2.6 EWEB’s Climate Guidebook Principles to Guide Policy and Programs
Within the Climate Guidebook, EWEB wishes to include a set of principles meant to define the general direction EWEB seeks to move towards on issues, mostly public policy, related to climate change. These principles are built on EWEB’s values, which are set by the Board of Commissioners and in alignment with established best practices in the utility industry.
EWEB’s organizational core values per Strategic Direction Board Policy SD1 include:
- SAFE: We value the safety, physical and psychological wellness of our workforce and the public, the security and integrity of cyber assets and data, and the protection of our customers’ assets
- RELIABLE: We value the ongoing continuous on-demand delivery of drinking water and electricity, and the dependability of our response to our customers.
- AFFORDABLE: We value and respect our customer-owners’ financial resources by making wise investments and controlling costs and rates.
- ENVIRONMENTAL: We value the prudent and sustainable stewardship of the environment and natural resources, including preserving our watershed, and our role in reducing the greenhouse gases (GHGs) contributing to climate change.
- COMMUNITY/CULTURE: We value a culture of intentional actions and outcomes, continuous improvement, diverse perspectives, that is trustworthy, respectful, equitable, and inclusive to employees and community members. We are dedicated to our public service, professions, local governance, and commitment to serve our community honestly and with integrity.
Developing a set of principles will guide the General Manager, and thus the organization, in fulfilling the Strategic Directive Policies such as SD15 from the Board.
A “principle” is a North Star – a position towards which EWEB seeks to move, based on our values. A principle is not a rulebook. As EWEB seeks to make positive changes in our community, we must first define the nature of those positive changes. Clearly articulated and transparent principles help us get there by orienting us in a certain direction. Policy development, program implementation, investment of EWEB staff time and/or investment of financial resources is the mechanism by which we move towards these principles.
As we better define our principles on various topics, we may discover that some of EWEB’s existing policies and programs do not currently meet all our aspirations. Recognizing that some policies and programs don’t currently align with our principles may be the first step in eventually ensuring that they do. Identifying any areas of potential misalignment may also help us identify and articulate to our stakeholders what barriers might exist and must be overcome before alignment is possible.
As EWEB further articulates its principles on a variety of topics, they will be included here for transparency and ease of reference. The topics can span from providing guidance on how to advocate for policy in Salem or Washington D.C, to informing internal program development, to articulating how a new technology relates to EWEB’s long-term interests. Topics submitted for inclusion could relate to climate change and the role the energy industry plays in decarbonizing society. Additional topics that merit development of their own set of principles will undoubtedly arise in the future and will be added over time. Context on the various topics and why / how the draft principles were developed is included here:
Carbon Policy & GHG Reduction Principles: Through the years, EWEB has worked with many regional partners on supporting climate and carbon policies at the state, regional, and federal levels. EWEB has been guided by a set of principles supported by previous Boards of Commissioners and in coordination with other public utility members of the Public Generating Pool. The principles included here are a refined version of those previously articulated principles.
Distributed Generation Principles: EWEB’s customers are increasingly interested in installing distributed energy generation and/or storage at their homes and businesses. How we compensate customers for the energy they produce and/or access through distributed technologies will become more important in the years ahead. The Distributed Generation Principles are in alignment with information staff has been providing verbally to the Board over time, are used to guide EWEB positions on relevant public policy, and are based on work done in coordination with best practices among comparable public utilities in the region.
Green Hydrogen Principles: Electric utilities are increasingly interested in how hydrogen can play a role in decarbonizing the economy. Here in Eugene, discussions have arisen about whether hydrogen should be blended into natural gas pipelines as a method of lowering the carbon content of the gas system. At the same time, regional coalitions are seeking funding for green hydrogen projects that may involve transportation fueling or other uses. A set of principles will help EWEB define and articulate our interest in hydrogen, as well as the types of projects we may pursue. The principles included here are based on alignment with principles advocated by U.S. Department of Energy, Oregon Department of Energy, and several regional partners.
