Testimony on HB 2713
by Bill Griffith
February 11, 2002

Thank you Mr. Chairman and members of the committee for the opportunity to speak on behalf of HB 2713. I am here today representing the Kansas Chapter of the Sierra Club and the Heartland Renewable Energy Society.

We are in favor of the legislation being discussed today for several reasons. Net metering is truly the lynchpin of small-scale renewable energy programs in the United States. Without net metering farmers, ranchers, schools, churches, and homeowners are in effect economically barred from investing in renewable energy for themselves.

Renewable energy has many advantages we should encourage: It is decentralized, which makes it much less of a security risk, it is non-polluting, and it adds needed variety to our resource mix which depends on coal to a higher degree than most other states do.

If you will take a moment and look at the map in my handout you will see thirty-four states have enacted net metering legislation as of now. Four states- Kansas, Missouri, Michigan, and Utah are considering it this year. The Utah bill has no opposition so in effect we will have at least thirty-five states with net metering provisions very soon.

I would argue that we realistically are looking at thirty-five out of forty states-not fifty at this point in time. The states in the southeastern portion of the country have the lowest wind speeds so the demand for this type of legislation is less. When solar power comes down a couple more dollars a watt in the next two to five years you will probably see movement from these states except of course Georgia, where the main utility was one of the driving forces in enacting legislation for net metering a year or two ago. Alaska has very little transmission lines outside of towns, so the point is moot because of their uniqueness in that regard.

Going back to Utah for a moment I would like to make two points: The key utility in the state is in support of the legislation. They do not feel it is a subsidy worthy of any consideration. There is a concern about how much future power will be required of them that comes from renewable energy if a renewable portfolio standard is put in place. They realize this would be the most inexpensive way to acquire new generation (let someone else pay for it). Secondly, it is very interesting to note that at the bottom of the sheet entitled "Solar, Wind-Energy Users May Get Benefit" from the Salt Lake Tribune it states that the Utah Committee of Consumer Services briefly flirted opposing the measure over concerns of a subsidy. On the second page, third paragraph the committee decided "that from a financial standpoint the cross-subsidy potential would be miniscule" (my quotations).

Continuing down to the fourth paragraph, Jeff Burks, the energy policy coordinator for the Utah Energy office is quoted as saying, "Barring the cross-subsidy issue, which could affect the typical Utah residential electricity user by a 'nano-cent' a year, there is little downside to allowing net metering" (my quotations).

The growing trend of adapting net metering standards has been also helped along with endorsements from the National Association of Regulatory Utility Commissioners (NARUC) and the National Association of State Utility Consumer Advocates (NASUCA). Both groups passed policy resolutions supporting state net metering policies. "These resolutions urge states to consider measures to make net metering available to small-scale renewable generating facilities, and authorize the Executive Committees of NARUC and NASUCA to 'request Congress and the FERC to identify and remove any barriers to state implementation of net energy metering' " (Starrs brief to the Iowa Supreme Court).

The Iowa Office of Consumer Advocates was active in the Iowa Supreme Court where it argued in favor of Iowa's net metering law. Also active among others were the Public Advocate Office of the State of Maine, the New York State Consumer Protection Board, the State of New Hampshire Governor's Office of Energy and Community Services, and the Maryland Office of People's Counsel. The point being here is if net metering raises rates for consumers and is a preferential treatment for one class of individuals, why are all these consumer groups lining up in support of net metering? The answer of course is there is no real subsidy or realistic chance of higher bills for customers. There is apparently, a large upside to net metering that is in the public's interest. I would also add it is just common sense that thirty-five states would not pass net metering if it led to higher bills for their constituents. No state has ever overturned a net metering statute. The reason is again, it does not lead to higher bills.

I would like to turn your attention to the document entitled "United States of America Federal Energy Regulatory Commission". This decision was issued in response to the Iowa Supreme Court case where FERC clarified what net metering is and is not.

Opponents of net metering have argued that the customer-generator is "banking" their power with the utility and withdrawing it later when they need it. This was the postion that MidAmerican Energy Company of Iowa took in the case. FERC ruled on page five in the first two full paragraphs that net metering does not constitute the banking of electricity.

FERC also backed the assertion of the Iowa Board on page two that net billing (metering) does not pay the generator the retail rate of electricity, but only the avoided cost of excess electricity generated at the end of the billing cycle. Both these rulings were important victories for net metering statutes across the United States.

