Six reasons Kim Reynolds should veto bad energy bill (updated)

Governor Kim Reynolds has an important decision to make in the next 48 hours: sign or veto Senate File 2311, a top legislative priority for utility companies.

Whether she cares about energy policy or is primarily concerned with her political image, this bill presents the perfect opportunity for the governor to exercise her veto power for the first time.

Iowa Senate Republicans approved the first version of this bill in early March, following hours of late-night debate. After clearing the House Commerce Committee just in time for the legislature’s second “funnel” deadline, the bill spent a month on the House “unfinished business” calendar amid doubts that 51 Republicans were willing to support it.

A lengthy committee amendment made a few positive changes but left most of the problematic provisions intact. House leaders brought the bill to the floor after 10:00 pm on April 26, and the majority suspended the rules to allow debate to continue past midnight. Nearly seven hours later, House members approved the committee amendment and final passage of the bill by 52 votes to 42. (The video from that all-nighter is available here.)

The House Democratic caucus was united against the energy bill, joined by five Republicans: Michael Bergan, Dave Heaton, Andy McKean, Rob Taylor, and Louis Zumbach. (Three Democrats and two Republicans were not present for the 5:00 am vote, and Democrat Amy Nielsen did not take part, citing a House rule forbidding members from voting on “any question in which the member or the member’s immediate family member […] has a direct financial interest.”)

The Senate took up the amended bill on April 30. After rejecting several amendments proposed by Democratic State Senator Rob Hogg, a leading Iowa voice on energy policy, Republicans approved the bill along party lines, 28 votes to 20. Independent State Senator David Johnson was not present but later indicated he would have voted no.

Two GOP senators, Rick Bertrand and Charles Schneider, had voted against Senate File 2311 in March. Both supported final passage of the bill on April 30. I suspect a decisive factor was that Apple, Google, Facebook, and Microsoft changed their stance from “against” to “undecided” due to the House amendment. Time will tell whether those tech heavyweights were right to be reassured or got played by legislators and lobbyists carrying water for utility companies (more on that below).

The legislature sent the finalized bill to the governor on May 2, giving Reynolds three calendar days to act before the Senate File 2311 becomes law automatically.

Why should the governor even consider vetoing a bill supported by nearly every lawmaker in her own party? Because doing so would not only be good for consumers and the state’s economy, but would also help Reynolds politically.

1. The bill would undermine energy efficiency programs.

Josh Mandelbaum of the Environmental Law & Policy Center explained here and here why Iowa’s energy efficiency programs are important. Democratic lawmakers, notably Senators Hogg and Joe Bolkcom, warned during the Senate debate in early March that the bill would reduce participation in those programs.

The House amendment didn’t address those problems. On the contrary: according to the Iowa Environmental Council, the revised Senate File 2311 would reduce energy efficiency programs by approximately two-thirds. Electric energy efficiency programs would be capped at 2 percent of the utilities’ rate revenue, a 50 percent to 75 percent reduction from current law. Gas efficiency programs would be capped at 1.5 percent of rate revenue, a 70 to 80 percent reduction.

The Iowa Environmental Council also pointed out that the bill

Allows all customers to opt out of a utility energy efficiency plan if the plan at the time of approval by the Utilities Board does not meet the threshold of at least 1 under the ratepayer impact test. The ratepayer impact test is the worst test the state can use. It sets up a hostage situation where, in order to meet the test, a utility will have to choose between either fewer effective energy efficiency programs or allowing all customers to opt out.

In addition, municipal utilities and rural electric cooperatives would no longer be required to have cost-effective energy efficiency plans.

Under Senate File 2311, our state would go from being a leader in energy efficiency for 25 years to near the bottom of the pack, compared to other states. The fallout is easy to foresee:

2. Iowans would see higher utility bills.

As Hogg and Bolkcom highlighted during the Senate debate, energy efficiency programs have saved Iowa consumers hundreds of millions of dollars a year. Mandelbaum explained why:

Energy efficiency helps keep utility rates low and stable for all customers, even those that do not choose to participate directly in the programs. When utilities build or purchase energy resources, they pass the cost along to customers. Energy efficiency works to meet new energy demand by getting existing customers to use less energy so that increased demand created by new customers can be met without new generation or by delaying the need for that new generation.

