CWEB.036/December.22.1998

Taxing Issue

Ballot Initiative Raises Questions About Montana's
Collection of Funds for Public-Purposes Initiatives

Montana voters have added yet another chapter to the ongoing drama of their state's struggle to implement Senate Bill 390, Montana's comprehensive electric restructuring act.

Montanans on Nov. 3 approved Constitutional Initiative 75, which stipulates no new tax or tax increase can be enacted without approval by a majority of voters in the geographic area subject to the charge. The initiative also gives citizens the right to sue government agencies and officials in civil court if they believe they've been subject to an unfairly levied tax.

The initiative's constitutionality is under review by the Montana Supreme Court, where a decision is expected by early 1999. Meanwhile legislators, advocates and public servants alike are fretting to varying degrees over the initiative's effect on the state's ability to collect and administer funds for universal systems benefits programs (also known as public purposes).

USBPs are defined by the restructuring law as fees assessed at each utility customer's meter to ensure continued funding of conservation, renewables and low-income energy assistance programs. SB 390 mandates that from Jan 1, 1999 through July 1, 2003--Montana's restructuring transition period--utilities must finance such programs at an annual level of 2.4 percent of 1995 retail sales revenues. Under the law, utilities and large customers receive credit toward USBP obligations for internal public-purposes programs. If a utility fails to fulfill its annual credit requirement, it must pay the difference to a universal energy assistance fund.

Legal Issues

While Montana's restructuring bill passed in 1997, collection of USBP charges is not scheduled to begin until Jan.1, 1999. Confusion has resulted as to whether the initiative should be applied to the benefits charge on the basis of its upcoming implementation date, or whether the charge should be exempt as part of legislation enacted in 1997.

Defining USBP charges as a "tax" under the initiative also remains subject to debate, although the initiative defines the term rather broadly as "any financial charge, however denominated, imposed by a governmental unit and from which revenue accrues to the government," with exceptions for school tuition, criminal and civil fines.

"The legal opinions that we have tell us that USBP probably falls under CI-75 because it would be implemented as a new charge," said state Sen. Fred Thomas, chair of the Legislature's electric utility restructuring transition advisory committee (TAC).

But not everyone agrees. "We think it's a preposterous claim that the universal systems benefits charge could in any way be construed as new," said Ralph Cavanagh of the Natural Resources Defense Council. "Public-purpose costs were already in rates before the restructuring legislation was ever enacted." Cavanagh also noted that if one were to take the idea of applying CI-75 to electric restructuring to its logical conclusion, "Every aspect of rate-making would have to be subject to a citizens' vote. If that's true, then nobody can charge for electricity in Montana. In essence, electricity in Montana would be free. And if that's the case," he said, "electricity won't be staying in Montana for long."

Cavanagh wouldn't rule out NRDC's participation in litigation, and said NRDC "is prepared to aggressively defend the USBP in Montana."

The Montana Public Service Commission, which recently issued a request for comments on the matter, is reacting cautiously to the controversy generated by CI-75. Staffer Will Rosquist said that while the commission's authority over USBPs under present restructuring legislation is not explicit, the commission "is charged with approving, modifying or denying the company's transition plan, including the universal systems benefits programs contained within it." Because of the law's ambiguity, Rosquist said the commission might be subject to lawsuits from advocacy groups "for failure to implement USBPs as part of SB 390. CI-75 might make commissioners, not to mention staff members, personally liable if we do go ahead with the programs."

"We think that the commission can legally implement program charges," said Montana Power vice president Perry Cole. He added that the utility wants to move ahead with USBPs as soon as possible. "We're committed to that 2.4 percent, and we want to get the tariffs in place and the programs up and running. And we need to be able to recover the costs. That was the legislative intent of electricity restructuring."

Meanwhile, draft legislation meant to expand upon and implement USBP policy outlined in Montana's initial restructuring legislation has been put on hold pending review of CI-75. The draft was approved by the TAC, but held up at the request of Thomas and Rep. Ernest Bergsagel, chair of the USBP subcommittee.

This legislation charges the state Department of Revenue with adopting rules and procedures governing utilities' USBP credits. The agency would also oversee payments from utilities that fail to meet annual USBP requirements. "Under this implementing legislation, the PSC has almost zero role," said Todd Everts, TAC legislative policy analyst.

Everts said he anticipates an early January meeting for all parties involved in the legislation "to determine how they want to proceed on the constitutional issues." Everts foresees three possible solutions to the dilemma presented by CI-75. "We could make a decision that the initiative doesn't apply and proceed with the bill as is. We could assume CI-75 does apply, in which case we could alter the legislation to eliminate the 'leftover' funds administered by the Department of Revenue. By forcing the co-ops, large customers and utilities to spend all the USBP funds, the money wouldn't accrue back to the government. Or, we could put the bill to a vote of the people as part of the state of Montana's initiative process."