Net metering imposes no direct costs to utilities, in fact administrative costs will go down because of no need to read a second meter and cut a check each month. The small loss of revenue in fact is comparable to energy efficiency improvements such as compact fluorescent lighting, a new refrigerator, or a more efficient air conditioner. The customers are offsetting retail purchases of power and their effective return on these efficiency investments is the avoided retail price of electricity.

This has been recognized by other states. For example on page sixteen of the Starrs brief to the Iowa Supreme Court, the New York Public Service Commission concluded in considering whether the state's investor-owned utilities were entitled to recovery of this resume stated, " Net metering results in a reduction of usage at a residence that is conceptually similar to other declines in consumption due to changes in lifestyle, purchases of energy efficient appliances, pursuing energy conservation, and the like. Just as the utilities are not permitted to automatically recover lost revenues attributable to reduced consumption, they are not entitled to recover lost net metering revenues. If a utility can instead demonstrate it has incurred a net metering cost attributable to factors other than lost consumption, it may attempt to justify recovery under the applicable rate and restructuring agreement."

The document you are looking at comes from an Iowa Supreme Court case that was decided in favor of the Iowa Utilities Board and the Department of Justice vindicating Iowa's net metering statute.

The expert who wrote this brief, Tom Starrs, has written the net metering laws for Oregon, Washington, and also Utah's proposed legislation. HB 2713 has many similarities to Mr. Starrs' model legislation.

Another key point Mr. Starrs makes is in the first two paragraphs on page seventeen where he states for the court that net metering has no technical consequences that impose a burden on a utility. Secondly, the utility never pays a retail rate for electricity. They only pay the avoided cost of a net excess of electricity. This is how the Kansas bill is written as well.

Mr. Starrs next addresses the subsidy issue by running an economic model of the utility in question and its net metering requirements and he then makes a projection ten times as large and then one hundred times as large. If you would turn to page nineteen of his brief you will observe the results of the analysis:

At 300kW there is no effect on residential rates at all. Growing the analysis to three megawatts (an incredibly large amount for net metering) it would come to the grand total of a penny. Three megawatts is the equivalent of 300 ten kW wind turbines-an unbelievable amount for one territory. With the cap on total net metered generation at one percent, everyone is assured that net metering will not become a real subsidy (a nickel? a dime?). If the opponents of net metering still insist on bringing up the idea of a "subsidy" I hope they bring some numbers to show proof of this to the committee that have been scrutinized like Mr. Starrs' analysis was.

I would like to comment on the one percent cap on generation in any REC or utility's territory. This will ensure a market for small-scale renewable generation which is very popular with the public and bring the benefits such as cleaner air, insurance for the generator against fuel spikes, reduced energy losses in transmission and distribution lines, voltage support, increasing the reliability of the electric supply, deferring the need for new transmission and distribution capacity, and the reduced demand for spinning reserve capacity. It will give assurance to the RECs and the utilities that the scope of net metering will be modest in their area and limited to only one percent of their territories production.

Poll after poll shows renewable energy has widespread support with the public and folks both rural and urban will continue to be in favor of renewable energy legislation. The two wind energy conferences drew packed houses and I have people contacting me all the time about how to tap into wind energy. It is time Kansas opened the wind market to small-scale renewable technology and our citizens who wish to use it.

Based on the facts presented here we urge the committee to vote yes on HB 2713 and allow Kansas to join the burgeoning number of states that have designed and implemented their own net metering legislation. Thank you.

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Testimony on HB 2631
by Bill Griffith
February 4, 2002

HB 2631 would allow rural landowners to form cooperatives for the express purpose of marketing renewable energy from their land.

Thank you Mr. Chairman and members of the committee for the opportunity to speak on behalf of HB 2631. My name is Bill Griffith and I am representing the Kansas Chapter of the Sierra Club.

As the committee is well aware, wind energy is beginning its ascendacy into a prominent position in our nation's resource mix. Not only is it the fastest growing energy source in the United States, but in the world as well. All projections indicate this will contiue at an accelerated rate.

Hopefully, this trend will be reflected in Kansas. We all have heard the reports that Kansas has now become a net importer of energy. This leaves us vulnerable to conditions outside our control. The only way to reverse this slide is to tap into our own vast wind potential and increase our energy efficiency.

HB 2631 creates an excellent opportunity for Kansans to harvest this resource for our own benefit. This will reduce our dependency on outside energy sources, stimulate local economies, reduce our emission of carbon dioxide, mercury, and other pollutants as well.

