Idaho Energy Update
April 8, 2011
The Idaho Legislature finally completed its unusually acrimonious 2011 session Thursday, but not before the Senate’s final vote – to pull the plug on Idaho’s incentive for investments in renewable energy. Despite easy passage in the House and amid the end-of-session chaos, the Senate came one vote shy of extending the sales tax rebate for renewable energy developments, an incentive viewed as critical for many renewable projects to move forward. Meanwhile, Seattle City Light has signed an agreement to buy the renewable energy credits from a wind farm under construction near Mountain Home. The PUC surprised many in rejecting a settlement agreement reached between Idaho Power and other parties on how the utility funds its energy conservation programs. And peripatetic Payette power plant proponent Alternate Energy Holdings filed its late financial report to the SEC – and the outlook for its would-be nuclear reactor is not a pretty picture.
For more information on these developments, along with our final legislative update, read on. Thanks as always, and if you have any calendar items, please send them along!
Clean Energy Program Director
Snake River Alliance
I: Senate’s Final 2011 Vote Kills Renewables Incentive Bill
The 2011 Legislature finally adjourned Thursday, but not before the Senate killed a bill to encourage renewable energy development in Idaho.
The death of H348, a watered down clean energy bill that would have extended the current sales tax rebate for renewable energy projects beyond its June expiration, was the coda in an end-of-the-session legislative flourish in which energy bills were quickly introduced, revamped, killed, revived and retooled as backstage negotiations sought to iron out a compromise. In the end, the only meaningful energy bill besides a quartet of geothermal bills already signed by the governor flew out of the Senate State Affairs committee on the Legislature’s final day, only to fail in a stunning 17-18 vote upstairs on the Senate floor just a few hours later.
Renewable energy companies agreed with the bill’s Senate co-sponsor, Sen. Curt McKenzie, that the sales tax rebate was critical to move forward some of the 18 wind projects whose utility sales contracts are currently before the Public Utilities Commission. But not only did the Senate vote to cripple yet-to-be-built wind and solar projects, it simultaneously let lapse the state’s incentive for geothermal, biomass, small hydro and other renewable developments. The current renewables sales tax exemption, which energy businesses say makes Idaho slightly more competitive with the incentives offered by other western states, will now expire at the end of June. McKenzie said Idaho ranks dead last among states in the region in supporting renewable energy development.
Electric utilities waged a high-stakes war against wind power almost from the beginning of this legislative session. A bill they backed to slap a two-year moratorium on new wind projects in Idaho was killed last month, but as the session neared an end utilities participated with energy developers in crafting a “compromise” of sorts to extend part of the sales tax rebate that became House Bill 347. By then, however, the legislative well had been poisoned by an intense misinformation campaign about renewable energy, which was variously and inaccurately portrayed as sapping the state’s budget, jacking up electric bills, destabilizing electric grids, and adding to a grossly oversubsidized renewables industry.
With the rebate bill killed, sponsors of a companion bill, H348, which dealt with the kinds of renewables projects that would qualify for more attractive preferred contract rate reserved for smaller energy developments, had that bill pulled from the floor and sent back to the Senate State Affairs Committee to die, inasmuch as the two bills were a packaged rewrite of an early bill dealing with renewable developments.
Here’s how the Senate voted on H348:
AYE: Bair, Bock, Brackett, Cameron, Darrington, Hammond, Heider, Hill, Keough, LaFavour, Malepeai, McGee, McKague, McKenzie, Siddoway, Stennett, Werk
NAY: Andreason, Bilyeu, Broadsword, Corder, Davis, Fulcher, Goedde, Lodge, Mortimer, Nuxoll, Pearce, Schmidt, Smyser, Stegner, Tippets, Toryanski, Vick, Winder.
That leaves the geothermal bills, described in the legislative section below, as the 2011 Legislature’s lone clean energy legislation. Other clean energy roadkill left by the Legislature are bills to give school districts more leeway in owning their own renewable energy resources, streamlining state approval processes for some renewable energy developments, and allowing counties to create their own renewable energy commerce authorities.
The Legislature’s Interim Energy, Environment, and Technology Committee, which was extended through this year earlier in the session, will take up the wind and other energy issues when it meets after the 2012 session adjourns. Meanwhile, the Idaho Public Utilities Commission is in the midst of a complex renewable energy case of its own, as Idaho’s three regulated electric utilities are seeking refuge from having to take additional wind onto their systems until regulators have a chance to study assorted renewable energy issues.
The PUC has already issued an order that effectively put the brakes on new wind projects while it considers the renewables case before it. Eighteen wind contracts with utilities and wind developers are before the PUC awaiting action, but a decision on those contracts may be delayed while the PUC considers the larger wind case. The PUC’s next big wind issue to decide is whether developers of large wind projects should be allowed to break those projects into smaller wind farms in order to qualify for more favorable guaranteed prices.