Helping pay for the cost of energy efficient technology is a cheaper way to meet energy needs, so eliminating energy efficiency programs would increase costs for all customers by causing the utility to invest in more expensive energy generation. In addition, customers who participate directly in energy efficiency programs get an additional benefit of reducing their energy use and utility bills further.

Republicans like Senator Jake Chapman have claimed that energy efficiency programs are a “secret tax,” hidden from consumers on utility bills. They have suggested that consumers could save money by being able to opt out.

Iowa Consumer Advocate Mark Schuling provided a reality check on April 30. Hours before the Senate debated this bill, Schuling warned,

“Energy efficiency has saved millions of dollars in energy savings and benefits all customers with lower rates. It has added thousands of jobs in energy efficiency across Iowa. . .. As passed by the House, SF2311 is a utility bill good for utilities that will result ultimately in higher rates for customers.”

That predictable outcome is the primary reason the AARP lobbied against Senate File 2311. That organization has long opposed policies that would increase utility bills for seniors, many of whom live on fixed incomes.

For those who enjoy going into the policy weeds, I recommend reading Schuling’s full statement on Senate File 2311. The mission of his office is “To represent Iowa consumers and the public interest in all forums with the goal of maintaining safe, reliable, reasonably-priced, and nondiscriminatory utility services for all consumers in all market settings while informing and educating the public on utility related issues.”

3. The bill would undermine solar energy development.

Iowa is widely known to be a major producer of wind-generated electricity, but many don’t realize solar “has the potential to play a much more significant role in Iowa’s energy portfolio.”

From 2014 to 2015, Iowa’s distributed solar capacity grew 32 percent according to data from the U.S. Energy Information Administration, placing it ahead of many Midwestern states including Illinois, Minnesota and Wisconsin. At the end of 2016, Iowa had an estimated 45 MW of installed solar including distributed solar and utility solar.

While solar is growing in Iowa, it has yet to meet its full potential. Iowa ranks 16th in technical potential for solar photovoltaic (PV) energy production and has the potential to build over 4,000 GW (GW) of solar – enough to power half a billion homes annually and meet Iowa’s current electricity needs 150 times over.

The initial draft of Senate File 2311 would have allowed investor-owned utilities “to discriminate against solar customers and charge them separate and higher rates”–a huge obstacle for consumers. Floor manager Michael Breitbach dropped that section from the bill during the first Senate debate in March.

The House amendment took another small step in the right direction by eliminating a proposed new energy efficiency fee on solar customers. That change convinced the Iowa Pork Producers Association to switch from “against” to “undecided” on the bill, which in turn helped deliver some Republican votes in the lower chamber.

Unfortunately, Senate File 2311 would allow municipal utilities to charge discriminatory rates to customers who install solar panels. That’s one of many concerns raised by environmental groups and why the Iowa Solar Energy Trade Association remained opposed to the bill.

4. The bill is bad for Iowa businesses.

An estimated 20,000 jobs in Iowa could be threatened by undermining energy efficiency programs, so it’s no surprise trade groups like the Greater Des Moines Heating & Cooling Association and Plumbing Heating & Cooling Contractors of IA opposed it. But the damage done would extend far beyond businesses that install energy-efficient equipment or solar panels.

In February, tech giants Apple, Facebook, Google, and Microsoft all registered against Senate File 2311, largely because of language that would have allowed investor-owned utilities to adjust rates without approval by the Iowa Utilities Board. When House floor manger Gary Carlson agreed to revise the bill to require board approval for rate adjustments, the tech companies were placated and changed their registrations to “undecided.” That shift brought some Republican lawmakers around, helping Carlson find the votes he needed.

From where I’m sitting, the tech companies missed the bigger picture. Data centers are energy hogs. Low electricity rates attracted those companies to Iowa. Gutting energy efficiency programs will cause all consumers to pay more for electricity, whether or not utilities are forced to seek formal approval from the state regulator. Higher electricity costs will be bad for businesses of all sizes. Why else would the Iowa Landlord Association or Iowa Real Estate Investors Association lobby lawmakers on an energy bill?

