Berkshire Hathaway Energy advances utility legislation despite Cantwell pushback

By Hannah Northey | 06/01/2015 07:12 AM EDT

Berkshire Hathaway Energy appears to be successfully pushing legislative language through both chambers of Congress that would scrap federal requirements for utilities to buy power from small renewable and cogeneration units.

Article updated at 11:40 a.m. EDT.

Berkshire Hathaway Energy appears to be successfully pushing legislative language through both chambers of Congress that would scrap federal requirements for utilities to buy power from small renewable and cogeneration units.

But Warren Buffett’s multinational conglomerate will have an uphill battle getting that language past the Senate Energy and Natural Resources Committee’s top Democrat, Maria Cantwell of Washington.


Cantwell has made clear she plans to work against Berkshire Hathaway Energy’s (BHE) proposal, which she said amounts to an attempt by the company to bolster its position in the Western coal markets, where it owns both rail lines and generators. Cantwell also said she’d rather spend her time on issues like battery storage than trying to create a market that needs policing.

"These guys are trying to deregulate a coal market where they make a lot of money coming and going," Cantwell said during an interview last month. "We’ve obviously had trouble with these very creative markets before, and when you have cheap, affordable, cost-based public power, you don’t want people to manipulate the markets."

At the center of the debate is a new "accountability" subtitle the House Energy and Commerce Committee unveiled this week to be included in the lower chamber’s larger energy bill. The House language mirrors an element of a proposal that BHE floated at a Senate hearing earlier this month regarding federal rules for small power production and cogeneration. Specifically, the House draft clarifies that renewable and cogeneration facilities at or below 20 megawatts have access to the markets, thereby eliminating an obligation for utilities in organized markets to buy power from those generators. But the House draft stopped short of addressing other provisions within BHE’s proposal. The subtitle will receive its first airing at a House Energy and Commerce Subcommittee on Energy and Power hearing this week (see related story).

The language would amend the Public Utility Regulatory Policies Act of 1978, a law aimed at bolstering renewables and efficiency by requiring utilities to buy power from "qualifying facilities," including cogeneration plants that use steam or heat from industrial and commercial processes, as well as solar, wind, biomass, waste and other facilities that are 80 megawatts or less. The Federal Energy Regulatory Commission has overseen the treatment of qualifying facilities for decades.

PURPA has triggered backlash in the past from utilities opposed to forced purchase of power, and the House language mirrors part of a proposal that Jonathan Weisgall, Berkshire Hathaway Energy’s vice president for legislative and regulatory affairs, laid out in prepared testimony at a Senate ENR hearing on May 14.

Weisgall said that BHE’s decisions in the renewable markets are being driven by state clean energy goals, technological advances and U.S. EPA rules — not PURPA. Forcing utilities to buy millions of megawatts from smaller units at higher prices that aren’t subject to the same scrutiny is triggering higher prices and reliability issues, he said. Weisgall noted one contract could force PacifiCorp’s customers to incur an incremental $1.1 billion over the next decade for unneeded power.

To modernize the law, Weisgall said utilities should be able to participate in a Western energy imbalance market and forgo the requirements of PURPA.

The energy imbalance market, which began in November 2014 and experienced price fluctuations at the outset, gives Western buyers the option to purchase electricity in five-minute increments. That is meant to allow utilities to draw on resources regionwide that may be cheaper than their neighboring plants on reserve and ready to ramp up production to compensate for declining wind and solar (EnergyWire, March 18).

But the House draft doesn’t make mention of energy imbalance markets.

A veteran energy attorney whose clients include both utilities and "qualifying facilities" said on background that the House language would "effectively end" PURPA for utilities in organized markets. "What’s really happening here is the revenue from a company-owned plant goes to the utility, and the revenue from a QF goes to a third party," he said. "One of the enumerated purposes of PURPA was to overcome traditional reluctance of utilities to buy power from and sell power to non-utility generators. And I think that reluctance is still there."

In the upper chamber, Sen. James Risch (R-Idaho) also took aim at PURPA’s requirement for utilities to buy power from cogeneration or small renewable energy facilities by introducing S. 1037, which would allow utilities to avoid the "mandatory purchase obligation" if their state regulators determined there was no demand for additional power. He said the obligation provides additional subsidy for renewable energy projects that already receive tax credits and forces utility customers to pay above-market rates for power they do not need.

Whatever language is up for discussion, Cantwell has made clear she’s not on board.

The senator blasted Weisgall at the hearing last month, noting that the company owns BNSF Railway Co. — the largest rail carrier of Powder River Basin coal — and coal generators, including MidAmerican Energy Co., PacifiCorp and NV Energy. "Isn’t it the case that obviously getting rid of this PURPA requirement would just greatly benefit the company financially on your profit margin by reducing competition for central station generation?" Cantwell asked Weisgall.

Weisgall rejected the senator’s assertion, defending the energy imbalance market as a way to usher more renewables onto the grid, lower power prices and reduce emissions. He also defended BHE’s dedication to clean energy, saying the company plans to reduce its footprint in coal from 35 to about 26 percent, and supports renewables at the right cost. In prepared testimony, Weisgall noted that BHE has invested $8 billion in wind energy in Iowa, Oregon and Washington, and another $8 billion in BHE Renewables. The company also operates 10 geothermal plants.

But Cantwell pushed on, accusing Berkshire Hathaway of trying to game the markets. Cantwell also made clear her constituents are opposed to the energy imbalance market.

"I can tell you one big group that doesn’t support it, and it’s the Pacific Northwest," Cantwell said.

Cantwell’s comments reflect a pushback in the Northwest to the creation of an energy imbalance market. George Caan, executive director of the Washington Public Utility Districts Association, said during an interview last week that the majority of consumer-owned utilities in the Evergreen State are "highly reluctant if not totally opposed" to the energy imbalance market and believe a less aggressive mechanism is more appropriate to integrate renewables onto the grid.

Her comments are also informed by the Western energy crisis, which bubbled over into her first year in office.

Cantwell came to the Senate in 2001, as California’s electric grid was experiencing frequent blackouts that would later be linked to market manipulation by the energy trading firm Enron, which would later declare bankruptcy. Cantwell dug into the investigation of Enron, whose operations extended into her home state, and was eventually instrumental in securing the release of audiotapes of traders joking about the havoc they were causing.

"The Pacific Northwest is not going to support another cooked-up scheme from California ISO about energy markets," Cantwell told Weisgall at the hearing. "We’re not getting screwed over again by another Enron-style ‘look over here but don’t pay attention to what’s going on over here.’"

Reporter Rod Kuckro contributed.