Rural landowners, often struggling because of a depressed farm economy would be able to reap the advantages of forming their own wind cooperatives and generating a consistent revenue stream from their land.

Another point for the committee to consider is what may occur at the federal level in upcoming energy legislation. Two bills from the U.S. Senate have provisions for a renewable portfolio standard to be implemented in the United States. Our president signed into law the largest renewable portfolio standard ever enacted in our country while he was governor. These factors seem to point to the likelihood of a federal rps at some point in the near future.

There is also a bill in the senate being marked-up this week that would establish limits on carbon dioxide emissions from power plants. Kansas is heavily invested in coal and could be affected more than most other states.

Also, since last September the decentralization of our power system has been pointed out as a critical area we must address. Wind power does that better than any fossil fuel we are currently using.
Given these factors, Kansas maybe called upon to increase its amount of renewable energy it generates. HB 2631 will make it easier to generate renewable energy and help Kansas meet any targets set in federal energy legislation.

In conclusion, the Kansas Chapter of the Sierra Club supports this bill and urges the committee to vote in favor of this legislation. Thank you.

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"What the State of Kansas and the Utilities Should Do to Promote Wind Energy"

A speech by Bill Griffith at the Wind Energy Conference, July 24, 2000

For more information, use this link: www.pinnaclet.com/kswind

Thank you, Mr. Holmes. I hope everyone in the audience is enjoying themselves at the conference and I certainly would like to thank the people who organized this conference for the truly great job they have done.

"My portion of the program is "What the State of Kansas can do to promote wind energy."

I would like to break that down into utility-size projects and distributed generation, or smaller turbines for homes, schools, and businesses. I will speak first on the utility- scale projects.

While we are focusing on what the state of Kansas can do we must factor in potential variables from the federal level. There are two that bear watching closely.

The first one is the Kyoto Protocol. This agreement reached between nations of the world is designed to reduce greenhouse emissions and begin reversing (hopefully) global warming. If the U.S. Senate ratifies this treaty it will have important ramifications in Kansas.

Regions that depend heavily on coal will be hardest hit. Kansas, of course, is a large purchaser of coal and uses it as its primary energy source. Under the terms of the Kyoto Protocol the price of coal will rise 153% to 800%. The increase at the residential level will be up to 36 dollars per month according to the Energy Information Agency. Small businesses can be expected to absorb the same type of increases if they are in a region that depends heavily on coal.

Our state is hooked like an addict and is mainlining coal from the western states and like the junkie we are in an unhealthy position. If the U.S. government decides we have to have a carbon tax some scenarios suggest that coal plants may become too expensive to run as a baseload plant. This reinforces the idea we need a variety of resources for our power needs.

The other major factor looming out on the horizon is the ongoing deregulation of the electric industry. There are several bills in Congress now and we have seen utilities preparing for this prospect by shearing costs such as deep-sixing demand side management programs.

Carbon prices are expected to go up as well under deregulation. Natural gas is projected to go up.7% year thru 2020 without the implementation of a carbon tax or deregulation. It has also been the subject of wild price swings recently. How many in this room think the price of natural gas will be lower in five years? Ten years?

Wind energy, by contrast, is expected to drop from $ 1000 per kW to $ 600 per kW by 2020.

Restructuring brings uncertainty concerning future demand needs. If utilities from outside the state can come in and potentially entice customers away how can you accurately figure future demand? Doesn't make since to build a huge plant saddled in debt if this is the wave of the future does it? I wouldn't want to be handed the job of forecasting my company's future market with competition out there, especially since the power companies have not been trained in the ways of good ol' cutthroat capitalism.

So what is one to do? Let's examine the attributes of wind: Wind is an excellent energy choice to add to the resource mix in Kansas.

Kansas is the third windiest state so we have plenty of fuel. And its free. No price hikes there. This minimizes the overall fuel-price risks hanging over our heads.

A wind farm can be installed in segments as needed with short constructions lead time so power companies can respond quickly to changing circumstances.

The wind farm brings increased revenues to local governments and landowners. A Union of Concerned Scientists study estimates the return on land at 30 to 100% and the land can still be farmed! Can you imagine the boon to some of our struggling farmers and cash-strapped counties? It's interesting to see what some of the farmers in Iowa and Minnesota are making on these leases.

