With a new year upon us, it is important to consider what the state and federal legislatures have in store for electric cooperatives. Will it be a new chapter, new verse or just the same old story? Whatever storyline develops, Central Electric will work diligently to ensure costly and unnecessary legislative and regulatory burdens are not passed on to members.
As the story played out last year, Oregon’s economywide carbon cap-and-trade bill (HB 2020) initially exposed Central Electric to nearly $7 million in new costs between 2021 and 2030. This cost exposure was unacceptable, given the electricity we provide to our members is already more than 96% carbon emission-free. To mitigate this financial risk, CEC met with the governor’s office and legislators, offering solutions which, eventually, were amended to the bill. The amendments reduced our cost exposure to approximately $3 million during the same 10-year period. HB 2020 languished on the Senate floor.
What happens during next month’s legislative short-session remains unclear. Will HB 2020 resurface, or will a vastly modified version be unveiled? Whatever the outcome, fairness and equity should prevail. Central Electric should not be financially punished for its nearly 100% carbon emission-free portfolio, while the two Oregon investor-owned utilities, who are only required to provide 50% renewable energy by 2040, get a 10-year free pass on carbon penalties. I will keep you informed of our efforts as this saga continues.
Unfinished business also awaits us on the federal legislative front. When Congress passed comprehensive tax reform in 2017, from thousands of pages emerged an unintended outcome jeopardizing many electrical cooperatives’ tax-exempt status.
Cooperatives must abide by the 85%-15% income test to maintain their tax-exempt status. That means no more than 15% of gross income may come from nonmember sources. For example, an electric cooperative that accepted grant money to assist with disaster recovery or broadband deployment would have to count the money as income if total monies received exceeded 15%.
The threat of a cooperative losing its tax-exempt status hits close to home. Two Oregon cooperatives, Lane Electric and Douglas Electric, were seriously impacted by last February’s record-setting “Snowmageddon.” While Lane Electric incurred $5.7 million in repairs and Douglas Electric about $10 million, both are eligible to receive aid up to 75% of those costs from the Federal Emergency Management Agency. These co-ops, however, may be forced to choose between keeping their tax-exempt status or foregoing FEMA financial assistance.
The bipartisan RURAL Act (H.R. 2147 and S. 1032) would resolve this dilemma. The Oregon congressional delegation has demonstrated bipartisan support for the RURAL Act, but Sen. Ron Wyden has yet to come on board. We remain hopeful, however, that as a leader on the Senate tax committee he will support and help advance this legislation. Oregon’s electric cooperatives will continue to weigh in with Sen. Wyden’s office until this legislation gets pulled across the finish line.
Our state and federal representatives need to hear your voices. I encourage you to visit our website, www.cec.coop, click on the Community tab and then ORECA-Action. Join your fellow CEC members and other Oregon electric co-op members to share your concerns with policymakers.