Oregon Climate Action Update: Key State Agencies Move Forward With Implementation Plans While EO Faces Legal Challenge

In an earlier post, we commented on the initial plans of various Oregon state agencies to implement Governor Brown's Executive Order No. 20-04 (EO 20-04) to reduce and regulate greenhouse gas (GHG) emissions. Much has happened since then, including two of the key agencies, the Department of Environmental Quality (DEQ) and Public Utility Commission (PUC), updating their implementation plans and a coalition of parties filing a legal challenge to the EO.

To recap, Governor Brown issued EO 20-04 in March of this year, in the wake of yet another failed legislative effort to pass a comprehensive cap-and-trade bill. EO 20-04 adopted a standard of a 45 percent GHG reduction from 1990 levels by 2035, and at least an 80 percent reduction from 1990 levels by 2050. The EO directed a multitude of state agencies to identify by May 15, 2020, proposed actions within each agency's authority to implement the EO’s provisions.

Two of the state agencies receiving special attention in the EO are the DEQ and the PUC. Recent filings by both agencies show that their implementation plans are moving forward rapidly.

DEQ's Role

As previously discussed, the DEQ is likely to have the lion's share of the work involved with implementing the EO, which directed the department to establish the program to cap and reduce emissions from transportation fuels, natural gas, and other emitters. Additional duties placed on the DEQ include expanding the Clean Fuels program, reducing methane emissions from landfills, collaborating with other agencies to implement a statewide transportation strategy, and adopting stricter emissions standards for trucks.

In accordance with the EO's directive, the DEQ issued an initial report on its plans in these areas in May. After a public comment period, the agency issued a final report on June 30, 2020, reflecting the comments it received. Perhaps of most note is the follow-up schedule—"Phase 2" in the report's terminology—for the DEQ's cap and reduce greenhouse gas (GHG) emissions proceedings. In particular, the DEQ envisions the remainder of this summer and part of the fall as the primary time for "policy and program scoping," in advance of rulemaking to occur late this year and into next year.

Consistent with that schedule, the DEQ held a "public engagement kick-off " on July 29, 2020, with reported attendance of over 130 remote attendees. A clear takeaway from the DEQ's presentation was that now is the time for interested stakeholders to join the process. In advance of hosting a number of (likely virtual) town halls in the fall, DEQ first intends to hold a series of "technical" workshops with stakeholders, starting in August.

The issues covered within these technical workshops are likely to go a long way towards informing—at least to start—the contours of the proposed program. For example, these workshops will address such questions as which GHGs and sources should be covered by the regulations; how quickly to decline the cap or caps; alternative compliance options; issuance of permits; cost effectiveness; and how to protect impacted communities.

All of these issues are likely to garner robust debate that will continue into the new year.

PUC Directives

The EO also provides special consideration for the Oregon Public Utility Commission (PUC). In addition to the general guidelines directing agencies to prioritize actions in a cost-effective manner, help populations most vulnerable to climate change, and consult with the Environmental Justice Task Force when evaluating climate change mitigation priorities and actions, EO 20-04 provided specific directives for the PUC, finding that rapid reduction of GHG emissions at reasonable cost was in the interest of utility customers and the public generally.

While reaffirming the PUC's independence in decision-making when carrying out regulatory functions, EO-04 directed the PUC to take action in six areas: 

• 1) Determine whether utility portfolios and customer programs reduce risks and costs by making rapid progress towards reducing GHG emissions.
• 2) Encourage electric companies to support transportation electrification infrastructure that support GHG reductions, helps achieve electrification goals set forth in SB 1044 (2019), and is reasonably expected to result in long-term benefit to customers.
• 3) Prioritize proceedings and activities that advance decarbonization in the utility sector to reduce GHG emissions, mitigate energy burden experienced by utility customers, and ensure system reliability and resource adequacy.
• 4) Evaluate electric companies' risk-based wildfire protection plans and planned activities to protect public safety, reduce risks to utility customers, and promote energy system resilience, all in consideration of the recommendations made by the Governor's Council on Wildfire Response 2019 Report and Recommendations.
• 5) Convene workshops to assist electric companies, consumer-owned utilities, and operators of electric distribution systems to develop and share best practices for mitigating wildfire risk.
• 6) Partner with Oregon Housing and Community Services to establish a public process to address and mitigate differential energy burden and other inequities of affordability and environmental justice.

