Joseph Krist

Publisher

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REGULATION

Arizona lawmakers are advancing legislation backed by utilities to shift the regulatory duty governing the regulation of the disposal of toxic ash produced by coal-fired power plants from the U.S. Environmental Protection Agency to the Arizona Department of Environmental Quality. Proponents say that the legislation would require that the state’s rules be as strict as those of the EPA. So why the change from federal to state regulation?

The state regulatory history suggests that the utilities believe that they would have an easier time with state regulators given the history of wastewater regulation in the state. Environmental advocates cite that history in opposition to this bill. The state is seen as supportive of coal fired generation. It comes as efforts continue on the part of investor-owned utilities to stifle the installation of residential solar.

The move comes at the same time that the U.S. Environmental Protection Agency is proposing a plan that would restrict smokestack emissions from power plants and other industrial sources that burden downwind areas with smog-causing pollution. This would likely burden the four remaining coal fired generating plants still operating in Arizona. The EPA proposal would affect power plants starting next year and industrial sources in 2026. The plan would cover boilers used in chemical, petroleum, coal and paper plants; cement kilns; iron and steel mills; glass manufacturers; and engines used in natural gas pipelines.

Obviously, the impact of renewed and strengthened environmental regulation will impact unevenly on a geographic basis. The newly proposed rules would apply in varying degrees to 26 states, located mainly in the East and Midwest but also hopscotching to include Wyoming, Utah, Nevada and California, none of which was covered by the last major “cross-state” pollution rule issued more than a decade ago and updated six years ago.

The folks at Inside Climate News have put together a great chart showing where the coal demand comes from to generate power.

PREPA FIGHTS THE FUTURE

When Hurricane Maria destroyed much of Puerto Rico’s electric distribution and generation system, we saw the situation as a huge opportunity. We discussed the suitability of the island to derive power from renewable generation and the view that microgrids would go a long way towards addressing the twin issues of supply and reliable distribution. That view gained traction over the next 18 months and culminated in the enactment of Act 17 in 2019.

That law requires that 100% of the territory’s electricity come from renewable sources by 2050. The legislation also sets ambitious benchmarks along the way, including 40% renewable energy by 2025 and 60% by 2040. In February, the Biden Administration and the Commonwealth reached an agreement that would provide some $12 billion in Federal recovery and grid modernization funds.

Then reality hit. The management of PREPA showed itself again to be an agent of obstruction. Just a couple of weeks after the agreement was announced PREPA’s executive director, testified that “To say that in three years there will be 40 percent of energy production in a stable, commercial manner and in compliance with all the requirements in service, I really don’t see it viable.” PREPA’s executive director, said he expects Puerto Rico to obtain one quarter of its total electricity from solar, wind and hydroelectric by 2025. The territory currently generates just 3 % of its total power from renewables, according to the U.S. Energy Information Administration.

The Puerto Rico Energy Bureau in 2020 ordered PREPA to procure contracts for at least 3.5 gigawatts of renewable energy development and 1.5 gigawatts of battery storage by 2025. PREPA is more than a year behind schedule on the procurement process. Some two-thirds of the required contracts have yet to be fulfilled. This in the face of A 2021 study by the Institute for Energy Economics and Financial Analysis which found that rooftop solar could reasonably generate 75% of all of Puerto Rico’s electricity within 15 years.

SALT RIVER PROJECT AND NATURAL GAS

The Salt River Project finds itself in the middle of yet another debate about how to best serve its continually growing service area. SRP has already gained notoriety as an opponent of net metering as it hopes to stave off the impact of rooftop solar in its sundrenched service area. Now, it finds itself in the middle of the debate over whether natural gas can be a viable bridge to renewable generation and the concept of environmental justice or equity.

SRP currently operates a 12-turbine gas fired generation facility in Pinal County, AZ. It hopes to be approved to expand the plant with the addition of some 16 new turbines. The Arizona Corporation Commission (ACC) is the regulatory body reviewing SRP’s application. The Arizona Power Plant and Transmission Line Siting Committee recommended that the ACC approve the application.

Now the project needs the final ACC approval and SRP is implying that without this expansion the utility will face reliability issues as soon as the summer of 2024. SRP says that it must have an approval by the end of this month. The host community believes that the approval process is being rushed to avoid opposition.

SRP has made it hard to believe in recent years that it is committed to lower or eliminate its use of fossil fuels. Its insistence that gas is necessary in combination with its clear efforts to hobble solar on anything other than an industrial scale place make SRP one of the more obstructionist utilities. It is something that environmental or green investors should take notice of.

MONEY FOR NOTHING

Energy Harbor will exit the fossil business through a sale or deactivation of its W.H. Sammis Power Station in Stratton, OH and its Pleasants Power Station in Willow Island, West Virginia in 2023. These plants represent 3,074 megawatts (MW) of generating capacity. Energy Harbor already closed four of the Sammis plant’s seven units in 2020. It blamed impending federal wastewater regulations for those closures.

