California State Senators Announce Legislation To Support Clean Energy and Reduce Greenhouse Gas Emissions

Yesterday, California legislators publicly announced a suite of bills to push forward the state’s ambitious clean energy and carbon reduction goals.  California Climate Leadership, a coalition of state senators, including Kevin De León, Ben Hueso, Mark Leno, Fran Pavley, and Bob Wieckowski, discussed the legislation at a press conference shown hereSB 350, SB 185, SB 189, and SB 32 form the core of California Climate Leadership’s legislative initiative.

SB 350, not yet formally introduced in the Senate, proposes the “Golden State Standards”:  a 50% renewable portfolio standard, a 50% reduction in petroleum use and a 50% increase in energy efficiency in buildings – all by 2030.  These standards parallel Governor Jerry Brown’s call in his inaugural address for a 50% RPS, 50% reduction in petroleum use, and doubling of energy efficiency of existing buildings by 2030.  See our report on the inaugural address here.  SB 350 will be the second bill this year that provides a 50% RPS; AB 197, summarized by Renewable + Law here, was introduced on January 28 by Assembly Member Eduardo Garcia.

SB 185 would create the Public Divestiture of Thermal Coal Companies Act.  The Act would require the California Public Employees’ Retirement System (CalPRS) and the State Teachers’ Retirement System (CalSTRS) to divest public employee retirement funds of any investments in thermal coal companies and prohibit new investments in such companies.  Senator De León previewed his plans for SB 185 in early December, spurring a backlash from CalPERS and CalSTRS. 

SB 189, introduced by Senator Ben Hueso, would create the Clean Energy and Low-Carbon Economic and Jobs Growth Blue Ribbon Committee.  The Committee would be comprised of seven members, with the mission of advising state agencies on the most effective ways to allocate clean energy and greenhouse gas related funds and implement policies in order to maximize California’s economic and employment benefits.

These three bills join SB 32, introduced by Senator Fran Pavley on December 1, 2014, to amend AB 32 (the California Global Warming Solutions Act) to bring California’s greenhouse gas reduction goal from reaching 1990 greenhouse gas levels by 2020, to a target of 80% below 1990 levels by 2050.

Stay tuned – we don’t expect these bills to be the last legislative initiatives this session to address these issues.

ALJ Recommends MN PUC Partially Disallow Xcel Energy’s $400 Million Cost Overrun on Monticello Project

Today marked the release of the highly anticipated report and recommendations from the Administrative Law Judge tasked with reviewing Xcel Energy’s handling of the life cycle management and extended power uprate (LCM/EPU) projects  The MN PUC initiated review of the LCM/EPU projects at the conclusion of Xcel Energy’s 2012 electric rate case after learning that the total costs of the LCM/EPU projects were approximately double Xcel Energy’s estimates utilized in the underlying certificate of need proceedings.  The thrust of the MN PUC’s inquiry was whether Xcel Energy’s handling of the LCM/EPU projects were prudent, whether the cost overruns were reasonable, and what disallowance remedy, if any, should be adopted.  As a necessary part of this analysis, the MN PUC directed the ALJ to determine what portion of the total $748 million spent on the LCM/EPU projects were for the LCM and EPU, respectively.

Relying heavily on analysis from the Minnesota Department of Commerce, the ALJ’s report questions Xcel Energy’s management of the LCM/EPU projects.  The ALJ ultimately concluded that “Xcel’s principal failure was that it did a very poor job managing the initial scoping and early Project management up until beginning installation during the 2009 refueling outage.  The Company’s decision to proceed with the combined LCM/EPU Project in 2009 rather than 2011 created an extremely difficult task that Xcel was not able to manage.”  The ALJ’s report goes on to chastise Xcel Energy for failing to appropriately track LCM and EPU project costs, proffer a reasonable cost allocation split for the LCM and EPU projects, and demonstrate a reasonable figure for disallowance.