"There are a lot of reasons to think CI-75 won't pass constitutional muster and may be thrown out by the Supreme Court," Thomas said. "But we don't expect a decision until February or March, and that's if it's done correctly, and by that I mean very expeditiously."--Angela Becker-Dippmann

More Information:

• Montana Electric Restructuring

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Changing Thinking in Olympia

Comprehensive Restructuring Legislation Unlikely in Washington,
But Narrower Bills, Including Public Purposes, Could Emerge

Comprehensive restructuring of Washington's electric industry is a virtual impossibility in 1999, although narrower electric-related legislation--including public-purposes funding--could be considered by Evergreen State lawmakers.

What might pass the Legislature and be signed into law by Gov. Gary Locke is another question.

"It's going to be an interesting session and I don't know how things are going to proceed," said Nancy Hirsh of Northwest Energy Coalition, which is working on legislation for public-purposes funding of energy conservation, renewable energy and low-income energy initiatives.

A year ago considerable interest in Washington was focused on the so-called portfolio model of restructuring, in which large electric customers would gain direct access to the electric market while smaller commercial and residential customers would choose from among a portfolio of power-supply options, including their incumbent utility. This approach--somewhere between the current monopoly system and wide-open retail access--would also take into account other major issues, including public-purposes funding. A leading legislative proponent, Sen. Bill Finkbeiner, then-chair of the Senate Energy and Utilities Committee, said he would propose funding energy conservation and renewable energy initiatives at 3 percent of electric industry revenues.

However, Finkbeiner never introduced a comprehensive restructuring bill on the portfolio or any other model in the 1998 legislative session. "Folks just aren't ready to have a real good and open debate" on the subject, he told Con.WEB at the time. "The case has got to be made a little more that the current changes occurring [in the energy industry] are serious enough to warrant a good discussion."

Finkbeiner and other legislative energy committee leaders floated the preliminary draft of portfolio model legislation in March, urging continued discussion of restructuring issues. However, "It never really went anywhere," said Lew McMurran, government relations director of the Washington PUD Association. "In two years it could be the bill that passes. Who knows?" he added.

No Restructuring Momentum

For the moment, however, there is no discernible push in Washington for broad electric industry restructuring legislation. "Right now I don't hear anybody talking about comprehensive [restructuring] legislation," said McMurran. Neither does consultant Enid Layes of Industrial Customers of Northwest Utilities, or Hirsh, who describes "a total loss of momentum" for sweeping restructuring.

McMurran cites "a greater awareness that the Northwest has more to lose than to gain in restructuring, especially if it's done improperly." Wholesale price volatility over the summer raised concerns, he noted. Salmon and hydropower issues, meanwhile, have to some extent eclipsed restructuring.

Also apparent to Washington lawmakers is some consumer discontent in restructured states such as California, Massachusetts and Montana, according to Hirsh: "That caused people to say, 'Hmmm, let's wait and see what happens.'"

Many Washington industrial customers have already gained access to market-based power through their utilities; nearly half the large customer load of 15 reporting utilities took service under non-traditional (and lower) rates in 1997, according to a draft state study. Hirsh believes this trend has muted industrial enthusiasm for full retail choice. And residential electric consumers in the low-cost Northwest are not badgering elected officials to be able to choose power suppliers. "This is still a price-based commodity," said McMurran. "As long as they can flip a switch, people are pretty satisfied. We all want choice. We don't necessarily want to make new purchasing decisions involved with it."

Layes thinks Washington legislators lack "the sheer political will" to tackle restructuring. Rising wholesale prices also have "dampened it a little bit."

Political circumstances in Olympia have changed as well. Democrats gained control of the state Senate in the November elections, and nearly captured the House as well, ending up in a 49-49 tie. "With the makeup of the Legislature, especially the 49-49 split in the House, it's going to be very difficult to pass any controversial legislation of any kind," said Layes.

It also changes leadership on energy committees, with Democrat Lisa Brown now in charge in the Senate Energy, Technology and Telecommunications Committee; Finkbeiner does not even sit on that committee anymore, according to Layes. She and others also noted telecommunications figures to be a bigger issue than energy this session.

Public-Purposes Prospectus

NWEC is developing prospective legislation to cover funding for investments in energy efficiency, renewable energy and low-income energy services. Hirsh is confident it will get introduced in the 1999 session.

Still being formed as of mid-December, the public-purposes legislation is likely to focus more on performance than spending, according to Hirsh. It probably will not include a requirement to spend 3 percent of electric revenues on public purposes, as recommended in the Regional Review. It may include portfolio standards for renewables (for all suppliers) and efficiency (for distribution utilities). "People are interested in something that isn't a number: 'You must invest blank,' whether blank is the right number," said Hirsh. "What if you can do it cheaper, or what if it costs more?" She noted that the Review's 3-percent figure derived from the Northwest Power Planning Council's assessment of cost-effective opportunities. "This is more directly performance-based."

Hirsh acknowledges separate public-purposes legislation will "raise a lot of flags" around Olympia. ICNU is likely to raise one of them. "It's going to be highly unlikely that industrial customers are going to support any additional money being driven into the [electric] system until we get some comprehensive open access," said Layes. The Review urged simultaneous legislative implementation of open retail access and public-purposes funding.

