Gambling With The Future: The Fight Over The Implementation of Renewable Energy in Utah

The Nature of the Debate

The State of Utah Public Service Commission has a running docket about the cost-benefit analysis/debate over Pacificorp's Net Metering Program, which is about whether Pacificorp should have to pay, and how much they should pay, customers who net produce more solar power than they consume from the grid, especially as the community of residential solar power energy producers grows.  It also questions what responsibility energy producing companies have to promote a better future.

"Net metering is a policy designed to foster private investment in renewable energy. In the United States, as part of the Energy Policy Act of 2005, all public electric utilities are required to make available upon request net metering to their customers..... Current law requires all utilities to offer net metering upon request, which implies no limits, and is in conflict with state laws which do set a limit." (9)(10) 

Code Ann. § 54-15-102, which states:
(12) Net metering program means a program administered by an electrical corporation whereby a customer with a customer generation system may:
   
(a)    generate electricity primarily for the customer’s own use;

(b)    supply customer-generated electricity to the electrical corporation; and

(c)    if net metering results in excess customer-generated electricity during a billing period, receive a credit as provided in Section 54-15-104. 

The debate began when Rocky Mountain Power (here I'll use interchangeably with Pacificorp, which is its parent company) moved to raise a fee of $4.65/month on net metering customers.  Because Net Metering issues are governed by state and federal laws, Rocky Mountain Power couldn't just raise its rates on net metering customers without first getting approval from the state and hence the Utah Public Service Commission mediating the public debate.  

Utah Code Ann. § 54-15-105.1 of the NEM statute, which provides that:
The governing authority shall:
(1)  determine, after appropriate notice and opportunity for public comment, whether costs that the electrical corporation or other customers will incur from a net metering program will exceed the benefits of the net metering program, or whether the benefits of the net metering program will exceed the costs; and
(2)  determine a just and reasonable charge, credit, or ratemaking structure, including new or existing tariffs, in light of the costs and benefits.

Utah Code Ann. § 54-15-105.1 Requires Consideration of the Costs and Benefits of the “Net Metering Program” (Not Solely of the “Net Electricity”) Which Necessarily Entails the Costs of the Entire Production from Participating Customers’ Distributed Generation (“DG”) Systems

The rationale Pacificorp used for the fee was that customers, who contribute energy generated from solar panels to the grid, should have to pay more for grid maintenance because "feeding small amounts of electricity from net meter customers to their neighbors results in increased "wear and tear" on the grid, and requires more frequent maintenance."  They also argue that customers who produce electricity with solar panels that goes back out into the grid should have to pay for the general use and maintenance of the grid.

The Company supports development of cost-effective renewable energy. But that development must not be at the expense of customers who choose not, or cannot afford, to install distributed generation. Moreover, voluntary actions taken by individual customers for their own personal reasons cannot shift expenses to the utility, as TASC and Sierra now advocate. Customers partially relying on renewable energy and the net metering program must still pay their fair share of the costs to serve them and to provide them with reliable backup power, and to provide them a grid through which they receive credit for their excess generation. As discussed below, the net metering program as currently structured unfairly shifts costs from net metering customers to all other customers. (1)

NOTE: As of 2014, there were approximately 2,500 residential net metering customers of Rocky Mountain Power as compared to their 800,000 non-net metering customers in Utah. (1) 

At first, in August, the commission ruled that Pacificorp couldn't apply the fee until they could prove factually that net metering customers were incurring higher maintenance costs.  Net metering customers who would be affected by this new "maintenance" fee and environmental groups such as UCARE, the Sierra Club and Utah Clean Energy had argued that if anything, people who were switching to solar were actually reducing the maintenance costs of the grid because they were using less kilowatt-hours and were striving to be more energy efficient in general.  

Rocky Mountain Power, convinced of its position, went forward by doing a study of electricity use and maintenance costs for its customers, comparing net metering customers with customers who only consume electricity.  The study was highly criticized by customers and environmental groups alike for being non-representative, biased and incomplete.   

