By

Paula C. Soos, Director, Government Relations
Ogden Energy Group, Inc.

October 6, 1998

Good morning. My name is Paula Soos. I am the Director of Government Relations at Ogden Energy Group, Inc. I'd like to thank the Chairmen and all the members of the task force for giving me the opportunity to speak today about the waste to energy industry and to share our thoughts on how the Commonwealth should promote renewable energy in its restructuring legislation.

Ogden Energy Group owns and operates two waste-to-energy facilities in Northern Virginia. These two facilities, in Alexandria and Lorton, convert nearly 4,000 tons per day of trash into 100 MW of electricity, enough to power 100,000 homes.

We believe that the task force should include in the proposed legislation that it is preparing for the Joint Subcommittee: (1) language clearly defining waste to energy as a renewable energy source and (2) language establishing a renewables portfolio standard or similar mechanism.

Why Is A Renewables Policy Necessary?

Federal law currently promotes renewable energy under the Public Utility Regulatory Policies Act (PURPA). This law was established in the mid-1970s when Congress realized that the country needed to reduce its reliance on foreign oil and promote indigenous, sustainable energy sources. PURPA, however, will no longer exist in a restructured electricity market -- its repeal will likely be part of comprehensive federal legislation -- and renewable energy sources will then be forced to compete with less environmentally friendly fuel sources solely on the basis of price.

To maintain the same level of renewable energy produced in the Commonwealth and to promote greater use of renewable energy sources, Ogden believes that the General Assembly should include language in its restructuring bill calling for a renewables portfolio standard or similar mechanism. The benefits of such a policy are numerous.

More diverse fuel mix: Promoting renewable energy in the Commonwealth will provide Virginia consumers with greater economic security. Renewable power, because is relies on non-depletable, indigenous energy sources, acts as an insurance policy against becoming overly reliant on, and vulnerable to, the potential price fluctuations or supply shortages of a single fuel. An example of a state that has paid the price for relying too heavily on one fuel source is Connecticut, which suffered occasional brown-outs when their nuclear power facilities had to be shut down.

Greater reliance on indigenous, sustainable fuel sources: Promoting renewable energy sources, including wind, solar, hydroelectric, biomass, municipal solid waste, and geothermal power, will help reduce the Commonwealth's and the country's reliance on foreign oil. It will also reduce our reliance on depleting non-renewable fossil fuels.

Reduction of wastes: Using more renewable energy in the Commonwealth will reduce the amount of residential and agricultural waste going into landfills and convert that waste instead into useable electricity.
Compatibility with other states: Most states that had passed restructuring legislation or regulations have included a section promoting renewables. States such as California, Connecticut, Illinois, Maine, Montana, Massachusetts, New Hampshire, Nevada, Rhode Island, and Vermont, to name a few, have all set up renewable portfolio standards or renewable energy funds, or promoted renewable energy sources through their systems benefit charge. Without similar language in Virginia, Virginia companies will be at a disadvantage when competing with their counterparts in other states.

Compatibility with federal legislation: While Congress is still working on its restructuring legislation, nearly all of the proposals have included language promoting renewable energy sources. Without a renewables policy of its own, Virginia will be forced to accept policy mandates from Congress in this area.

What Is A Renewable Portfolio Standard?

A renewables portfolio standard (RPS) is a market-based policy to ensure that the benefits of renewable energy -- wind, solar, hydro, biomass, municipal solid waste, geothermal, etc. power -- will not be lost as electricity markets become more competitive. An RPS ensures that a minimum amount of renewable energy is included in the energy portfolio (energy mix) serving each state. There are a number of mechanisms that the Commonwealth can use to achieve the targeted portfolio level, including:

Requiring the distribution company to maintain a minimum level of renewable power in the electricity it distributes to its customers;

Requiring the independent system operator or power exchange to maintain a percentage of renewables in the "pool" equal to the portfolio standard; or

Requiring each power supplier to achieve and maintain, through self-generation or the purchase of renewable energy credits, a minimum level of renewable power in its energy sales.

An RPS approach is analogous to many successful market-based environmental laws, including the Clean Air Act Amendments of 1990, in which Congress set a declining national sulfur emissions cap and created tradable sulfur dioxide allowances.

Waste To Energy As A Renewable

Waste to energy has been considered a renewable energy source under federal legislation since the first drafts of PURPA in 1977. Municipal solid waste, which is comprised of primarily organic biomass, is not only indigenous -- trash-hauling costs often limiting a facility's waste shed to a discrete geographical area -- it is sustainable and non-depletable. (There will always be more trash to be disposed of.)

How Does An RPS Affect Local Communities?

Waste-to-energy facilities are one of the most highly regulated power generators under the Clean Air Act. To keep up with these ever-changing federal laws, communities such as Fairfax County, the City of Alexandria, and Arlington County may need to spend additional dollars in the future to keep their WTE facilities on the cutting edge of environmental technologies. One of the revenue sources they can use to finance retrofits is their energy sales. An RPS would provide them with a guaranteed market for their power and help them cover the costs of future changes in federal law without necessarily having to raise taxes on residents or increase garbage disposal rates.

As the General Assembly works to develop a new market for electricity in Virginia, policy makers need to remain aware of the dual social purpose of WTE facilities. While WTE facilities generate clean, renewable energy, their primary focus is to safely dispose of municipal solid waste. Policies that fail to recognize this may have the unintended consequence of transferring the cost of electricity restructuring from large industrial users to residential ratepayers through their garbage bills.

Thank you very much for allowing me to testify today. I would be happy to work with you on formulating language that addresses these issues.