Climate + Energy Project

Summary: Testimony was heard on HB 2013 (.pdf), on a Renewable Portfolio Standard (RPS).

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Today is the hearing on HB 2013, a bill on a Renewable Portfolio Standards (RPS). Full room!

Meeting called to order. Lots of testimony today.

Chairman Holmes – regarding the five member subcommittees. They will meet Fridays from 8:30 to noon in 783 Docking (for most part – and not this Friday). Committees are  (1) renewables, Rep. Knox will chair (2) greenhouse gases, Rep. Moxley will chair (3) KCC legislation, Vern will chair, (4) Energy Efficiency – Rob Olson will chair – all this after committee leaders meet to decide details.

All energy committee members invited to sit in on subcommittees, but only subcommittee members can vote and make motions. Hearings will happen in subcommittees, too, if subject matter has already been covered in main committee.

Bill introduction – Rep. Sloan for Rep. Gatewood and independent telephone companies, re party line notification requirement.

Hearing opens

Proponents

Dan Hartman, NWKS Regional Energy Collaborative – 17 counties in NW KS
Emphatic support for codified RPS – key foundation for economic development of NW KS, and developing our wind. We need this legislation in place to grow our economies and stabilize our communities. Introduces Thomas County Commissioners who came with him to lend support.

Kimberly Gencur-Svaty, Wind Coalition
Almost every wind developer in KS is a member of our coalition. All of them have compelling stories about how wind farms help economic development. Every dollar spent locally turns over seven times before leaving Ellis and Lincoln counties where Smoky Hills wind farm is. Huge capital investments for these counties. These projects mean a lot to these communities. We also had tornado this summer – wheat crops were lost – and income from turbine leases helped bridge that gap. Wind helps farmers diversify. Wind Coalition fully supports RPS, sends strong signal, says KS is open for business. 1000MW of wind development in KS has already brought $1 billion of investment to state.

Melissa Dublin, Revisor’s Office – briefs bill, RPS requirements. Notes coal generation provision.

Rep. Kuether for Dublin – Q: explain nameplate capacity to committee A: It’s the rating of a facility, what it can produce at maximum, but it is not what it always produces. Q: What is effective date of statute? A: July 1, 2009. Q: Is the Governor’s current agreement nameplate? A – Holmes – gov’s initiative is based on nameplate, I believe.

Tom Thompson, Sierra Club
28 states already have mandatory RPS. Sierra Club supports RPS, it would be good for state. This is good long-term public policy, and it will reduce greenhouse gases being produced by state, will increase energy diversity, and will create new jobs. KS is poised to be a leader in renewables, with our vast wind resource. MN claims to be a leader, but they don’t have a great wind resource. SC thinks this is a nice clean bill, but our concern is that there might be a temptation to combine this bill with other bills – some might be good, but we wouldn’t want it to be combined with coal power plant that would increase GHGs, because that would defeat the purpose of an RPS. SC would oppose the bill if that became the case.

Mark Schreiber, Westar Energy
Westar supports this bill, it puts in statute something we have agreed with already. With our gas peaking plants and increased transmission, we should be able to handle it nicely. Amendment – should allow RECs to be used by utility in case of weather, etc., until construction is completed.

Joe Spease, Windsohy
KS has potential for thousands of megawatts of firm wind – and I have been talking about an RPS for seven years. Urgency now – lots of benefits to bringing wind to KS. MN, OR, CO, etc, all passed RPS and then saw thousands of new jobs come to state, wind turbine manufacturers. But we are now running lower on manufacturers available to build here. Even MO has an RPS, and they don’t have a wind resource. They do have carbon fiber manufacturers though, and those are used in turbine blades. Legislators have opposed RPS in past because it is a mandate. If you don’t pass it, you mandate jobs go places other than Kansas. Another objection is that wind costs too much – many states that have implemented RPS, wind is now their lowest cost electricity. Support this bill, pass it.

Mark Lawlor, Horizon Wind
Just finished Cloud County project (Meridian Way) – we have other projects ready to go, need RPS to make those projects a reality. Meaningful RPS sends clear signal to industry – developers, manufacturers, both. Aggressive RPS matters to our decisions. Our industry depends on competition between states, and Kansas needs to compete. Wind has limited capital, so we limit that states we spend it in. Economic impacts of wind are significant.

Dan Nagengast, Kansas Rural Center
Urges aggressive RPS. DOE has operated under Bush proposal to get 20% renewables by 2030. That means 16,000 MW per year. 7,000 total MW for KS by 2030. KS grid can’t absorb that, we need transmission. National RPS important, but state RPS is very important. Tells marketplace we want this type of development. A non-aggressive RPS is no big deal. In Wind Working Group this summer we heard that Xcel energy is trying to get 30% RPS in MN. Part of this RPS can also be community wind. % of RPS could be locally owned.