Pacificorp has not given up the struggle for the fee, threatening that the cost for increased maintenance caused by net metering customers, if not paid for by them, will inevitably be passed on to all customers in the form of higher rates.  

Over time the debate has heated up and taken on global proportions by including global issues.

An argument posed by net metering customers and aformentioned environmental groups is that net meter customers should not have to pay more because their conversion to producing solar energy is net beneficial for the environment, the economy and public health when compared with the adverse impacts of fossil fuel burning for electricity generation.  It is also argued by the same parties that introducing a unique fee for solar power generators who contribute to the grid would have a chilling effect on the use of renewable energies, which is detrimental to the economy, the environment and public health, especially in the face of modern problems such as climate change and environmental pollution.  The debate also centers around whether or not Pacificorp has a responsibility to be modernizing towards renewable sources of energy production, perhaps paying a carbon tax/fine, knowing that fossil fuel burning for electricity production is contributing to environmental degradation and climate change, perhaps even contributing to adverse health impacts in Utah's public via air and water pollution. (1)  http://psc.utah.gov/utilities/electric/elecindx/2014/14035114indx.html.  

Pacificorp hasn't dedicated any attention to the "externalized" costs of burning fossil fuels to produce electricity.  These real-world health care, economic, and environmental costs of burning carbon are shifted from Rocky Mountain Power's financial calculations to our families and communities. (1)

To counter these arguments, Pacificorp's latest addition to the docket comes out with guns blazing calling the "avoided costs for healthcare, environmental clean-up or other intangible societal benefits" by the use of solar or other renewable resources as "unquantifiable" and "speculative." (12)

"While the Company knows with a degree of certainty what its fuel costs are, the same cannot be said for avoided health or environmental impacts from displacement of fossil fuels-based resources." (12)

And because all these impacts are "unquantifiable" and "speculative" Rocky Mountain Power continues by absolving itself of all responsibility in argument 5.

V. The Company Does Not Have the Burden of Proof to Support Costs And Benefits of the Net Metering Program. 

In response to arguments such as Don Gren's:

"There are benefits to Rocky Mountain Power that solar contributes to the electrical system (i.e. less carbon fuel burned, less need for more powerplants, fewer transmission costs and less energy lost on transmission lines, reuced EPA compliance costs, and less vulnerability to fossil fuel price fluctuations........ As well as solar's value to the State and its citizens in offsetting the costs (healthcare, economic, and environmental) of burning fossil fuels to produce electricity."

Pacificorp counters:

Assuming some intervenors’ arguments to be true (though unproven) that subsidizing residentially-produced renewable electricity at the expense of other customers will provide a benefit of reducing the use of fossil fuels, the Commission must necessarily consider such things as loss of jobs, loss of network reliability, and loss of profit margins for small businesses as they grapple with dramatically rising electricity prices, and so forth. All of these things would negatively impact the economy. All of these would need to be considered and are probably more quantifiable than the hypothetical societal, health and environmental “benefits” of displacing base load resources.  Value should not be attributed to alleged fuel price hedging, fuel price volatility and environmental risk factors, as well as to societal and health risk factors.  They are based on divergent and speculative projections and are not costs the Company incurs to provide service. (12)

According to Pacificorp, the quantifiable benefits of the solar output generated as part of the net metering program include a) avoided energy costs and b) avoided capacity costs.  These benefits, from their point-of-view, are only net-metering customer specific and thus do not offset the costs that come with the increased costs on the grid incurred by net metering.

Depending on the electrical characteristics of the distribution system, a high penetration of NEM requires infrastructure upgrades to provide safe and reliable electricity to customers. For example, the upgrades include, without limitation:

·    replacement of existing voltage regulators, installation of new voltage regulators (particularly on lines with NEM customers heavily clustered at the end of the line);
·    increased maintenance of voltage regulators due to the impact of cloud cover resulting in an increased number of operations;
·    replacement of distribution transformers;
·    upgrading or replacement of existing line reclosers or protective relays and installation of new line reclosures to replace existing fuses where protection coordination may be impacted due to large amounts of NEM connections on the feeder; and
·    installation and maintenance of additional substation equipment such as dead-line check.

