New Mexico legislature passes 100 percent renewable power law

Thursday, March 14, 2019

The New Mexico state legislature has passed a bill that requires public utilities other than rural electric cooperatives and municipalities to supply all retail sales of electricity in New Mexico with zero carbon resources by 2045.

The bill is SB 489, also known as the Energy Transition Act. Much of the Energy Transition Act focuses on procedures allowing utilities to obtain approval to abandon generating facilities which obtaining financing orders from the New Mexico Public Regulation Commission allowing the utilities to recover all of their energy transition costs through securitization -- issuing energy transition bonds whose costs the utilities pay by collecting an "energy transition charge" from their customers. The act creates funds to provide training and economic development in communities within 100 miles of abandoned facilities.

The law also revises New Mexico's renewable portfolio standard. It requires distribution cooperatives to sell at least 40 percent renewable energy by 2025 and at least 50 percent renewable energy by 2030, and sets a "zero carbon resource standard" target for distribution cooperatives by 2050, composed of at least 80 percent renewable energy, if feasible from technical, reliability, and affordability perspectives. For public utilities other than rural electric cooperatives and municipalities, the law requires similarly increasing percentages of renewable power, including 80 percent renewable energy resources by 2040 and 100 percent zero carbon resources by 2045. It allows public utilities to ask the Commission to provide financial or other incentives in excess of these amounts.

The bill passed the state senate with a vote of 32-9, and the state house with a vote of 43-22. It now goes to Governor Michelle Lujan Grisham for her signature. According to a statement Governor Lujan Grisham issued on March 12, "The Energy Transition Act is a promise to future generations of New Mexicans."

Other states are considering changes to their renewable portfolio standards, carbon emission limits, and other legal requirements affecting the electric power sector. If SB 489 is enacted into law, New Mexico will join California and Hawaii in having a future commitment or goal of 100 percent carbon-free electricity.

An Act To Establish a Green New Deal for Maine

Wednesday, March 13, 2019

As Congress considers “Green New Deal” resolutions sponsored by Representative Alexandria Ocasio-Cortez and Senator Ed Markey, some state legislators are proposing their own Green New Deal concepts. Newly-released legislation under consideration by the Maine State Legislature would establish a "Green New Deal for Maine". Here's a look at the bill known as LD 1282, An Act To Establish a Green New Deal for Maine.

LD 1282 includes four main parts:
  • Part A amends the law establishing Maine's renewable portfolio standard, to require that by 2040, each competitive electricity provider must demonstrate that at least 80% of its portfolio of supply sources for retail electricity sales in Maine is accounted for by renewable resources. Part A also revises Maine's statutory goals for reduction of greenhouse gas emissions to include a long-term goal of reducing emissions to 75% to 80% below 2003 levels by 2040.
  • Part B establishes an 11-member "Task Force for a Green New Deal" to create a plan to advance environmental sustainability, renewable energy and economic growth for Maine. The law would require the plan to include a strategy to achieve the increased renewable portfolio standard specified in Part A, plus a strategy for job creation, retention, and training, and a residential energy strategy, each meeting certain defined criteria.
  • Part C requires the Public Utilities Commission and the Efficiency Maine Trust to propose legislation to establish a voluntary, virtual net metering program to facilitate the installation of solar photovoltaic energy systems on kindergarten to grade 12 public school buildings, with the program to begin no later than December 31, 2021.
  • Part D creates a new 13-member "Commission on a Just Transition to a Low-carbon Economy" to ensure that Maine's transition to a low-carbon economy "benefits all residents fairly and equitably, with consideration for their sources of employment, levels of income and historical experience." The new Commission would be required to submit an annual report examining "principles of environmental justice, information about income inequality as it relates to environmental harm, professional training opportunities and investments and racial-specific and ethnic-specific effects of past, present and future trends in energy production and consumption", as well as options for accelerating the transition to beneficial electrification in the rail and automotive sectors.
LD 1282's prime sponsor is Representative Chloe Maxmin. The bill is co-sponsored by Senators Shenna Bellows and Justin Chenette, and Representatives Seth Berry, Jeffrey Evangelos, Allison Hepler, Craig Hickman, and Henry Ingwersen. The bill has been referred to the legislature's Joint Standing Committee on Energy, Utilities and Technology. As of March 13, 2019, the committee had not yet scheduled a public hearing on the bill.