ICNU's Ken Canon in October predicted public-purposes legislation would be "a major issue" generating "considerable debate." He also said public-purposes funding will be characterized as a tax, and as such he questioned its public support.

"Our argument," said Hirsh, "is that what we're going to put forward is more of a restoration of what's been lost and addressing cutbacks that have already occurred, due to what we call virtual restructuring." As evidence, a draft state study found that responding Washington utilities (representing 90 percent of statewide electric sales) have sharply reduced their conservation spending, from a peak of $155 million in 1993 to an estimated $43 million in 1998 and a projected $25 million in 2000. These figures include Bonneville Power Administration funds, which are similarly declining.

The PUD association's McMurran understands NWEC's perspective on funding reductions, and said his membership wants to cooperate on public purposes. But PUDs also are adamant about maintaining local control. Many have undertaken significant conservation initiatives in their service territories, and a mandatory public-purposes charge "could really cause some problems." He also said any public-purposes legislation "needs to work in conjunction" with BPA's proposed wholesale rate discount for conservation and renewables activities.--Mark Ohrenschall

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Still Talking

Oregonians Debate Restructuring Proposals,
But 1999 Legislative Prospects Uncertain

Oregonians continue to debate electric industry restructuring legislation, but its 1999 prospects are uncertain.

"We do not see a ground swell of consumers asking for deregulation," said Oregon legislative staffer Harrison Conley. "Legislators aren't jumping on the bandwagon."

Still, two House and Senate interim committees held a two-day joint meeting in October to discuss utility restructuring. And Sen. Gene Derfler, who has reportedly been working with the Association of Oregon Industries, is circulating a one-page document on retail electric competition.

Derfler's document includes a recommendation the Legislature establish a transition policy covering conservation and renewable energy investments, and create a portfolio access program for residential customers. In addition, the document suggests the Legislature also indicate when retail markets will open to competition; set requirements for consumer protection and access to needed information, as well as provisions to protect consumer-owned utilities; establish aggregation policies; and outline ratepayer and shareholder sharing of stranded costs or benefits.

"The ball is in Derfler's court," said Steve Weiss of the Northwest Energy Coalition, a member of the Fair and Clean Energy Coalition that drafted legislation discussed during Oregon's last legislative session, in 1997. FCEC's main concern is ensuring the state maintains a commitment to conservation and renewables, either in a restructured environment or through traditional utilities.

Bob Jenks of Oregon Citizens Utility Board, another Fair and Clean Energy Coalition member, said the group's 1999 legislative proposal will improve on its last effort and take a more specific portfolio access approach. "We're going into this session with everyone knowing what the deal is [in order] to go forward," Jenks said.

Oregon Gov. Kitzhaber has said he wants a 3-percent system benefits charge; industrial customers want open retail access; the Oregon Public Utility Commission wants a portfolio approach for residential customers; and public utilities want local control. "We could easily write up a bill to accomplish all that," Jenks said, but the various stakeholders aren't yet ready to accept such a proposal. "Maybe they will be in February or March," when the legislative session is in full swing.

Portland General Electric also is working on a proposal, spokesman Kregg Arntson confirmed. He said it will reflect PGE's six restructuring principles, including a 3-percent systems benefit charge collected from customers only in those areas where all customers have a choice of energy suppliers. No such SBC would be required unless a territory opened to retail competition.

Most of the Oregon restructuring discussions have been held within the context of PGE's customer choice plan now before the OPUC. That case is entering its final phase, with a decision expected in January. However, OPUC staff has indicated the commission will seek guidance from the state Legislature in implementing any restructuring plan for PGE--or other Oregon utilities. "We want to continue this dialogue working toward restructuring," Arntson said. "The dialogue at this time is moving toward the Legislature," but "we're discovering it's going to take some time."--Jude Noland

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What's To Gain?

Idahoans Not Keen on Electric
Industry Restructuring

The Idaho Legislature will take a slow and "very conservative" approach to the subject of electric industry restructuring, said Idaho legislative staffer Mike Nugent--if the lawmakers take up the issue at all in the low-cost-power state.

"Everyone in Idaho is really gun-shy [of restructuring], given Montana's and California's experience," he said. "What good did either one do?"

Sen. Laird Noh, a member of the Legislature's interim committee on electricity restructuring, recently said it would be over legislators' dead bodies that any restructuring measure would be introduced.

The interim committee, which has met regularly since the end of the last legislative session and is to present a report to lawmakers at the beginning of the 1999 session, technically went out of existence Nov. 30.

