As Energy Targets Loom, Bill Shows Who Has Power

Civil Beat - March 08,2011

By: Michael Levine

Hawaii's clean energy goals are ambitious, but a proposal before the state Senate shows they're not written in stone.In 2008, the Hawaii Clean Energy Initiative laid out the state's short- and long-term roadmap to get off fossil fuels.In addition to a 30-percent increase in efficiency, the plan calls for utilities to generate 40 percent of their power from clean sources by 2030. But that legally binding, penalty-threatening target for energy companies is, apparently, open for negotiation.A bill the full Senate will take up Tuesday, if adopted as currently written, would clarify that the utilities can count things like residential rooftop solar toward their goals — a step that might help the utilities hit their marks, and avoid fines.Senate Bill 1346 would ensure that customer-sited, grid-connected electricity generation will continue to be part of Renewable Portfolio Standards ("RPS") — the section of state law that established the targets for the utility companies.Even though the law already points in that direction, Senate Energy and Environment Committee Chair Mike Gabbard said the utility companies "are kind of freaking out" with deadlines and penalties looming on the horizon."They're looking under every rock to help them meet their goals," Gabbard said. He said his intent had been to "hold their feet to the fire" by narrowing what they could claim credit for, but another committee rejected his proposal.His committee approved an amendment that would have allowed the utilities to count only the net amount of power they receive from energy-generating customers rather than the full amount generated on-site.The energy consumed on location would have been counted not as part of the 40 percent RPS goals, but instead part of Energy Efficiency Portfolio Standards ("EEPS"), the other 30 percent. That separate section of law will, starting in 2015, count things like efficient appliances as well as energy offset projects like solar water heaters and seawater air conditioners.HECO Deserves CreditHECO spokesman Peter Rosegg said Gabbard's proposal would have hurt the company. "If we're going to be in a position where we can be penalized for not reaching those goals ... taking it away has a negative value," he said. It's fair for the utility to get credit for customers' renewables because it's required to maintain the infrastructure to serve them when necessary, Rosegg said. Gabbard's changes didn't make it far. The bill was changed back to its original form by the Senate Committee on Commerce and Consumer Protection, whose chairwoman, Roz Baker, introduced the measure.Baker said it doesn't matter whether renewable energy is generated by a large company or by individual homeowners."Anything that anybody can do to help our state reach our clean energy goals, we think that ought to be included and counted," she said. "I just think it gives us a more honest picture."Acting Hawaii Energy Program Administrator Estrella Seese, the Abercrombie administration's voice in the debate, agreed. She said residential solar affects the supply side of the equation rather than customer consumption or demand for electricity."Wherever you count it, both the RPS and EEPS are counted in our goal of 70 percent," she told Civil Beat. "They're the two pieces of the goal, so it's just counting the beans and counting it where they belong."No Difference to the Public?The decision on how to count rooftop solar may not make a difference for the general public, but it will certainly have an impact on the utility company.The Public Utilities Commission (PUC) is working on rules that would assign responsibility for the EEPS and could establish penalties for non-compliance. While the utilities might end up with some culpability for implementing programs like efficiency-promoting rate design, they likely will not have the same potential exposure as they do with RPS.The PUC said in 2008 that utilities could face a $20 fine for every megawatt-hour they fall short of their RPS goals. To put that in perspective, the estimated 15 megawatts of customer-sited power on Oahu right now could save Hawaiian Electric Company up to $400,000 in fines if the company falls short of its renewable energy sales targets of 15 percent in 2015, 25 percent in 2020 and 40 percent in 2030.And that's just the beginning. Gabbard said just 4,000 of 274,000 homes on Oahu have photovoltaic on their roof. That number could increase dramatically in coming years. But it's not likely to be impacted much by how the savings are counted.HECO spokesman Peter Rosegg said Gabbard's proposal wouldn't do much for customers but would have a significant negative impact on the utility."I don't think counting in RPS or not counting it in RPS is going to affect the customer who is considering renewable energy," he said. Economics are generally going to be the main motivating factor driving homeowners to invest in solar or other technologies, he said."We don't think it's going to hurt anybody, it's not going to help anybody, it's not going to change anyone's decision making, but it will affect our company," he said.Of course, if the utility couldn't count the customers' power, more clean energy might be generated. The customers would still want to build their own systems and the utility would have to purchase or generate the entire 40 percent target."If these guys weren't putting PV on their roof," Rosegg said of customers generating their own energy, "we would have to go contract with another provider, probably a utility-scale provider, to meet that need."Impact to HECOHECO, which testified in favor of the original version of SB1346 and against Gabbard's amended version, is part of a for-profit company with responsibilities to its shareholders. But the utility says what's good for it is good for the public. Even though the PUC explicitly ruled the companies will not be allowed to raise electricity rates to pay for its fines, a heightened target could impact the company's financial outlook by affecting bond ratings and loan interest rates.Supporters of the bill have suggested that by giving utilities this small concession, they might be more inclined to play nice and accommodate interconnection requests where people sell power back to the grid under programs like net-energy metering and feed-in tariffs. In its testimony supporting the bill, the Sierra Club said the measure "gives an incentive to electrical utilities to encourage distributed generation instead (of) solely focusing on large, centralized forms of power."Not all are convinced.Hawaii Solar Energy Association President Mark Duda testified that gifting the utilities the right to count customer-sited energy generation toward its goals would foreclose the possibility of customers selling those green credits in a yet-to-be-created market. He told Civil Beat he expects either the federal or state government will consider those types of renewable energy incentives in coming years, and Hawaii citizens will be left out in the cold.The Blue Planet Foundation cited similar concerns and opposed a similar proposal last year, Executive Director Jeff Mikulina said. This year, the organization didn't provide testimony — a conspicuous absence for an entity that weighs in on energy legislation regularly.To be fair to all parties, the proposal is a small one in the grand scheme of things.It's not as if the RPS standards rules are bulletproof as currently written. Exceptions are made for weather, labor strikes and general difficulty procuring land and finding cost-effective clean energy. The PUC said it will evaluate those hardships in determining what, if any, fines to lay down in the event of a missed deadline.But the bill sends a signal to the utility that lawmakers may be willing to walk back their tough talk on clean energy if the utility finds itself struggling to meet its obligations. In this game, it's the electric companies that have the power.