The Sammis plant was scheduled for closure this year until the infamous HB6 bill was passed. The bill was designed to support nuclear generation. It was however, cited as a reason to keep the coal-fired plant open. Energy Harbor could use the savings from the nuclear subsidies in the bill to keep other generation on line. The nuclear bailout was repealed last year after federal authorities charged ex-Ohio House Speaker Larry Householder and five others with using $60 million in FirstEnergy bribe money to secure the passage of the HB6.

HB6 was not repealed in its entirety. Ohio residents still pay surcharges to support the Ohio plant but also one in Indiana. Now, proposed regulatory changes at the EPA may make the two plants uneconomical. In January, the U.S. Environmental Protection Agency proposed denying requests by the two plants to continue using unlined surface ponds to hold coal ash.

The irony is that a lot of many was spent and careers destroyed by the lobbying effort to get the aid for the two plants. The ex-Ohio House Speaker, along with a former Ohio Republican Party chair, will go to trial next January. Three other defendants have pleaded guilty, and one committed suicide.

OIL AND ALASKA

The recent surge in oil prices has led revenue forecasters to increase their estimates of oil-related revenues expected to be realized in the fiscal year 2023 beginning in July. The relatively low prices of oil in recent years have pressured the State’s budget, This has led to significant expenditure cuts to basic services and reduced Permanent Fund payments to residents.

Now, forecasters at the Alaska Department of Revenue have raised the state’s two-year forecast of oil revenue by $3.6 billion. In the current fiscal year, which ends June 30, state revenue is expected to be $6.95 billion, an increase of $1.2 billion from the state’s prior estimate. In Fiscal Year 2023, which starts July 1, the new forecast is for $8.33 billion, up $2.4 billion from a forecast in December. 

Last spring, the Alaska Legislature approved a $5.3 billion budget. Now it is up to the Legislature to decide how much they can rely on the revised estimate. The Revenue department estimates oil prices at $101 per barrel, an increase of $30 from December. The Legislature is moving towards an $80 per barrel figure. At $80 per barrel, the state would collect about $6.7 billion in FY23.

PREEMPTION

In 2021, St. Louis County passed an ordinance requiring new buildings to include electric vehicle charging and for charging to be installed at existing buildings in the case of renovations or changes of use. The city of St. Louis passed similar legislation early last year with more details and exemptions for some types of businesses. Brentwood, a city in St. Louis County, requires all new or renovated homes to include electrical infrastructure for charging. 

Now legislation is being offered in the Missouri legislature that would, like so many similar efforts in other states, seek to preempt local regulation. The bill would prohibit cities from passing building codes requiring businesses to install chargers unless the municipalities pay. The St. Louis law required that newly-built or renovated residential, apartment and commercial buildings be “EV Ready,” meaning that they have the necessary electrical capacity and other infrastructure to easily install an EV charger.

Parking lots with more than 50 spaces would have to provide chargers on 2% of them, and 5% of the spots would need to be EV ready. By 2025, 10% would have to be EV ready. The legislation requires that businesses with smaller parking lots have one or two spaces that are EV ready or have a charger installed depending on their size. 

NUCLEAR

The Nuclear Regulatory Commission (NRC) informed Florida Power & Light Co. (FPL) that its two Turkey Point nuclear reactors must go through a full environmental review before the agency will allow them to run for an additional 20 years. The NRC originally signed off on the extension in late 2019, using what’s known as a generic environmental study. NRC will not issue any further licenses for subsequent renewal terms until the NRC staff … has completed an adequate National Environmental Policy Act (NEPA) review for each application,” 

The reactors had to be able to quantitatively demonstrate numerous performance metrics to show that the plant’s structural and protective integrity could withstand an additional 20 years of operations. The NEPA review will evaluate impacts on the environment including the potential impact on groundwater supplies.

The Nebraska Public Power District (NPPD) and Entergy jointly announced that they would end their near two-decade operating agreement at Cooper Nuclear Station. Entergy was contracted by NPPD to help the District address operating problems at the plant. It was some 20 years ago that federal regulators had given Cooper the lowest grade a nuclear plant can have while remaining open. NPPD now owns 100% of capacity and has the sole operating responsibility.

EMINENT DOMAIN FIGHT CONTINUES

A second effort to legislate regulations on the use of eminent domain to obtain right of way for pipelines in Iowa is underway. A bill has been offered which would states that the Iowa Utilities Board shall not grant any requests for eminent domain and that a pipeline company shall not seek or exercise any eminent domain rights until March 1, 2023. The bills are designed to try to stimulate negotiations between one project sponsor and landowners.

Summit Carbon Solutions has proposed a pipeline which would cross 680 miles of Iowa land across 29 counties. There are potentially 15,000 Iowa landowners in the pipeline’s path. Negotiations have secured easements on more than 100 miles of the proposed route in Iowa, and that agreements on another 70 miles are in the final stages.

