Oregon Enacts Groundbreaking Law to Eliminate Coal and Boost Renewables

Oregon lawmakers passed a landmark bill on March 2, 2016 that seeks to phase out the use of coal-fired electricity in the state by 2030. The bill, titled “Elimination of Coal From Electricity Supply” (SB 1547), now heads to Gov. Kate Brown, who has indicated that she will sign it.

With the Obama Administration’s Clean Power Plan stayed pending judicial review, most near-term climate change initiatives are expected to occur at the state and regional level. SB 1547 requires regulated electric companies in the state, including Oregon’s two largest investor-owned utilities, Portland General Electric (PGE) and Pacific Power, to:

1. Eliminate coal-fired resources from their electricity supply by 2030.
2. Acquire 50 percent of their power from renewable resources by 2040.

The Oregon Public Utilities Commission (OPUC) is charged with overseeing the two requirements, and will have authority to adjust the phase-out schedule upon a showing that compliance would violate grid reliability obligations or otherwise “compromise[] the integrity of the electric company’s electrical system.”

It is estimated that the bill will reduce carbon dioxide (CO2) emissions currently attributable to PGE and Pacific Power by up to 90 percent and, by virtue of those utilities’ size in the state, would make the Oregon electric grid 70-90 percent carbon-free by the statutory deadlines. However, those CO2 reductions cannot be accomplished by in-state coal plant retirements, because there is only one remaining coal plant operating in the state, and that plant had already been scheduled to retire in 2020.

The majority of the required reductions would have to be achieved by modifying or canceling existing power purchases from coal-fired plants located outside of Oregon (mostly from the neighboring states of Montana and Utah), and replacing them with agreements to purchase power from lower carbon intensive resources. Purchased power represents approximately 30 percent of the state’s current power portfolio.

The second key component of SB 1547, the 50 percent renewable portfolio standard, is aggressive, but comparable to recent renewable energy mandates in other states such as California, New York, Hawaii and Vermont.

While several states have recently instituted CO2 abatement requirements for existing coal plants that exceed current federal requirements, SB 1547’s method for doing so is an unusual “reverse portfolio standard” for coal, i.e., requiring 0 percent coal to be included in Oregon’s largest utilities’ portfolios by a date certain. But whether unusual or not, the new law raises complicated issues regarding, among other things, a state’s authority to preclude its retail utilities from purchasing certain types of power, whether from in-state or out-of-state power generators, and the impact of such restrictions on federally regulated wholesale markets. Once signed, then, it is safe to assume that the law will face Commerce and/or Supremacy Clause challenges.

The full text of SB 1547 is available here.