While it's likely the 1999 Legislature will pass a resolution to reinstate the interim committee or have another committee take its place, Nugent said the former committee lost some key members, including Ron Crane, who has been elected Idaho state treasurer. Co-chair Sen. John Hansen didn't run for re-election, while co-chair Bruce Newcomb has been elected speaker of the House, and would not serve on a reconstituted committee. If the committee continues, it may take massive re-education to get new members up to speed on the issue--which may not be possible before the end of the 1999 session.--Jude Noland

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Upping The Ante

BPA Contemplates Raising Public-Purposes Rate Discount
From $30 Million to Conditional $45 Million

Bonneville Power Administration is considering upping the ante for its proposed energy conservation and renewable energy wholesale rate discount from $30 million annually to a conditional figure of $45 million.

The additional $15 million would kick in only during favorable BPA revenue years, and wholesale customers would need to invest two public-purposes dollars to receive one discount dollar from that pot. The $30 million base tentatively offers a straight 1-to-1 ratio of public-purposes spending to discount funding.

This amended thinking reflects "a lot of concern" among stakeholders that $30 million "would not move the ball downfield" sufficiently in promoting conservation and renewable energy initiatives by BPA customer utilities, according to BPA vice president for energy efficiency Terry Esvelt. He told the BPA conservation/renewables discount working group Dec. 15 that the additional $15 million could stimulate up to $30 million more in regional public-purposes initiatives.

Many important details of the $15 million adder are unclear. For example, what constitutes a good revenue year to trigger the extra available discount? Uncertainty troubled Maureen Carr of the Public Power Council: "Most folks I work for said they could handle [the $30 million notion] and support it. They might be able to handle more. They probably won't like more, but they'll probably like more better than uncertainty." Northwest Energy Coalition's Steve Weiss said he would prefer a consistent $45 million cap, but he recognized BPA's fiscal concerns. Bonneville officials have said they want to limit the discount's wholesale rate impact to about .05 cents per kilowatt-hour, which translates to about $30 million.

Esvelt in any case reiterated BPA's intention to offer at least a $30 million annual public-purposes discount in its subscription proposal for post-2001 federal power. "That's a given," he said. Indeed, it is contained in BPA's subscription strategy released Dec. 21.

Earlier in the meeting, Noel Shelton of ESI questioned this basic policy call, expressing disappointment in the lack of public involvement in BPA's decision to offer a discount. Michael Early, representing aluminum companies, suggested the discount is a resource acquisition program, which raises many implications. He also said the discount effectively creates two separate and unequal priority firm rates.

Esvelt, however, said BPA will not acquire or pay anything with the discount. "We're encouraging our customers to spend their own money," collected from their retail customers. "We're just providing a financial incentive." Shelton responded: "How you pay for it doesn't matter," and he said it's still a resource acquisition.

Details, Details

With BPA's determination to provide a public-purposes rate discount, policy debates have focused on implementation. Some current thinking developed in stakeholder subcommittees (and elsewhere) was outlined Dec. 15.

One key issue is the discount amount for various conservation activities. "Most of the discussion has centered on a proposal for a 'Cost Plus' system," according to a subcommittee report. "With this system, the customer (utility or DSI) would receive a discount equal to its actual costs plus some fraction of the difference between that cost and the estimated value of the electricity savings that would be produced (presumably assessed at market prices). The fraction is undecided--somewhere in the 30 to 50 percent range. The amount of the discount would be capped by the value of the electricity savings." This idea attempts to reconcile utilities seeking a simple discount methodology and those that want the discount achievement-based, according to NWEC's Weiss. He said he's heard compelling arguments for both cost and value approaches, and perhaps utilities could choose among alternatives.

John Saven of Northwest Requirements Utilities said an irrigation scheduling program, for example, might succeed in one utility territory and fail in another. "If utilities spend their own money trying, who are you to judge?" he asked. NWEC's Nancy Hirsh agreed the discount should be "as simple and easy as possible," but some regional accountability is needed. "I'm not ready to say whatever you spend you get back," she said.

The Regional Technical Forum factors into this debate. As explained in another subcommittee report, the RTF would serve as an advisory committee to the Northwest Power Planning Council; the Council would determine its members and functional guidelines. At BPA's request, the RTF also would develop a list of qualifying measures for the rate discount--and track discount-related accomplishments from BPA customer invoices. Esvelt stressed the RTF would be strictly advisory to Bonneville, after Tom O'Connor of Oregon Municipal Electric Utilities raised concern about the RTF's regulatory potential and Hirsh suggested the RTF was becoming BPA-dominated.

The RTF is envisioned to establish standard regional protocols to verify and evaluate energy savings, track regional progress toward conservation and renewable resource goals, and suggest improvements. Dick Watson of the Council told the working group the RTF's composition may be patterned after the Northwest Energy Efficiency Alliance, with most members coming from utilities. A tentative schedule has the Council establishing the RTF by next spring, and BPA adopting the list of discount-qualifying measures by January 2001. The discount is scheduled to take effect Oct. 1, 2001.