Rocky Mountain Power closes their argument by essentially claiming that all objections to their proposed fee on net metering customers are politically motivated and thus not worthy of consideration:

And although at least one party in this case sees it as a decision that rewards “smart customer choices” for “smart and engaged … distributed solar customers,” the Company views it as a decision that would force subsidies to support certain customers’ social, political and economic choices at the expense of others. (12)

There is an especially strange line in Pacificorp's argument that I'd like to address later:

The Company submits that policies that artificially boost a specific type of renewable energy rather than targeting emission reductions from any source, in particular at the expense of Utah customers and at the expense of the utility, is not good policy.

Getting To Know Pacificorp

Before we parse the details of the debate previously mentioned, I felt it would be good for us to get to know Pacificorp a little bit, locally known as Rocky Mountain Power, Utah's major electricity provider.  On their website Pacificorp describes itself as "one of the West’s leading utilities. It operates as Pacific Power in Oregon, Washington and California; and as Rocky Mountain Power in Utah, Wyoming and Idaho. Balancing growing energy needs with costs and the environment is an ongoing focus for the company."  (2) http://www.pacificorp.com/index.html

It operates 69 generation facilities in the six states that Pacific Power and Rocky Mountain Power operate in, plus two facilities in Montana, three in Colorado, and one in Arizona.  It serves serves most major cities in Utah, with the following exceptions: Bountiful, Eagle Mountain, Kaysville, Lehi, Provo, Murray, and Logan.  Overall it provides power to over 1.4 million residential customers, 202,000 commercial customers, and 34,000 industrial and irrigation customers - for a total of approximately 1,668,000 customers. 70.6% of the power generation is from thermal sources (i.e. coal or natural gas), 6.7% from hydroelectric sources, and 0.2% from wind sources. 22.5% of PacifiCorp Energy's generation is purchased from other suppliers or under contracts. (3)

Pacificorp is a wholly owned subsidiary of Berkshire Hathaway Energy (formerly MidAmerican Energy Holdings Company), which is a holding company that is, itself, 89.8% owned by Berkshire Hathaway (controlled by investor Warren Buffet). (4)(5)  Berkshire Hathaway Energy holds the following companies: MidAmerican Energy Company, MidAmerican Renewables, PacifiCorp, Northern Powergrid (formerly CE Electric UK), Integrated Utility Services UK, CalEnergy Generation, Kern River Gas Transmission Company, Kern River Pipeline, Northern Natural Gas Company (Omaha), HomeServices of America, BYD Company (10% of outstanding shares), NV Energy, Metalogic Inspections Services, Intelligent Energy Solutions, AltaLink.

The parent company of Berkshire Hathaway Energy is Berkshire Hathaway which has $493 billion worth of assets and according to Forbes is the fifth largest public company in the world.  The company wholly owns GEICO, BNSF, Lubrizol, Dairy Queen, Fruit of the Loom, Helzberg Diamonds, FlightSafety International, NetJets, Acme Building Brands, Benjamin Moore and Company, Clayton Homes inc., owns half of Heinz and an undisclosed percentage of Mars, Incorporated, and has significant minority holdings in DIRECTV, Exxon Mobil Corp., Goldman Sachs, Phillips 66, Wal-Mart, The Proctor and Gamble Company, American Express, The Coca-Cola Company, Wells Fargo, IBM and Restaurant Brands International, amongst many others. (4) 

A holding company is "a company that owns other companies' outstanding stock. The term usually refers to a company that does not produce goods or services itself; rather, its purpose is to own shares of other companies to form a corporate group. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies." (6) 

The point of all this, is that when we're talking about Pacificorp, we're talking about the tip of a massive iceberg of companies-who-own-companies that suspiciously seem like a hierarchy scheme to diffuse liability and to be a monopoly without apparently seeming to be one.  

