Grassroots Efforts Help Mitigate Financial Risk

CEO Dave MarkhamFor the past decade, the Oregon Legislature tried passing various versions of an economywide cap-and-trade bill to regulate greenhouse gas emissions. At the time of this writing, it appears those efforts will finally succeed, with Gov. Kate Brown poised to sign HB 2020 this summer.

As initially drafted, HB 2020 inadvertently exposed Central Electric Cooperative to more than $7 million in new costs between 2021 and 2030. Deeply concerned, and through the collective efforts of the Oregon Rural Electric Cooperative Association, we offered solutions to the governor’s office and legislative members. They listened and took action to address this unintended consequence.

HB 2020 sets an ambitious statewide goal to reduce carbon emissions to 80% below 1990 levels by 2050. The electric, industrial and transportation sectors bear the burden to meet this goal. To financially assist businesses in transitioning to a cleaner energy portfolio, the original bill calls for businesses annually emitting 25,000 or above metric tons of CO2 to receive carbon credits based on their emissions spanning 2017 through 2019.

Thus, the rub. CEC is under the 25,000 metric tons threshold those three years, but due to rapid growth in Central Oregon, CEC’s service load is projected to surpass it in 2020—a full year before the law goes into effect, and after the state distributes the
carbon allowances.

Despite CEC having a 96% carbon emission-free energy resource portfolio, limitations on the hydropower system require buying some market resources—a mixture of solar, wind and natural gas generation. Classified as “unspecified” and therefore carbon emitting, the co-op is forced to exceed the carbon emission threshold in 2020, but not receive any carbon credits to provide financial relief for our members. In comparison, the two investor-owned utilities in Oregon are only required to provide
50% renewable energy by 2040, and this legislation gives them a 10-year free pass on carbon penalties.

To restore some measure of fairness and equity, CEC pushed for amendments to help mitigate the financial risk to our members. Rather than determining issuance of carbon credits solely during 2017-2019, the amendments allow for the state’s newly created Climate Policy Office to also calculate credits on a five-year average post-2021. Under this methodology, CEC would qualify for carbon credits and reduce our financial exposure from $7.4 million to approximately $3 million from 2021 to 2030.

Though not a perfect solution, I am pleased that our effort these past six months produced a more favorable outcome—but the work continues. As the Climate Policy Office embarks on the rulemaking process to enforce HB 2020, we must ensure our amendments are properly adopted.