Rate Design Principles: One of EWEB’s five organizational values is affordability, and as discussed in Chapter 3, keeping rates low for customers is climate action. EWEB has long held a set of principles, based on industry accepted principles, for meeting legal standards and achieving best practices in rate making.
Explore this webpage: 2.6.1 EWEB’s Carbon Policy & GHG Reduction Principles | 2.6.2 EWEB’s Distributed Generation Principles | 2.6.3 EWEB’s Green Hydrogen Principles | 2.6.4 EWEB Rate Design Principles
2.6.1 EWEB’s Carbon Policy & GHG Reduction Principles
Revision date: April 2024
Policies and laws to reduce greenhouse gas (GHG) emissions are a viable tool if society is to avoid the worst effects of climate change. Because electric utilities rely on an interconnected grid, policies that impact this grid also impact local electric utilities. Electric utilities rely on the grid to meet customer needs, sell surplus resources, and ultimately work together to keep rates as low as possible. Even with EWEB's ambitious voluntary internal climate policy goals for our owned and contracted resources, there are times when we buy power from the market. Getting to a fully decarbonized Western grid – the Western Interconnect (WECC) – and ultimately a fully decarbonized economy will require policies to reduce GHG emissions at the federal, regional, state, and/or local levels.
The most ambitious proposed federal policy on GHG reductions died in 2009 when Congress failed to pass a bill that would have instituted a nationwide plan to cap carbon emissions and allow emitters to trade pollution credits - a cap-and-trade system. Since then, only minor federal action occurred, until 2022 when Congress passed the Inflation Reduction Act (IRA). The IRA signaled a change in the federal approach to GHG emissions - rather than punish emitters, the IRA subsidizes emissions-free energy such as wind and solar.
In the absence of comprehensive federal legislation, Oregon has attempted to implement GHG policies. In 2019 and 2020, Republican legislators walked out of the Capitol to prevent votes on cap-and-trade legislation. So, Gov. Kate Brown implemented executive orders. In 2022, the Climate Protection Program took effect, setting a declining cap on emissions from fossil fuels - but it did not apply to electricity generation, which already must meet goals under the State's Renewable Portfolio Standard. In December 2023, the Climate Protection Program was invalidated by the Oregon Court of Appeals, yet Oregon Department of Environmental Quality seeks to reestablish a climate mitigation program. At the same time, the state's Clean Electricity Standard, which was enacted in 2021, requires the state's two largest utilities - but not publicly owned utilities such as EWEB - to achieve net-zero GHG emissions by 2040. Additionally, the State's Clean Fuels Program addresses GHG emissions from transportation fuels and provides credits for entities that invest in transportation electrification among other low-carbon transportation fuel choices.
As EWEB advocates for comprehensive climate policies as directed in EWEB Board Policy SD15, we will be guided by the following principles.
Relating to climate policy, EWEB prefers and supports policies that:
- facilitate the reduction of GHG emissions most efficiently and at the least overall cost to society.
- are technology-neutral, economy-wide, and market-based.
- recognize the role of legacy hydropower in limiting GHG emissions, ensure that existing hydropower resources will not be disadvantaged relative to newer renewables, and are compatible with a variety of future physical climate and hydropower production conditions.
- measure carbon emissions as far upstream and nearest to the point of production as possible and are as resource specific as possible; in pursuit of more effective signals favoring the dispatch of cleaner resources and simpler and/or reduced administrative burden.
- preserve a path for load/resource growth and flexibility for utilities that pursue cross-sector decarbonization.
- are regionally consistent.
- consider the equity of the impacts on diverse segments of the population and are consistent with EWEB’s Diversity, Equity, and Inclusion Policy SD23.