Furthermore, while Carlson made a small concession in his manager’s amendment, the bill as a whole still “includes numerous provisions that weaken the oversight of the IUB over monopoly utilities in Iowa,” according to analysis by environmental advocates.

Reynolds has substantive grounds to reject this bill. But even if she doesn’t care about policy, she should veto Senate File 2311 to improve her election prospects.

5. The bill goes against a signature Reynolds accomplishment.

As lieutenant governor, Reynolds chaired the group that drafted the Iowa Energy Plan, released in December 2016. The plan devoted a major section to “Energy efficiency and conservation.” Excerpts:

As a result of the state’s commitment to renewable energy and its low energy prices, Iowa has a racted major tech companies to the state including Google, Microsoft, and Facebook. […]

In addition to the state’s success with renewable energy, Iowa has long been considered a national leader in energy efficiency with comprehensive energy efficiency programs in place since 1992. The Iowa Utilities Board (IUB) has determined that for the period spanning 2009-2013, the state saved approximately 1.4 percent of retail electricity sales through the implementation of energy efficiency programs, while returning $2-$3 in benefits for every dollar invested.2 At the same time, Iowa’s investor-owned utilities have maintained some of the highest customer satisfaction scores in the U.S. and have consistently ranked at the top of the list for Midwestern utilities.3 These energy efficiency programs have increased consumer and business knowledge of energy efficiency, resulted in countless projects being completed, and have provided additional opportunities for investment.

While Iowa has continued to invest in clean energy technologies the state continues to benefit from some of the lowest energy costs in the nation. In 2016, Iowa was ranked as the third least expensive state overall for energy prices4 and the ninth least expensive state for electricity prices.5 This is particularly evident for the industrial sector, where manufacturers and processing plants benefit from electric rates that are 19 percent below the national average.6

James Q. Lynch reported on a May 2 press conference organized by advocates who oppose the bill.

“I don’t know why lawmakers would put her in this situation,” Amanda Zwanziger, a member of the governor’s Iowa Energy Plan working group, said Wednesday about Senate File 2311, which majority Republican lawmakers passed and sent to the governor.

The bill, she said, does the opposite of the plan’s call for increasing energy efficiency and decreasing the operating costs of buildings.

Zwanziger said she is holding out hope of a veto because, after working on the Iowa Energy Plan that Reynolds has praised, “I know where her priorities lie, and it’s been in encouraging growth in the energy-efficiency space.”

Reynolds has often touted her work on the Iowa Energy Plan. During her first speech as governor last May, she named “innovating Iowa’s energy policy” as one of her top four priorities. Skeptics like me have never bought into the idea of Reynolds as a policy wonk. By blocking this bill, the governor could show her critics that she understands this issue and wasn’t just mouthing well-rehearsed talking points.

6. A veto would show Reynolds isn’t a tool of big business.

The lobbyist declarations indicate who would be helped and hurt by Senate File 2311. Investor-owned utility companies and groups representing municipal utilities or rural electric cooperatives are the only entities registered in favor of the bill. A large and varied coalition opposed the legislation.

In a worrying sign, the governor spoke at a May 2 conference sponsored by the Iowa Utility Association. That’s the trade group for MidAmerican Energy and Alliant Energy, the investor-owned utilities which have monopolies to serve a large percentage of Iowans. It’s also worth noting that Alliant’s top lobbyist is Jeff Boeyink, who managed the 2010 Branstad/Reynolds campaign and served as Terry Branstad’s chief of staff during Reynolds’ early years as lieutenant governor.

Signing Senate File 2311 would reinforce the narrative that Reynolds cares more about big business and their profits than about ordinary Iowans. A veto would show she can stand up for what’s right, even when powerful interest groups and well-connected lobbyists are on the other side.

To urge Reynolds to veto Senate File 2311, use this electronic contact form or call the governor’s office at 515-281-5211 as soon as possible. She will act one way or another on May 4 or 5.

UPDATE: Reynolds signed the bill on May 4 with no ceremony and without releasing a written statement. The same afternoon, she invited the media to watch her sign the most restrictive abortion law in the country, surrounded by Christian school children and cheering conservatives.

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