Witnesses agreed, the high cost of natural gas is making renewable sources of electric generation more competitive for electric generators with renewables serving as a hedge against higher electric bills for customers in the future.

These comments came at a hearing this week by the Senate Environmental Resources and Energy Committee on renewable portfolio standards (RPS) legislation pending in the Senate.

The Committee heard from Douglas Biden, President of the Electric Power Generation Association, Lance Miller from the New Jersey Board of Public Utilities, PUC Chairman Terrance Fitzpatrick, Joseph Vasturia of the Delaware County Solid Waste Authority, Timothy Hartman of the Waste System Authority of Eastern Montgomery County, Sonny Popowsky, the PA Consumer Advocate, Nathan Wilcox of PennEnvironment, Peter Rigney of the Scrubgrass Generating Plant in Venango County and J. Michael Love of the Energy Association of PA.

Representatives of the Electric Power Generation Association (generators) and Energy Association (distributors of power) both told the Committee the high cost of natural gas has narrowed the cost differences between renewable sources of generation, in particular wind energy.

The state’s Consumer Advocate, Sonny Popowsky, pointed to a Colorado study that found including renewables through an RPS standard could actually save consumers money over the longer term because of the high cost of natural gas now and the cost of renewables coming down in the future.

And everyone agreed the cost of natural gas was not coming down any time soon.

Natural gas holds a strategic place in electric generation portfolios because it has been used increasingly to help meet stricter environmental standards, replacing dirtier sources of generation on the grid and with distributed energy users, and to fuel peak load generators that kick in when demand is high.

Several witnesses pointed out energy providers are already investing and delivering electricity from renewable sources now.

Chairman Fitzpatrick said it was a pleasant surprise to see how more than 100,000 customers bought green power after electric deregulation in Pennsylvania in 1996 gave them that option.

“It has certainly not escaped our notice that 20 percent of the customers in Pennsylvania who have chosen a generation supplier other than their local utility have demonstrated a willingness to pay a premium for renewable energy,” said Biden. “We expect that trend to continue and create a greater demand for renewable energy as the retail electricity market continues to develop.”

Biden noted if a “pure” renewable standard was adopted, wind power would be the most cost-competitive for utilities to use to meet the RPS standard. Wind power capacity would have to be increased from the 129 megawatts in place now (a few dozen wind mills) to over 9,400 megawatts. There are now about 6,300 megawatts of wind power in the entire United States.

Love pointed out that installation of renewable energy capacity was many times not under the control of the generator.

“Local zoning is an issue that impacts construction of any generating unit, renewable or not,” said Love. “There have been recent actions where communities in other states have turned down construction permits for wind, coal, and gas-fired units. Renewable hydro stations have been destroyed because certain groups were able to secure consideration of fishing rights over renewable energy.”

He also pointed out it was not only the generating units themselves, but also local restrictions and opposition to construction of the power lines needed to connect these facilities to the grid.

The timing of when to impose an RPS was a concern to several witnesses.

Chairman Fitzpatrick noted companies in Pennsylvania now are subject to rate caps and cannot increase their rates to pay for the increased cost of electricity from renewable sources. He suggested either waiting until the caps come off or including a cost recovery mechanism in the RPS legislation.

Fitzpatrick did comment in response to a question that he thought companies could implement an RPS without raising rates significantly—from 1 to 3.5 percent, although Committee Chair Sen. Mary Jo White took issue with that saying that was significant to many of her constituents.

Cost recovery was also recommended by the Electric Power Generation Association, Energy Association and the Pennsylvania Consumer Advocate, especially if the RPS is implemented before the caps go off.

Popowsky proposed implementing an RPS now, phasing it in over time, but not have it actually take effect until the caps come off so companies could recoup their costs.

Most witnesses argued for a broader definition of “renewable energy” to take advantage of Pennsylvania’s own resources and environmentally beneficial processes like eliminating coal waste piles by burning them to produce electricity. Two witnesses said waste-to-energy facilities and landfill gas recovery should also be included.

Nathan Wilcox from PennEnvironment argued for a very narrow definition for renewable that does not include coal waste or waste-to-energy.

Lance Miller from the New Jersey Board of Public Utilities said they have been successful encouraging their solar power industry through RPS and a series of grant and subsidy programs. They’ve seen a 550 percent increase in solar production to 2.4 megawatts in the last two years. New Jersey also charges a social benefit fee of about $10 a year on all electric customers to help finance these programs.

Sen. White said the first two hearings on RPS provided the Committee with valuable information about the potential costs, benefits and impacts of a standard and she expected to schedule more hearings in the next few months.

Pending RPS legislation includes Senate Bill 1030 (Erickson-R- Delaware), Senate Bill 962 (Ferlo-D-Allegheny) and House Bill 2250 (Ross-R-Chester).

6/25/2004