Climate change
Otter Tail Power Company's principles for public policy
Background
We recognize growing concerns regarding climate change. Since 1994, when Otter Tail Power Company through EEI joined the U.S. Department of Energy in the Climate Challenge, the electric utility industry has led all other industrial sectors in reducing greenhouse gas emissions on an intensity basis (lbs./mwh generated). Through various programs now under way—including conservation and demand-side management programs, renewable energy development, power plant efficiency improvements, transmission siting processes, and participation in industry research—our commitment continues.
We acknowledge the public concern about greenhouse gas emissions. Success in reducing greenhouse gas emissions, while maintaining the reliable and reasonably priced electricity supply vital to our economic well-being and national security, will require our company, our industry, and state and federal policy makers to make an aggressive and sustained commitment to developing and deploying a full suite of technology options, including:
- An intensified national commitment to energy efficiency, including advanced efficiency technologies and new regulatory and business models.
- Accelerated development and cost-effective deployment of renewable energy resources.
- Advanced clean coal technologies (e.g. supercritical pulverized coal and IGCC technologies).
- Continued development of carbon-capture techologies and storage for all types of fossil-fueled generation.
Otter Tail Power Company's public policy position
Our mission is "to produce and deliver electricity as reliably and economically as possible to the balanced benefit of customers, shareholders, and employees and to improve the quality of life in the areas in which we do business." To that end, although we welcome the debate on global climate change in Congress and the state legislatures, we are concerned that a rush to legislate could lead to unintended consequences resulting in a significant cost impact to consumers of electricity, create market imbalances, and negatively impact both the reliability of the nation's electricity system and, potentially, the environment itself.
Our goal is to cultivate informed decision making, not to slow the progress of global climate change legislation.
Federal action
We believe that greenhouse gas solutions should come from a uniform and coordinated federal-rather than regional, state, or local-approach. We support federal action or legislation to reduce greenhouse gas emissions that:
- Involves all sectors of the economy and all sources of greenhouse gas.
- Employs market mechanisms to secure cost-effective greenhouse gas reductions and an effective economic safety valve to provide for alternative actions if costs get too high.
- Ensures stable, long-term public funding to support the development and deployment of technologies that reduce or sequester greenhouse gas emissions. Government funding levels should be commensurate with the gravity of the issue.
- Ensures achievable compliance timelines. They must be consistent with the expected development and deployment timelines of needed technologies.
- Requires global solutions and enforcement, including appropriate participation by developing nations such as China and India.
- Provides for the use of a broad range of domestic and international greenhouse gas offsets.
- Recognizes that modifications to reduce or capture CO2 from existing generating facilities should not force other changes to unrelated equipment or operations that may be required by existing laws.
- Provides for the determination of approved CO2 sequestration methods and indemnification of entities using approved sequestration methods. Potentially, the federal government could develop sequestrations standards and/or federal repositories for CO2.
- Recognizes early actions and investments made to mitigate GHG emissions.
State action
We support state action or legislation to reduce greenhouse gas emissions that:
- Recognizes that standards should not be ownership- or location-specific. The standards should consistently apply to investor-owned utilities, cooperatives, and municipals regardless of the state in which they're located.
- Recognizes that renewable standards should not be technology-specific. The standards should not be different for wind, biomass, or methane.
- Recognizes that renewable standards must include customer protection for cost increases, system reliability, and transmission constraints.
- Recognizes that CO2 reduction projects, transmission development, and renewable project costs are in the public interest and therefore, the company should be allowed to automatically recover those costs, including construction work in progress (CWIP).
- Recognizes the need to study the economic impact to residents and businesses of any state greenhouse gas reduction, energy-efficiency, or renewable standard requirement.
- Avoids additional penalties from increasing greenhouse gas emissions that occur to support other provisions of legislative mandates (e.g. ethanol plants and other renewable energy projects that may increase demand for electricity).
- Ensures that costs associated with state-specific requirements that are in excess of multi-jurisdictional least-cost alternatives are assigned to the customers of the state making such requirements.
Otter Tail Power Company's CO2 regulation position
It's clear that CO2 regulation, such as cap and trade or carbon tax, has the potential to significantly increase our customers' energy bills. That's why we will encourage legislative measures that help protect our customers from significant cost increases.
Minimizing CO2 regulation cost impact
Our intention is to maintain CO2 emissions at our company's 2005 levels by 2020 and to oppose any tax or allowance costs on CO2 emissions below those levels. We've based our target levels on 2005 because most federal bill proposals have used 2005 as a baseline year and because it may not be cost effective to reduce CO2 levels below those of 2005 in absence of federal legislation.
Mix of generation resources
Using a mix of generation resources helps to minimize long-term cost increase risk to consumers due to potential CO2 regulation. If we have the option of a least-cost Integrated Resource Plan that reduces CO2 emissions without assuming CO2 regulation costs, we will implement that plan. But we aren't currently planning to make additional capital investments to reduce our CO2 emission levels below those of 2005 until we see legislative or regulatory certainty regarding such emissions.
Equitable CO2 reduction
Equitable CO2 reduction by all sectors of the United States economy and by all industrialized nations is important. Our customers must be able to fairly compete locally, regionally, nationally, and internationally. Steps to reduce CO2 emissions should be handled in a collaborative manner with other industrialized countries. Legislators and regulators must not place our customers' competitiveness at risk.
