Newly introduced legislation backed by Gov. Mark Gordon would force utilities to implement carbon capture, and then allow them to pass up to $1 billion in investments on those technologies onto consumers’ electrical bills.
Two prominent lawmakers, including the bill’s sponsor, called it a “tax” embedded in a piece of utility legislation. Instead of funding state government, the money raised would subsidize utilities’ investment in a technology that observers say remains commercially unproven.
The bill introduced yesterday and sponsored by House Revenue Committee Chairman Dan Zwonitzer (R-Cheyenne) would use the Wyoming Public Service Commission to force electrical utility companies to incorporate an undefined%age of “low-carbon” electricity into their energy portfolios. The bill defines low-carbon electricity as power generated using technology to capture carbon dioxide — technology Wyoming politicians hope will keep coal-fired power relevant.
No-carbon electricity — renewable energy like wind and solar — would not qualify. Utilities wouldn’t be able to recover the costs for building new wind and solar farms or any other new electricity sources until the Wyoming PSC determines the company is complying with the carbon capture mandate.
House Bill 200 – Reliable and dispatchable low-carbon energy standards, isn’t all stick for utilities, however. It offers significant carrots to the companies as well, incentives that would come out of the pocket of the state’s electricity customers. The bill does not distinguish between commercial and residential power users..
The Wyoming PSC governs electrical rates for utility companies operating in the state. The body’s mandate is ensuring “safe and reliable service to customers at just and reasonable rates.”
The bill appears to say each utility in Wyoming could pass on $1 billion in costs, said Joshua Macey, a law professor at Cornell University who studies utility laws. There are two utility companies — Black Hills Energy and PacifiCorp — operating coal plants in Wyoming that appear to fall under the proposed legislation.
Macey predicts the companies would welcome an easy path to increase revenue through rate-making.
“You would go as close to a billion as you can,” with your carbon capture investment, Macey said. “In fact you’d probably go to $800 million, make sure you recover it and then ask for $700 million more.”
In other states, Macey said, attempts at statutory caps on utility investments have not held up. “When you’ve invested $900 million and they say it will take $500 million more, it’s hard to say no at that point,” Macey said.
A lobbyist for PacifiCorp subsidiary Rocky Mountain Power said the corporation was still reviewing the bill. A lobbyist for Black Hills Energy did not respond to a voicemail by publication time.
“Industry knows they need coal, this gives them the way forward to keep baseload coal power holding the grid,” Zwonitzer said.
Wyoming exports more than 80% of the electricity it produces. Zwonitzer suggested utility companies could likewise export 80% of the cost of carbon capture technology. States like Oregon and Washington are driving a transition to renewable energy and threatening Wyoming’s coal plants and the jobs and taxes they provide, Zwonitzer said.
This bill exports the cost of Wyoming’s efforts to save those plants onto electricity users in those states, he said. Coal power with captured carbon is a form of the green energy they want, he said. Residents of those states just don’t know it yet.
“While other states’ ratepayers may not like it,” he said, “it certainly helps meet the demand for cleaner energy. We’re just doing it another way.”
Macey disagreed. Public service commissions in other states would have to approve the rate increases for their customers, he said, and there is little indication Washington, Oregon or others would do so. Such refusals would leave the costs squarely on Wyoming ratepayers’ shoulders.
“No Wyoming legislator can confidently say that other states would bear some of these costs,” Macey said.
The legislation’s definition of “low carbon” still includes carbon outputs and might not assuage other state’s climate change concerns, Macey said.
The bill defines low-carbon electricity as electricity generated using carbon capture technologies and producing not more than 650 pounds of CO2 per megawatt hour of electricity. Coal plants averaged about 1,768 pounds of carbon dioxide per megawatt-hour in 2013, according to the Washington Post.
The Wyoming legislation is more ambitious than the starting levels of former President Barack Obama’s Clean Power Plan. That proposed regulation, now defunct, called for reducing carbon dioxide emissions from coal plants to 1,100 pounds of carbon per megawatt.
The bill offers another bonus to utilities. Captured carbon has economic value to some. Technology boosters point in particular to energy companies’ desire to pump CO2 into old oil wells to stimulate production.
If a utility can find a way to sell some of its captured carbon, the bill would allow it to apply to the PSC to turn that profit back to its shareholders — as opposed to reducing the cost for ratepayers. PacifiCorp, the utility seeking to retire some Wyoming power plants early, is owned by Berkshire Hathaway, the holding company of billionaire investor Warren Buffett.
The bill is an answer to a call Gordon made in his state-of-the-state speech Monday.
“Wyoming will demonstrate what no other state has had the courage to do,” Gordon said. “We will require true CO2 sequestration, not just some artificial notion that wind and solar can cure climate change all by themselves.”
On Wednesday, Gordon’s spokesperson Michael Pearlman told WyoFile that Zwonitzer’s bill is what Gordon referred to in the speech.
As Wyoming’s mineral-industry revenue drops, lawmakers have rejected any attempt at imposing new taxes — even very slight ones — to make up for the decline. But subsidizing a new energy technology on the backs of electricity users is a form of tax, Zwonitzer’s co-chairman on the Joint Revenue Committee said.
It’s “a tax on ratepayers,” Sen. Cale Case (R-Lander) said.
“It’s technically feasible,” Case said of the technology, “but it’s really expensive.” If the subsidy was confined to the state’s borders, Case estimated that calculating $1 billion into ratemaking could raise electricity rates in Wyoming by 15%.
Earlier this year, the Joint Revenue Committee rejected an electrical generation tax that would have taxed utility companies for each megawatt hour they produced in Wyoming. That’s a simpler way to raise money for Wyoming through its energy customers in other states, Case said.
Zwonitzer did not shy away from calling the bill a tax.
“I think Wyoming ratepayers need to understand that as the coal industry declines taxation is [going to be] happening somewhere,” he said. “If this bill were to pass … we can export that tax burden to people in other states.”
Paying for carbon capture will keep the coal industry afloat to the benefit of all the state’s residents, he argued, justifying the rate hike.
“The longer we can keep coal going at a sustainable level the better not only for employment but for the overall tax burden,” he said.
WyoFile is an independent nonprofit news organization focused on Wyoming people, places and policy.