In its May 15, 2020, report, the PUC identified three main themes for actions and discussion with stakeholders: GHG reduction activities, impacted communities, and wildfire prevention and mitigation. The PUC asked stakeholders to submit comments on the report by June 15, 2020, and a summary of the comments was recently released. The report and comments submitted confirm that the PUC will carry a heavy burden in implementing EO 20-04.

Among other matters, commenters expressed support for the following actions and policies:

• The PUC should provide guidelines to incorporate the social cost of carbon (SCC) into utility Integrated Resource Plans (IRPs) and avoided cost proceedings;
• Commenters recommended reassessing the resource value of solar to incorporate co-benefits into the quantification of different generation resources and accelerate PURPA decision-making to reduce barriers to distributed generation;
• Development of green tariffs, including communitywide green tariffs, and support PUC efforts to increase customer access to clean, safe, reliable energy resources with specific call-out for distributed energy resources and demand-side management opportunities;
• Pursue greater partnerships within regional initiatives and explore performance-based ratemaking measures by incentivizing and enabling utility behaviors aimed at accelerating GHG reductions;
• Creation of new rate schedules to encourage EV adoption and cost-effective charging behavior, and factor EV loads into utility distribution system planning; and
• Undertake public processes to develop more time-of-use (TOU) rates to shift electricity consumption to periods when electricity demand is lower and access to low-carbon electricity sources is typically greater.

There were also disagreements as to some proposed PUC measures, including whether the PUC would have authority to include consistency with EO 20-04 as a factor in the prudency review of a utility investment. Some commenters also recommended that the PUC not allow accelerated depreciation of fossil fuel facilities.

With regard to impacted communities, the PUC proposed to expand the recently formed internal Low Income Roundtable and to create a Diversity, Equity, and Inclusion (DEI) Outreach Coordinator position. The PUC also proposed to ensure that regulatory actions would be evaluated with affordability and energy burden in mind so as to undertake actions that will help protect and benefit impacted communities.

Proposed actions include requiring GHG reduction activities and pilots to include dedicated actions to serve low-income communities, and develop a streamlined approval for measures benefiting low-income ratepayers. Commenters asked that the PUC develop a plan to study and quantify the energy burden faced by low-income and frontline communities.

As to wildfire mitigation, the PUC received broad support from commenters to initiate an investigation formalizing electric companies' wildfire protection and mitigation plans, and to partner with all operators of electric systems in Oregon to develop best practices in order to equip all utilities to effectively adapt to changing wildfire risks. The PUC held its first wildfire workshop on July 30, 2020, titled "Identifying & Monitoring Wildfire Risk from Seasonal to Long-term Time Frames," and will hold a second one in September on "System Hardening."

The May 15 report and comments received suggest that the PUC will undertake substantial rulemaking activity to implement EO 20-04. The PUC is now developing work plans and processes to scope and implement the various action items discussed in its report. In the short term, the PUC is implementing rules to allow for investments in Renewable Natural Gas (AR 632) and is in the early stages of an investigation into the value of capacity to complement past work on the Resource Value of Solar. The PUC is also updating its approach to voluntary green tariffs and improving access to the grid.

Legal Challenge

Separately, we note that the EO is now facing its first court challenge in a new state action filed on Friday by a number of businesses and trade groups. The plaintiffs seek a declaratory judgment declaring unconstitutional, on separation of powers grounds, the EO's establishment of GHG reduction goals, its direction to agencies to implement those goals, and its directions to DEQ to amend the clean fuels standards and establish a cap and reduce program.