The INDEPENDENT, February 15, 2012
Page 13
Power of the People
By W. Marc Farmer, General Manager,
West Oregon Electric Cooperative
Oregon RPS Has
Unintended
Consequences
This article is meant to inform
you and ask for your support in
an important issue that West
Oregon Electric Cooperative is
working on in this legislative
session. Though it does not impact us at this moment,
it is impacting electric cooperatives in the state, and
could affect us in the future. In an effort to support our
cooperative friends and to be proactive rather than re-
active, should a data center or large single load want
to locate into our service area, we are supporting and
participating in changes to the current RPS require-
ments by the State of Oregon. Again, your support
would be appreciated.
What is Oregon’s Renewable Portfolio Standard?
In 2007, the Oregon Legislature created a Renewable
Portfolio Standard (RPS) requiring utilities to supply a
portion of retail electricity sales from renewable ener-
gy sources, such as wind or solar. By 2025, 25% of
energy sold by large utilities must be renewable ener-
gy. For small utilities, up to 10% of sales must be re-
newable energy (and 5% for the smaller utilities).
Large utilities are designated as those that sell 3% or
more of retail electric sales in Oregon (currently PGE,
PacifiCorp and Eugene Water & Electric); the small
utilities are those with less than 3% of state energy
sales. When the law was enacted, it was anticipated it
would take years before any of Oregon’s small utilities
would pass the 3% sales threshold and become large
utilities. This changed with the advent of high technol-
ogy data centers arriving in rural Oregon.
What is a data center “cloud” and why rural Ore-
gon? Data centers deploy thousands of powerful com-
puters called servers to provide the online “cloud” that
hosts your streaming video, e-mail and Facebook ac-
counts on the Internet. Data centers first arrived in
Oregon 5 years ago, seeking inexpensive power, a
mild climate that keeps servers running cool and a tax
structure that includes property tax exemptions and
no sales tax. Although rural utilities are not recruiting
data centers, they have a responsibility to serve those
who locate in their service territory. While data centers
are not large employers, 1 job in rural Oregon equals
the same impact as 125 jobs in urban Oregon.
What are the unintended consequences of Ore-
gon’s RPS? Rural utilities asked to provide 20 to 100
megawatts of power to a single large new load, such
as a data center, can quickly find themselves pushed
into the Large Utility category and be required to ob-
tain costly new sources of renewable energy. Rural
utilities consider it a privilege to help their communi-
ties grow and prosper, but this unanticipated conse-
quence of the RPS creates an economic disincentive
for job recruitment and regional economic stability.
What is the impact of the RPS on rural power con-
sumers? Umatilla Electric Cooperative (UEC) serves
as an example of the potential impact of the RPS on
a rural electric utility. UEC’s power use represents
about 2% of Oregon’s overall consumption. However,
three new data centers have recently started opera-
tion in UEC territory and more may be on the way.
This influx of energy demand is expected to push
UEC’s power consumption quickly beyond the 3%
threshold. According to a study conducted for UEC,
the projected cost to its 14,000 consumers to comply
as a Small Utility under the RPS is $15 million over 20
years. But if UEC is elevated to the Large Utility cate-
gory under the RPS, the cost to consumers will grow
by another $41 million. The $56 million would be col-
lected from UEC consumers who collectively earn
22% less than the state average and 31% less than
Portland-area
What challenges do small utilities face managing
the RPS? By limiting the requirement of small utilities
to acquire new renewables to 10 percent, Oregon’s
RPS rightly acknowledges that small rural utilities
(Consumer-Owned Utilities or COUs) don’t have the
same resources to meet this costly mandate in com-
parison to large Investor Owned Utilities (IOUs).
Unlike Portland General Electric, with 820,000
ratepayers, and PacifiCorp, with 557,000 ratepayers,
small utilities can’t divide costs among a large
ratepayer base, shareholders and state and federal
taxpayers via tax exemptions and deferrals. Small util-
ities don’t have generating plants that they can retrofit
to a renewable resource like large utilities can. They
also don’t generally have the same tax advantages,
access to capital, diversified generation portfolios and
ability to manage risk enjoyed by large
IOUs. Small utilities face less choice and
more restrictions for access to power mar-
kets and transmission of new renewable
resources.
What is the proposed solution? The
RPS was never intended to make small,
rural customer bases purchase massive
amounts of green power. Change is need-
ed to keep the RPS the way it was intend-
ed – small utilities participating in the RPS,
but at a level that fits the size of their com-
munities.
Modifying the Oregon RPS law is the
Out of My Mind…
From page 2
ic for another day.)
The U.S. is closer to achieving energy self-
sufficiency than it has been since 1973, when an
Arab oil embargo triggered a recession and led
to lines at gasoline stations. Domestic oil output
is the highest it has been in eight years, and nat-
ural gas production is so high that the govern-
ment may approve export terminals.
“For 40 years, only politicians and the occa-
sional author…talked about achieving energy in-
dependence,” said Adam Sieminski, who has
been nominated by President Obama to head
the U.S. Energy Information Administration.
“Now it doesn’t seem such an outlandish idea.”
The U.S. has the potential to become the
world’s top energy producer by 2020, with posi-
tive implications for the economy and national
security by boosting jobs and government rev-
enue; cutting the trade deficit; enhancing manu-
facturers’ competitiveness; and allowing greater
flexibility in dealing with unrest in the Middle
East.
U.S. energy self-sufficiency has been steadi-
ly rising since 2005, when it hit a low of 70 per-
Please see page 17
best solution to account for large new loads in rural
communities. The following proposed modification is
designed to allow small utilities that are suddenly
faced with providing additional power to a single large
company to remain as a small utility under Oregon’s
RPS mandate:
“(4) The provisions of this section do not apply to an
electric utility if:
(a) The electric utility’s sales of electricity to retail
electricity consumers on or after January 1, 2009, are
increased from an amount that equals less than 3%
percent of all electricity sold to retail electricity con-
sumers to an amount that equals 3% or more of all
electricity sold to retail electricity consumers; and
(b) The increase is a result of the addition of one re-
tail electricity consumer that increases the electric util-
ity’s retail sales by:
(A) More than 10% of the electric utility’s total elec-
tricity sales to retail electricity consumers; or
(B) More than 20 average megawatts.
Would this be an exemption to the RPS? No. Rec-
ognizing the RPS inequity and leaving the small elec-
tric utilities at no more than 10% RPS would have vir-
tually no adverse impact on renewable deployment in
the state. There would be no adverse effect on wind
development or wind revenues, nor does it result in an
increase in harmful emissions. (The small utilities
served by Bonneville Power Administration rely on
zero carbon emission hydropower.)
It’s unfair that rural electric utilities should pay tens
of millions because the RPS mandate when enacted
didn’t anticipate new single source high tech compa-
nies that can suddenly and unexpectedly require a ru-
ral electric utility to increase their renewable energy
requirement by 250%.
How can I help? Please contact your Oregon state
legislators to support legislation that would modify the
state’s RPS to preserve its original intent to require
customers of small, rural utilities to buy less green
power. The legislation will be considered during the
February 2012 Legislative Session.