Other states are considering their own Green New Deals through executive and legislative action. In January 2019, New York Governor Andrew Cuomo announced his inclusion of a state-level "Green New Deal" in New York's 2019 executive budget; the Connecticut General Assembly is considering H.B. 5002, An Act Concerning the Development of A Green New Deal; and the Rhode Island House considered a resolution (H.R. 5665) to study the benefits of a Green New Deal for Rhode Island. While the details vary from state to state, common themes in these initiatives include increasing renewable electricity requirements, reducing carbon emissions, and promoting jobs and social welfare.

SEC regulation of shareholder climate proposals

Activist shareholders are increasingly using the shareholder resolution process to pressure corporations to take various steps in pursuit of goals related to climate change. A rule of the U.S. Securities and Exchange Commission allows companies to exclude certain proposals that seek to “micromanage” a company’s “ordinary business” operations. But as recent SEC action shows, there can be a fine line between reasonable proposals and micromanagement.

Staff at the U.S. securities regulator have issued a pair of "no-action letters" telling two companies that staff will not recommend enforcement action against the companies if they exclude from shareholder ballots certain resolutions calling for greenhouse gas emissions reduction targets, because the proposals seek to "micromanage" the companies' ordinary business. At the same time, the U.S. Securities and Exchange Commission staff concluded that another company could not exclude a more general reporting proposal on this basis. The letters highlight the role of shareholder activism and its impacts on companies and climate change.

The U.S. Securities and Exchange Commission is charged with protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. The SEC is the primary enforcer of federal securities laws.

On December 17, 2018, counsel for trucking company J.B. Hunt Transport Services, Inc. informed the SEC of the company's intent to exclude a shareholder proposal and supporting statement from the proxy materials for the company's 2019 annual meeting of shareholders. The proposal was submitted by Trillium Asset Management, LLC, the Timken Matthews Family Foundation, the Community Environmental Council, and the Threshold Foundation, and requested the company to "adopt company-wide, quantitative targets to reduce total greenhouse gas (GHG) emissions, taking into account the goals of the Paris Climate Agreement." The company argued it could exclude the proposal from the proxy materials under an SEC rule allowing exclusion of proposals dealing with "a matter relating to the company's ordinary business operations."

As described in a 2017 SEC legal bulletin, SEC Rule 14a-8(i)(7) permits exclusion of certain proposals dealing with a company's ordinary business operations "to confine the resolution of ordinary business problems to management and the board of directors, since it is impracticable for shareholders to decide how to solve such problems at an annual shareholders meeting." SEC guidance explains that this policy rests on two central considerations: the proposal's subject matter, and the degree to which the proposal "micromanages" the company.

On February 14, 2019, the SEC staff wrote to J.B. Hunt Transport Services that the Trillium proposal "seeks to micromanage the Company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment." Staff noted that it would not recommend enforcement action to the Commission if the company omits the proposal from its proxy materials.

In a similar vein, on January 30, 2019, counsel for Devon Energy Corporation informed the SEC of the company's intent to omit a shareholder proposal and supporting statement that it received from the George Gund Foundation and As You Sow from inclusion in the company's 2019 proxy materials. The resolution proposed to request that the company's board disclose "short-, medium-and long-term greenhouse gas targets aligned with the greenhouse gas reduction goals established by the Paris Climate Agreement to keep the increase in global average temperature to well below 2°C and to pursue efforts to limit the increase to 1.5°C." In support of the company's intent to exclude this proposal from its 2019 proxy materials, the company argued that the proposal "relates to Devon’s ordinary business operations and the Proposal attempts to micromanage Devon by probing too deeply into matters of a complex nature upon which shareholders, as a group, are not in a position to make an informed judgment."

On March 4, 2019, SEC staff issued a letter to Devon Energy Corporation, again agreeing that the proposal  "would micromanage the Company by seeking to impose specific methods for implementing complex policies in place of the ongoing judgments of management as overseen by its board of directors." The no-action letter concludes that staff would not recommend enforcement action to the Commission if the company omits the proposal from its proxy materials on this basis.

But the SEC staff reached a different conclusion on a more general proposal requesting that Anadarko Petroleum Corporation issue a report describing if, and how, it plans to reduce its total contribution to climate change and align its operations and investments with the Paris Agreement's goal of maintaining global temperatures well below 2 degrees Celsius. While Anadarko invoked the "ordinary business" rule, SEC staff wrote that the reporting proposal "transcends ordinary business matters and does not seek to micromanage the Company to such a degree that exclusion of the Proposal would be appropriate", and therefore said staff did not believe the company could omit the proposal from its proxy materials on this basis.

These letters illustrate the role of shareholder activism on corporate climate change matters, and the regulators' present response to activist efforts to prompt management attention on climate issues.

