The Washington State Legislature is completing work on major legislation that would require the state’s electric utilities to eliminate all greenhouse gas emissions from their generating fleet within the next quarter century.  Governor Jay Inslee, who is making climate change the focus of his recently-launched Presidential campaign, would undoubtedly sign the legislation with enthusiasm.

The bill, E2SSB 5116, passed the Senate on March 1 by a vote of 28-19, and is now making its way through the House.  Weighing in at 54 pages, it would establish a three-stage process.  First, utilities must eliminate their reliance on coal-fired resources by 2026.  Second, they must make their retail electricity sales greenhouse gas (GHG)-neutral by 2030.  Third, they must make their retail electricity sales using only non-emitting resources by 2045.  Failure to meet these benchmarks will result in a penalty of $60 (adjusted for inflation) for each megawatt-hour (MWh) of non-compliant electricity.

I. Background

This legislation builds on the state’s Energy Independence Act, a 2007 voter initiative that required utilities to increase their use of renewable energy to 15% by 2020.   It also attempts to overcome the failure of two subsequent voter initiatives, a 2016 measure that would have imposed a carbon tax, and a 2018 measure that would have imposed a carbon fee.  The failure of the 2018 measure is often touted by opponents of climate change legislation as evidence of voter skepticism toward such legislation, even in relatively liberal Washington State.

In an attempt to learn from prior defeats, the pending legislation does not rely on a tax or fee to incentivize behavior by putting a price on carbon emissions.  Instead, the Democratically- controlled Legislature is relying on an old-fashioned prescriptive approach, simply mandating that, with certain limited exceptions, electric utilities do whatever is necessary to achieve 100% clean electricity.  Thus, the legislation is less vulnerable to the charge that it is imposing an unpopular “energy tax,” even though the cost of utility compliance is ultimately borne by ratepayers.

II. Overview of the Legislation

Act I:  No Coal by 2026

The bill’s first step—eliminating coal-fired resources by 2026—is relatively simple because most of the heavy lifting has already been done.  Following years of intensive negotiations, two of the Northwest’s three coal-fired power plants are scheduled for closure: Oregon’s Boardman plant by 2020, and Washington’s Centralia facility by 2025.  That leaves only Montana’s Colstrip plant.  To facilitate withdrawal from Colstrip, the bill directs the Washington Utilities and Transportation Commission (WUTC) to allow rate recovery of all decommissioning and remediation costs prudently incurred as part of the withdrawal process.

Act II:  GHG Neutrality by 2030

Achieving GHG neutrality by 2030 is far more complicated.  As a starting point, the bill requires utilities to reduce or manage their retail load by pursuing all cost-effective, reliable, and feasible conservation and efficiency resources, and to use electricity from renewable resources and non-emitting electric generation in an amount equal to 100% of the utility’s average annual retail electric load.

Recognizing that moving to 100% renewables and non-emitting resources within 11 years would be very challenging for at least some utilities, the bill would allow them to satisfy 20% of that requirement through various alternative compliance options.  The simplest of the options would be to use renewable energy credits (RECs) or pay the $60 per MWh penalty, with RECs almost certainly being the less expensive choice.

A more creative but less certain path would be to invest in what the bill refers to as “energy transformation projects.”  In addition to traditional home weatherization and energy efficiency measures, energy transformation projects include support for electrification of the transportation sector and investments in distributed energy resources.

The electrification of the transportation sector is particularly important because it is the source of over 40% of Washington’s carbon emissions, the largest of any sector.  Under the bill, utilities would get credit for investing in infrastructure to connect more vehicles to the electric grid, and in the smart grid technology necessary to use the batteries in those vehicles as a form of energy storage.  This would, for example, allow utilities to charge car batteries at night when demand is low, and then draw upon those batteries during the day when demand is high, thereby reducing the need for additional generation to serve those high-load periods.

Act III:  100% GHG-free by 2045.

By 2045, the final step must be complete: all electricity sold to Washington retail electric customers must be from either non-emitting generation or renewable resources.  Again recognizing the ambitious nature of both the 2030 GHG-neutrality and 2045 GHG-free mandates, the legislation includes a safety valve.  The WUTC and the Department of Commerce would report bi-annually to the legislature on any impacts to system reliability.  If they find adverse impacts, the governor would have authority to delay the compliance deadlines in the bill until those reliability issues can be addressed.

Stay Tuned

Assuming this legislation becomes law later this session, we plan to unpack its many detailed components and their implications in later blog posts.  For example, how will this legislation mesh (or not) with California’s existing climate-related programs, and with the cap and trade approach currently being considered by the Oregon Legislature?  (For more on the Oregon bill, see this recent post by our colleague Derek Green.)  How will the bill affect investor-owned utilities differently from consumer-owned utilities?  How will it affect utilities that own hydropower facilities, by far the region’s largest source of renewable energy?  And how will it affect other participants in the electricity sector, such as large customers and those seeking to develop other renewables, such as solar, wind, or low-impact or pumped storage hydroelectric?

For now, you can track the bill on the Legislature’s website, and stay tuned here for more analysis.