Pacificorp fuels 58% of its electricity production with coal and according to its website, "Approximately one-third of the coal used in the PacifiCorp system is produced from captive mines. PacifiCorp's mines produce approximately 8.8 million tons of coal annually from both surface and underground mines. Surface operations produce approximately 0.6 million tons per year and underground operations produce approximately 8.2 million tons per year." (2)

According to its website, it produces renewable energy in the form of geothermal, hydroelectric and wind. (2)  Wind power accounts for about 8.8% of their total electricity production and, as far as I could tell, the total amount of energy produced by hydroelectric was 10.8%, and geothermal 0.2%.  Additionally, from my calculations it came out to be that fossil fuel burning for electricity production accounted for about 80.2% of the company's total output.

Addressing The Economic and Environmental Costs of Burning Carbon


On a factual level Pacificorp's argument is problematic to say the very least and as I hope to have shown in the previous section, one can hardly expect an honest argument out of such a vested hierarchical scheme (Rocky Mountain Power as one branch of Pacificorp which is one branch of Hathaway Berkshire Energy, which is just one branch of Hathaway Berkshire, which is only the 5th largest company in the world!).

In a statement, Rocky Mountain Power said that there were beginning to be enough net metering customers that it effected normal business operations, which, to me, might be implying that the real motivation behind this public debate is that residential solar panel use is cutting into Pacificorp's profits.

Further proof that Pacificorp's actions are more motivated by the bottom line, than by any other consideration, can be found in a recent Deseret News article titled, "Clean Power: States Told to Reduce Carbon Dioxide; Utah assails Obama's Plan."  Therein it talks about "Obama's Clean Power Plan mandating carbon reductions from existing power plants" in effort to address human-caused climate change and how its being received by many states and businesses as an attack on coal.  In reality it is an attack on coal because coal power plants are some of the worst point sources of pollution anywhere.  According to the White House, Utah power plants produce 31 million metic tons of carbon pollution annually, which equates to the average pollution created by 6.5 million cars over the course of a year.  As we all know, carbon pollution is the main culprit of climate change, but this doesn't phase Rocky Mountain Power, the main electricity producer in Utah.  In the article it talks about Rocky Mountain Power's resistance to the plan for initiating a greener future.  And in some ways their resistance makes sense because, after all, Pacificorp generates the majority of its electricity with coal power plants and much of this is fueled with coal that comes from mines that Pacificorp owns.  If you made your money by owning coal mines and producing electricity by burning coal, wouldn't you find it threatening if it was mandated that coal could no longer be used for any of these purposes?  But just because, their motivations are understandable does not make their resistance to change excusable, especially when failure to change endangers the health of the environment and society, from here to the future.

As if there needed to be anymore evidence that climate change is underway as a result of humanity's boundless appetite for combustion, a new study published in Nature journal, "Observational determination of surface radiative forcing by CO₂ from 2000 to 2010," provides more such evidence. 

"Scientists have observed an increase in carbon dioxide's greenhouse effect at Earth's surface for the first time. They measured atmospheric carbon dioxide's increasing capacity to absorb thermal radiation emitted from Earth's surface over an 11-year period at two locations in North America. They attributed this upward trend to rising carbon dioxide levels from fossil fuel emissions." (7)

Climate change, contrary to Pacificorp's claims that it is "unquantifiable and speculative", is a reality with much supporting evidence that is going to have to be dealt with by all humans regardless of agenda.  Along with climate change, the deterioration in quality of air, water and the environment are also readily quantifiable and non-speculative outcomes of burning of fossil fuels,

Prolonged exposure to toxins from energy production facilities, is tied to (mortality), birth defects, heart disease, asthma attacks, lung disease, learning difficulties, and even lower property values.  A 2010 report by the National Research Council (NRC) calculates that particulate matter pollution from U.S. coal-fired power plants is solely responsible for causing approximately 1,530 excess deaths per year.  In addition, properties in close proximity to toxic facilities average 15% lower property values. (8)

