Renewable Standards and the Rural Difference

The Devilish Details of RPS

Imagine if by law your grocery list had to include a minimum amount of certain foods and had limits on other products. Would you resent having others make critical nutrition choices for your family – particularly if some of the items you were forced to purchase were expensive and difficult to find?

Renewable Portfolio Standards (RPS) can have just such an impact on small, not-for-profit rural electric cooperatives. By mandating that a certain percentage of the power these utilities generate and distribute each year comes from qualifying renewable sources, RPS laws intrude on the flexibility and local control that rural utilities must maintain in order to best serve their customer bases.

If poorly designed, RPS mandates can also be bad for electricity users – as always, the devil is in the details. For example, are the mandates truly achievable? Are the deadlines realistic? Which energy sources qualify for compliance? What are the proposed benefits? Is there any economic protection for consumers who might see their electricity costs skyrocket?

Different Strokes for Different Folks

In states like Colorado and New Mexico, legislatures have been careful to establish separate renewable standards for large, urban-based, investor-owned utilities (IOUs) and rural electric cooperatives. The distinction is important because, unlike IOUs, cooperatives are not-for-profit and cannot easily absorb the capital investments that are needed to adapt their fuel portfolios to ever-changing and often arbitrary quotas. Instead, those costs must be passed along in the form of higher electricity rates to the families, farms and small businesses at the end of the transmission lines. With co-ops typically serving far fewer customers across much larger territories, the cost burden on each individual customer can be much greater than it would be for IOU ratepayers.

Redefining “Renewable”

While some environmental special interests would like to impose a one-size-fits-all standard on all utilities, those same activists are much more discriminating when it comes to deciding which energy resources should qualify as “renewable” under an RPS. We often see such laws drawn so narrowly that they exclude environmentally responsible energy sources while rigging the market for other select industries such as wind and solar. Consider the case of hydropower.

Co-ops have been using hydropower to bring electricity to farms and rural communities since the 1930s and ‘40s. Today, co-ops are more heavily invested in this resource than most utilities – more than 600 co-ops rely on cost-effective power purchased from federal hydro projects nationwide, and many more make good use of small-scale hydro projects at the local level.

And yet, even though hydropower is clearly a clean and renewable resource, many RPS laws do not allow co-ops to count their use of large hydro programs toward compliance. Going back to our grocery list analogy, this would be like having laws mandating that your shopping cart be 30 percent full of dairy items – but also declaring that milk doesn’t count in order to inflate the sales of cheese and sour cream. It’s a case of absurdity trumping common sense.

Unnecessary, Unreasonable

It is also worth noting that rural electric cooperatives are increasingly at the forefront of adopting renewable and other clean energy initiatives – making unreasonable RPS laws unnecessary and a potential burden to local innovation.

Today, more than 90 percent of  the nation’s 900-plus rural electric co-ops provide electricity generated using renewable energy sources – through projects ranging from solar farms in western Colorado to wind farms in eastern New Mexico.

Consumer-owned, not-for-profit rural electric cooperatives are owned and operated by – and accountable to – the people they serve. Top-down, one-size-fits-all mandates that erode this local control serve no larger purpose but disrupt a business model that has worked for more than seven decades.

Where Are We Now?

With very little time left in the 2013 legislative session, Colorado lawmakers hastily introduced and passed Senate Bill 252, legislation that doubled the current 10% renewable energy mandate for rural electric cooperatives – while leaving in place the same compliance deadline of 2020. That seven-year timeframe is wildly unrealistic, which reflects the fact that bill sponsors and supporters made no effort to discuss the proposal with the cooperatives and other affected parties before rushing it through the Colorado Legislature.

Despite an outpouring of opposition from across the state, Colorado Governor John Hickenlooper signed the bill into law on June 5 .  The governor’s approval was particularly disappointing because, upon signing the bill, he immediately called for a panel to evaluate whether the timeframe of the bill is truly realistic and whether the consumer protection measures are indeed workable. This is a virtual admission that the new renewable standard was drafted hastily without the proper analysis – and that it should not have been approved in the first place. 

This also means the public debate over Senate bill 252 and renewable energy use in Colorado is not over. Please continue to follow this issue through Keep Electricity Affordable.