On renewable energy, a subcommittee has recommended the discount focus on increasing energy production from new and/or expanded renewable resource facilities. A tentative list of eligible renewables includes solar, wind, geothermal, and certain biomass and hydroelectric resources. Direct-application renewables (for example, solar water heating) are also anticipated to be eligible, as are funds invested in renewables research and development initiatives. Among the pending issues are ownership requirements and cost-effectiveness criteria. The renewables subcommittee favors discount payments based on net electricity production, while acknowledging direct-application renewables and renewables R&D may require other approaches.

Another subcommittee working on small utility issues is considering potential discount exemptions, such as from reporting requirements. Other issues in this category include definition of small utility, lack of efficiency opportunities, and tiny staffs to offer conservation services, according to a subcommittee report.

Subcommittees are supposed to report their conclusions by Jan. 13, the date of the next working group meeting. Esvelt said BPA needs to finish the numbers for its upcoming rate case proposal, including the public-purposes discount, by February.--Mark Ohrenschall

More Information:

• BPA's Proposal For a Conservation/Renewables Rate Discount

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Renewable Energy Landmark

Vansycle Ridge Wind Farm Spins Out
Electrons for Pacific Northwest

High above a wind-scoured ridge in northeastern Oregon wheat country, giant blades endlessly cartwheel in place atop immense towers, spinning out electricity for the Pacific Northwest.

Vansycle Ridge Wind Farm, the Northwest's first commercial-scale wind-energy project, began delivering electricity to the Northwest grid in early November. A month later, on Dec. 3, came the official dedication ceremony, highlighting the sense of history and possibility represented by the project, and the collaboration--local, national and international--that made it happen.

"This is a big deal for us," Walt Pollock of Portland General Electric told the large crowd assembled at Pendleton Convention Center for the dedication. "It has extraordinary significance." PGE will buy all the energy produced by the 24.9-megawatt-capacity wind project; the projected 9.5 average megawatts each year will fetch a premium. Pollock told Con.WEB the utility's total cost for Vansycle Ridge is 5.6 cents per kilowatt-hour (4.9 cents per kilowatt-hour on energy), with price escalators over the 30-year contract term. That's roughly double the average price for peak-period wholesale power on the current Western spot market.

Wind energy, however, provides benefits beyond the bottom line. It burns no fossil fuels and harms no fish, noted Roy Hemmingway, salmon and energy advisor to Oregon Gov. John Kitzhaber. It also diversifies energy supply. "The governor feels very strongly that wind power and other renewable resources must be a part of Oregon's future," Hemmingway said at the dedication. "We are a growing state with a

Photo taken by Mark Ohrenschall

growing economy and growing energy needs . . . We believe this is the first step in a long journey toward environmentally friendly energy projects for the Pacific Northwest." Another Oregon political leader, Democratic U.S. Sen. Ron Wyden, sent a written note praising Vansycle Ridge as "a model for us and others in the region to follow."

Speaker Rachel Shimshak of Renewable Northwest Project also looked ahead. "This marks the dawn of a new industry for the Northwest," she said, "the first new renewable energy contribution to a sustainable future for us and our children." Despite the December chill, "This project feels more like spring, a new beginning for the region." Shimshak specifically lauded PGE's perseverance on the project, developer FPL Energy's good work on the site and in earning stakeholder support, and the important roles of Bonneville Power Administration, Umatilla County and the Oregon Public Utility Commission.

Pollock took a historical perspective, noting PGE began working on what became the Vansycle Ridge project in 1993, when it solicited renewable energy supplies. In the 1970s as an Oregon Department of Energy employee Pollock personally talked with Northwesterners who were very knowledgeable and passionate about wind energy. Before his time, Pollock said, small windmills were erected in Umatilla County to pump water for agriculture. Now, with this latest wind technology, "Oregon can be extremely proud to see the development of a major source of clean, renewable energy going to hundreds of thousands of its citizens." Vansycle Ridge power initially will be melded into PGE's system, via BPA transmission lines, but Pollock later said the utility anticipates a specific green-power offering in the near future.

BPA played a key role in Vansycle Ridge, rebuilding and upgrading a nearby power line to accommodate the project. Bonneville will absorb the wind-generated energy into its system and deliver a like amount to PGE's system a week later, so PGE knows how much wind power it's getting, according to BPA's Kirk Robinson. "Without this arrangement, wind power would be considerably less valuable," he said. BPA's hydro-based system ideally complements wind power, by filling energy-production gaps from the intermittent wind resource. Robinson also paid tribute to history, specifically the MOD 2 wind machines designed, built and installed by The Boeing Co., (with U.S. Department of Energy and BPA funding) in the early 1980s in the Goodnoe Hills of south-central Washington. Although eventually dismantled, "It didn't squelch enthusiasm for renewable energy development" and it provided valuable lessons.

Collaboration

PGE and BPA were instrumental in creating the Vansycle Ridge project, but they were hardly alone.

The owner/developer is FPL Energy, a recently formed subsidiary of Florida-based FPL Group. FPL Energy bills itself as "a leader in environmentally friendly generation and . . . the world's largest generator of electricity using wind and solar." It has an ownership interest in nearly 2,200 MW of wind, solar, geothermal, natural gas and biomass generating projects; wind represents about 30 percent of this portfolio, according to the company. FPL Energy chose Vansycle Ridge for "its favorable wind resources, compatible land use, and ease of interconnection with the Bonneville Power Administration transmission lines." Annual average wind speed is 16 to 18 mph.

