Lawmakers hash out restructuring of troubled Energy Department 

“These recommendations are a work in progress,” Holvey said. “It’s not something were trying to shove down your throats; it’s something we want your help in completing.”

The Republicans nonetheless suggested many of the recommendations are too weak or off base. They said the agency failed to provide performance measures or outcomes to evaluate its programs, and they argued Democrats are trying to expand the agency’s mission to forward the state’s climate-change agenda.

“I don’t think we’ve dug deep enough,” said Sen. Alan Olsen, R-Canby. “We just peeled off the top layer of the orange…. Our mandate was to conduct a thorough review…. But I will add for the record that I don’t think we did.”

One thing was clear from Friday’s meeting: The notion that the Department of Energy might be dissolved, with its work distributed to other agencies, is off the table. The first finding in the co-chair’s report was that there was a continuing need for the agency but that it should be overseen by a new independent Energy and Climate Board.

And that’s where the discussion went sideways.

“I certainly didn’t know anything about a climate board,” said Sen. Doug Whitsett, R-Klamath Falls. “Unless I was sleeping, it was never addressed.”

Democrats on the eight-person committee say monitoring carbon emissions is inextricably linked with the agency’s core mission of ensuring a safe, reliable and affordable energy supply.

They contend the agency ought to provide impartial policy and technical advice to the Legislature and the governor on climate issues and coordinate that work with the Department of Environmental Quality and the Department of Transportation.

“I don’t know how (the energy agency) can fulfill its statutory duties without considering greenhouse gases,” Holvey said.

Republicans questioned whether the agency has that policy expertise today, and said it had proven singularly ineffective at tracking energy savings and greenhouse emission reductions from past programs.

They didn’t object to the agency considering climate issues, but said elevating them alongside energy in a new mission and governing board would duplicate work at other agencies and risk turning the department into a politicized advocacy organization.

Among the other problems and recommendations discussed Friday:

Tax credits: The agency’s mismanagement of tax credit programs has been the subject of controversy for nearly a decade. The chairs recommended allowing its Energy Incentive Program and Biomass tax credit to sunset in 2018, as currently scheduled.

They suggested continuing the residential energy tax credit for two more years while the agency studies replacements more likely to promote efficiency and reliability. The agency would have to track and report the amount of energy produced or conserved, along with the costs and greenhouse gas reductions for all incentives provided.

Rep. Cliff Bentz, R-Ontario, said the committee was formed because of problems stemming from the Business Energy Tax Credit Program. That experience, he said, should be reflected high in the committee’s report, particularly as the state pursues ambitious and financially complicated measures like its low carbon fuel standard and a carbon cap-and-trade program.

“What did the BETC actually buy for the state of Oregon?” Bentz asked. “There was so much free ridership. What did we pay as a state for the CO2 reduction? It would sure would be interesting to see what we got.”

He also said it’s critical that “our Department of Justice follows up” on any illegal activity or questionable credits.

The committee agreed to beef up the report with lessons learned from the tax credit debacle, recommend clawing back incentive money when possible, and urge the Justice Department to aggressively investigate possible fraud identified in the investigative audit.

Small Energy Loan Program: Because of a string of bad loans, this long-running program faces a cash flow problem, with further lending suspended.

Incoming payments from borrowers are insufficient to cover the repayment of bonds issued to fund the loans past 2019 or 2020. At that point, taxpayers will have to bail out the program by supporting those debt payments. The deficit is projected at $16 million, but could grow if more loans go bad.

The co-chairs recommended returning the loan program to its original mission and capping loan sizes. They suggested transferring it to the Oregon Business Development Department, which may have more expertise in loan underwriting.

The chairs also said the Legislature should plug the program’s shortfall by repealing another unused agency loan program and transferring its $3 million in remaining funds to the small energy loan program.

Whitsett said Friday the committee needed more answers before going that direction. He wants to consider selling the remaining loan portfolio to an outside lender, using the proceeds to help pay off the outstanding bonds.

A sale of the loan portfolio could come at a significant discount to its current balance, however, increasing the shortfall taxpayers would have to cover. Whitsett said those costs need to be set against the program’s administrative costs and the risk of more loan defaults

“What is the lowest-cost exit strategy for the taxpayers of Oregon?” he asked.

Beyer said the committee might need to reach out to the Oregon Treasury or the Business Development Department to study options.

Energy Facility Siting Council: This seven-member board is appointed by the governor, is staffed by the Department of Energy, and makes permitting decisions for new power plants, wind farms and other energy generation facilities.

The council has been criticized for heavy-handedly rejecting public input, repeated conflicts of interest and bias in favor of energy companies. Critics say agency staffers write, apply and interpret the rules, control the hearings process, and end up shutting citizens out of siting decisions that directly affect them.

The chairs want the agency to convene a workgroup on the siting council, particularly aimed at improving public participation and the process for contesting cases.

Energy Supplier Assessment: This assessment is imposed on the gross receipts of energy suppliers of all stripes, from utilities to petroleum companies, and funds about a third of the energy department’s operating budget.

Utilities say they get little to nothing in return, calling the assessment a highly variable and illegal tax that exempts some renewable energy providers.

The chairs are recommending, again, that the agency convene a work group to address issues with the assessment and recommend changes.