II: Seattle Utility Buys “Green Tags” from Idaho Winds Project
While the Legislature taps the brakes on wind development in Idaho, utilities like Seattle City Light continue to see the value in Idaho wind.
The Washington state utility, the nation’s 10th largest public electric utility and the first utility in the nation to go “greenhouse gas neutral,” said this week it will purchase the “renewable energy credits,” also known as “green tags,” from the Idaho Winds 22-megwatt Sawtooth Wind Project. Seattle City Light will pay the wind developer about $1 million a year for the renewable energy credits from 2015 to 2029. In one of the ironies of the way wind power is being developed in Idaho, particularly in light of the Legislature’s decision to end incentives for wind and other renewable developments, Idaho Power is buying the electricity from the Sawtooth Wind Project, but it cannot claim that it is providing renewable energy from the wind turbines to its customers. That’s because Idaho Power does not own the green tags from the project. In buying the green tags, Seattle City Light can claim the 10 megawatts worth of green power.
Green tags, which represent a certain amount of clean energy generation, have marketable value and are bought and sold. But only one entity can claim the environmental attributes from a renewable energy project, and in this case that’s Seattle City Light, not Idaho Power. Idaho Power does have contracts for wind and geothermal energy deliveries, but cannot claim that green energy if it doesn’t have the green tags. In Seattle City Light’s case, the tags will help the utility comply with Washington State’s “renewable portfolio standard” that requires Washington utilities to obtain at least 15 percent of their electricity from new renewable energy resources by 2020. Utilities can use these green tags to meet some of their green power requirements even if they do not actually receive the electricity from the generation.
Idaho Winds’ Sawtooth Wind Project is being built on a sugar beet farm about 60 miles east of Boise near Mountain Home and is expected to be completed by year’s end.
III: Would-Be Payette Nuke Developer Files Late Financial Report to SEC; Losses Mount
The Eagle-based startup that claims it will build one or more nuclear reactors in Payette County near the Snake River and the Oregon border finally filed a late financial statement to the U.S. Securities and Exchange Commission, and it’s not a pretty picture.
Alternate Energy Holdings, Inc., which is facing a SEC lawsuit over alleged fraud and stock price manipulation charges, as well as a class-action lawsuit from investors claiming they were bilked by the company, has now lost just under $20 million since it began shopping its reactor scheme around southern Idaho more than three years ago. The company tried unsuccessfully to sell its nuclear scheme to Owyhee and then Elmore Counties, and is now trying to restart its rezoning application in Payette County amid the still-pending SEC fraud case.
AEHI filed a report in March saying it could not file its annual “10-K” financial report on time because it “was not able to timely compile the subject report without unreason able effort or expense.”
When it did file its required 10-K, its report contained some unsettling narrative even beyond the overwhelming legal problems it’s facing in U.S. District Court in Boise. For instance, it reported a net loss of $8.8 million for the year ended last Dec. 31, nearly four times its net loss in 2009 and bringing the total net loss since its inception to $19.5 million. Its income is primarily derived from the sale of millions of shares of stock, which as of today is trading for 11 cents a share on a gray market after the SEC suspended trading of AEHI stock.
Beyond the numbers, however, AEHI also reported that its accounting controls haven’t been up to snuff: “Controls established to obtain proper authorization and documentation of expenditures, valuation and recording processes for shares issued for services were not operating effectively. Documentation for some shares issued for services was missing. Also, there are transactions recorded for services provided where an invoice to substantiate the expense could not be located. Invoices have not been retained to support expenditures reported as required by the company.”
That’s particularly troublesome in light of AEHI’s commitment to a federal judge that, in exchange for the judge unfreezing the company’s assets, AEHI will report to the SEC each month on expenditures of $2,500 or more.
The company also told the SEC that it plans to use a South Korean Generation 3 light water reactor for its project, although the manufacturer has not submitted that plant to the U.S. Nuclear Regulatory Commission for certification – a process that will take years. AEHI has identified various reactor designs in its short stay in Idaho.
IV: Idaho PUC Turns down Settlement Agreement for Idaho Power Efficiency Programs
The Idaho Public Utilities Commission has rejected a proposed settlement agreement between Idaho Power and several parties, including the Snake River Alliance, on the way it handles some of its energy efficiency programs.
“The (PUC) said the issues raised in the settlement are more appropriately addressed in a general rate case, which is anticipated to be filed later this year,” the Commission said in a news release. “The Commission also expressed concern that shifting some conservation program expense to other areas may result in a cost allocation to some customer classes that is not equitable.”
While the Alliance and the Idaho Conservation League and the NW Energy Coalition participated in the settlement talks together and supported the settlement agreement with Idaho Power and Commission staff as well as the Community Action Partnership Association of Idaho, the Industrial Customers of Idaho Power opposed it. Among other things, the industrial customers said the agreement would shift costs to its members.
