LONGVIEW — Energy suppliers say a Washington state law aiming to slash greenhouse gas emissions could raise costs, while some experts have said Southwest Washington customers are not likely to see drastic price jumps.
Effective in January, the Climate Commitment Act establishes a “cap-and-invest” program lawmakers hope will incentivize businesses and fuel suppliers to find creative ways to pivot away from fossil fuel production.
The statewide effort to reduce emissions 45% by 2030 and 90% by 2050, based on 1990 emissions, has support from environmentalists and lawmakers. Local utility districts have wondered whether it may result in customers shouldering the price for a program that will now include buying “allowances” for emissions.
“(A business) has to buy the permission to emit, and if it already has the permission to emit, these are called allowances,” said Paul Thiers, associate professor of public policy at Washington State University Vancouver. “It can sell those allowances to other power plants or other emitters and actually make money off that, so it provides an incentive to reduce emissions even beyond a regulatory target.”
Power sources in Southwest Washington
Most of Southwest Washington uses hydropower to get energy across the region, Thiers said.
Bonneville Power Administration supplies more than 80% of this hydropower to the Pacific Northwest and, as a federal agency, would not have to comply with the new state regulations.
Cowlitz County Public Utility District, along with several public service providers, will receive free allowances from the state when the first auction occurs in February. These allowances will determine the types of regulations around the agency’s emissions, mostly because they provide an essential service for residents.
Much of what this might mean for consumer prices will not be clear until the county utility district knows exactly how many allowances they will get from the state, PUD spokesperson Alice Dietz said in an email to The Daily News.
The county utility district gets its power from BPA and the Swift No. 2 hydroelectric project on the Lewis River — owned by Cowlitz PUD — as well as Columbia Gorge wind resources and wholesale market purchases, Dietz said.
Dietz said the law could raise prices for ratepayers because it requires providers to switch to certain types of renewable power sources like wind and solar, “even when more reliable and less expensive clean hydroelectricity is available.”
Thiers said hydropower is not considered a greenhouse gas-emitter and thus will not have to comply with the cap-and-invest policy.
BPA spokesman Doug Johnson said in an email to TDN that there is some uncertainty under the CCA. Electric utilities will include any carbon emissions associated with their BPA wholesale power purchases in the utility’s greenhouse gas reporting and compliance.
The “rapid transition” away from fossil fuel production, Dietz said, could end with blackouts and outages if they cannot get reliable or affordable energy.
Thiers said the Southwest Washington region could result in some prices changes, though these changes would likely be “marginal” because of how much energy is supplied through hydropower.
Claire Boyte-White, Department of Ecology communications specialist, said if fuel prices rise, that would be a decision made by fuel suppliers to put the brunt of cost on customers.
“All of the businesses covered by the program are fully empowered to make all of their own operational decisions,” Boyte-White said.
One aspect of the bill also includes consignment, which would apply to the Cowlitz County PUD. If they sell off their allowances, they can use that for revenue, but the CCA mandates that the money must go to providing relief for ratepayers, especially those in low-income communities, or weatherization projects.
A lawsuit in Grays Harbor County filed by Chicago-based Invenergy is currently weaving through the Washington state courts and could determine whether private fuel supplies get the free allowances that public entities will.
Thiers said it will take a long time before the case is decided, and it could change the auction landscape.
“It’s a sound economic mechanism, regardless of whether the allowances are auctioned off or given away,” Thiers said. “The point is you trade them afterwards. And it’s that trading that will squeeze every bit of greenhouse gas reduction that we can out of this sector.”
How cap-and-invest works
The CCA establishes a cap-and-invest trade program, which means that agencies covered under the law that emit more than 25,000 metric tons of greenhouse gases will have to get vouchers to continue fossil fuel production.
Lawmakers hope the cap-and-invest program will encourage agencies to reduce emissions by avoiding the hassle of allowances so they can comply with the emissions cap.
Also, as supply of allowances reduce over time, Boyte-White said the value of them will increase. The hope is that business leaders will eventually have to reduce emissions in order to mitigate those costs.
“There’s going to be a price per metric ton, and that price has parameters,” Boyte-White said. “We wanted to keep it in a sustainable range. … The actual price of the allowances during the auction is decided by the auctioneers.”
Exemptions include combustion of aviation fuel, watercraft fuels and certain coal-generated plants that are already federally exempted.
Thiers said the market-based approach in Washington state may still have effects seen in Idaho and Montana because of what fuel suppliers might decide to do. The main entities that will be affected are natural gas suppliers, he said, which would apply to places like the Clark Public Utilities’ River Road Generating Plant.
“They will need allowances for all the greenhouse gas emissions from that natural gas plant,” Thiers said.
A similar cap-and-invest program exists in California, though Thiers said Washington state’s is slightly different because it makes entities have to funnel the revenue they get from selling allowances directly into their community.
The law goes into effect in January, but it will take more than a year for the Department of Ecology to get and verify the reports that covered agencies must submit in 2024, Boyte-White said.