With this in mind let's gaze into our crystal ball courtesy again of the Energy Information Agency:

Kansas has a projected summer demand this year of 13,461 megawatts of electricity and has a capacity of 15,465 megawatts plus three new coal-fired plants coming on line with an additional 1,309 megawatts. By the year 2009 the demand is projected to increase to 17,168 megawatts. Where should we find the required power plus a little extra for a margin of error? Wind of course. I propose the state of Kansas require 500 MW of wind power by the year 2009. It will meet the projected needs, increase our resource mix, help rural Kansas and help ensure smaller price increases. If deregulation or the Kyoto Accords are implemented we will certainly need to add more megawatts of wind in order to stabilize our energy costs. I call on the governor and the legislature to study the examples set by other states and to go into action on this issue. A small amount of foresight now will save a great deal of finger pointing in the near future.

Let's move over to the distributed generation arena and see what we can do there. The main problem is the upfront costs associated with a wind turbine system. There are two tools we can use to assist folks who would like to join the wind revolution. The first thing we need to have in Kansas is net billing or net metering as it is often called. Net metering is a key component that needs to be in place in order to make wind energy a viable option for farms, schools, businesses, and homeowners in Kansas.

By definition net metering is where the meter runs backwards when the producer generates more electricity than is needed at that particular time. The standard home utility meter works forwards and backwards and is conducive to net metering. The excess generation can either be just put back in the grid at no compensation to the producer such as in Iowa, it can be sold back to the utility at the avoided cost of fuel, or it can be sold back to the utility at the retail cost as it is done in Wisconsin. States handle this excess generation in different manners.

As of now over 30 states have enacted some form of net metering. In the next couple of years I'm sure we will see even more states enact this reform.

This is certainly one area that brings out frustration in folks with wind turbines in our state. Kansas has the LARGEST discrepancy in the price the utilities charge and the price they will pay for generated electricity of all the 50 states. Let's look at some examples: Larry Spiva of Claflin is charged 9.5 cents per kilowatt hour by KGE when he is purchasing electricity yet is only allowed to sell it back at 2 cents per kilowatt hour. Certainly a bargain for KGE and an ongoing frustration for Mr. Spiva.

Paul Burmeister of Burr Oak has had a wind turbine since the early 80's and Bob Courtney of the Olathe School system is looking into putting up a wind turbine at one of their athletic complexes. Bob told me the complex uses about 55,000 dollars annually for electricity. Without net metering his bill will probably still be around 40,000 dollars. With net metering it could drop to around zero. In four to five years the district could save a quarter million dollars or so on just one complex with a turbine and net metering. Think of the possibilities of schools across the state and how they could re-direct those funds into other valuable directions. Check out what Spirit Lake School is doing in Iowa right now.

Some utilities have required extra safety features or costly insurance in order to bring a wind turbine online. These costs drive up the initial investment and make wind turbine ownership less appealing. What makes this scenario even more frustrating is there are over 5,000 small wind turbines in operation, logging over 300 million operational hours with no liability claims or lineman injuries from inter-connected systems. Any safety concerns can be disposed of rather quickly as a red herring.

The state of Kansas should enact a net billing law that gives the right to interconnect under standardized requirements, protect producers from liability insurance barriers, and other unreasonable disincentives and encourages prospective wind producers to invest in turbines that fit their particular needs.

Of course, another disincentive is the price of a wind system. While it certainly pays for itself over time, the initial cost can be prohibitive for many individuals and businesses.

Some of you may recall Kansas has a tax credit for renewable energy some years back. Many of the wind and solar systems we have came from this era. I propose a state tax credit for renewable energy systems of 45% of the purchase price with accelerated depreciation and allowing the credit to be spread over five years.

I spoke with Mike Bergey of Bergey Wind and he suggested that 45% would be a good target to aim for in order to make wind energy viable in the distributed market. Let's look at an example of a business or farm that pays $500 per month in electric costs and has a $2000 tax bill annually to the state.

$500 x 12 = $6,000 annually in electric bills. Annual tax bill of $2000. Total annual costs are $8000.

A $30,000 wind turbine with a tax credit of 45% would give a total credit of $13,500.

Let's say the depreciation schedule is 30-20-20-15-15. The first year the purchaser would have $4,050 tax credit so they would pay no taxes. With net metering the electric bill could very well be zero or they may get money back from the utility, but we will say that they net out for the sake of our example. So, the first year they save $2,000 in taxes and $6,000 in electric bills and put $8,000 in black ink instead of red ink.