Like many utilities, Idaho Power funds its energy conservation programs through a 4.75 percent energy efficiency “tariff rider,” which customers pay on their monthly bills. As Idaho Power has expanded its energy efficiency programs, it has sought and received increases in the efficiency rider to help fund them. The Commission acknowledged supporters of the agreement who said moving some of the conservation program expenses into base rates and some to the annual “power cost adjustment” would have the effect of putting conservation programs on the same level as supply side generation resources such as dams or coal plants. Putting some of the programs in rates also would allow Idaho Power to earn a rate of return on some of its conservation investments, as it does with power plants.
But Idaho Power said its programs are growing so fast that they can’t keep up with the amount of money collected to fund them. The company projected it will have a negative balance in its efficiency rider account of $17 million by the end of this year and $30 million by the end of next year.
To review the Commission’s order and other documents in this case, go to www.puc.idaho.gov and then “File Room” and then “Electric Cases” and scroll to IPC-E-10-27.
On The Agenda:
► The Snake River Alliance’s Spring Membership Dinner will be from 6 p.m. to 8 p.m. on April 20 at the First Congregational Church at 2201 W. Woodlawn Avenue in Boise. Members and nonmembers are invited. The cost is $5 for members and $10 for non-members, and kids can eat free. The program will feature information on the Alliance’s Clean Energy Program and an update on current campaigns. Information will also be provided on the nuclear crisis in Japan. For more information or to RSVP, call Lisa Young at the Alliance at 344-9161. Lisa can also be e-mailed at [email protected]
► The NW Energy Coalition’s Spring Conference and Board meeting will be held in Boise this year and runs May 13-14. For more information, including registration information and the agenda, go to http://www.nwenergy.org/get-involved/2011-spring-conference/
►The Idaho Green Expo, a celebration of all things green – including energy! – runs May 14 and 15 in Boise. For more information, go to www.idahogreenexpo.org
► The Idaho Public Utilities Commission holds its next decision meetings on April 18 and 25. Agendas are normally posted the day before on the Commission’s website at www.puc.state.id.us. The meetings typically start at 1:30 p.m.
IN THE LEGISLATURE: Legislators Suck Energy Out of 2011 Session
As mentioned above, the Idaho Legislature’s 2011 session came to an unceremonious end this week, with the Senate’s final vote one to sidetrack future state incentives for renewable energy investments in Idaho.
Each week during the session, we’ve posted thumbnail summaries on where the bills stand. Text of bills can be found by going to the Legislature’s main site at www.legislature.idaho.gov and clicking the “Bill Center” link and then “Legislation By Subject” and scrolling to the categories in which you’re interested in. Such as “Energy,” “Environment” or “Utilities.” You then click the link to the bill for more information. The Energy section will look something like this:
Alternative commercial operations, sales tax rebate H0322
Alternative commercial operations, sales tax rebate H0347
Alternative electricity generation, tax rebate, when H0250
County-based renewable energy commerce authority H0208
Energy/environment/technology, interim study comm HCR004
Idaho National Laboratory, 60th anniversary HCR019
Office of Energy Resources, approp H0244 – Ch.155
Renewable energy projects, expedite permits S1035
School district, electric energy, receive credits S1112
Wind energy facility siting, minimum requirements H0342
Wind energy farms, construction moratorium H0265
Wind/solar electric generation tax rebates, PURPA rates H0321
Wind/solar electric generation tax rebates, PURPA rates H0337
Wind/solar electricity purchase, avoided cost rates S1209
Wind/solar electricity purchase, avoided cost rates H0348
Here’s a look at the status of this session’s bills:
Grow Green Idaho Jobs Act (S1035):
Calls on state and local government jurisdictions to “expedite” permit applications for renewable energy projects and to hold public meeting on the applications. Says the “permitting and approval of such projects shall be a priority of each state agency or political subdivision.” Requires local governments and the state to expedite permits for renewable energy projects and to provide for public meetings on such applications in an accelerated fashion.
Status: Held in Senate State Affairs
Sponsor(s): Sens. Edgar Malapeai, Les Bock, Michelle Stennett, Elliot Werk, and Dianne Bilyeu. (332-1351).
Interim Energy Committee Renewal (HCR4):
Joint House-Senate resolution to renew the interim Energy, Environment and Technology Committee, which will convene after the 2011 session to study energy and related matters. This interim committee has been authorized to meet for the past 14 years, and this year it will be tasked with the Legislature’s first five-year review of the 2007 Idaho Energy Plan. Much of the 2007 plan has been implemented only in part or not at all, so the committee will review which of the dozens of plan recommendations should be updated or dropped from the plan – as well as whether new recommendations should be added.