FERC workshop on abandoned mine pumped storage

Monday, March 11, 2019

Federal hydropower regulators have scheduled a workshop to explore potential opportunities for development of closed-loop pumped storage projects at abandoned mine sites, as required by the America's Water Infrastructure Act of 2018.

Enacted by Congress and signed by President Trump in October 2018, the Act amends several portions of the Federal Power Act which govern how the Federal Energy Regulatory Commission issues preliminary permits, hydropower licenses, and approvals for qualifying conduit hydropower facilities. Among other requirements, the Act directed the Commission to issue a rule establishing an expedited process for issuing and amending licenses for closed-loop pumped storage projects under this section.

The Act also includes provisions designed to facilitate exploration of the use of abandoned mine sites for pumped storage projects. Section 3004 of the Act requires the Commission to hold a workshop within 6 months to explore potential opportunities for development of closed-loop pumped storage projects at abandoned mine sites, and issue guidance within one year to assist applicants for licenses or preliminary permits for closed-loop pumped storage projects at abandoned mine sites. In November 2018, the Commission docketed its action on Closed-loop Pumped Storage Projects at Abandoned Mines Guidance as Docket No. AD19-8-000 and established a schedule for rulemaking, public comment, and issuance of guidance.

The Commission has now issued a Notice of Workshop in the abandoned mine pumped storage docket, scheduled for April 4, 2019. The notice states that the workshop will involve roundtable discussions by panelists, moderated by Commission staff. The agenda for the workshop includes discussion of how to identify sites for development of closed-loop pumped storage projects at abandoned mines, as well as the benefits and challenges associated with the use of abandoned mines for pumped storage. The agenda also includes time for soliciting feedback from the workshop panel and other participants on what types of information would be most helpful to include in the guidance mandated by the Act.

FERC official testifies on electromagnetic pulses and geomagnetic disturbances

Friday, March 8, 2019

Electromagnetic pulse and geomagnetic disturbance events "pose a serious threat to the electric grid and its supporting infrastructures that serve our Nation," according to testimony delivered by a federal official to the U.S. Senate Committee on Homeland Security and Governmental Affairs.

Electromagnetic pulse (EMP) and geomagnetic disturbance (GMD) events are two types of events that could affect the nation's electric grid. Generally speaking, GMD events are naturally occurring solar magnetic disturbances which periodically disrupt the earth’s magnetic field. These disruptions can induce currents on the electric grid that may simultaneously damage or destroy key transformers over a large geographic area.

On February 27, 2019, Joseph McClellan, director of the Federal Energy Regulatory Commission's Office of Energy Infrastructure Security, testified before the Senate committee. As described in his testimony, EMP events can be generated by "devices that range from small, portable, easily concealed battery-powered units all the way through missiles equipped with nuclear warheads." High-altitude nuclear detonations can generate three distinct EMP effects: "a short high energy radio-frequency-type burst called E1 that can destroy electronics; a slightly longer burst that is similar to lightning termed E2; and a final effect termed E3 that is similar in character and effect to GMD, with the potential to damage transformers and other electrical equipment."

According to Director McClellan's testimony, any of these effects could lead to "wide-area blackouts." In his testimony, he cited reports by the federal EMP Commission as finding that "a single EMP attack could seriously degrade or shut down a large part of the electric power grid," with the potential that significant parts of electric infrastructure could be “out of service for periods measured in months to a year or more."

He also cited a 2010 study by Oak Ridge National Laboratory as finding that "EMP and GMD events pose substantial risk to equipment and operation of the Nation’s electric grid and under extreme conditions could result in major long-term electrical outages," that "GMD disturbances are inevitable with only the timing and magnitude subject to variability," and that a solar storm such as occurred in 1921 "could damage or destroy over 300 bulk power system transformers interrupting service to 130 million people with some outages lasting for a period of years." Director McClellan clarified that subsequent analysis suggested that in case of such an event, "the power grid may collapse before significant damage was done to transformers; resulting in a potentially wide-spread, but relatively short, power outage."

Director McClellan also spoke to the Federal Energy Regulatory Commission's "dual-fold approach" to address these threats: employing mandatory standards to establish foundational practices while also working collaboratively with industry, the states and federal agencies to identify and promote best practices to mitigate advanced threats. According to a report released in 2018 by the U.S. Government Accountability Office, U.S. and Canadian electricity suppliers have taken steps to prepare for potential electromagnetic disruptions, but more research is needed on both geomagnetic disturbances and high-altitude electromagnetic pulses.