The second and third year saves $2,700 in taxes and of course, there is again a $6,000 savings in electricity, so again a total savings of $8,000 each of those two years. The fourth and fifth year there is a $2025 tax savings and the $6,000 in electric savings, so again a net savings of $8,000. After five years the total savings is $40,000, the wind turbine can be paid off fairly quickly and the electric bill will be minimal, nonexistent, or better yet our folks will receive a check back from their utility for being a producer of electricity. Now that's exciting!

Obviously this is a hypothetical case and each scenario is different. But this two-pronged strategy of net metering and a tax credit can give the economic boost that is needed to make wind an affordable option for the distributed power market. Imagine the economic boost this can give struggling farms and businesses that have seemingly scoured every dark nook and cranny for extra savings and now realize the electricity they are using for their search is actually the light at the end of the tunnel.

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2002 Kansas Wind Energy Conference
(Sierra Club is one of the sponsors) Lawrence Holidome

Small Solar and Wind Systems Tuesday, October 1, 2002
12:00 Registration-Exhibit Area Open
1:00 Opening Remarks
1:20 National Update on Small Systems-DOE
1:40 National Update on Small Systems-USDA
2:00 Small Systems Overview (Wind)
2:20 Small Solar Systems Overview
2:40 Break-Exhibit Area
3:10 Interconnect Issues-REC''s/Muni's/Utilities
3:30 Interconnect Issues-What Have Other States Done?
3:50 Other State's Policies Promoting Small Renewable Systems
4:10 Legislative Forum-Q and A with members of State Utilities Committees
5:00 Exhibit Area Open
6:00 Socail Event-Abe and Jake's Landing in Downtown Lawrence

Large -Scale Wind Development Wednesday, OCtober 2, 2002
7:30 Registration-Exhibit Area Open
8:30 Opening Remarks
Overviews-DOE, AWEA, USDA, MISO
10:05 Break-Exhibit Area
10:35 Break Out Sessions
1-Transmission/Integration and Forecasting Issues
2-Landowners/Leasing Issues
3- Economic Development
12:15 Lunch
1:45 Environmental Issues
3:00 Break-Exhibit Area
3:30 Developers-Overview of what is happening in Kansas

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Kansas Wind Energy 2002 Conference Article

Kansas Wind Energy 2002 will be held in Lawrence, Kansas, on October 1-2, 2002. Expecting large participation, the conference is a third in a series sponsored by the Kansas Corporation Commission's (KCC) Energy Programs and Department. of Energy's Wind Powering America. Kansas recently being touted as the number one state by a new study (US PRIG, Feb. 2002) for potential wind resources, along with a lucrative property tax exemption, has made the state a hotbed of activity, according to Jim Ploger, Manager of Energy Programs at the KCC.

"The potential of a billion dollars worth of wind development over the next decade has really stirred up interest on all fronts," Ploger said. "This includes agricultural, economic development, environmental groups and organizations, and the utility industry."

The Tuesday meeting (Oct. 1) will kick-off at 1 pm and will be devoted to small (farm/residential) wind and solar systems. Representatives from DOE and USDA will discuss federal activities and leading manufacturers will discuss state-of-the art wind and solar systems. Next interconnect issues will be addressed, state policies around the U.S. and finally a panel with Kansas legislative representatives.

The second full day of the meeting (Oct. 2) will focus on commercial wind farm development in the state. Sessions planned include overviews from federal representatives followed by breakout sessions on transmission issues, landowner/lease issues and economic development. In the afternoon, discussions on environmental issues in the tallgrass area of the Flint Hillls and major wind developers showcasing their companies are being planned.

An active Kansas Renewable Energy Working Group (KREWG) has been formed to focus on renewable energy issues, especially wind, according to Ploger. The ad hoc, non-profit, non-partisan organization was formed this summer to bring together interested parties to address common interests and concerns. KREWG will also meet in conjunction with the Conference on the morning of Oct. 1.

Information and online registration is available at:
http://www.pinnaclet.com/kswind/2002/index.html.

Vendor and exhibitor space and conference sponsorships are available.

Jim Ploger
Energy Program Manager
KANSAS CORPORATION COMMISSION
1500 SW Arrowhead Road
Topeka, KS 66604-4027
Phone: 785-271-3349
FAX: 785-271-3268
Email: j.ploger@kcc.state.ks.us

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