There is also a racial/minorities/poverty and disenfranchised people's component to these adverse effects.  For instance,

Approximately 68% of African Americans live within 30 miles of a coal-fired power plant, which produces the largest proportion of energy compared to any other energy production type. The health conditions associated with exposure to toxins coming from these plants disproportionately affect African Americans. An  African American child is three times as likely to be admitted to the hospital and twice more likely to die from an asthma attack than a white American child. Though African Americans are less likely to smoke, they are more  likely to die of lung disease than white Americans are. (8)

At the same time, many of the same polluting facilities that affect the daily health and well-being of host communities are major contributors to the greenhouse gases that are driving climate change. Carbon dioxide emissions are the leading cause of climate change and coal-fired power generation accounts for 32% of all carbon dioxide emissions. (8)

ARE THERE SOLUTIONS?

As Abraham Lincoln once said, "Determine that the thing can and shall be done, and then we shall find the way."  Most problems are not without solutions, but without cooperation they might as well be without solutions.  What I don't understand about Pacificorp, and many other companies with similar stature and influence, is that they resist the inevitable rather than being the vanguards.  Realizing that climate change, pollution, resource uncertainty and the resulting costs to society in health and wealth are modern realities that must be dealt with, why not just invest in the necessary changes rather than standing in front of the crumbling dam insisting that it's just an illusion?  Face it, humans have screwed up a lot of things on this Earth, but it will only be the end of the world if we insist that we haven't and continue down the same old path of destruction.  There's nothing inevitable or unavoidable about our current situation nor are the problems we've created unsolvable if we had each other's cooperation and determination to take the facts into account and make the necessary changes.

So how much energy could renewable sources generate in Utah?

Solar power in Utah has the capacity to provide almost a third of all electricity used in the United States. (8)(11)

Solar: Utah has urban utility-scale PV potential of 30,492 GWh (72.2% of total net generation), rural utility-scale PV potential of 5,184,878  GWh (over 100% of total net generation), rooftop PV potential is 7,514 GWh (17.7% of total net generation) and  concentrated solar power potential is 5,067,547 GWh (over 100% of total net generation). (8)(11)

Wind: Onshore wind power  potential is 31,552 GWh (74.6% of total net generation). (8)(11)

Geothermal: Utah has hydrothermal power potential of 12,982  GWh (30.7% of total net generation) and enhanced geothermal systems potential is 939,381 GWh (over 100% of  total net generation). (8)(11)

And besides, Utah has a voluntary renewable energy standard of 20% by 2025.  Why not strive to attain a goal worth so much more than money, like individual and societal well-being?  (Currently, only about 3% of electricity production in Utah comes from renewables, the other 97% coming from the combustion of fossil fuels, 30% of which leaves the state). (8)

Sources:
1) http://psc.utah.gov/utilities/electric/elecindx/2014/14035114indx.html
2) Pacificorp Website http://www.pacificorp.com/index.html
3) http://en.wikipedia.org/wiki/PacifiCorp
4) http://en.wikipedia.org/wiki/Berkshire_Hathaway
5) http://en.wikipedia.org/wiki/Berkshire_Hathaway_Energy
6) http://en.wikipedia.org/wiki/Holding_company
7) http://www.sciencedaily.com/releases/2015/02/150225132103.htm
8) http://naacp.3cdn.net/65ceef04a8572daf81_tym6blqfc.pdf
9) http://en.wikipedia.org/wiki/Net_metering
10) http://web.archive.org/web/20090521131550/http://apps1.eere.energy.gov/states/alternatives/net_metering.cfm
11) http://www.nrel.gov/docs/fy12osti/51946.pdf
12) Docket No. 14-035-114  REPLY COMMENTS RESPONDING TO INTERVENOR COMMENTS RELATED TO APPROPRIATE COSTS AND BENEFITS TEST EQUATIONS AND METRICS TO EVALUATE NET METERING PROGRAM
13) http://www.pv-tech.org/news/utah_suspends_net_metering_dispute