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I-937 Updates: New Legislation and New Administrative Rules May Alter Washington's Renewable Portfolio Standard

April 07, 2014 posted by Eric Christensen

As a result of both legislative and administrative action, several notable changes to Washington's Initiative 937 ("I-937", also known as the Washington Energy Independence Act) are on the horizon. While rejecting large-scale reform, the legislature made significant course corrections related to treatment of conservation and conduit hydro projects under the initiative. Those changes, and possibly several others, will be addressed in ongoing rulemaking proceedings at the Washington Department of Commerce and Washington Utilities & Transportation Commission ("UTC"). Two changes to I-937 were enacted in the 2014 session of the Washington Legislature. First, HB 1643, popularly known as the "conservation smoothing" legislation, allows utilities that achieve conservation in excess of specified targets to credit the excess toward future compliance periods, within limits. As originally enacted by the voters in 2006, I-937 required all covered utilities to obtain all "achievable cost-effective conservation." This mandate was carried out in a two-year process, which requires utilities first to identify conservation targets, then to adopt a plan to achieve those targets. In carrying out this mandate, many utilities, especially smaller utilities, found that conservation is not achieved in neat blocks, but instead is often achieved in major increments that may exceed specific biennial conservation targets. In these circumstances, I-937 both denied utilities the benefit of conservation achieved above biennial targets and created a perverse incentive to delay these conservation achievements. To address these problems, HB 1643 generally allows utilities to meet up to 20% of their biennial conservation targets using excess conservation achieved in the previous biennium. Where conservation comes from efficiency projects involving a major industrial facility, the carryover limit increases to 25%. HB 1643 also resolves an issue that had become a major concern for some utilities by requiring conservation targets to be based upon the Northwest Power & Conservation Council's most recent Power Plan, rather than the Plan in effect at the time the initiative was passed. The second bill enacted by the legislature, HB 2733, expands the definition of "qualifying renewable resource" to include generators installed in municipal water pipes and wastewater pipes. As enacted, I-937 inexplicably included only generators installed in irrigation pipes and canals as "qualifying renewable resources," and excluded generators installed in municipal water and wastewater systems. With rapidly improving technology for installing small hydroelectric systems in water and wastewater systems, this change may prove important to both utilities and municipalities across the region. These changes, along with several others, are now under consideration at the Department of Commerce. The additional issues to be considered in the Commerce rulemaking include several of potentially great significance to Washington's publicly-owned utilities, including the treatment of Renewable Energy Credits purchased from the Bonneville Power Administration and the treatment of incremental hydroelectric generation (that is, additional hydroelectric capacity created by improvements at existing hydro facilities). Commerce recently issued a notice seeking comments on its proposed changes by April 30 and scheduling a workshop for May 14. The UTC is expected to issue a notice seeking comments on a similar list of I-937 issues in the near future (UTC Docket No. UE-131723). If you have any questions about I-937, the administrative processes that may revise I-937 regulations, energy law in Washington, or other matters involving the energy or natural resources industries, please contact a member of GTH's Energy, Telecommunications, and Utilities or Environment & Natural Resources practice groups. We're proud that our partner Jim Waldo was recently named 2013 Lawyer of the Year for Energy and Natural Resources Law, and practice group members Don Cohen, Bill Lynn, and Brad Jones were all named among Seattle's Best Lawyers.