In the News

Governor Signs Renewable-Energy Mandate Increasing Rural Electricity Costs

On Wednesday, Governor John Hickenlooper signed SB-252, the highly controversial bill that
doubles the renewable-energy mandate for rural-electric cooperatives. At the same time, the
Governor issued an Executive Order for an analysis of the bill’s deadline and cost.

Link to pdf of executive order

CACI had asked the Governor to veto the bill, and the veto-request letter by CACI President
Chuck Berry is contained in the May 7th
issue of CACI’s Colorado Capitol Report.

Two of the prime sponsors of SB-252 were the majority-party leaders of both chambers,
Speaker Mark Ferrandino (D-Denver) and Senate President John Morse (D-Colorado Springs).
The other two prime sponsors were Representative Crisanta Duran (D-Denver) and Senator Gail
Schwartz (D-Snowmass).

The bill’s primary main targets—Intermountain Rural Electric Association (IREA) and Tri-State
Generation and Transmission Association—issued a joint news release after the Governor signed
the bill:

Colorado’s not–‐for–‐profit electric cooperatives are deeply disappointed that Governor
Hickenlooper chose to sign Senate Bill 13–‐252, which doubles cooperative renewable energy
mandates with no additional time for compliance and raises electricity rates for rural Coloradans
at a time when they can least afford it.

“We met with Governor Hickenlooper twice to discuss rural communities’ significant concerns
with the bill,” said Kent Singer, executive director of the Colorado Rural Electric Association.
“By the time the bill arrived at his desk, the many flaws in the bill could be addressed only with
a veto.”

Both IREA and Tri-State are CACI members.

Here’s the text of the news release issued by the Governor’s Office:

DENVER — Wednesday, June 5, 2013 — Gov. John Hickenlooper signed SB13-252
“Renewable Energy Standard Retail Wholesale Methane” today. He also signed an Executive Order related to the legislation and issued a signing statement addressed to the General Assembly.

The Executive Order creates an advisory committee to the Director of the Colorado Energy Office on the effectiveness of SB13-252.

“This legislation will expand economic opportunities across Colorado through the development of wind, solar, and other innovative energy resources,” the order says. “Rural areas, in particular, will benefit economically from the expansion of renewable resources because the vast majority of renewable resources are located outside of the State’s urban centers. For example, this bill will expand construction and manufacturing opportunities in rural areas through large wind and solar projects and will create jobs in the newly eligible waste-to-energy and coal mine methane industries.”

The order says the legislation is necessary to continue to diversify electric generation and reap the associated rate, economic and environmental benefits. SB13-252 will also allow developers to take advantage of historically low prices of renewable energy available this year.

“The reasons for signing the legislation outweigh the reasons for vetoing the bill, but this bill is imperfect,” the order says. “Some of the concerns raised during the legislative process were not given due consideration. Top among these concerns are the feasibility of the implementation timetable and consumer protections. The advisory committee will work to fully address these concerns, culminating in proposals for the 2014 legislative session.”

The advisory committee will work to address the cost and feasibility concerns of the companies impacted by this legislation. The committee will have eight principal members, six of which will be appointed by the Director from individuals designated by and representing each of the following organizations or subject-matter areas: Tri State Generation and Transmission Association; Intermountain Rural Electric Association; Colorado Rural Electric Association; a representative of the renewable energy industry; a representative of the nonprofit environmental advocacy community; and a representative of a nonprofit organization proficient in electric resource planning. The advisory committee will also have the following non-voting members: The Attorney General, or their designee; and the Chair of the Public Utilities Commission, or their designee.

A copy of the full Executive Order is attached to this press release.

The signing statement addressed to the General Assembly says:

“After careful consideration, I signed Senate Bill 13-252, legislation that expands economic opportunities for wind, solar and other renewable technologies in Colorado. The development and deployment of most of these innovations are already taking place in rural communities across Colorado. That fact has influenced our administration’s review of this legislation.

“We believe SB13-252 merits passage on a variety of grounds. First, this Act will eliminate the arguable in-state preference concerning renewable resources currently in state statute.

“Second, this legislation creates significant benefits to rural communities. This legislation expands ‘eligible energy resources’ to include synthetic gas produced by pyrolysis of municipal solid waste. Each waste-to-energy facility creates an estimated $54 million in economic activity and most of the proposed facilities have been targeted toward rural communities. Also as a newly eligible resource, waste-to-energy projects create profitable outlets for the more than 70 million waste tires stockpiled in the rural areas around Colorado.

“Additionally, this legislation includes coal mine methane as an ‘eligible energy resource’ which will allow Colorado to more safely develop coal gas production in rural communities. Again, these are mostly rural projects and rural jobs.

“Third, this legislation builds upon the initial success of the rural electric cooperatives, which in partnership with their generation sources, have begun to include renewable generation. We believe, and utility practices have demonstrated, that diversifying electric generation portfolios with renewable generation tempers rate increases. Tri-State and its member cooperatives are exceeding current renewable requirements without a 1 percent net retail rate impact. This gives us confidence that the increased renewable energy goal of SB13-252 can be achieved without exceeding the additional 1 percent rate increase limit set forth in this bill. Further, if the rate cap is hit, the bill provides electric cooperatives with flexibility in meeting the renewable energy goals established in SB 13-252.

“We believe that this legislation, while imperfect, is necessary to keep diversifying electric generation and reaping the associated rate, economic and environmental benefits. Vetoing this bill and waiting until the 2014 legislation session for a more perfect version would set Colorado back one year in our pursuit of a more diverse energy portfolio. We cannot afford to lose this valuable time, especially with the expiration of the Federal Production Tax Credit on wind generation at the end of this year.

