News & Notes

by Chris Shreve

Colorado Regulator Nominated for FERC Chair

President Obama has nominated Ronald Binz, the former head of Colorado’s Public Utilities Commission to head the Federal Energy Regulatory Commission (FERC). Shortly after his nomination in June, Binz received the endorsement of the National Association of Regulatory Utility Commissioners (NARUC).

“He knows how the decisions made in Washington impact ratepayers across the country,” said NARUC president Philip Jones. “A strong federal-state partnership is essential as our nation confronts the numerous challenges ahead, and we are confident Ron, if confirmed, will maintain such a dialogue.”

Binz would replace the current FERC chairman, Jon Wellinghoff, who announced in May he was stepping down. Wellinghoff has held the position since March 2009.

During Wellinghoff’s tenure, the agency investigated alleged market manipulation by several high profile companies, including Deutsche Bank and Barclays Bank (see next article). Also under Wellinghoff, FERC implemented in 2011 the landmark “Order 1000.” It required, for the first time, that electricity transmission providers engage in region-wide transmission planning, and that such planning must consider how federal and state public policies affect transmission needs.

Barclays Penalty Is LIHEAP’s Gain

The Federal Energy Regulatory Commission (FERC) on July 16 ordered Barclays Bank PLC and four of its traders to pay $453 million in civil penalties for manipulating electric energy prices in California and other western markets between November 2006 and December 2008. FERC also ordered Barclays to disgorge $34.9 million, plus interest, in unjust profits to the Low-Income Home Energy Assistance Programs of Arizona, California, Oregon, and Washington.

FERC found that Barclays’ actions demonstrated an affirmative, coordinated and intentional effort to carry out a manipulative scheme, in violation of the Federal Power Act and FERC’s Anti-Manipulation Rule. The $435 million in penalties must be paid to the U.S. Treasury within 30 days of the order. Barclays also has 30 days to distribute the unjust profits, with 19% going to Arizona, 63% to California and 9% each to Oregon and Washington.

New York Court Upholds Local Hydrofracking Bans

A New York State court has ruled two upstate towns can legally bar hydraulic fracturing, or hydrofracking, within their borders. In two related decisions, an Albany appellate court upheld the rights of the towns of Dryden and Middlefield to regulate land use—specifically, the right to bar all activities related to the exploration, production, and storage of natural gas and petroleum—through zoning ordinances. At issue was whether the state’s Gas and Solution Mining Law trumped these local ordinances.

The plaintiffs, Norse Energy Corp., a Norwegian company engaged in oil and gas exploration and production in the United States, and Cooperstown Holstein, a dairy farm that had planned to drill gas wells on its land, argued the state law took precedence.

The court disagreed. While acknowledging the state law does “supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries,” the court ruled unanimously on May 2 that “the zoning ordinance at issue . . . does not seek to regulate the details or procedure of the oil, gas and solution mining industries. Rather, it simply establishes permissible and prohibited uses of land within the Town for the purpose of regulating land generally.”

In 2011, the towns of Middlefield and Dryden both amended their zoning laws, joining more than 50 New York municipalities that have banned gas drilling in the past few years.

Both court decisions are being appealed.

More Energy Nominations (and a Confirmation!)

Since our last issue, the White House has announced President Obama’s nominees for several high-ranking positions related to energy, and one former nominee was finally confirmed.

EPA Administrator Gina McCarthy was confirmed by the Senate on July 18 after nearly five months—the longest wait ever for an EPA nominee. She is now in charge of carrying out the president’s planned regulations on climate change, prompting TIME magazine’s Bryan Walsh to opine, “If there’s a harder job in government than McCarthy’s, I don’t want to know what it is.”

For Assistant Secretary of the Navy for Energy, Installations, and Environment, Obama nominated Dennis McGinn, the current president and CEO of the American Council On Renewable Energy (ACORE). A retired vice admiral, McGinn has been a vocal advocate for American energy independence, and for biofuels in particular.

For chair of the Nuclear Regulatory Commission (NRC), the president tapped Allison Macfarlane, a geologist and nuclear waste specialist who served on the Blue Ribbon Commission on America’s Nuclear Future. During her confirmation hearing on June 12, senators brought up issues ranging from the future of small modular reactors to evacuation plans for the Indian Point nuclear facility north of New York City. And not surprisingly, Yucca Mountain. At the hearing, Macfarlane did not take a position on the long-delayed Nevada waste site, saying it is NRC’s job only to verify the safety of potential sites, not to make energy policy.

And finally, for under secretary of the U.S. Department of Energy (DOE), the president nominated NASA Chief Financial Officer Beth Robinson. She would become DOE’s third-in-command. Prior to joining NASA in 2009, Robinson was the senior-most career official at the White House Office of Management and Budget.

At press time, all of the above nominees were awaiting confirmation.

