Energy and Environment MonitorOn February 9, 2010, State Representatives Harry Moberly (D-Madison), Dennis Horlander (D-Jefferson), Mary Lou Marzian (D-Jefferson), and Jim Wayne (D-Jefferson) filed House Bill 408 in the Kentucky General Assembly. HB 408 purports to encourage greater energy efficiency, conservation, and the use of renewable resources in the Kentucky energy sector. State Representative Rocky Adkins (D-Sandy Hook) filed a competing Bill, House Bill 3, in the Kentucky General Assembly on March 2, 2010. Both Bills were referred to the House Natural Resources & Environment Committee. As of the writing of this article, only HB 3 has been posted for consideration by the Committee. On March 17, 2010, HB 3 was taken from the Committee for its first reading on the floor of the House. The Bill was subsequently returned to the Committee. The Bill did not progress any further before the 2010 Regular Session ended on April 15, 2010.
Like its competitor, HB 3 would create new sections of KRS Chapter 278 to define renewable forms of energy that may be used to satisfy requirements of a renewable energy portfolio standard. However, while HB 408 focuses on comprehensive low-income residential energy efficiency programs, HB 3 focuses on low-carbon energy generation as the primary method to meet the benchmark requirements. HB 3 establishes two sets of benchmarks for nonindustrial sales of electricity in the state as set forth in the table below.1
|
Year |
Percent of Electricity Generation from Renewable Sources |
Percentage of Electricity from Low-Carbon Sources and/or Savings from Efficiency Programs |
|
2012 |
- |
4% |
|
2014 |
2% |
8% |
|
2018 |
6% |
14%* |
|
2022 |
10% |
20% |
|
2026 |
10% |
28% |
|
2030 |
10% |
36% |
|
2034 |
10% |
44% |
*After 2017, efficiency programs must account for at least 12% of the total.
The first set of benchmarks requires utilities to meet a portion of nonindustrial demand for power from Kentucky-based renewable sources such as solar energy, geothermal energy, wind energy, biomass, and hydro power in place after January 1, 1992, anaerobic digestion, combined heat and power, and landfill gas. The second set of benchmarks requires electric utilities to meet a portion of nonindustrial demand from low carbon resources and efficiency measures.
Low carbon alternatives could be electricity produced from a coal plant equipped with carbon capture technology or power generated from a coal gasification facility. Efficiency measures include load shifting and programs designed to encourage customers to reduce electric consumption. In addition, improvements to generation, transmission, or distribution facilities that result in a measurable energy improvement and investments made to promote electric vehicles qualify for the energy efficiency benchmark. With the second set of benchmarks, utilities may choose to pursue efficiency programs, low-carbon sources of electricity, or some combination of the two in order to meet the requirements. By 2017 and beyond, efficiency programs must account for at least 12% of the total, but no further efficiency improvements are required past 2017.
The benchmark requirements are the same for both regulated electric utilities (privately owned and rural electric cooperatives) and the municipally-owned electrics. However, the state agencies charged with oversight of the Clean Energy Portfolio Standards differs. The Public Service Commission will oversee program compliance of the regulated electric utilities and the Energy and Environment Cabinet will oversee program compliance for the municipal electric utilities, both generators and retail distributors. If after an annual review by the respective agency it is determined that renewable energy or low carbon resources are not reasonably available, the agency may require the electric supplier to purchase clean energy certificates or may reduce the obligation of the electric supplier for a particular year. The Bill would permit deviations from the benchmarks under some circumstances outside of the electric supplier’s control, such as weather-related noncompliance, equipment or resource shortages, or if the cost of compliance would exceed 3% of otherwise purchasing or producing the electricity.
As mentioned above, a market for clean energy certificates is to be developed that would allow one Kentucky electric supplier to purchase "credit" from another Kentucky electric supplier. A clean energy certificate would represent one megawatt hour of electricity generated from a Kentucky renewable energy resource or low carbon resource that is not needed by that Kentucky electric supplier to meet the benchmarks.
HB 3 also amends various loan and grant programs to include energy efficiency projects, renewable energy projects, and alternative fuel facilities. A tax incentive equal up to 80% of the severance taxes paid on natural gas is established if used as a feedstock for an alternative fuel facility.
This article was co-authored by Kevin McGuire and Mary Beth Naumann, Jackson Kelly PLLC. For more information on the authors see (McGuire) here and (Naumann) here.
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1Nonindustrial sales represent approximately one-half of the electricity sales in the state.
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