Mark Calcara, Sunflower Electric
Supports bill. This makes good sense for our consumers, we are already at 12.5% ourselves. We would tweak it a bit – change the term “nameplate capacity” to “nameplate rating.”

Neutrals

Dave Springe, CURB
(consumer counsel) I represent the people who will pay the bill for economic development. CURB does support KS utilities adding wind to their portfolios. We do oppose arbitrary mandates and timing on level of resources to be added. This constrains utility and they can’t bargain for best price for consumers. All of our utilities are different in terms of fuel mix. Ratepayers will have to pay for economic development. CURB doesn’t like mandate. On back page, I did add amendment – to eliminate utility incentives for renewables in another statute (KSA 66-117 (e) (1)) – because consumers shouldn’t have to offer a prize for something that has been mandated.

Kansas Livestock Association – written testimony

Nancy Jackson – Climate and Energy Project
Really should be proponent. We do support RPS for all of the reasons discussed. Would like to respond to Mr. Springe – cost is always a concern. NREL and LBNL have done research showing that empirical costs of an RPS have not unduly increased electric rates across the board. Looking at these reports, I would point out some opportunities – ie, nameplate capacity. This is not the same as energy delivered. Most other RPS talk in terms of energy generated, not nameplate. Also, RECs would be a good idea, plus a REC tracking system. Finally, cost recovery mechanism for an RPS is important. Also – best practices is to have an enforcement mechanism for noncompliance, if a utility does not meet the standard. You can also incent in-state community wind – ie, CO credits in-state wind at 125% and community in-state at 150%.

Larry Holloway, KCC
Nameplate capacity is not right word. Our concern – when talking about renewables it could also mean biomass facility, which has different nameplates for boilers, for turbines, etc. We would suggest net renewable generation capability ratings instead. That is consistent with ratings used in SPP reliability criteria and testing of generators. This is a national standard adopted by Congress.

No more conferees (no opponent testimony).

Questions from committee.

Rep. Burgess for David Springe – Q: What kind of figure will be actual rate increase of wind? A: Not at my fingertips. In recent Westar docket (and all utilities are different) 300 MW wind – well, I don’t have a good answer going forward. We don’t want to get into a debate about absolutely achieving lowest cost because there are other factors that make wind a good thing.

Rep. Moxley for Kimberly G-S – Q: your list of wind coalition members – have any of them committed to relocating? A: Three are strongly looking at KS, for two KS is in top two, and since the RPS bill has been introduced there has been much chatter.

Rep. Myers for Mark Schreiber Q: By 2016 each utility must meet 15% of retail peak load – that’s where the demand is greatest, during hot years, when wind is not blowing. Can your company meet that requirement then? You are required to have the capacity when you won’t have it. A: In August, we don’t expect to get much wind toward peak load. But in spring and fall, it makes up for it. We make 6% now, will have to double capacity. 700 MW increase, 1000 MW total for us.

Rep. Myers for Mark Calcara – Q: Can you meet this? A: Yes. This is very doable. We have looked at our generation portfolio and these levels are also cost-effective. We are also 50% gas, and so wind displaces gas – this helps our consumers. One drawback might be that our transmission needs to be addressed out there. We don’t want wind developers to be discouraged. Q: Why, if we have available developers with desire to build wind power, why do we need market requirement in statute? A: Is that a question for me? Q: For anyone who will answer. We don’t require Cessna or Boeing to manufacture a certain number of airplanes just to get jobs. I’m not in favor of requiring if there is already a market. A: This is a complex issue – about more than cost of energy to consumers. Economic development – as David Springe said, if we look at it in a micro way, we might not get right answer. Ratepayers are important, and that is our incentive. If this is a state policy to encourage this development, then that is a policy decision for you all to make. A: So policy-wise, state could require Boeing and Cessna to build airplanes – and people would have work, even if there were no market.

Rep. Myers for Joe Spease – Joe – Voluntary commitments are one thing, but when u r a developer trying to secure financing, and you have lots of overhead, you need regulatory certainty of an RPS that there is a definite demand for renewables. It reduces your risk. (discussion about electrical engineering follows here with Spease and Myers)

Rep. Holmes – we are looking for a bill on compressed air soon.

Rep. Moxley for Mark Schreiber – Q: Why did Westar ask for rate increase when added wind to mix, if wind is so effective? A: We would ask for recovery for building any new generation, through a rate case. Q: Are you expecting to generate the amount of renewables this bill asks for, voluntarily anyway? A: We did commit initially, but postponed 200MW due to what we saw as penalties from KCC in recovery. So we held off, and re-evaluated. We will add it but it is a matter of timing.

