Stripped of $1B limit, Gordon carbon capture bill clears House

Stripped of $1B limit, Gordon carbon capture bill clears House

By on Mar 3, 2020 in In the News | 0 comments

The House on Friday passed a Gov. Mark Gordon-backed bill that would subsidize carbon capture projects through Wyoming residents’ electrical bills.

The House advanced the effort with a 40-19 vote as lawmakers continued their drive to protect Wyoming’s coal industry through mandates on electrical utility companies. A provision in the bill that would have allowed a utility to recoup up to $1 billion in carbon capture project investments from its customers was eliminated in a House committee. Despite that amendment, opponents still worry about Wyoming electricity costs increasing.

House Bill 200 – Reliable and dispatchable low-carbon energy standards is Gordon’s answer to other states’s renewable energy standards and policies requiring increased carbon-free electricity. 

“We took that idea, and we flipped it,” Gordon’s energy policy advisor Randall Luthi said. HB-200 would require utilities to produce a portion of their electricity from low-carbon sources. The bill targets one source: Coal plants with carbon capture. 

Utility companies aren’t leaping to install carbon capture in coal plants on their own. “While they appear willing to invest millions and millions in wind and solar, they don’t appear to have the same appetite to invest anything in carbon capture,” Luthi told WyoFile. “We thought maybe it’s because there’s not a carrot and stick approach like was used in renewables to make them want to,” he said.

To incentivize carbon capture projects in coal plants, the bill would allow electrical utility companies to seek reimbursement for those investments through the Wyoming Public Service Commission, which regulates utility rates. The PSC is charged with maintaining affordable and reliable electrical power. 

That investment recuperation is the carrot. The stick Luthi mentioned is a section of the bill that would prevent a utility company from similarly recuperating its investments in new electricity generation — wind, solar or even natural gas — that replaces coal plants until the company has satisfied the new mandate. 

Utility company Rocky Mountain Power, a subsidiary of PacifiCorp, has drawn ire from state politicians since it plans to retire some Wyoming coal-fired power plants early. The company is building wind farms in Wyoming to replace some of that coal power. 

Gordon promoted the idea behind the bill in his state-of-the-state speech to lawmakers at the beginning of the session. He also appeared in front of the House Revenue Committee on Feb. 19 to help push the legislation through that committee. 

On the House floor, votes against the bill came from Democrats and the House’s most conservative faction — both political constituencies argued the bill could cost Wyoming ratepayers and violates free market principles. The House’s lone independent, Rep. Jim Roscoe (I-Wilson), also voted against the bill. 

“We’re not really paying attention to the national economy or the world economy,” Roscoe told WyoFile. “I don’t understand why the coal industry hasn’t done this themselves. I do believe there’s room for some research, but I don’t think we should be the only ones doing it.” 

Bill proponents believe there is still a need for coal plants with carbon capture technology, even as utility regulators and legislatures in other states pass mandates for carbon-free power. Many of those states have mapped out ways to derive 80% of their electricity from renewable sources, Jason Begger with the Wyoming Infrastructure Authority told the House Revenue Committee. But to reach 100% low-carbon sourcing, they’ll need carbon capture, he argued.

“That’s sort of the dirty little secret,” he said. Begger, whose agency haspushed carbon capture projects for years, is one of a number of people who came up with HB-200, according to Luthi.

The Gordon administration is “trying to extend the life of coal in Wyoming,” Luthi said. “The trajectory for coal is likely to keep going down, we recognize that. I don’t see that changing, but I think there’s a way to extend it out as long as possible as [energy] transitions are made.” 

$1 billion erased

The bill initially included a $1 billion cap for investment recovery on carbon capture. That large number sparked public concern in newspaper letters to the editor and messages sent to lawmakers. 

The $1 billion figure was an estimate with no concrete basis in what a carbon capture project might cost, Luthi told WyoFile. 

A legislative committee replaced the $1 billion figure with a percentage cap. Under the bill passed by the House, utility companies could only increase ratepayer cost by up to 2% to recoup their investments in carbon capture technologies.

Opponents of the bill, however, continue to worry. The PSC will have a hard time preventing a utility company from recouping its full investment through rates, they argued. 

