Todd WynnCascade Commentary

Background

House Bill 3155 will require consumer-owned utilities (COU) to establish local conservation, energy efficiency programs, and carbon reduction or avoidance programs within the utility’s service territory.

HB 3155 could require COUs to fund such programs by an amount equal to 2 percent of the utility’s annual retail electric sales.

COUs will be able to collect a charge associated with such programs as part of the retail electric rates or through a non-bypassable fee on each customer’s electric bill. The revenue generated from the fee must go to conservation, efficiency, and/or carbon reduction or avoidance programs.

COUs can use a “joint operating entity” or a “joint operating agency” for the purposes of implementing these programs.

Problems

1. Adding an extra tax on energy bills will only further hurt Oregonians, particularly low-income Oregonians.

As of 2006, COUs serve approximately 406,114 customers, of which 4.5% are already on some sort of low-income assistance plan[1], compared to utilities serving urban communities, which have a rate of 1.8%.

Rural Oregon communities have been hit hard by the economic downturn, with unemployment rates over 20 percent in some counties (Hood River and Curry). COUs predominately serve rural counties and communities where the poverty rate is higher.

House Bill 3155 taxes all ratepayers, and the funds generated could be put into energy efficiency/conservation programs that may help to offset some of the costs associated with the tax. Yet, there are provisions that allow the money to go to carbon reduction/avoidance. Carbon reduction and avoidance would result in the utility purchasing more expensive renewable energy that does not reduce electricity bills. This means that ratepayers would be forced into paying a tax for a program that actually may increase electricity rates even further by having more renewable energy on the grid.

In difficult economic times where not only low-income Oregonians are having trouble making ends meet, but middle-class Oregonians are also stretching every dollar earned, carbon reduction/avoidance is not an immediate problem. However, paying electricity bills is.

2. Creating another Energy Trust would be a mistake.

A program like this already exists for Investor Owned Utilities such as PGE and PacifiCorp, which supply 41% and 31% of Oregon’s electricity respectively[2]. Senate Bill 1149 established a 3% tax on electric bills called the public purpose charge (similar to what HB 3155 would establish), and the majority of the tax revenue has been funneled into a third party nonprofit called the Energy Trust of Oregon. This tax was originally expected to bring in about $40 million a year[3], yet the 2009 budget is at $126 million. As electricity rates rise in the future for COUs, this new tax will become larger and create a giant slush fund that is diverted into expensive projects that benefit few at the cost of many.

The Energy Trust is the perfect example. The Energy Trust funds predominately go to incentivizing upper-income households to install solar panels and capital-intensive energy efficiency upgrades[4]. This is literally robbing the poor to pay the rich.

Also, a large portion of Energy Trust funds are directed towards commercial interests to increase energy efficiency and profitability for private businesses all at the expense of Oregon ratepayers.

Alternatives

Continue to allow the market to respond to its natural incentive to minimize costs, including energy. The amount of energy per dollar of GDP has declined steadily for 50 years. In fact, the energy intensity of the Oregon economy (energy consumed per unit of GDP) decreased by 91% between 1963 and 2005, and this will continue even without government market manipulation.

If this bill must pass, establish a cap on the tax so that it does not become a runaway slush fund that can be used on numerous pet projects that do little to benefit ratepayers; and focus on energy efficiency, not carbon avoidance.

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