Capping off close to a year of stakeholder engagement, the Oregon Public Utility Commission (PUC) submitted a report to the Legislature on actively adapting to the changing electricity sector. The report’s top recommendations are to allow the PUC to better address the electricity sector’s role in quickly reducing greenhouse gases and improving equity and access in the energy system.
Report Background
The PUC is the state agency charged with using economic regulation to ensure that regulated utilities make safe and reliable electricity available to everyone in their service territories at reasonable, non-discriminatory rates. When the authority for the PUC was first established at the turn of the 20th century, the primary concern was to bring electricity service to all residents, with an emphasis on affordability and reliability. In recent years, there has been growing recognition of the regulated electric system’s role in climate change, and its opportunity to reduce greenhouse gases as well as achieve other critical societal objectives such as social equity.
In 2017, the Oregon Legislature passed Senate Bill 978, requiring the PUC to take a holistic look at the future of the electricity sector. SB 978 required the PUC to “establish a public process for the purpose of investigating how developing industry trends, technologies and policy drivers in the electricity sector might impact the existing regulatory system and incentives currently employed by the commission” and to consider changes to the regulatory system and incentives.
The PUC organized a robust stakeholder process that invited many new participants and perspectives into the utility process. Six priority action areas ultimately emerged: climate change; affordability, equity and environmental justice; customer options; utility incentive alignment; regional market development; and participation.
PUC’s Role in Climate Action
Having Oregon’s utilities more urgently address climate change was “one of the most critical issues” identified by an overwhelming number of participants in the SB 978 process, and is featured as a top priority for action in the report (full report, executive summary). The utility system has a crucial role to play in rapidly decarbonizing the electric grid as well as electrifying end uses, especially the transportation sector.
The PUC currently lacks a clear mandate and authority to address greenhouse gas reduction except as an economic risk in utility resource planning, or to achieve legislative mandates like a renewable portfolio standard. SB 978 stakeholders made it clear that the utility system barriers to rapid decarbonization need to change, and quickly.
Climate Solutions participated in a sub-group of stakeholders – the Low Carbon Future group – which offered recommendations for the PUC to consider, and other stakeholders provided support for climate action throughout the process. The SB 978 report captures the tenor of the discussion well, as stakeholders “emphasized the important and central role the electric sector should play in meeting the state’s greenhouse gas emission goals, both by reducing the electric sector’s carbon emissions and helping to reduce emissions from other carbon-intensive sectors.”
Climate Strategies, including Cap and Invest
To enable rapid, efficient decarbonization of the utility sector under the PUC, a diverse set of stakeholders supported a mandatory economy-wide cap on greenhouse gas emissions to reach an 80% reduction goal below 1990 levels by 2050. Municipalities, utilities, ratepayer advocates, environmental and energy organizations alike agreed that a mandatory cap would enable utilities to more ably achieve their share of the state climate targets – demonstrating just how strong the alignment was on this point. Some of the stakeholder comments in support of an economy-wide mandatory cap on climate pollution are highlighted in our written comments to the PUC. Climate Solutions is committed to passing cap and invest legislation in the 2019 session that would establish a strong, mandatory cap on greenhouse gas emissions.
We, along with other participants, also supported utility action to reduce emissions in other carbon-intensive sectors such as transportation, including increasing investments in transportation electrification, which the PUC included as an area for further action in the report. At the urging of Climate Solutions and other stakeholders, the PUC also noted it would explore performance-based ratemaking mechanisms, which would reward utilities for based on outcomes such as reducing greenhouse gas emissions. Performance-based ratemaking can incentivize utilities to achieve climate policy objectives, reduce GHG emissions, and make deeper investments in decarbonization and transportation electrification.
High level climate recommendations in PUC’s report include:
- Work with the Legislature and stakeholders towards an appropriate role in greenhouse gas mitigation;
- Work with the Legislature and stakeholders to appropriately define the electric sector’s role, if any, in reducing emissions from other carbon-intensive sectors, such as transportation;
- Continue to consider economic costs and risks associated with climate change and greenhouse gas regulation to ensure that utility systems are designed to accommodate cost-competitive, low carbon technologies
Equity and Environmental Justice
Equity emerged as the other top issue in the SB 978 process. The discussion focused on whether and how to increase the affordability of electricity for low-income customers and how social equity and environmental justice are integrated into the PUC’s decision making practices. A sub-group of stakeholders – the Access Group – discussed these issues in depth, offering a number of recommendations for consideration in the SB 978 process.
Recommendations for further PUC and legislative action on equity include:
- As part of the Low Income Utility Program Working Group, make recommendations to the Governor’s Carbon Policy Office in December 2018 to address energy burden of low-income Oregonians
- Assist, as requested, in legislative consideration of new ways to mitigate energy burden of low-income Oregonians, including changes to ratemaking laws that currently limit the Commission’s authority
- Explore differentiated service classifications (e.g. establishing a different rate for those in multifamily housing or who are low-income) that may indirectly address energy burden with the Commission’s current authority
- Engage external resources to develop and host annual PUC staff training on social equity and environmental justice
- Integrate environmental justice impact analysis into applicable rulemaking processes, and consider extending to other processes and continue to participate on the Environmental Justice Task Force
More work lies ahead to shape and implement the specific actions the PUC and Legislature take on climate change and equity. We look forward to working with the Legislature and SB 978 participants to accelerate our state’s energy and transportation sectors’ transition to an equitable, low carbon future.
