The Clallam County PUD Board of Commissioners unanimously adopted a resolution opposing Initiative 732, the Carbon Pollution Tax, at their May 9, 2016, Board meeting.

Commissioners received a presentation about I-732 at their May 2, 2016, meeting where the impacts to the utility were discussed.  I-732 will be on the November 2016 ballot and ultimately taxes carbon emissions.  Because of the way the tax will be applied, and because the PUD’s current fuel mix is 98-99% carbon free, the impacts of I-732 to the utility would be significant.

The I-732 carbon tax would start in 2017 at $15 per ton of carbon emissions, rise to $25 in 2018 and increase by 3.5% plus inflation annually until it reaches $100 per ton in 2016 dollars.

It would impact what we pay for electricity. The PUD projects the cost of power would increase:

• ·         July 1, 2017-July 1, 2018 (when the tax is $15 per ton) between $500,000 and $1,800,000.
• ·         When the tax rises to $25 in 2018 the cost is projected to range between $900,000 and $3,000,000.  The tax would continue to go up from there.
• ·         In 2025-2026 the tax liability is projected to be between $1,200,000 and $4,100,000.

The reason for the cost increase is because the initiative assigns a carbon liability for market purchases of electricity made by the Bonneville Power Administration and included in the electricity the PUD buys at-cost from BPA to serve customers.

The initiative would affect public utility districts, including Clallam PUD No. 1, by applying the carbon tax to certain resources used to serve customers.  The tax is imposed on the consumer of electricity. For Clallam PUD No. 1 that means it is imposed on PUD customers using electricity. The Initiative requires the seller of that electricity (the PUD) to collect the tax from the consumer (the PUD customer). However, the PUD is liable to the state for payment of the tax. Ultimately the PUD would have to ensure the taxes are collected and paid to the state.

Commissioners considered the impacts of I-732, in part, because, while the vast majority of the electricity used to serve PUD customers is carbon free, again, the way the initiative is written, it would assign a carbon (coal and other fossil fuels) liability to a portion of PUD resources that are purchased from a pool of electricity made up of a variety of resources (everything from wind and solar to natural gas and coal).

Additionally, Commissioners were concerned about the “pancaking” of other carbon reduction policies in Washington and how those, all totaled, might impact the utility.  There are two carbon reduction policies currently being developed in Washington for implementation that would likely impact PUD electricity resources.  It is unknown exactly how the policies being developed would correspond with I-732 should it be enacted.

The state is also developing a “Clean Power Plan” to meet federal carbon emissions reduction requirements for electricity generation. The Clean Power Plan is due to the Environmental Protection Agency by September of 2016 but the state may request an extension until 2028.  Compliance would start in 2022.  The plan is in draft form.  Lastly, the state is developing a “Clean Air Rule” intended to help the state meet carbon reduction goals set by the 2008 legislature.

The PUD remains committed to serving its customers and providing factual information about the impacts of policies on the utility, as they relate to the PUD’s Mission of “Providing reliable, efficient, safe and low-cost utility services in a financially and environmentally responsible manner.”

For additional information about Clallam PUD, visit www.clallampud.net.