The Vansycle Ridge turbines, meanwhile, were made in Denmark by Vestas, self-described as the world's largest wind-turbine manufacturer.

Vansycle Ridge also enjoyed substantial local support. FPL Energy project manager Collie Powell mentioned, among others, the Confederated Tribes of the Umatilla, Umatilla County Planning Commission, environmental groups and residents from neighboring communities in Oregon and across the state border in Washington.

The federal government also contributes, in the form of a 1.5 cents/KWh wind-production tax credit for 10 years. Vansycle Ridge beat the on-line eligibility deadline by some eight months; this credit currently expires in mid-1999. FPL Energy said the tax credit "has been instrumental to the growth of the [wind] industry and has led to tremendous technological advances, as well as significant increases in cost efficiencies."

Another constituency is the local bird population, which is reportedly small. "Compared to other wind energy sites this area gets relatively little bird use," Umatilla County Planning Department found. Nesting habitat is poor, based on a lack of prey in the wheat-farmed land surrounding the turbines.

In the way of mitigation, Vansycle Ridge wind machines are painted a highly visible white and the tubular towers minimize perching and nesting opportunities. The blades bottom out 90 feet above the ground, leaving flying space below. Power lines run underground in the turbine area. FPL Energy has pledged to monitor the project's impact on birds and bats. "With a valid avian monitoring plan, such as the one in place, Umatilla County has an opportunity to set an example for the Pacific Northwest in wind generation projects," said Lynn Tompkins of Blue Mountain Wildlife in an FPL Energy news release.

Wind Farm In Perspective

From a southerly distance the wind farm is not visible from Pendleton or even the nearby tiny community of Helix. It can be seen from the Walla Walla River Valley, forming a modest presence on the southern skyline day and night.

From close range, however, the wind machines are stunningly large. Each tower rises 166 feet and the blades top out another 76 feet in the sky, creating a structure 242 feet tall--nearly half as tall as Seattle's Space Needle.

Photo taken by Mark Ohrenschall

"They're just so [expletive deleted] big," marveled one onlooker on a Dec. 3 site tour prior to the speech-making in Pendleton.

Besides wind, the only substantial sound on Vansycle Ridge comes from whirling blades--"whoosh-whoosh-whoosh"--capturing the wind's kinetic energy and transforming it into electrical energy in a generator atop the tower. The electrons flow down through wires into underground cables to a substation transformer, thence to the grid.

A controller cabinet at the base of each hollow tower displays real-time information on wind speed, energy production, revolutions per minute and pitch degree (the rotor blades pitch slightly to maximize energy production as wind conditions change). On Dec. 3 near midday at one particular turbine, wind speeds ranged from the low to high 20s (mph), energy production fluctuated from less than 500 KW to about 600 KW (660 KW is capacity), and pitch varied from about 1 to 2 degrees.

Later that day Kitzhaber's assistant Hemmingway shared a perspective on Vansycle Ridge by repeating the Chinese proverb about a journey of a thousand miles beginning with a single step. At 24.9 MW capacity the new wind project represents .07 percent of the region's electric generating capacity, in December, under low water conditions, according to BPA figures. And the anticipated energy output of 9.5 aMW equals about .04 percent of the total net average energy resources in the Northwest, also under low water conditions.--Mark Ohrenschall

More Information:

• Con.WEB Articles on Vansycle Ridge:
  "Vansycle Ridge Wind-Energy Project Under Construction in Northeastern Oregon," (July 31, 1998); "Oregon Wind-Energy Project Goes On-Line," (Nov. 25, 1998)

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Solar Project Clouded

Planned New Mexico Solar Power Plant With Washington Firm's
Major Involvement Faces Uncertain Future in Land of Enchantment

Financial issues have clouded a huge proposed New Mexico solar-power plant in which a Washington company is substantially involved.

Envisioned as a 5-megawatt-capacity facility operating by 1999, the planned solar-power project now looks initially smaller and incremental.

Nevertheless Washington-based Applied Power, selected by Public Service Company of New Mexico as a potential solar-energy supplier, remains optimistic. "We feel . . . there is going to be a project going forward," said Applied Power executive vice president Darrel Anderson. But based on PNM's current cost-recovery plans, "It will probably be on a smaller scale and a more phased-in approach."

PNM in May announced its choice of Applied Power and California-based Science Applications International Corp. to negotiate contracts for the proposed solar-power venture, tentatively located near Albuquerque. Lacey-based Applied Power, a subsidiary of Idaho Power Resources, was anticipated to design, build, own and operate a 4-MW solar photovoltaic installation, which the company said would make it the world's biggest single-site PV producer. SAIC was to supply 1 MW from a solar-thermal system using dish/Stirling technology. PNM at the time said construction could begin in fall 1998--if approved by the New Mexico Public Utility Commission.