Minnesota Enacts New Solar Energy Standard

Minnesota’s omnibus energy bill, passed by the state legislature in May and signed by Governor Mark Dayton, significantly increases the state’s solar mandate for public utilities. The new mandate requires investor-owned electric utilities to generate 1.5% of their energy from solar by 2020.

“This is a good bill that will send a long-term, predictable signal that Minnesota is serious about developing renewable energy and a stable solar market,” said state senator Chris Eaton, a co-author of the bill.

Within the 1.5% solar mandate is a requirement that 10% must come from installations that are 20 kW or less. Other provisions in the bill allow for the development of community shared solar, in which a group of individuals can choose to invest in a shared system of not more than 1 MW; expansion of the Made in Minnesota solar modules incentive, which includes a $250,000 program for solar thermal systems; and net metering cap increases from 40kW to 1MW for the four investor-owned public utilities.

Rural electric cooperatives and municipal power companies are exempt from the new standards, meaning roughly one-third of Minnesota residents and businesses are not included in the new mandate.

The bill sets a statewide goal of reaching a 10% solar energy standard by 2030. Minnesota’s overall renewable energy standard is one of the nation’s strongest, requiring utilities to provide 25% of their total electrical generation from renewable sources by 2025.

Texas Says Howdy to PACE

Texas has enabled commercial property assessed clean energy (PACE) programs across the state. On June 14, Governor Rick Perry signed legislation that will allow commercial and industrial building owners to obtain private sector PACE financing for water conservation and energy-efficiency improvements.

“PACE will help Texans meet the conservation goals in our state water plan and reduce demand on our electric grid,” said state senator John Carona, sponsor of the bill. “These savings will benefit the building owners directly and help keep the Texas economic engine primed for growth and prepared for the continuing influx of people moving to Texas to share in our prosperity.”

Administered locally, PACE programs place an assessment on a property to pay for retrofits, and then transfer payments to a lender. There are no upfront costs to the property owner, and in most cases the annual utility savings resulting from the retrofit will exceed the amount of the annual assessment, essentially allowing a PACE project to pay for itself over time.

Colorado Boosts Rural Renewable Energy Standards

A contentious bill that doubles the renewable energy standard for rural utilities in Colorado was signed into law by Governor John Hickenlooper on June 5. The bill requires some of the state’s largest rural electricity cooperatives to get 20% of their electricity from renewable sources by 2020.

Despite a provision capping the ratepayer increase at 2%, opponents of the bill pointed to its potential economic impact on rural residents and businesses. In an op-ed for the Durango Herald, state senator Ellen Roberts, a Republican, cited higher-than-average unemployment in many rural counties and called the bill a “drag on economic recovery at the worst possible time.”

Nonetheless, the bill, which affects rural co-ops serving more than 100,000 customers, as well as the utilities that generate and supply electricity on their behalf, went into effect July 1. State Senate President John Morse, a Democrat and the bill’s sponsor, defended the law, saying it sets modest, attainable goals. “This bill will help stabilize the cost of electricity in the long run, create jobs and economic activity, and limit greenhouse gas emissions,” he said. “These are all good things, and I am incredibly pleased to know we have taken another step toward national leadership in the clean energy field.”

This is the third Colorado General Assembly bill since 2004 to expand renewable energy standards.

Vermont Bills Promote Energy Efficiency

On June 17, Vermont governor Peter Shumlin signed into law three bills that will improve access to energy efficiency and clean energy in his state. The legislative package provides new financing options for projects that meet state energy goals, makes improvements to the state’s thermal efficiency programs, and streamlines the permitting process for farm digester projects.

The Governor signed the bills at the second annual Clean Energy Finance Summit at the University of Vermont. “In Vermont we have led the nation with ground-breaking energy efficiency programs that help families and businesses save money while cutting carbon emissions and promoting economic development,” Governor Shumlin said.

The new financing law authorizes the Vermont Economic Development Authority to borrow up to $10 million from the state treasury to establish two new commercial sector loan programs and a new energy efficiency loan guarantee program. The bill also provides $6.5 million for residential efficiency loans through a program run by the Vermont Housing Finance Agency. And changes to the Home Weatherization Assistance Program prioritize assistance to LIHEAP recipients for buildings that are the least efficient.

The new farm digester law streamlines the process for farmers to install digesters, which convert cow manure into methane, which is then burned to generate electricity. Besides providing a renewable energy source, the process creates two important byproducts: fertilizer—and better smelling farms.

Connecticut Expands On-Bill Financing

Connecticut’s comprehensive energy strategy act, signed by Governor Dannel Malloy on July 8, will bring new on-bill financing options to the state. The act directs the state’s Energy Conservation Management Board and Clean Energy Finance and Investment Authority (CEFIA) to consult with electric distribution companies and gas companies to develop a statewide, residential clean energy on-bill repayment program by April 1, 2014.