“Regulators cannot force utilities to comply with regulatory mandates and then prevent utilities from recovering their compliance costs,” Joshua Macey, a visiting professor at Cornell Law School who studies utility law, wrote in comments to legislators that he provided to reporters. 

“Thus, if a utility incurred costs to comply with a carbon capture mandate and then found itself unable to recover those costs because of the rate cap, it would surely challenge the legality of the rate cap,” Macey wrote. “This is a textbook example of an illegal and confiscatory regulatory taking.” 

Unable to prevent the utilities from recouping its costs, the state would have no choice but to put the burden on ratepayers, Macey argued. 

But the governor’s office and the bill’s legislative supporters argued the PSC will protect ratepayers from exorbitant rates. 

The PSC can keep costs to ratepayers under control, chairwoman Kara Fornstrom told the House Revenue Committee when it considered the bill on Feb. 19.

Opponents also worried the language of the amendment still leaves room for the PSC to pass more costs on to ratepayers.

The amendment includes the following line: “To the extent the rate recovery mechanism is insufficient to compensate the public utility for its prudently incurred incremental costs” for carbon capture, “the commission shall take such actions as necessary … ensure the public utility is able to recover its prudently incurred incremental costs.” 

The language is “squishy,” opponents said. “It’s a cap with a loophole,” Powder River Basin Resource Council staff attorney Shannon Anderson told WyoFile. 

The PSC can regulate what’s considered a “prudent” investment, Fornstrom told the House Revenue Committee. Under existing utility law, companies come to the Wyoming PSC and outline energy infrastructure they want to build. The regulators determine if the investment is prudent and won’t overtly impact electrical rates before they allow the projects to proceed. 

Will states bite?

As Begger described, the legislation is a bet that other states will seize the opportunity to fill out their renewable energy portfolios with “low-carbon” coal power. Wyoming is an electricity exporter — far more power is sold out of the state than consumed within it, making it critical that the costs can be spread over other states in the electrical grid. 

If not, electricity rates in the state could rise by as much as 16-17%, Luthi said. Even bill proponents said if other states won’t buy in, the price on Wyoming ratepayers will likely be too high. “If it’s just going to be Wyoming-borne that makes it a non starter,” Luthi said. 

Luthi and other proponents argue Wyoming ratepayers are already paying more on their electrical bills to support investments in renewable energy that other states are making. The Gordon administration is asking for other states to do the reverse and buy into carbon capture given the perceived limitations on renewable energy. 

Other states will not pass costs for commercially unproven carbon capture technology onto their ratepayers, Anderson said. The six states, including Wyoming, in PacifiCorp’s grid sign on to an agreement called the Multi-State Protocol. The current version of the agreement is up for approval by service commissions right now, Anderson said.

“It is very specific that a state-initiated action will be limited to cost recovery in that state,” she said. Under the agreement PacifiCorp would bring any new initiative — like a low-carbon energy standard, for example — before a working group “to discuss whether each issue is a State-specific initiative,” according to the protocol.  

It’s unlikely other states will support the carbon-capture initiative, Anderson said. Most of them seek “no-carbon” electricity, she said, not low carbon. Oregon, for example, passed legislation in 2016 that would eliminate the use of coal-fired power in the state by 2030.

“We shouldn’t test out this technology on the pocketbooks of Wyoming citizens and small businesses,” Anderson said.

Proponents however argue enough states on the grid will see the value of carbon capture on coal plants to buy in. They argue the legislation is not just Wyoming’s chance to protect its coal industry, but also a way for the coal state to play a role in the energy transition. It’s “not only a benefit for our ratepayers, it’s really a benefit for the entire world,” the bill’s official sponsor, House Revenue Committee Chairman Dan Zwonitzer (R-Cheyenne), told the chamber before its final vote. 

The bill has been assigned to the Senate Corporations Committee, which has not yet posted a meeting date for a hearing. 

CORRECTION: This story has been updated to note that Oregon legislation eliminates the use of coal-fired power in the state by 2030, not 2035 as originally reported. It has also been updated to correct the spelling of Jason Begger’s name. —Ed.