2.6.2 EWEB’s Distributed Generation Principles
Revision date: April 2024
Traditionally, power plants have been large and centralized structures such as hydroelectric, nuclear, coal, or natural gas plants, usually located far from where most of the power output will be consumed and connected to these load centers via a long-distance transmission and distribution system.
The U.S. Environmental Protection Agency (EPA) defines the term distributed generation to include a variety of technologies that are decentralized and often located close to where the power will be consumed. Due to the decentralized nature, these resources tend to be smaller in size than traditional centralized power sources. Distributed generation technologies may serve a single building such as a home or business or participate in a microgrid (a smaller grid that is connected into the larger electricity delivery system) that could serve a wider area such as an industrial facility, a college campus, a military base, or a downtown district for example.
Per EPA, in the residential sector, common distributed generation systems include:
- Solar photovoltaic panels
- Small wind turbines
- Fuel cells, usually fueled by natural gas
- Emergency backup generators, usually fueled by gasoline or diesel fuel
Per EPA, in the commercial and industrial sectors, distributed generation can include resources such as:
- Combined heat and power systems
- Solar photovoltaic panels
- Wind
- Biomass combustion or cofiring
- Municipal solid waste incineration
- Fuel cells fired by natural gas or biomass or hydrogen
- Emergency backup generators, usually fueled by diesel fuel
Local development of distributed generation technologies is allowing EWEB’s customers to generate their own electricity and even generate surplus electricity that they can sell to EWEB via a process called net metering. These distributed generation technologies seek to make our community more resilient to disasters, reduce losses from the long-distance transmission system, and give customers choices about where to get their energy.
At the same time, customers with distributed energy resources are still connected to EWEB’s grid. These customers rely on EWEB’s grid for energy when their generators aren’t producing and to distribute excess energy to other consumers connected to the grid. Solar homes, for instance, still need energy from EWEB’s grid at night. And these customers also rely on EWEB’s grid of distribution and transmission lines when they sell surplus energy to EWEB.
EWEB incurs significant costs maintaining a robust grid and procuring energy for all customers, even those with distributed generation technologies. EWEB believes that these costs should be equitably shared among all customers.
With that goal in mind, EWEB has developed the following principles:
- EWEB supports and facilitates customer choice to install non-utility owned distributed generation equipment and infrastructure.
- EWEB recognizes that some distributed generation technologies are better at meeting the community’s historical electricity demand (load) than others.
- EWEB supports pricing mechanisms that fairly compensate customers for electricity they supply to the grid and that do not transfer unpaid costs to other customers.
- EWEB strives for the equitable allocation of costs among all customers to maintain the electric grid.
- EWEB will need a rate design that fairly assigns the costs of procuring energy (including peak energy needs) and maintaining the electric grid to the customers who cause those costs.
- EWEB prioritizes the safety of utility workers and customers and will develop interconnection standards that ensure safety and reliability.
- EWEB supports policies and practices that consider the equity of the impacts on diverse segments of the population and are consistent with EWEB’s Diversity, Equity, and Inclusion Policy SD23.
2.6.3 EWEB’s Green Hydrogen Principles
Revision Date: April 2024
The most abundant element in the universe – hydrogen – is evolving as a tool to decarbonize sectors of the economy that have few or no other low-carbon options. In 2021, the federal government set a goal of reducing the cost of hydrogen to one dollar for one kilogram within one decade (1 1 1). Also in 2021, the Oregon legislature passed SB 333 that directed the Oregon Department of Energy to conduct a study on the potential benefit of, and barriers to, production and use of renewable hydrogen in Oregon.
