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Kentucky Resources Council, PO Box 1070, Frankfort, KY 40602 Phone [502] 875-2428

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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

KRC Opposes Beshear Administration's Energy Bill  Posted: February 28, 2009

Dear Representative Adkins:

I am writing to express directly my reservations concerning the Administration's energy bill, HB 537. Tom may have conveyed my difficulty with several provisions in the bill, but I wanted to convey them directly to you since you were not able to attend the committee meeting.

I take no pleasure in having to oppose HB 537, particularly since you are carrying the measure as a courtesy for the Administration, since with your leadership we have made great strides in energy policy in the past two sessions. Unfortunately, HB 537 fails to move the Commonwealth forward in critical areas, and represents a real opportunity missed at a time when we can ill-afford to be timid.

You will recall that the Public Service Commission, which was at the time a part of the Environment and Public Protection Cabinet, was directed to study and make recommendations to the General Assembly by July 2008 on a renewable and energy efficiency portfolio standard. Rather than moving the regulated utilities forward in diversifying their portfolios to incorporate demand side measures and renewables through adoption of a renewable portfolio standard, HB 537 calls for yet more study on the issue.

We simply do not have the luxury of additional study of a fairly straightforward issue that has been successfully incorporated into over a score of state's utility statutes. With a statewide portfolio 98% composed of power plants reliant on coal and petcoke, and a carbon mandate looming in the near horizon, absent some more robust fuel mix our electricity rates will soar once carbon emissions are monetized. A REPS is a reasonable, cost-effective method of stabilizing market demand and attracting private and utility investment in renewables.

A number of the Investor-Owned Utilities already function in states with REPS, and adjustment to one in Kentucky is inevitable given that Congress will very likely impose a federal standard within the next year. It is time for Kentucky to adopt a standard, and to provide for cost recovery for reasonable measures taken by utilities to meet the standard.

The bill also includes an unjustified additional tax subsidy to grain-based ethanol, by allowing unused cellulosic ethanol credits to raise the existing cap on grain-based ethanol credits. Grain-based ethanol, which already consumes the lion's share of federal and state biofuel subsidies, is not part of the solution of a sustainable alternative fuel future. The continued inclusion of that measure also prevents this bill from being revenue neutral, since inasmuch as there were no takers for the cellulosic ethanol credit last year, it will in all likelihood mean that the ceiling on grain-based ethanol will be raised through this rollover provision.

Finally, the language in HB 537 regarding the mandate to the workgroup on legal issues affecting carbon sequestration, contains some offensive and inappropriate language, where it identifies one of the priorities the "avoidance of lawsuits based on nuisance, obstruction and harassment."

First, existing laws and supreme court rules address and provide protections against and penalties for frivolous and nuisance lawsuits. Second, the language presupposes that legal challenges in this difficult and uncharted area are likely to be for illegitimate purposes. Avoidance of lawsuits is best accomplished by carefully, thoughtfully, and thoroughly working through the legitimate concerns of landowners, mineral owners, ratepayers and the public at large (including future generations) and creating a just and sound framework; not in presupposing that a lawsuit brought is of necessity intended to harass or delay a project.

As you know, I stand ready to work to build on the great strides that the General Assembly has taken in these last two sessions. I hope that the Administration will move more boldly in the future to help protect our Commonwealth's ratepayers by diversifying our energy portfolio, and to better position our state for the coming carbon-constrained future.

Fitz
(Tom FitzGerald)
www.kyrc.org


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