January 6, 2010

Dear Roy and Tia:

Thank you for the opportunity to comment on the draft legislation arising from the work of the Task Force on Global Warming. As you know, I have spent considerable time presenting the task force recommendations to our membership and many other organizations representing rural Wisconsin. Most expressed a willingness to maintain a positive dialogue about the Task Force’s recommendations.

Having participated in the Task Force’s work from the beginning—and having co-chaired its Agriculture and Forestry Work Group—I was happy to help advance the process to the crucial next step, converting recommendations into practical legislation codifying agreed-upon commitments and setting forth an orderly path toward achievable goals.

The Clean Energy Jobs Act as drafted in LRB 3883/1 appears to fail in several ways to meet those criteria. Here are a few of the more problematic issues we have identified:

• A straightforward economic assessment of the draft legislation is needed in order to properly evaluate the new costs to be incurred against any offsetting benefits. So far, the Wisconsin Policy Research Institute’s research is the only study that looks at specific aspects of Task Force proposals in the draft legislation and it concludes they would have a net negative impact. While the Political Economy Research Institute concludes that Wisconsin could become a green jobs state, this conclusion is based on its own strategies and not those of the Task Force.

Furthermore, a study by the U.S. Department of Energy concludes that similar federal legislation would have a substantial negative effect on manufacturing jobs and a net negative impact on employment for all non-farm sectors over its implementation timeline. It is crucial to know the cost impacts of the renewable portfolio standard, low-carbon fuel standard, and other provisions that are certain to raise energy costs across the board. Construction costs for commercial, residential and agricultural facilities will also rise.

• A related issue is the unknown potential for job gains or losses. I am hopeful there will be a substantive analysis that will determine what the overall impact of the bill will be on the state’s employment numbers and long-term payroll. For example, if the number of green jobs created exceeds the number of jobs lost this is a positive impact. However, scoring by the simple net increase could ignore the varied impact of actual job losses. These consequences must not be overlooked since the draft—understandably constrained by the fiscal realities state government is facing because of the already battered economy—provides no additional resources for low-income assistance or funding to retrain displaced workers

• Presumably for fiscal reasons alluded to above, every recommendation for incentives that would help rural Wisconsin cope with the certainty of a higher cost of living was unfortunately left out of the draft. Our state’s rural residents are already at an income disadvantage and rural areas generally trail urban areas in job creation. For example, what’s labeled as an incentive for agricultural producers to grow bioenergy crops has no dollars appropriated to fund it. Rather, funding is punted to the first day of the next fiscal biennium and the resourcefulness of a Legislature not yet elected. As co-chair of the Ag and Forestry Work Group, I would advise that it will be difficult to ask that constituency to accept the certainty of higher energy prices in exchange for the slender hope that the 2011-12 Legislature will discover a meaningful funding source. Furthermore, other state incentives recommended by the Ag and Forestry Work Group to promote development of distributed generation in rural areas are dropped in favor of electric rate subsidization that will hurt low-income households already having difficulty paying their bills.

• The language I believe most Task Force members understood to be aimed at giving the Public Service Commission greater latitude to allow new nuclear plant construction does not appear to serve the intended purpose. Instead, it appears destined to invite a constitutional challenge, the successful pursuit of which would cause state law to revert to the status quo that we agreed was unacceptable. To achieve the deep cuts in carbon dioxide emissions contemplated by proponents of this legislation—without precipitating a disastrous contraction of Wisconsin’s economy—will be impossible unless this state’s power providers have among their range of viable options emissions-free nuclear energy from newly-constructed plants.

• An additional problem with revising the nuclear “moratorium” as proposed is that the draft (citing here a Legislative Council memorandum of December 8, 2009,) “Delays the effective date of all these changes until after the PSC has initially implemented the enhanced energy efficiency and renewable resource programs and the enhanced RPS identified above.” It is not immediately apparent what span of time will pass before the requirement that these programs are “initially implemented” can be satisfied. But clearly the intent is that the provision delays any change in the status quo. This is at cross purposes with the overarching goal of achieving cuts in greenhouse emissions, since the only currently available base-load generation source that does not produce such emissions—nuclear—is placed in the queue behind generation sources that must be backed up by approximately equivalent fossil-fueled capacity.

• There are additional cost increases beyond the scope of Task Force recommendations, including a domestic generation component for the enhanced RPS, mandated boiler efficiency improvements, expansion of the idle-reduction proposal, creation of an agricultural energy efficiency code and elimination of the cost-to-benefit consideration currently required by the residential energy efficiency code.

• Inclusion in the enhanced RPS of a specified domestic generation component is troublesome. The question needs to be answered whether the prescribed standards are even feasible. The number of suitable in-state sites for wind generation and the availability of other sustainable energy resources are not infinite. It would be unwise to mandate expenditures for renewable generation that is less efficient than similar generation in alternative locations. While the provision is promoted as a job-creator, it’s uncertain how long such jobs would last. What is certain is prices for renewable energy would be higher than they otherwise would have been without this standard.

• Questions about the potentially unconstitutional delegation of authority must be explored. The broad expansions of authority granted to the Department of Natural Resources and Public Service Commission leave Task Force members to support or not support initiatives whose details will be filled in later on. In addition, the Low Carbon Fuel Standard appears to cede authority to the Midwest Governors’ Association and adoption of the California Vehicle Emissions Standard likewise cedes authority to another state’s regulators to make decisions for Wisconsin.

More broadly, questions need to be answered concerning the value of Wisconsin’s single-state approach to issues everyone agrees would be more effectively addressed nationally or, ideally, globally. Conspicuously missing is any quantification of the environmental benefit Wisconsin residents could expect their greater energy cost outlays would achieve if the many challenges set forth in the draft are undertaken successfully. In order to make honest statements regarding draft legislation’s impact on job creation, rural economies, the overall statewide economy and the environment, the proposal and all its components should be carefully analyzed. For these reasons, Cooperative Network is further evaluating the need to commission its own independent study of this proposal.

Thank you for the opportunity to provide input on the draft legislation prior to its introduction. Please let me know if you have any questions.

Sincerely,

William L. Oemichen
President & CEO and Task Force Member