Rep. Moxley for David Springe – Q: On Westar rate increase for wind, what is CURB point of view? You opposed it, right? A: I don’t understand the request. Q: What’s your take? A: There were two cases (explains) companies have right to a predetermination case of rate recovery for building new generation. Westar came forth with 300MW in predetermination hearing. CURB did NOT oppose. We thought Westar adding wind to mix would be good overall for their fuel mix. All we opposed was the use of the incentive statute, the extra 1%, which was $50 million over twenty years. Since KCC approved Westar’s recovery for wind, why did they need the extra sugar on top, since the risk was reduced. In second case to build more gas to back up wind, we did oppose that rate increase. CURB continues to fight the incentive when it is asked for by Westar. All utilities need are cost recovery, not incentives. We never opposed the wind.

Rep. Sloan for Mark Lawlor, Tom Thompson, and Nancy Jackson – Lawlor first – MH missed question – A: This is not the most aggressive RPS out there, but roughly on a par with some other states. Maine is talking about 30% in shorter time frame. Nameplate or energy – majority of states use energy. Nameplate is much less. Building to nameplate is easy. Building to energy production matters more. I want an RPS – period. If I had my wish, it would be based on energy.

Nancy Jackson – I echo Mark. Connecting nameplate and peak helps, though. I’d take either one, but I prefer energy generated. That is the strongest category that most analysts support for writing in an RPS.

Tom Thompson – we support movement in the right direction, not a specific number. I would love to see a more robust RPS – KS can actually make it happen, versus other states. We would love to see one that is energy produced, not nameplate, but we will take this bill the way it is.

Rep. Sloan – no one has addressed deliverability, and transmission. And this statute does not include municipal utilities and I am disappointed that none of the conferees have mentioned that. I am also disappointed there is no discussion of how to make this work – additional gas generation will be needed in the short term. This bill doesn’t address many issues that subcommittee needs to address.

Rep. Svaty for David Springe – Q: You talk about the potential for loss of bargaining power for utilities in purchasing power – doesn’t that problem exist already in a transmission constrained world? A: Yep. You buy it from guy who has it or lights go out. Q: And in RPS world, doesn’t it guarantee lowest possible price of wind, because of the bidding process and the competition? A: I disagree. If I am a wind developer and I know all the numbers and who needs what, then I have bargaining power. It gives wind developers power in negotiating power purchase agreements. Q: MUnis were excluded because of their transmission problems, right? A: I didn’t draft the bill – but I would observe there is nothing to stop any muni from buying wind. Q: Jetmore has done that, but reasons behind RPS are to (MH missed it, but David and Josh go back and forth) Josh – is a marginal to negligible price increase statewide countered by thousands of manufacturing jobs? David – should we require Cessna and Boeing to build certain number of planes?

Rep. Moxley for Kimberly – Q: if wind energy is such a good idea that we need to force people to do this, why do we make exceptions for municipalities. A: Yes. Wind is a good idea because it brings economic development opportunities. Mandates might be philosophically problematic – but they do drive transmission development, too, and shows SPP that KS is committed to wind energy. An RPS is promising to deliver this power. On munis, (MH missed it)

Rep. Sloan – you can require munis to have same generation mix in their portfolio. Question for Dan Nagengast – Q: There is nothing to prevent communities from developing community wind. So I am troubled that RPS would require 5% from community wind. A: First off, if you think of wind as a natural resource of KS that can enter worldwide energy market, the question is how much benefit rests with Kansas. The world will appreciate our inexpensive wind as an export. That’s very large scale, so it’s very cheap – but the money goes to the source of finance. If you require some local ownership, more of the return stays in the state. The point is, if we develop 7,000 MW of wind and it’s all owned by outside investors, it will have great impact on state economy, but if we have some local ownership, that’s even better. Q: Do you really want to change Horizon’s business model to include local ownership? A: there actually isn’t the money to put up community wind turbines. We aren’t getting the CREBS and 9007 grants.

Rep. Holmes – for Dan and Nancy –Q: if you come in with 5% mandate, how do you affect investors? A: Nancy – I would not do a % set aside, I would do an incentive model like they do in CO. Q: The PTC is not available to community wind, also. A: You are absolutely right. And KS munis have not been taking advantage of CREBS, either.

Rep. Holmes for everybody– we want a community wind bill. Come in with written definition of community wind for tomorrow. That’s your homework. If there’s fifty people here, I want fifty definitions.

Rep. Wetta for Holloway – Q: what other states in SPP have RPS? A: MO, TX, NM. Would RPS in KS help a lot with SPP? I don’t know – it’s the 14,000 MW level of wind in OK, TX and KS that justify high voltage transmission projects. And NE has just joined SPP.

Hearing closed. Adjourned. See you tomorrow.

— Maril Hazlett, www.climateandenergy.org