Puget Sound Energy is pushing for legislation that would help it secure a large ownership stake in new renewable projects in the state.
The new projects would replace the fossil-fueled power plants the private utility is expected to gradually shutter in the next two decades because of Washington laws that seek to slash greenhouse gas emissions.
Companion bills in both chambers of the state Legislature would ensure that PSE owns 60% of new solar, wind and other renewable energy projects that supply power to the state’s largest private utility. The investor-owned utility would be required to stop offering new commercial or residential natural gas hookups by June and file a decarbonization plan every four years starting in 2026.
The legislation has drawn the support of key Democrats, some who say PSE is demonstrating leadership in the bill’s pledge to move away from fossil fuels. It has drawn strong opposition from independent power producers as well as renewable energy advocacy groups opposed to turning over the dominant share of these projects to PSE.
And the state utilities commission, tasked with overseeing investor-owned utilities’ operations in the state, said the draft of the bill is not ready for adoption.
“I was actually pretty shocked to see it — I think it’s a bold step that they’re trying to take to decarbonize,” said Nicole Hughes, executive director of Renewable Northwest, a coalition pushing for renewable energy deployment in Oregon, Washington, Idaho and Montana. “There’s other gas utilities out there that are not even close to making this bold move. So I commend them again for doing that. But I just don’t think that their solution is the right one for protecting ratepayers.”
Less than half of states have 100% clean energy goals set into law. Fewer, including Washington, California, Hawaii, Oregon and New Mexico, have more aggressive plans to wean power utilities off fossil fuels by 2045 or sooner.
Washington’s 2019 Clean Energy Transformation Act and 2021 Climate Commitment Act put PSE and others on a fast track to net-zero emissions. The 2019 law calls for utilities to become carbon neutral by 2030 and carbon free by 2045. The Climate Commitment Act sets a cap on statewide emissions that gradually ratchets down over time.
PSE serves some 1.2 million electric customers and 850,000 natural gas customers mostly in northwest Washington. In 2020, the utility relied on coal and natural gas for half of its electricity generation.
Over the past century, PSE and its predecessors built out its natural gas infrastructure. Now it’s required to transition to mostly clean electricity generation in a matter of years.
“It’s going to take a significant amount of investment to make that happen,” Ken Johnson, PSE vice president of public affairs, said in an interview. “I do not want to suggest that customer rates are not going to go up. They will.”
The question is, Johnson said, at what pace and at what level do we collectively feel is fair, just and reasonable to customers to be able to achieve those clean energy goals?
PSE began drafting policy in response to the state’s sweeping climate legislation in hope of keeping the cost of the transition down.
Former state Sen. Reuven Carlyle said that in the years leading up to the passage of the Clean Energy Transformation Act, PSE officials raised concerns about how the loss of the gas turbines would impact the reliability of the power they provide to their ratepayers. And they raised, at a “high level,” their desire for the utility to have a stake in generating renewable power.
Carlyle said he thought PSE had a legitimate concern to try to ensure there was ample power that could be provided at peak periods of demand, such as very cold days, when supplies might be tight and market prices might soar.
But Carlyle, the former chair of the Senate Environment, Energy & Technology Committee, said there was no effort to put any requirement that PSE control a portion of the renewable energy projects into the 2019 bill that became law.
“The discussion was there. It just wasn’t ripe,” Carlyle said.
The utility, in an email, said the provision of the proposed legislation granting it majority ownership of new renewable energy projects comes “from the need to acquire a significant amount of resources in a limited amount of time.”
The bills as written would allow the utility to cut out the go-between, said Sen. Joe Nguyen, and own 60% of the state’s renewable energy production, rather than buying it from the market. The rest of PSE’s renewable energy would come from power purchase agreements with independent power producers.
According to PSE, when the utility seeks out new energy sources, it has to draft a request for proposals. That request is then reviewed and approved by the Utilities and Transportation Commission, and PSE will contract with the bidder that meets its needs to supply the energy.
The request for proposal process would continue, but PSE would be able to work with the developers of the clean energy projects to have whole or partial ownership of them when they begin producing electricity, said Johnson, of PSE.
“The bottom line is,” Johnson said, “we have thousands of megawatts of new generation that we need to acquire to meet CETA, the bulk of which needs to be done by 2030. We strongly believe we have to accelerate the acquisition of those and it will take every tool in the toolbox to realize our clean energy future.”
Independent power producers include those who develop, own and operate fossil-fueled power plants and wind and solar farms. Some may sell their power generation facilities, others may continue to operate them and sell the power to investor-owned utilities, like PSE, or directly to large energy customers, like Microsoft.
At a Senate hearing on the bill this month, state regulators, renewable energy advocacy groups and representatives from trade associations for independent power producers raised concern and opposition toward the provision granting PSE 60% ownership of Washington clean energy generation.
“Our concern would be, if we’re assuming that the company is going to own a certain percentage of the generation,” said Lauren McCloy, policy director for the NW Energy Coalition, “do we have sufficient consumer protections in place to ensure that those costs are going to be reasonable?”
As a regulated utility, PSE must have any electricity or gas rate increases approved by the state Utilities and Transportation Commission, which reviews them in rate case proceedings.
Dave Danner, chair of the commission, said the original language of the bill is not ready for enactment but rather is a first step in a complex and lengthy negotiation among many interested parties.
“We want to make sure that the bill will allow us to manage costs that can ensure meaningful carbon reductions and ensure that we have the regulatory tools to enforce the provisions in the bill,” he said.
The UTC’s rate case process is the main mechanism to ensure the people and businesses that rely on PSE’s energy pay fair rates, said Nguyen, the bill’s lead sponsor. PSE was one of Nguyen’s top campaign donors in the 2022 election.
“What I care about is decarbonizing our infrastructure in Washington state,” he said. “That’s my main goal. If you [PSE] have to make money, I’m not opposed to it because we do live in a capitalist society. But at the same time, we can’t price-gouge our ratepayers.”
“The devil is in the details on this one,” Nguyen said. “There’s a lot to still hash out.”
“We want to make sure that if we do pass a bill,” said Rep. Beth Doglio, a Thurston County Democrat who chairs the House Energy & Environment Committee, “that it protects low-income customers, that it is fair with our industrial customers.”
Doglio, the House bill’s lead sponsor, said lawmakers are still sorting through the numbers to better understand the potential implications, like whether it could drive costs up or down for ratepayers.
The bills were passed out of House and Senate environment committees last week.
If the legislation isn’t adopted this year, PSE leaders say they’ll head back to the drawing board.
The opinions expressed in reader comments are those of the author only and do not reflect the opinions of The Seattle Times.