“Opponents of this legislation have raised a number of objections — all of which we weighed seriously. First, they argue that reaching a goal of 20 percent by 2020 is not achievable. Second, they argue that attempting to achieve it will result in billions of costs to rural ratepayers, despite a 2 percent rate cap designed specifically to protect consumers.

“If the 2 percent rate cap was compounded, I would veto this bill. While it is computed annually, it does not compound. This rate cap operates the same way that the current 1 percent rate cap operates. The bill is designed to protect against incurring investment costs, including debt service, that push beyond a 2 percent cap. The assertion that this legislation will levy billions in costs to rural consumers is not borne out by the facts.

“We know that utilities across the country have actually saved money by incorporating more renewable energy generation. Wind, for example, can cost as little as 2.75 cents per kilowatt hour, which is lower than the average cost of new natural gas generation. Renewable energy generation also offers long-term price contracts, negating the price volatility of fossil fuels.

“We believe these concerns point, not to a veto, but rather to a commitment in favor of finding
appropriate compromise in the next legislative session.

“It is relevant that the parties directly involved in this legislation came close to agreeing upon compromise language that would have addressed some of these concerns. A standard of 20 percent by 2022 was agreed to by representatives of the co-ops at one point in the legislative session. This compromise was later rejected by co-op boards, but we should continue to monitor the possibility of compromise on the timetable for achieving a 20 percent standard.

“In the coming legislative session, we will support other elements of that failed compromise. Specifically, we believe that the pooling of renewable energy credits, as it pertains to sharing compliance responsibilities between cooperatives, would be an important improvement. Rep. Jerry Sonnenberg suggested legislation along these lines in the closing days of the session. We have assurance from the leadership of the General Assembly that this bill will draw bipartisan support next year.

“Through separate action, I have directed the Colorado Energy Office (CEO) to engage Tri-State, the cooperative electric utilities, and other stakeholders over the next six months. CEO will be tasked with pursuing a transparent assessment of the feasibility  of the 2020 timetable and the rate impacts of the 20 percent renewable energy standard.

“If this assessment raises legitimate concerns with either of these issues, we have agreement from the Speaker of the House and Senate President that the Seventieth Colorado General Assembly will take up legislation making necessary changes to the law.

“CEO recently completed an Agricultural Efficiency Study which identified opportunities for partnerships in rural Colorado to increase energy efficiency practices to help producers cut back on energy costs. I have directed CEO to identify ways we can support farmers and ranchers in reducing their utility costs.

“The ideal way to improve this bill is through the legislative process rather than a veto and starting over. While the desired compromise was not achieved in the 2013 legislative session, our engagement of proponents and opponents of this bill in the last few weeks has confirmed our view that legitimate concerns can be effectively resolved through stakeholder engagement over the rest of this year and in the next legislative session.”

Here’s the reaction from the minority Senate Republicans as contained in a news release:

Denver- Today Governor Hickenlooper signed Senate Bill 252, a measure that increases utility rates on working families across the state by mandating that customer-owned rural cooperatives and utilities increase their renewable energy standard when they can least afford it.

Senate Republicans expressed outrage at what they view as another assault on rural Colorado. Senate Minority Leader Bill Cadman, R-Colorado Springs, said, “Senate President John Morse initiated the urban attack on rural Colorado when he sponsored SB 13-252. With his signature, Governor Hickenlooper joins Morse in perhaps the largest unfunded government mandate in Colorado history.”

He went on to say, “In addition to disregarding the bipartisan opposition to this legislation, the Governor is ignoring the common interests of Coloradans in favor of special interests of extremists. Colorado families, businesses owners, farmers and ranchers will now be on the hook for billions of dollars in increased utility rates. Additionally, all government entities — municipalities, school districts, fire departments — will now face unnecessary rate increases.”

Senator Greg Brophy, R-Wray, added, “Here is another example of the Democrats’ callous attitude toward the families in rural Colorado who are struggling to make ends meet. Utility bills will now increase on the very people who can least afford it.”

Senator Steve King, R-Grand Junction, said, “Senate Bill 252 will directly impact people on fixed incomes in rural areas who are just barely hanging on in this economy. I am very disappointed that Governor Hickenlooper would sign yet another measure that only gained bipartisan opposition and puts seniors at risk.”

Opponents of Senate Bill 252 include Colorado Association of Commerce and Industry, National Federation of Independent Business, Colorado Concern, Colorado Mining Association, IBEW Local #111, IBEW Local #667, IBEW Local #969, IBEW Local #12, IBEW Local #68, IBEW Local #113, Rocky Mountain Agribusiness Association, Colorado Corn Growers Association, Colorado Telecommunications Association, Colorado Farm Bureau, Colorado Cattlemen Association, Associated Governments of Northwest Colorado, Action 22, Club 20, Progressive 15, Metro North Chamber of Commerce, Pueblo Home Builders Association, Colorado Hospital Association, Economic Development Council of Colorado, Craig Moffat Economic Development Partnership and the Douglas County Business Alliance.

Senator Brophy concluded by asking, “If Senate Bill 252 is such a reasonable piece of legislation, I am curious why the Governor decided to sign it in Denver and not when he was traveling in rural parts of the state?”

For more background on this bill, read the May 3rd issue of CACI’s Colorado Capitol Report.

CACI members with questions about SB-252 should contact Carly West, CACI Governmental Relations Representative, 303.866.9622.

For more on SB-252, read:

“Hickenlooper signs bill to double rural renewable-energy requirement,” by Mark Jaffe, The Denver Post, June 6th

“Hickenlooper signs controversial renewable-energy bill,” by Cathy Proctor, The Denver Business Journal, June 5th