Status: Approved by both chambers
Sponsor(s): Interim Committee Co-Chairs Rep. George Eskridge and Sen. Curt McKenzie.
Geothermal Development on State Lands (H52, 52, 54, & 56):
Mostly technical but nonetheless important bills by the Department of Lands designed to remove certain barriers to geothermal energy development on state lands. H52 amends Idaho code to lengthen the maximum lease period for geothermal leases from the current 10 years to 49 years, similar to the change already made for wind. The extension is needed to provide time for geothermal energy developers of projects to recover their investments H53 would amend Idaho code to allow the state to negotiate royalty rates for geothermal projects on state lands, rather than be forced to use the current minimum annual rates of 25 cents per acre and royalties of not less than 10 percent of the geothermal resource produced. The change is needed to allow latitude in negotiating rates depending on the kinds of geothermal uses proposed. H54 amends Idaho code that restricts the size of geothermal leases on state lands. Currently, code restricts leases to a single “section”, or 640 acres, when in practice geothermal projects can cover thousands of acres. This change allows the state to negotiate one lease rather than several leases for each section of land. H56 modifies state bonding procedures to allow for lease performance in bonding and also to reflect bonding for actual surface disturbance without duplicating existing bonding requirements by the Department of Water Resources.
Status: All four bills signed by governor
Sponsor(s): Bob Brammer, Idaho Department of Lands; 334-0239.
School Districts and Renewable Energy (S1112):
Allows local school districts to exchange or receive credits on their bill for excess thermal or chilled water or electric energy not needed by the school district. As more school districts look to clean and renewable energy resources such as wind, solar, biomass and heat pumps, they want to be able to receive credit for excess amounts of energy they produce during times they don’t need as much. This bill would allow them to receive credits on their energy bills for unneeded energy.
Status: Held in Senate State Affairs
Sponsor(s): Sen. Chuck Winder
Transmission Lines and Eminent Domain (H189)
Adds new language to existing state eminent domain language dealing with electric distribution and transmission lines. Says any entity besides a regulated public utility or a cooperative or municipal utility (meaning any private or merchant transmission developer) must show a new transmission line “directly serves the interests of the residents of Idaho.” While the state’s big regulated utilities have the power to use eminent domain if needed to acquire land for transmission rights of way, private companies would have to show a benefit to Idaho residents. There are questions about how to define those benefits. One private transmission developer, LS Energy, which plans a line in southern Idaho, opposes the measure on grounds it sets a higher standard for eminent domain proceedings than that for Idaho’s regulated utilities.
Status: Held in House State Affairs.
Sponsor: Rep. Scott Bedke
County Renewable Energy Authorities (H208)
Authorizes counties to create their own “renewable energy commerce authorities” to help facilitate the development of renewable energy projects within their borders. The authorities could receive federal, state, or local funds and enter into contracts to acquire, hold or lease property to promote projects.
Status: Held in House State Affairs
Sponsor(s): Rep. Bert Stevenson
Renewable Energy Sales Tax Rebate (H250)
Extends the five-year-old renewable energy sales tax rebate, which is scheduled to expire June 30, for another three and a half years. Says projects must produce commercial-scale electricity by Dec. 2014, or developers must return their rebate.
Status: Replaced with substitute legislation, H347 and H348
Sponsor(s): Rep. George Eskridge, Sen. Curt McKenzie
Wind Turbine Moratorium (H265)
Places a two-year moratorium against counties, cities or state agencies from granting approval or issuing licenses or permits for construction of wind turbines higher than 100 feet or producing more than 100 kilowatts of power. That would ban new wind farms during the pendency of the moratorium.
Status: Killed by House State Affairs
Sponsor(s): Rep. Erik Simpson
Wind Turbine Restrictions (H342)
Allows property owners within 2 miles of a proposed wind turbine to prevent its construction.
Status: Killed in House State Affairs
Sponsor(s): Rep. Tom Loertscher
Renewables Sales Tax Rebate (H347)
Extends the existing renewable energy project sales tax rebate beyond its scheduled expiration in June 2011. Would have limited eligible wind and solar projects to those that have utility agreements approved by the PUC by October 2011. All projects qualifying for the incentive would have to be built and operating by the end of 2014.
Status: Passed in House 40-29 and failed in Senate, 17-18
Sponsor(s): Rep. George Eskridge and Sen. Curt McKenzie
PURPA Projects Limitations (H348)
Would codify the current PUC limits on renewable energy projects qualifying for favorable contract rates at 100 kilowatts rather than the former 10 megawatts, effectively preventing wind and solar farms from qualifying for those guaranteed rates.
Status: A companion bill to H347 above, this was referred back to Senate State Affairs by the full Senate after H347 was defeated.
Sponsor(s): Eskridge and McKenzie