The ALJ concluded that Xcel Energy’s failures justify a disallowance of approximately $72 million of the EPU project costs, resulting in a roughly $10 million reduction to Xcel Energy’s annual revenue requirement on a Minnesota Jurisdictional basis.  This reduction is based on a cost-effectiveness comparison between the final cost of the EPU against the cost of the next least-cost alternative that was considered in the underlying EPU certificate of need proceedings.

Parties to the proceeding will have the opportunity to submit exceptions to the ALJ’s report.  Although no deadline has been set yet, we suspect review of the matter will proceed swiftly.  Oral argument before the MN PUC on this matter has already been set for March 3, with deliberations and an oral decision to follow on March 6.  This schedule was previously set to allow the MN PUC to build the decision into deliberations on Xcel Energy’s pending 2013 electric rate case (set to conclude by March 26).

Bill Targeting 50% RPS Introduced in California Legislature

In his inaugural address earlier this month, Governor Brown, referenced several ambitious goals he would like to see accomplished over the next 15 years, including  increasing from one-third to 50 percent the amount of California’s electricity that must be derived from renewable resources. On January 28, 2015, a legislator joined in this ambitious goal setting, as Assembly Member Eduardo Garcia (D, District 56) introduced Assembly Bill 197, which focuses on renewable resources procurement.

Under California’s current Renewables Portfolio Standard (RPS) 33 percent of procured electricity must come from eligible renewable energy resources.  As currently drafted, AB 197 would require “electrical corporation, in a long-term plan, or local publicly owned electric utility, in a procurement plan, to adopt a long-term procurement strategy to achieve a target of procuring 50 percent of its electricity products from eligible renewable energy resources by December 31, 2030.” [underline added]

We will be watching closely the strategies pursued by the Governor and the legislature to achieve his goal of a 50 percent RPS in California.  In this space, we will track further action by the legislature and regulatory agencies regarding the push to 50 percent RPS.

Minnesota Community Solar Gardens Forecast: Partly Sunny with a Chance of Rain

Within days of its open on December 12, 2014, Xcel Energy’s Minnesota Community Solar Garden (CSG) Program had well over 300 MW worth of CSG applications submitted and by this writing nearly 430 MW.  The rush of significant application creates a question of “who’s in line first?”  That was the question before the Minnesota Public Utilities Commission (Commission) today.

As noted in our prior coverage, the Commission instructed the program to be “first-ready, first-served” and laid out specific instructions on the steps developers would need to take to complete applications and develop a garden in compliance with the program. These instructions were the result of substantial deliberation with interested parties and reflected in Xcel’s shiny new Tariff Section 9 governing the CSG Program.  The problem, however, is that any CSG  needs to interconnect to Xcel’s distribution system, and that process is governed by Xcel’s existing Tariff Section 10.  The interplay of these two tariff sections complicates the “who’s in line first?” issue by adding the question “which line?” Importantly, over 100 MW of applications destined for the CSG program were in line in the Section 10 interconnection queue before the CSG program opened last month.  A developer sought resolution of the two-queue issue from the Commission.

After considerable discussion, the Commission essentially decided the interconnection queue should follow the CSG program queue and directed as follows:

  • CSG applications will enter the appropriate Section 10 interconnection queue and be placed or reordered in this queue based on the date and time that Xcel determines the application to be complete under Section 9.
  • For any interconnection applications already studied that require additional engineering study due to changes in the interconnection queue positions, Xcel was directed to track the additional cost incurred by re-performing parts of the engineering study and bill applicants for the parts of the study that were required to be redone due to distribution system changes.

Although it was understandably difficult for the Commission to decide at what point an application should receive a spot in line, today’s decision vests more weight in Xcel’s completeness determination – previously a ministerial task.  Furthermore, the Commission left open how CSG developers that have invested money in furtherance of Section 10 interconnection applications will receive value for that investment if they move backwards in the Section 10 interconnection queue.

During deliberations the Commission also acknowledged that other issues are bound to percolate.  Stay tuned . . .