PG&E withdraws Potter Valley hydro relicensing, FERC opens orphan project solicitation

Wednesday, March 6, 2019

California electric utility Pacific Gas and Electric Company has withdrawn its expression of intent to seek a new license for the Potter Valley Hydroelectric Project, saying its relicensing would be contrary to the interests of its electric ratepayers. The withdrawal has prompted federal hydropower regulators to institute an "orphan project" process to find interest from other entities in seeking a license for the project. If no other entity seeks and obtains a new license for the project, PG&E would be responsible for surrendering the existing project license.

The Potter Valley Project is located on the Eel and East Fork Russian Rivers in northern California, about 15 miles northeast of the city of Ukiah. Originally licensed by the Federal Power Commission in 1922, and owned by PG&E since 1930, the project includes Lake Pillsbury, impounded by Scott Dam; the Van Arsdale Reservoir, impounded by the Cape Horn Diversion Dam; and a tunnel, penstock and powerhouse located in the headwaters of the Russian River Basin. PG&E estimates the average annual generation of the project to be 19,900 megawatt-hours, with an installed capacity of 9.4 megawatts. The current license issued by the Federal Energy Regulatory Commission expires on April 14, 2022, requiring PG&E to submit a new license application by April 14, 2020.

On April 6, 2017, PG&E filed a pre-application document (PAD) and notice of its intent (NOI) to file an application for a new license. But on January 25, 2019, PG&E filed notice of the withdrawal of its NOI and PAD, indicating it is no longer seeking a new license for the project and is terminating its efforts to transfer and sell the project.

In that notice, PG&E said it has "determined that it would be contrary to the interests of its electric ratepayers to continue relicensing the Potter Valley project." PG&E said it had long recognized hte project as "uneconomic for PG&E's ratepayers (i.e. the cost of production exceeding the cost of alternative sources of renewable power on the open market)." PG&E cited "continued declining energy markets, potential increased costs associated with anticipated new license conditions, and challenging financial circumstances" as leading the company to conclude it cannot justify to its ratepayers further expenditures associated with the project.

PG&E noted its anticipation that the Commission would institute its "orphan project" process under the Commission's rules to solicit license applications for Potter Valley from other entities, and expressed its understanding that PG&E would be responsible for surrendering the existing license if no other entity seeks and obtains a new license for the project. PG&E closed by saying it "recognizes the value of Potter Valley to local communities because it provides for the protection of important environmental resources, consumptive water uses, public recreation, and other economic values" which the utility said should be appropriately considered if it is required to file a surrender application.

In response, on March 1, 2019, the Commission issued a Notice Soliciting Applications for a new license for the Potter Valley project within 120 days. The Commission noted that if no other applicant files an application for a license by April 14, 2020, PG&E would be provided with written notice that no timely application for the project has been filed, and would then have 90 days within which to file a schedule for the filing of a surrender application for the project.

FERC, DOE to hold Security Investments for Energy Infrastructure Technical Conference

Tuesday, March 5, 2019

The Federal Energy Regulatory Commission and the United States Department of Energy have scheduled a joint technical conference to discuss current cyber and physical security practices used to protect energy infrastructure and possible federal and state incentives for related security investments.

According to a notice issued on February 4, the Security Investments for Energy Infrastructure Technical Conference will be led by one or more FERC Commissioners and DOE senior officials. Its agenda addresses two high-level topics: types of current and emerging cyber and physical security threats, and how federal and state authorities can facilitate investments to improve the cyber and physical security of energy infrastructure.

In a supplemental notice issued on March 1, the agencies noted that the Commission has adopted a "well-developed set of mandatory and enforceable reliability standards that set baseline protections for both cyber and physical security of the bulk electric system" as well as "policies that allow for the recovery of prudently incurred costs to comply with those mandatory reliability standards." The supplemental notice describes the technical conference as aimed at better understanding:
  1. the need for security investments that go beyond those measures already required by mandatory reliability standards, including in infrastructure not subject to those standards (e.g., natural gas pipelines);
  2. how the costs of such investments are or could be recovered; and
  3. whether additional incentives for making such investments are needed, and if so, how those incentives should be designed.
The supplemental notice describes two panels, the first of which will discuss types of cyber and physical security threats to energy infrastructure, particularly electric transmission, generation, and natural gas pipelines, as well as best practices for cyber and physical security mitigation beyond those measures already required by mandatory reliability standards and industry and government engagement needed to address these matters. The second panel will explore how federal and state authorities can provide incentives and cost recovery for security investments in energy infrastructure, particularly electric transmission, generation, and natural gas pipeline infrastructure

The federal agencies' Security Investments for Energy Infrastructure Technical Conference has been scheduled for on March 28, 2019.