The threat of eminent domain has been cited as an obstacle to negotiations. Without the threat of its use, eminent domain becomes less valuable as leverage for the entities building the pipelines. This typically forces them to spend more than they wanted to acquire rights of way.  The case is being made that the pipeline will increase the value of corn through ethanol enough to offset any negative impacts from the pipeline. But if the ethanol is for fossil fuel applications….?

ZONING

Connecticut will take a crack at the issue of zoning and its impacts on housing, transportation, and jobs. A new zoning bill would allow denser housing development around Connecticut’s train stations, with goals of making housing more affordable and providing easier access to transportation. House Bill 5429, backed by advocacy group Desegregate Connecticut, would require towns to allow housing with at least 15 units per acre within a half mile of a passenger, commuter rail or bus rapid transit station. At least 10% of the units would have to be designated as affordable.

If enacted, the law would take effect on October 1. It would significantly streamline the approval process by allowing developers to avoid the public hearing process to build in those areas. It fast tracks the decisions process on permit applications by requiring that they must be issued within 65 days of submission. Certain types of land are exempt from the requirement, including wetlands, steep slopes and areas necessary for protecting drinking water.

A 2017 law, 8-30j, requires towns to develop affordable housing plans every five years. The first is due in July. The politics of the bill quickly became clear. Less prosperous towns like New Haven and others see support for the bill. Communities like Greenwich and Westport are seen as opposing the bill over worries about property values. It’s not a new development. It is even predictable.

BERKELEY HOUSING – NEVER MIND

It only took eleven days for the CA legislature to enact the repeal of certain provisions of the California Environmental Quality Act (CEQA) after a court decision upholding requirements that housing proposed to serve the UC Berkeley campus would have had to meet was handed down. The University announced that it would have to rescind admissions to the campus by some 2,600 because of a lack of student housing. The proposed project was designed to address that.

The California Legislature voted unanimously to change the law, sending a bill to Governor Newsom, who quickly signed it. The decision had put the University squarely in the middle of a conflict between the need to offer more places at the school to improve access with limits on their ability to develop housing for those students.

The law Newsom signed is narrowly tailored to fix the specific problem at UC Berkeley. It did however, shine a spotlight on the impacts of the use of the environmental law to halt all sorts of projects. The issues cited by the opponents of the housing project focused on things like traffic and rents rather than on traditional “environmental” concerns. There is now at least some debate over whether the scope of the CEQA could or should be narrowed.

GAS TAX HOLIDAYS

The wide range of potential solutions to the spike in gasoline prices reveals a complete lack of consistency and highlights the political nature of the proposals. Massachusetts just rejected a gas tax holiday over the threat it posed to bond covenant compliance. New York’s pending budget would suspend gas taxes from May 1, 2022 through the end of the year.

The Maryland legislature is considering altering current law that started in 2013 which mandates the increase of gas taxes annually based on inflation as measured by the Consumer Price Index. The current inflation rate is 7.48%. Republican state lawmakers are pushing legislation to repeal that provision, or at least pause it for two years. The Georgia legislature is considering a suspension of its state’s gas tax for two months.

It is a topic of short-term value. The real answer would be to replace fuel taxes with mileage-based fees and drive demand away from fossil fuels. It’s a completely political answer to a question which needs a more nuanced response.

SEC FRAUD CHARGE

The Securities and Exchange Commission charged the Crosby Independent School District (Crosby ISD) in Texas and its former Chief Financial Officer with misleading investors in the sale of $20 million of municipal bonds in order to pay its outstanding construction liabilities and fund new capital projects. The SEC also charged Crosby’s auditor with improper professional conduct in connection with the audit of the school district’s 2017 fiscal year financial statements. The complaint charges that the District failed to report $11.7 million in payroll and construction liabilities and falsely reported having $5.4 million in general fund reserves in its audited 2017 fiscal year financial statements.

The Commission charges that the District knowingly included the false and misleading financial statements in the offering documents used to raise $20 million through the sale of municipal bonds in January 2018. In August of 2018, seven months after the offering, Crosby ISD disclosed that it was experiencing significant financial issues, including that it had a negative general fund balance. The following month, ratings agencies downgraded Crosby ISD’s bonds. 

As is often the case in situations like this, Crosby ISD agreed to settle the SEC’s charges by consenting, without admitting or denying any findings, to the entry of an order finding that it violated the antifraud provisions. The CFO greed to pay a $30,000 penalty and not participate in any future municipal securities offerings. The auditor agreed to be suspended from appearing or practicing before the SEC as an accountant with the right to apply for reinstatement after 3 years. They also agreed to not serve as the engagement manager, engagement partner, or engagement quality control reviewer in connection with any audit expected to be posted in the MSRB’s Electronic Municipal Market Access system until reinstated by the SEC.

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