California Governor Pledges 50% Renewable Energy by 2030

In November 2008, former Governor Arnold Schwarzenegger signed Executive Order S-14-08, which set a 33 percent renewable portfolio standard for California by 2020.  On Tuesday, Jerry Brown was sworn in for a record fourth term as Governor of California and, during his inaugural speech, Governor Brown touched on California’s ambitious climate change policies, including a proposal for California to obtain 50 percent of its electricity from renewable resources within the next 15 years.  Citing to AB 32, Governor Brown stated:

“[W]e are well on our way to meeting our AB 32 goal of reducing carbon pollution and limiting the emissions of heat-trapping gases to 431 million tons by 2020. But now, it is time to establish our next set of objectives for 2030 and beyond.

Toward that end, I propose three ambitious goals to be accomplished within the next 15 years:

  1. Increase from one-third to 50 percent our electricity derived from renewable sources;
  2. Reduce today’s petroleum use in cars and trucks by up to 50 percent;
  3. Double the efficiency of existing buildings and make heating fuels cleaner.”

Stoel Rives will continue to monitor legislative and regulatory activity involving the California renewable energy portfolio standard.

Initial Take: Xcel Energy’s 2016-2013 Integrated Resource Plan for Minnesota

Today, Xcel Energy filed its 2016 – 2030 Integrated Resource Plan.  Xcel Energy’s proposal is fairly significant in scope – it proposes to cut CO2 emissions by 40% by 2030, add new renewable and natural gas generating resources, and lay the stage for reforming the resource planning process conistent with its framework filing and proposals from the e21 Initiative.  Specifically, Xcel Energy’s preferred plan contains the following elements:

  • Add approximately 1,800 MW of wind resources;
  • Add approximately 1,700 MW of utility-scale solar resources;
  • Add approximately 1,750 MW of natural gas peaking resources;
  • Operate the carbon-free, baseload nuclear plants through at least 2030;
  • Operate Sherco Units 1 and 2 at reduced levels through 2030;
  • Extend the life of Blue Lake Units 1-4 an additional four years through 2023; and
  • Modify the procedural review process by inviting stakeholder participation in modeling discussions prior to the traditional discovery and comment processes. 

The assumptions underlying this proposal, as well as other parties’ proposed alternatives, will be debated over the next year.

Xcel Energy Submits Framework Filing in Response to e21 Report

Today, Northern States Power Company, d/b/a Xcel Energy, submitted a filing to initiate a discussion with the Minnesota Public Utilities Commission regarding the recently released e21 Phase I Report (see our blog post here).  Key components of Xcel Energy’s proposal to begin implementing the e21 Initiative’s vision include:

  • Lead the effort to achieve carbon reduction by 40% by 2030;
  • Advance distribution grid modernization;
  • Provide customers, including energy-intensive trade exposed customers, with a platform of innovative service and product offerings; and
  • Implement a new regulatory framework.

This last point was addressed at length in the e21 Phase I Report.  There, e21 stakeholders proposed significant reform to both the integrated resource planning and rate case regulatory processes.

Minnesota Stakes its Claim as a National Leader on Energy Regulatory Reform with Release of e21 Report

Today marks the release of the highly anticipated report from the Minnesota e21 Initiative (e21 stands for 21st Century Energy System).  The Great Plains Institute assembled a diverse range of stakeholders, including utilities, ratepayer advocates, environmental advocates, and independent power producer advocates, to discuss regulatory reform in Minnesota to accomodate anticipated changes to our energy system.  The e21 Phase I Report can be found here.  A brief summary of the e21 Recommendations is as follows:

(A) Allow a multi-year, performance-based regulatory framework for utilities that wish to opt-in.

(B) Require utilities that opt into a multi-year, performance-based framework to file a comprehensive Business Plan (covering up to 5 years) consistent with a 15-year (or longer) Integrated Resource Analysis (described in (C) below).

(C) Revise Minnesota statutes to allow utilities that opt into a multi-year, performance-based framework to replace the current Integrated Resource Plan (IRP) with a 15-year (or longer) Integrated Resource Analysis (IRA) that guides the utility business plan; and allow utilities to coordinate the filing plans of the Busness Plan and IRA. 

(D) The Commission should encourage the use of pilot programs or other methods for testing and evaluating components of a multi-year, performance-based framework.