The proposed solar plant originated from a provision in a PUC order approving a stipulation agreement for PNM to buy power from a natural gas-fired peaking plant in Albuquerque. PNM subsequently requested proposals for 5 MW of solar power, which led to Applied Power's and SAIC's selection. Their proposals fell in the range of 20 cents to 40 cents per kilowatt-hour, according to PNM project manager Steve Anderson. "We're not doing this because it's an economic resource at this point in time," he told Con.WEB in May.

Money Issues

PNM initially asked regulators for rate-based cost recovery for power-purchase contracts with level annual payments for 20 years, which would cost the average PNM residential customer $3 annually, according to the PUC's Anastasia Stevens. A subsequent proposal called for building a 4-MW first phase financed through a rate surcharge of 0.5 percent; the remaining capacity would be built over time with funding from individual customer subscriptions.

New Mexico industrial customers opposed the plan, citing such concerns as rate impacts and the solar project's fit in a restructuring electric industry, according to a PUC case summary. New Mexico Solar Energy Industry Association, meanwhile, protested the venture would competitively disadvantage small-scale solar and other renewables in the Land of Enchantment.

On Oct. 27 the New Mexico PUC issued an order in the case, noting "tremendous excitement and interest in the pursuit of solar and other renewable sources of electricity generation. What is further apparent, however, is that the specific goals to be reached in that general pursuit are not easily agreed upon . . ."

The commission endorsed a PNM rate surcharge "for the purpose of developing and acquiring renewable generation resources on a 'pay as you go' basis . . . all acquisitions of resources or research and development projects funded out of the rate rider shall be made on a cash basis, with no financing to be repaid from future consumer contributions (except where the customer voluntarily participates on that basis)."

Half the 0.5-percent surcharge on all customers would go to the Applied Power/SAIC solar project, and the capacity ratio would change to 3 MW photovoltaic and 2 MW dish/Stirling. The PUC asked PNM to renegotiate with the two companies, acknowledging that pay-as-you-go funding "result[s] in a substantially longer period of time to complete acquisition of these resources and that this may make the transactions unattractive to the successful bidders." Should deals not materialize, this earmarked money would switch to an annual renewables bidding process funded by the remaining half of the surcharge.

"What the order allows us to do is collect the money and then spend it," said PNM's Anderson. "We're under no obligation to sign a long-term contract . . . If we can work a deal with the existing vendors we're still obligated to keep going to get 5 MW." His "conservative estimate" is 20 years to reach 5 MW through the rate surcharge, which would bring in about $2.5 million annually, or $1.25 million for the proposed Applied Power/SAIC project. Anderson said the utility has not started renegotiations with the two firms, but plans to do so after the PUC order becomes final as expected within the next month or two.

"It's been a rocky road," said PUC executive director Dave Warren, who pushed for the solar RFP because, he believes, "we ought to develop solar energy in New Mexico." The pay-as-you-go financing would stretch out construction of the Applied Power/SAIC project, he said, but it would also substantially cut the utility's costs by avoiding finance charges.--Mark Ohrenschall

More Information:

• "Washington Firm Anticipates Big Role in Big Solar-Power Plant" (Con.WEB, May 29, 1998)

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View From The Chair

New Alliance Chairperson Sees Good Progress, Bright Future,
Some Improvements Needed for Regional Collaborative

The Northwest Energy Efficiency Alliance is making good progress in its fundamental mission and has a promising future, according to Carol Brown, the new chairperson of the regional market transformation collaborative. At the same time she believes the Alliance can improve in certain areas as it enters the final year of its original three-year charter.

Brown lists ensuring Alliance funding beyond 1999 as a top priority, along with focusing her board of director colleagues on the Alliance's as-yet-unknown future. Brown, manager of marketing and operations at Portland General Electric, was elected Alliance chairperson in October to succeed Jake Fey of Tacoma Power.

"I believe the Alliance has done very well at getting projects into the marketplace that will eventually transform the regional energy efficiency market," said Brown in an e-mail interview. "Since market transformation occurs over time, it cannot be expected that the Alliance would have made significant strides in the transformation process after two short years." She considers the Energy Star Resource-Efficient Clothes Washers program [formerly known as WashWise] "one of the most significant projects that have notably made a difference in the marketplace." The Alliance portfolio now contains 30 projects altogether.

A primary reason for the Alliance's success, Brown believes, is an increasingly unified 18-member board focused on regional market transformation. "This unification will continue to be the driving force that will lead the Alliance to a successful position in the future," she said. Yet Brown also acknowledged a tendency among board members to micro-manage. "As we move into the future, it is going to be more valuable for the board to be addressing the direction of the Alliance and the path to reach the established goals rather than getting too deeply into the operation of the projects."