The Oregon Department of Energy provides an overview of renewable hydrogen as follows:
“Hydrogen is currently used in several industrial processes – it is a fundamental input for manufacturing ammonia, which is then used for fertilizer production; it is used to process crude oil into refined fuels, like gasoline and diesel; and it is also used in the metallurgic industry. However, most of the hydrogen produced today is derived from natural gas or coal, which is “grey" hydrogen. “Blue" hydrogen is also derived from fossil fuels but with the associated carbon emissions captured and stored. Most “green" or renewable hydrogen is produced using renewable electricity to power an electrolyzer that splits water into its component parts of oxygen and hydrogen. SB 333 refers to renewable hydrogen as “hydrogen derived from energy sources that do not emit greenhouse gases." Renewable hydrogen could be used to replace grey hydrogen where it is currently used, as a transportation fuel, or as a replacement for natural gas in some applications.”
As part of the IIJA, the U.S. Department of Energy committed $7 billion in competitive funding for entities and groups forming regional hubs to pursue research and deployment of clean hydrogen. And the 2022 Inflation Reduction Act contains tax credits for both investing in hydrogen projects and producing hydrogen using renewable energy. In October 2023, the US Department of Energy selected the Pacific Northwest Hydrogen Hub as one of seven regional hydrogen hubs nationwide.
The energy storage capabilities of hydrogen offer intriguing possibilities for utilities planning to incorporate more intermittent, renewable energy resources into their portfolios. Excess electricity from renewables such as wind and solar can be used to create hydrogen and that hydrogen can be converted back to electricity when it’s needed later or sold for use in other secondary applications. Producing hydrogen, rather than curtailing resources during times of surplus, will reduce the overall cost and justify further investment in intermittent renewable energy sources. By storing energy, hydrogen can help balance fluctuations in renewable energy production, while also fostering a secondary market for abundant renewable energy.
The technology for hydrogen is advancing rapidly. While more than 95% of hydrogen used in the U.S. today is generated using fossil fuels, researchers are improving methods of creating clean, green, renewable hydrogen. And utilities are launching pilot projects to test hydrogen’s energy storage potential.
To guide us in proactively pursuing technologies to harness the power of hydrogen produced from non-emitting sources, EWEB supports policies that:
- support hydrogen production that results in the lowest possible lifecycle greenhouse gas emissions[1] and facilitates the use of and/or investment in non-carbon emitting electricity generation resources.
- provide opportunities for electric utilities, or independent power producers, to use hydrogen production to capture value from otherwise curtailed intermittent renewable generating resources, further incentivizing investment in renewables.
- consider hydrogen and other non-emitting options as generic alternatives for energy storage applications.
- does not exclude hydrogen, including other non-emitting chemistries, fuel cells, and/or direct combustion, as a decarbonizing energy alterative in other sectors such as industrial processes and medium/large vehicle transportation.
- provide options for utilities to use hydrogen or other storage alternatives to improve the reliability and/or performance of local and/or distributed portions of the grid.
- provide for diverse forms of clean energy storage to improve the resiliency of local communities.
- consider the equity of the impacts on diverse segments of the population and are consistent with EWEB’s Diversity, Equity, and Inclusion Policy SD23.
[1] Lifecycle greenhouse gas emissions are the overall GHG impacts of the production of a particular fuel. Depending on the boundaries of the analysis, this could include the GHG impact of feedstock production and transportation, fuel production and distribution, and use of the finished fuel. There are different lifecycle GHG emissions associated with different hydrogen production methods. For example, using renewable power to split a water molecule via electrolysis has a different lifecycle GHG value compared to a process that uses fossil-based energy to crack fossil natural gas molecules via steam methane reformation technology. EWEB seeks to be technology agnostic and move towards ever-evolving technologies that result in the lowest climate impacts.
2.6.4 EWEB Rate Design Principles
Revision Date: April 2024
Utility rates have a legal duty to establish rates that are “reasonable” and not “unduly discriminatory”[1] and EWEB has closely aligned its rate making principles with industry accepted principles that provide the basis for meeting legal standards and best practices in rates making.
Industry Standard Principles:
- Sufficiency
- Fairness
- Efficiency
- Customer Acceptability
- Bill Stability
EWEB Rate Making Principles:
- Sufficiency
- Affordability
- Efficiency
- Cost Basis
- Equity
- Gradualism
EWEB ratemaking principles are codified in several different Board policies.