(E) The Commission should establish clear methods for determining the value of grid services and DER services.

(F) The Commission should review and adjust time-varying rates for energy services so that they send more accurate and effective price signals.

(G) Enable innovative product and service options and technologies by revising Minnesota statutes and regulations, specifically including options for energy-intensive trade-exposed industries.

(H) The Commission and Department of Commerce should use their existing authorities to achieve e21 Principles and Outcomes; and review and recommend revisions to their authorities where needed.

(I) The Minnesota Legislature should appropriate the resources necessary for the Commission and the Department to implement e21’s recommendations.

(J) The Commission and the Department should institutionalize the practice of using a collaborative regulatory process.

(K) The Commission and the Department should look for opportunities to initiate generic dockets.

(L) Initiate forward-looking stakeholder processes.

(M) Develop a transparent, forward-looking, integrated process for modernizing the grid.

(N) Identify and develop opportunities to reduce customer costs by improving overall grid efficiency. 

Legislative work and Phase II work to follow in 2015.

 

 

 

 

 

 

 

To Need or Not to Need, that is the Question: MN PUC Answers in the Affirmative

On Monday, the MN PUC addressed whether ‘tis nobler in the pocketbook to suffer the slings and arrows of the MISO market or to invest in new generating units against a sea of uncertainty.

As we noted in prior blogs, the MN PUC initiated the competitive process seeking bids to meet a claimed capacity need on Xcel Energy’s system from 150 MW by 2017 to up to 500 MW by 2019. Over the course of the proceeding, circumstances changed so drastically that it became entirely uncertain whether Xcel would have any capacity need during the relevant timeframe. Nonetheless, the MN PUC decided in March of this year that, notwithstanding the uncertainty, the record demonstrated a need for more than 300 MW by 2019. The MN PUC then found that if the parties can agree to terms that are consistent with the public interest, the Solar PPA provides an appropriate choice for meeting a portion of Xcel’s reliability and adequacy needs (and to fulfill the state’s energy policies) AND that all of the remaining thermal bids may also provide appropriate choices for the same. In other words the Commission directed Xcel to finalize agreements with all parties (or estimates for its own Black Dog project) and submit these finalized terms to the Commission for review.

After the MN PUC’s March decision, Xcel Energy filed yet another updated need assessment explaining that the company no longer expects to have a resource need until perhaps 2024. Xcel Energy also asked the MN PUC to delay action on all thermal projects as a result.

When the MN PUC began deliberations this week, it first took up the question about whether to revisit the need assessment and decided to stick with the original capacity need estimate set forth almost 2 years ago. The Commission then proceeded to oversee some modification of the Solar PPA terms but ultimately determined it was in the public interest and then went on to also find that the Calpine and Black Dog 6 terms were also consistent with the public interest. Thus at a time when even Xcel Energy is arguing it has no capacity shortfall for almost 10 years, the MN PUC authorized over 600 MW of capacity resources to move forward (71 MW solar project, 345 MW Calpine project, 209 MW Black Dog 6 project).

Furthermore, Xcel Energy’s Community Solar Gardens program opened on Friday, December 12. The MN PUC did not inquire as to the initial level of applications. Although verifiable numbers have not been publicly released, there could be a material amount of community solar gardens entering the system by 2015, which could put additional downward pressure on Xcel Energy’s capacity needs.

Xcel Announces Launch Date for its Community Solar Garden Program

Xcel announced this morning that it plans to open its Community Solar Garden program next Friday, December 12, 2014 at 9:00 AM CST. In its filing, the company attempts to clarify the “first-ready, first-served” application process it plans to follow. The company explains that Garden operators can view a time stamp marking when the application is sent to engineering to start the 30 day timeline for Xcel to determine application completeness. The company clarified that some applications may move through the system faster than others largely based on where the project resides geographically. Xcel also clarified that existing Section 10 interconnection applications that are in the engineering queue and conform to the Community Solar Garden program will retain their position in the queue.

Full details on Xcel’s filing are here (PDF). Feel free to contact us if you have any questions.

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