Residential customers of any electric distribution company or gas company will be eligible for the program, which stipulates the repayment term of any project cannot exceed the expected life of the improvements, and monthly payments cannot exceed the amount of the customer’s bill before the project was installed.

On-bill financing is gaining popularity across the country. According to the American Council for an Energy-Efficient Economy, at least 23 states have implemented or are about to implement on-bill financing programs for energy efficiency improvements.

Obama Administration Raises Social Cost of Carbon

In May, the Office of Management and Budget quietly released an update to its accounting of the social cost of carbon (SCC), a monetized estimate of the societal damages caused by emitting carbon dioxide (CO2). The new estimate increases the cost from $21 to $35 per metric ton of CO2 in 2015.

The change could have far-reaching consequences because federal agencies are required to assess the costs and benefits of proposed regulations; and some agencies, in particular the EPA, may need to account for the benefits of reducing greenhouse gas emissions, represented in part by the social cost of carbon. Therefore, raising the SCC estimate could make new energy efficiency regulations—on everything from coal plants to vending machines—appear more reasonable in a cost-benefit analysis.

This is the first time the SCC value has been updated since 2010, when the original estimate was developed by an interagency group convened by the Council of Economic Advisers and the Office of Management and Budget. The new estimate takes into account the latest data on the impacts of climate change, including damages from increased flood risk and changes in agricultural productivity.

Critics have voiced concerns over how the administration announced the change (buried in a release on new energy efficiency standards for microwave ovens), the lack of transparency in the process, and whether it will be used to justify new regulations.

To address these issues, a House oversight committee on July 18 questioned Howard Shelanski, head of the Office of Information and Regulatory Affairs, which is responsible for reviewing proposed regulations. “There is no doubt that the social cost of carbon will be used in a number of economically significant rules,” Shelanski said. But he defended the process, saying the SCC estimate will be open for review when used as part of the cost-benefit analysis for new regulations.

Prior to the hearing, U.S. Representatives Duncan Hunter (R-CA) and Nick Rahall (D-WV) introduced legislation that would require any cost-benefit analysis used to justify regulations held for at least 60 days, pending public review and comment.

Chinese Wind Corporation Charged with Stealing Trade Secrets

On June 27, a federal grand jury indicted China’s Sinovel Wind Group and three individuals for stealing proprietary wind turbine technology from United States-based AMSC, causing an alleged loss of more than $800 million to the company. The deputy director of Sinovel’s research and development department, a Sinovel technology manager, and a former employee of an AMSC subsidiary in Austria were charged with one count each of conspiracy to commit trade secret theft, theft of trade secrets, and wire fraud.

AMSC (formerly known as American Superconductor Inc.) developed and sold software and equipment to regulate the flow of electricity from wind turbines to electrical grids. It considered the software and equipment to be trade secrets and proprietary information. The indictment alleges the defendants conspired to obtain AMSC’s copyrighted information and trade secrets in order to produce wind turbines and to retrofit existing wind turbines with the technology.

“The allegations in this indictment describe a well-planned attack on an American business by international defendants—nothing short of attempted corporate homicide,” said U.S. Attorney for the Western District of Wisconsin John W. Vaudreuil.

Following the alleged theft of AMSC’s intellectual property, Sinovel commissioned several wind turbines in Massachusetts and copied into the turbines software compiled from the software stolen from AMSC, according to the indictment. The U.S.-based builders and operators of the Massachusetts turbines have cooperated with the F.B.I., which is investigating the case from its offices in Madison, Milwaukee, and Boston.

If convicted, Sinovel faces a maximum penalty on each count of five years of probation and a fine of up to twice the gross loss of $800 million.

Each individual defendant, if convicted, faces a maximum penalty of five years in prison on the conspiracy charge, 10 years in prison for theft of a trade secret, and 20 years in prison for wire fraud.

Political Ideology Affects Energy-Efficiency Choices

Recent research published in the journal Proceedings of the National Academy of Sciences found that promoting products on the basis of their environmental benefits could hinder the adoption of energy efficiency in the United States.

In two related studies, researchers from the University of Pennsylvania’s Wharton School and Duke University’s Fuqua School of Business demonstrated that political conservatives “were less in favor of investment in energy-efficient technology than were those who were more politically liberal.” While many readers may not be shocked, the study went on to show how this difference could have real-world consequences, especially for businesses that market energy efficient products.

When presented with a hypothetical choice to “buy” either an incandescent light bulb or a compact fluorescent (CFL) bulb, labeled only with basic data on their energy use, conservatives and liberals were equally likely to choose the CFL, even when it cost slightly more. But when the CFL’s package included the phrase “Protect the Environment,” conservatives balked, picking the CFL far less often.