Brown appreciates learning the varying board member perspectives on energy efficiency, and she notes a continuing need to balance interests of the four states and the region. "In the future, if the Alliance wants to maintain its regional perspective it will need to be more adept at working with the individual states and creating market transformation headway." In Montana, which is establishing statewide public-purposes funding (see story above), "support for the Alliance is going to be dependent on the support that Montana residents get from the current and future Alliance projects. This is something that the board will need to consider in its future decision-making and its long-term plan. This is an issue that will eventually need to be addressed for each state."

Collaboration, Adaptation

Brown sees the Alliance functioning well as a collaborative effort among the board, staff, project contractors and utilities. "The businesses and other regional stakeholders are just becoming aware of the Alliance and we want to work with them to support and eventually embrace the next steps of the market transformation process." Creating more awareness of the Alliance has only recently gathered steam, as the board and staff have been focusing on forming the organization and launching projects. "Building awareness both regionally and nationally will continue in order for the Alliance to be successful and to demonstrate that it is a leader in market transformation," she said.

In its projects, the Alliance has learned to adapt as circumstances change in the market and elsewhere. Brown calls it "effective and notable that programs have been stopped when they are not meeting the milestones as specified, or adapted to meet the goals of the project." The Alliance also has learned to streamline its review process for potential new projects. If the Alliance gets additional funding, "the board will look to the needs of the marketplace and be more specific with the project requests, specifying sector and segment requirements."

Asked her priorities as chairperson, Brown first listed continued Alliance funding beyond 1999. She plans to work with her own utility, other investor-owned utilities and regulators on securing more money for the Alliance, in the absence of state legislation earmarking dollars for market transformation. Public-purposes funding represents "one of the major influences" on the Alliance's future, but Brown acknowledged it as uncertain in Washington, Oregon and Idaho.

Another priority is getting the board to think about the Alliance's direction beyond 1999. Brown also wants to "add breadth to energy efficiency market transformation through collaboration and participation by market allies," as has already happened with some Alliance projects, such as the Energy Star High-Efficiency Residential Window initiative that involves the window industry and the U.S. Department of Energy's Energy Star program.

In conclusion, Brown said, "I believe the future looks great for the Alliance. It is demonstrating its success with many of the projects and that success should help with securing future funding."--Mark Ohrenschall

More Information:

• Northwest Energy Efficiency Alliance

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Two Oregonians Receive
National Energy Manager Awards

Two Oregonians have received national Energy Manager of the Year awards for their work in energy management.

Cathy Higgins, manager of the Oregon Municipal Energy and Conservation Agency, won in the Utility and Vendor category "for her innovation and management success of OMECA," according to the Oregon APEM newsletter. Higgins helped organize OMECA in 1994, and under her leadership the organization's programs have saved more than 4.6 average megawatts at a delivered cost of about 1.5 cents per kilowatt-hour. "Her management created enthusiasm, consensus, and built relationships necessary for success," the newsletter reported.

Michael Hatten of Hatten and Johnson Associates in Eugene won the national award in the Commercial/Industrial category. Hatten taught a two-year course on Commercial Building Energy Analysis at Lane Community College, involving students in performing energy audits and following through with project management to implement campus efficiency upgrades, according to the Oregon APEM newsletter. The project led to annual energy savings of nearly 3 million KWh and LCC energy bill reductions of almost $100,000 a year.

This marks the fifth consecutive year one or more Oregon APEM members have won national energy manager awards, according to the chapter newsletter.

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Large Planned Commercial Buildings Sought For
Performance Contracting Pilot Program

Planned commercial buildings larger than 50,000 square feet are eligible for an energy-saving performance contracting pilot program.

Participating building owners will receive free energy modeling and other services to help save energy, improve occupant comfort and shrink the total life-cycle cost of new construction, according to California-based Eley Associates, which is administering the program with an Energy Foundation grant.

The pilot venture offers design team incentives, in which some of the architect/engineer or design/build contractor's pay is linked to an energy performance target. Another potential approach is for an energy services company to finance and implement pre-construction design improvements for a new building, and get paid from future energy savings.

For more information, contact Eley Associates: phone, (415) 957-1977; fax, (415) 957-1381; e-mail, performance@eley.com; or look on the Web at http://www.eley.com/prfpilot.htm.

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OMECA Wins League of Oregon Cities
Award for Excellence For Conservation Work

Members of the Oregon Municipal Energy and Conservation Agency recently received an Award for Excellence from the League of Oregon Cities for their approach to energy conservation.

OMECA members--the cities of Ashland, Monmouth and Milton-Freewater, Forest Grove Light and Power, McMinnville Water and Light and Springfield Utility Board--were recognized for "beneficial and innovative improvements to municipal service delivery," according to an OMECA news release. OMECA initiatives in the residential, commercial and industrial sectors have saved more than 4.6 average megawatts in the past four years. OMECA utilities also conserve more than 25 million gallons of water each year by encouraging use of low-flow showerheads and resource-efficient clothes washers.

"The award confirms our belief that the effort we put into cooperative involvement with other cities through OMECA has definite benefits to our customers," said SUB energy services manager Paul Warila.