Sufficiency is the principle that provides investor-owned utilities with the ability to recover costs and a reasonable rate of return to attract capital and continue to invest in the system on behalf of customers. For a municipal utility like EWEB, sufficiency is a principle supported by Board Policy SD6 Financial Policies and SD9 Rate Setting Policy.
SD6 states “Rate Sufficiency Policy: Rates and charges will be adequate to provide revenues sufficient to maintain a degree of financial soundness over and above requirements for compliance with existing bond covenants. (FP 1.1) “
SD9 states “set rates at a level sufficient to recover ongoing costs of utility operation.”
Affordability is included in Board policy SD1, Mission, Vision, Values & Legacy. “Affordable” is listed as one of the utility’s five values.
SD1 states that EWEB values and respects our customer’s financial resources by making wise investments and controlling costs and rates. This value is supported by EWEB’s limited-income programs and long-standing budgeting practices.
Efficiency in ratemaking refers to the concept that electricity prices should be set at an economically efficient level. The prices should reflect, as closely as possible, the true cost of providing reliable electric services to each customer class and should not inadvertently distort the market. Setting an electricity price that does not align with costs has significant consequences for utilities. Additionally, efficiency can also be used to describe the customers’ understanding and interpreting the utility prices, rates, and tariffs.
Cost Basis has two components that align with the Board policies SD3 Customer Service Policy and SD9 Rate Setting Policy.
SD3 states that “rates will be uniform to all consumers within various service classifications; and that pricing for utility service and products will be cost based…”
SD9 states EWEB’s elected Boad of Commissioners has complete authority to “approve rates which are cost-based, nondiscriminatory, and in concert with the needs of EWEB’s customers.”
The cost-of-service models are the basis for meeting the standard of cost-based rates for EWEB customers. The -costs are based on the Board approved budget annually and projected in three-year periods for multi-year cost of service review.
Equity is in reference to the legal standard of rates that are “fair and reasonable” and “not unduly discriminatory” and is met by applying an industry standard cost of service approach to cost allocation among various customer classes and by employing standard rates and policies for customers within the respective customer classes. This ratemaking principle is aligned with Board policy SD9 Rate Setting Policy and SD23 EWEB’s Diversity, Equity, and Inclusion policy, especially within the focus area of equitable “access to products and services”.
SD9 requires that “rates and charges for utility service be fair and nondiscriminatory” and are considered nondiscriminatory when “customers receiving like and contemporaneous service under similar circumstances are treated equally in the development and application of specific rates.”
SD23 authorizes, delegates, and directs EWEB’s General Manager to ensure that the Community we serve has Equitable Access to Products and Services.
Gradualism (Bill Stability) refers to the need to ensure that electricity tariffs remain relatively stable over time. The cost of electricity can vary hour to hour and the principle of stability reflects the utilities’ role in managing that volatility and insulating customers from the impact of the volatility. EWEB develops a 10-year financial plan and manages its financial plans to mitigate rate shock and volatility in retail rates and prices.
EWEB Board policy SD6 Financial Policies 1.2 supports the principle of gradualism.
SD6 FP 1.2 states “certain funds will be held in reserve for the purpose of mitigating the customer rate impact of unanticipated events.” EWEB annually reviews and updates its Rate Stabilization Fund.
The intent of these established rate design principles is to align EWEB rate development processes with the legal framework and utilizing industry standard practices of establishing its revenue requirement and cost allocation, while providing the Board of Commissioners adequate discretion within these principles to meet competing objectives, organizational goals, and community values.
Links and Relevant Resources:
- EWEB Board of Commissioner Policies. Includes Strategic Direction Policies SD 1, SD 3, SD 6, SD 9, and SD23 referenced in this section.
[1] Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591 at 645 (1944).
