Oregon Legislation Mandates 100% Clean Electricity by 2040 With a Focus on Environmental Justice – JD Supra

[co-author: Haley Nieh*]

For the past two legislative sessions, the Oregon legislature triedand failedto pass comprehensive climate legislation. Those efforts, which were focused on a cap-and-trade, economy-wide approach, were met with such harsh resistance that opponents walked out of the legislature, grinding the sessions to a halt and leading Governor Kate Brown to take matters into her own hands through executive action.

With that history still fresh, a broad coalition of stakeholders took a different approach this year by targeting the elimination of greenhouse gas (GHG) emissions from the electric generating sector while focusing on the effects of climate change on a community-by-community basis, and giving a stronger voice to environmental justice stakeholders.

On June 26, 2021, those efforts resulted in the passage of House Bill 2021, a far-reaching clean electricity bill that requires the state's two largest investor owned utilities (IOUs) and retail electricity service suppliers to reduce GHG emissions associated with electricity sold to Oregon consumers to 100 percent below baseline emissions levels by 2040, with interim stepsincluding an 80 percent reduction in just nine years (2030)along the way. The 2040 deadline is even faster than the 2045 deadline set by neighboring Washington in 2019, a goal that was seen as remarkably ambitious at the time.

Moreover, the legislation ensures broad stakeholder input in shaping how Oregon reaches those targets. It also encourages more renewable development within the state while setting labor standards for such projects; prohibits the siting of new natural gas, coal, or other fossil fuel based electric generating facilities unless demonstrated to be "nonemitting" (defined as not emitting GHGs into the atmosphere); and allocates $50 million for the development of community-based renewable energy projects.

Here we highlight some of the most significant aspects of this new legislation, which Governor Brown is expected to sign. But the legislation's passage is only a first stepmany of the significant details will be determined by the agencies tasked with implementing it.

Retail electric service in Oregon is provided by a mix of IOUs, public or consumer owned utilities, and "electricity service suppliers" serving commercial and industrial customers under Oregon's "direct access" laws. HB 2021's mandates are directed at the state's two largest "electric companies"IOUs PacifiCorp and Portland General Electric (both of which supported the legislation)and electricity service suppliers, which together account for the lion's share of retail electricity supply in the state.1

Under HB 2021, the Department of Environment Quality is tasked with determining the amount of emissions reduction necessary for each retail electricity provider covered by the law to meet clean energy targets. The targetswhich do not replace the separate renewable portfolio standards previously established in Oregonincrease over time: electricity sold to Oregon consumers would first need to meet an 80 percent below baseline emissions threshold by 2030 and 90 percent below baseline emissions by 2035.2

The legislation requires electric companies to develop and submit to the Oregon Public Utility Commission (OPUC) clean energy plans to meet the law's targets. These plans, which are to be developed in conjunction with the electric companies' established integrated resource planning processes, must address a series of topics, including the anticipated means for, and progress towards, meeting the clean energy targets; resiliency benefits; and the associated costs and benefits. The OPUC is tasked with monitoring the electric companies' progress towards meeting the established targets and acknowledging the plans found to be consistent with the reduction targets and in the public interest.

The legislation authorizes the OPUC to grant electric companies a temporary exemption from the targets on a case-by-case basis. The electric company must persuade the OPUC that achieving a target would conflict with its ability to comply with mandatory reliability standards or resource adequacy obligations, compromise its ability to provide service at fair and reasonable rates, or otherwise compromise the power quality or integrity of the electric company's system. If granted a temporary exemption, the OPUC is to require specific actions within a specified timeframe in order to remedy the potential problems.

The bill also establishes a cost cap process for the OPUC to grant a "narrowly tailored" and "limited duration" exemption to the targets for electric companies or electricity service suppliers if compliance costs are determined to exceed a specified limit (6 percent of the annual revenue requirement for electric companies, with a "comparable exemption" to be provided for electricity service suppliers).

In addition to its clean energy targets, HB 2021 has a strong environmental justice component, similar to Washington State's recent climate legislation. Among other things, Oregon focuses on ameliorating the impacts of climate change on environmental justice communities, which the legislation defines as communities of color, communities experiencing lower incomes, tribal communities, rural communities, coastal communities, and communities with limited infrastructure. It also includes other communities traditionally underrepresented in public processes and adversely harmed by environmental and health hazards, including seniors, youth, and persons with disabilities. The legislation emphasizes the development of community-based renewable energy, increased resiliency, local job development, and reducing energy costs for families and businesses.

The legislation requires an electric company filing a clean energy plan to convene a Community Benefits and Impacts Advisory Group to gather input from community stakeholders. The Advisory Group is to submit to the OPUC a biennial report analyzing the energy burden and disconnections impacting residential and small business customers, and identifying opportunities to increase contracting with women-, veteran-, Black-, Indigenous-, or People of Color-owned businesses. It is also to review resiliency opportunities and the social, economic, and environmental justice co-benefits that result from the utility's investments or practices.

The legislation establishes a $50 million Community Renewables Investment Fund that will make grants to Indian tribes, public bodies, and consumer-owned utilities to develop community renewable energy projects. The grants are to promote small-scale (not more than 20 MW) renewable energy projects that will benefit qualifying communities by providing energy resilience, local jobs, economic development, and direct energy cost savings to families and small businesses.

Under current law, electric companies are required to provide residential consumers with a portfolio of rate options for electric service, including both a market-based rate and at least one other rate "that reflects significant new renewable energy resources." The new legislation expands on this portfolio by providing local governments with the ability to coordinate with the electric companies serving consumers within their boundaries on the establishment of more specific rates for their constituents that are directly tied to the specific local government's clean electricity goals, such as to promote community-based renewable resources.

HB 2021 also establishes contractor labor standards for the construction and repowering of "large-scale" energy projects (generally those with a capacity of 10 MW or more). The standards include apprenticeship outreach to women, minorities, veterans, and people with disabilities and establishes policies to prevent harassment and discrimination and promote workplace diversity, equity, and inclusion. The legislation also requires the payment of wages in accordance with the same trade or occupation in the locality where the labor is performed.

HB 2021 authorizes a number of rulemakings and other agency proceedings to implement its various provisions. DWT will be closely tracking those developments.

* Haley Nieh is a Summer Associate in DWT's San Francisco office and a rising 2L at Santa Clara Law.

1 The legislation's GHG target reduction provisions do not apply to electric companies serving fewer than 25,000 Oregon retail electric customers.2 Measured and reported as GHG emissions per megawatt-hour as reported under ORS 468A.280.

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Oregon Legislation Mandates 100% Clean Electricity by 2040 With a Focus on Environmental Justice - JD Supra