Public utilities, like Benton and Franklin PUDs and Richland Energy Services, are intensely proud of the renewable resources they use to serve customers. Public utilities have made significant investments in renewable energy such as hydropower, wind, biomass, landfill gas and solar, as well as substantial investments in conservation programs. Even so, the Energy Independence Act (EIA), which requires that utilities achieve renewable energy targets based on a rigid timeline, should be modernized to allow utilities to reach those targets in a more strategic and cost-effective manner.
The EIA contains two basic requirements for utilities: conservation and renewable resources. The conservation requirement, which requires qualifying utilities to acquire all cost-effective conservation, makes good sense. Conservation includes measures like energy-efficient lighting and heating and is the cheapest, cleanest resource for utilities to satisfy customer load growth. Conversely, the EIA's renewable energy targets have already proved problematic for many Washington utilities and will likely cause bigger challenges in the future because of outdated, invalid assumptions that are more than eight years old.
The EIA requires utilities with more than 25,000 customers to purchase a certain percentage of their power to serve customer loads from qualifying renewable energy resources (which excludes hydroelectric power) based on a fixed and rigid timeline. By 2012, utilities were required to serve 3 percent of their loads from qualifying resources. This requirement grows to 9 percent in 2016 and 15 percent in 2020, and that's where modernized assumptions used in establishing the timing of target compliance could help.
Let's look at the assumptions used in establishing the current EIA targets. In 2006, the initiative's targets were set assuming a 1.4 percent average annual growth rate in customer loads, which at the time was generally accepted in the region. Given that growth rate, utilities would have needed to purchase renewable energy to meet new loads at a pace that roughly coincided with the timing of compliance with the 2016 and 2020 targets. But that growth rate is no longer likely for the region.
Regional energy planners now estimate the average annual growth rate in customer loads to be 0.6 percent, less than half the original projection used in developing the targets. This drop in load growth is partially because of the EIA's conservation requirement that utilities acquire all cost-effective conservation. Not surprisingly, utilities have continued to invest in conservation, pushing load growth lower. Unfortunately, the renewable targets were not written to adapt to changing economic conditions, increased conservation and reduced load growth.
The net result is that some utilities have already been forced to contract for renewable energy or equivalent credits that aren't needed, and more utilities will face that same predicament in the future. That doesn't make sense.
There is an easy fix. The EIA should be modernized so as to align the timing of target compliance with the need to purchase energy to serve our customers' power needs. The target percentages wouldn't change; only the timing to reach the targets would be affected so as to match each individual utility's need for additional energy. Most future load growth would be met with renewable resources.
In Washington, public utilities already have some of the cleanest, greenest and lowest cost energy portfolios in the nation. Modernizing the EIA would provide utilities the flexibility to mitigate rising costs and protect customer retail rates while continuing to make common-sense investments in renewable resources and conservation for the long term.