TVA, Southeast Score Largest Exemptions from House RES

us50_eeSome bloggers are anxious about the renewable electricity portfolio standard in the latest version of the Waxman-Markey energy bill. Jim DiPeso writes, “The renewable portfolio standard as currently written may be worse than doing nothing.”

I think that goes too far, and encourage you to take action and support this legislation, but there are some pretty remarkable changes to the bill language. One little-noted provision is the higher threshold for regulation under the standard. In fact, the provision is so expansive that although the Tennessee Valley Authority is arguably the largest utility system in the country, public or private, the bill would exempt 50% of the Tennessee Valley Authority system from the renewable electricity standard (RES).

The revised RES includes a requirement that certain utilities provide 12-15% renewable energy and 5-8% energy efficiency by 2020. Utilities with annual electricity sales greater than 4 million megawatt hours (MWh) are required to meet this standard.

The TVA’s large exemption drives the Southeast’s generally above-average exemption. Southeast states with little or no TVA presence tend to have lower exemption rates than those with a large TVA presence. Looking at an eight-state region, utilities representing 26% of electricity sales in 2007 would be exempted from the RES, compared with an average national exemption of 20%.

Other notable exemptions resulting from this language include the entire state of Alaska, most of the utilities serving Vermont, and most of the utilities serving the upper Plains states.

For the TVA, this means that rather than 12-15% renewable energy, and 5-8% energy efficiency, it will only have to deliver 6-7.5% renewable energy and 2.5-4% energy efficiency. Also notably, only the TVA itself and its six largest distribution utilities will be subject to the act; 153 of its distribution utilities are exempt.

This estimate does not take into account that existing hydroelectric and other resources are exempt from the baseline. Considering those effects, the renewable energy requirement for the TVA will be even lower. I will update the analysis soon to include the hydroelectric effect.

Unfortunately, since the Energy Efficiency Resource Standard (EERS) portion of the Waxman-Markey bill is now incorporated into the RES, the same utilities with exemptions from the RES are also exempt from energy efficiency standards.

Exemption from proposed RES varies widely

State 2007 Electric Sales (GWh)
Utilities > 4 million MWh (GWh)
Percent of Load Exempt
TVA
170,686
85,313
50%
Tennessee 106,001 56,477 47%
Mississippi 48,153 26,480 45%
Georgia 137,453 95,320 31%
Southeast
939,918 698,608 26%
Alabama 91,828 68,395 26%
North Carolina 131,881 99,010 25%
South Carolina 81,948 62,482 24%
USA
3,739,785 2,981,265 20%
Florida 231,085 193,977 16%
Virginia 111,568 96,467 14%

Methods:

These estimates are based on 2007 EIA Form 861 data. Utilities are considered non-exempt from the RES if their total sales are greater than 4 million MWh. For investor-owned utilities, SACE has assembled a nationwide database of utility holding companies; all of the utilities owned by a single holding company are considered non-exempt if their cumulative sales are 4 million MWh or greater.

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9 Comments

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John,

I haven’t been following Waxman-Markey closely. Can you explain the rationale for having exemptions to begin with. Is this a cost-control measure?

Thanks.


Comment by Brian Miles on May 27, 2009 7:42 pm


John:
I am most interested in your ans. to Brian’s query about the Waxman Bill. Please clarify these exemptions.
What is the effect on NC ratepayers in plain language .
Thank you!
Susan Tompkins
Charlotte


Comment by susan tompkins on May 28, 2009 7:42 am


Well, unfortunatly, I am unsure what the rationale might be. For the smallest utilities, it makes sense to exclude them because the administrative burden of compliance could outweigh any benefits of compliance. But this threshold is much higher than that, so I really can’t say why so many utilities are being exempted.


Comment by John Wilson on May 28, 2009 8:19 am


John — where’s that map from? Can you mail me the source? Thx. The justification for the exemptions was essentially logrolling.


Comment by Brad Johnson on May 29, 2009 5:15 pm


I’ve completed a similarly distressing analysis of the now severely weakened RES in the Waxman-Markey bill, which you can find here:

http://thebreakthrough.org/blog/2009/05/climate_bills_renewable_electr.shtml

I’m curious about your post though: is there a specific exemption for TVA you are referring to, or are you just estimating the impact of the existing exemptions (for electricity load served by hydropower, I’d assume) that apply to TVA? TVA falls above the 4 billion kWh/year threshold right, so they aren’t entirely exempted from the requirement. Thanks for clarifying.

Jesse Jenkins
Director of Energy and Climate Policy
The Breakthrough Institute
http://thebreakthrough.org


Comment by Jesse Jenkins on May 29, 2009 6:26 pm


John, could you email me with your analysis/assumptions (if you’ve got a spreadsheet, that’d be great). I’m very interested in how you came up with this and factored in the exemptions, because that’s currently missing from my analysis. jesse[at]thebreakthrough[dot]org. Thanks, and nice work here.


Comment by Jesse Jenkins on May 29, 2009 6:39 pm


My husband and I are building a new home and trying to be energy efficient AND take advantage of all tax credits, etc.
We have 2 problems in this pursuit.
1. We took advantage of a Federal Tax Credit for Geothermal Heating cooling back in the late 70′s and loved our geothermal heat, but even after our state senator (Ohio) at that time confirmed that we qualified, the IRS, several years later, forced us into a class action lawsuit which we lost and we had to pay attorney fees and back taxes for this AND penalties. We now no longer trust our government’s promises of tax rebates, deductions, credits etc. How do we know they are not going to go retroactive and disaalow these credits later again?

2. Is there a website that lists credits succinctly for Energy Star Appliances? Did not find DSIREUSA.org effective since you must look up each appliance seperately at a different location. Trying hard in S. Carolina. Thanks.


Comment by Patti Smith on May 30, 2009 11:39 am


There is no rationale for the exemptions other than political expediency and fear mongering that a RPS will raise some energy prices (already artificially low in the Southeast due to subsidies). It’s political horse-trading at its most pernicious, none of it based on science or on creation of new green jobs. It’s the creation of lawyers working for $Billion corporate clients who will change grudgingly or not at all until there is a substantial risk of carbon taxes penalties. I feel sorry for Henry Waxman…..he’s a good guy with good intentions but he can’t control the back room maneuvering.

The lady from SC makes a good point – you can’t always trust the states’ tax credits and RECs will be there when you need them. In Georgia, the 35% state tax credit for renewables is capped at a pitifully low $4 M and grants at $2.5M, and you apply AFTER you spend the money without any window or accountability into the process. They could reject your application and you would have no way to know if they had reached a cap or not. We need transparency and the ability to earmark state incentives on a project by project basis, or else you are taking a gamble that you will get back some of your renewable investment through credits/grants. Some states are trying to reneg on funding, diverting those funds to deficit reduction or other line items.


Comment by Steve Fortuna on June 11, 2009 1:32 pm


[...] has no energy efficiency mandate because none of its utilities qualify to be regulated under the CERES. The CERES has little or no impact on North Carolina and several [...]


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