The problem: A Public Utility Commission order late last year putting limits on Schedule 272, an obscure PacifiCorp rate schedule that Facebook has used to claim its large and growing Central Oregon operations are as green as can be.
In a recent PUC filing, Vitesse, Facebook’s subsidiary for its Prineville data center, said the stakes were high.
The Prineville data center is one of the social media giant's largest (on Thursday, the company said the facility would add two more buildings, bringing it to 11 buildings and nearly 4.6 million square feet).
“Vitesse is planning to use Schedule 272 in 2021 to support 100% of its Oregon data center load with renewable energy,” the company said. But the PUC order, it continued, “could significantly disrupt those efforts,” rendering Prineville “Facebook’s only data center in the country without a viable tariff to maintain its commitment to supporting its operations with 100% renewable energy.”
The situation highlights the complex regulatory landscape that companies face in Oregon in pursuing aggressive sustainability goals. Those goals are vital to tech giants, burnishing their public image, helping them retain employees and boosting their standing in the environmental, social and corporate-governance ratings that are increasingly important to investors.
BloombergNEF recently listed Facebook as the world’s third-leading corporate clean energy buyer, trailing only Amazon and Google. But it’s been a struggle in Oregon.
PacifiCorp, a Berkshire Hathaway company, is the PUC-regulated power provider in the Prineville area. The utility is making hefty investments in renewable energy, but about three-quarters of the electricity supplied to its Pacific Power customers in Oregon in 2019 came from fossil fuels, mostly coal.
Four years ago, Facebook’s green-conscious Prineville neighbor Apple went to the extraordinary lengths of ditching its PacifiCorp service, paying hefty exit fees to buy power from new solar and wind power plants developed in Oregon by Avangrid Renewables.
Facebook, meanwhile, agitated for regulatory changes that would give it greater access to renewable energy. It failed in several instances, but finally appeared to get what it needed with Schedule 272, which PacifiCorp calls “Blue Sky Select.”
Schedule 272 had been around since 2004, but in 2017, the PUC accepted an important change, allowing PacifiCorp to say that under the rate schedule, big customers could buy renewable energy certificates from specific power plants.
RECs, in the simplest terms, are evidence that renewable energy has been produced — one is awarded for each megawatt-hour of electricity generated by a renewable power plant. RECs give electricity users a way to claim the “green energy” that flows onto the grid, where its source is indistinguishable.
But among tech’s green leaders, and the organizations that critique their efforts, buying random RECs on the open market is frowned upon. These companies aim to get as close to the source of renewable energy as possible, spurring grid additions — as Apple did in its Avangrid Renewables deals, contracting for RECs “bundled” with energy produced at the newly built Gala solar plant and Montague wind farm.
Facebook didn’t go that far, but has made the case, with
PacifiCorp’s support, that its REC purchases were vital to the utility doing
power purchase agreements with developers of new solar power plants in Oregon.
s a claim that BloombergNEF, which tracks corporate green energy purchases, accepts.
“The thinking is that the utility wouldn't sign the clean energy contract without the demand from Facebook,” Kyle Harrison, a BNEF senior associate, said. “As a result, these are additional contracts, even if they’re structured slightly differently from a traditional virtual PPA.”
But now Oregon regulators are having second thoughts about how PacifiCorp has used Schedule 272.
In that 2017 interpretation of Schedule 272, the commission accepted that PacifiCorp’s use of the rate schedule didn’t constitute selling bundled energy to customers. That was crucial, because the PUC has ruled such products can only be offered under what’s known as a voluntary renewable energy tariff, or VRET.
VRETs have to adhere to extensive guidelines to ensure costs aren’t shifted to other ratepayers, and that the utility doesn’t gain competitive advantages over independent power producers.
Portland General Electric proposed a VRET in 2018. After it was approved, PGE signed up dozens of green-hungry customers to the program, which it calls “Green Future Impact.” One customer is Intel, which is set to buy energy and RECs from a 138-megawatt solar plant that Avangrid Renewables is developing.
But putting together an acceptable VRET is a complex regulatory undertaking, and space quickly filled up in PGE’s program, forcing it back to the commission to seek permission to expand it.
PacifiCorp has chosen not to propose a VRET.
“We haven’t seen an advantage to a VRET offering as compared to Blue Sky Select,” Etta Lockey, the company’s vice president for regulation, said.
It might need to reconsider that in order to keep Facebook a satisfied customer.
The PUC’s order placing limits on Schedule 272 use came in a PacifiCorp rate case. The commission was prompted by requests from PUC staff and Calpine Energy Solutions, an independent energy provider. They were particularly aggrieved that PacifiCorp had acquired a Montana wind farm specifically to supply Facebook with more Schedule 272 RECs.
In its order, the commission wrote:
The potential for future acquisition of resources … in order
to provide Schedule 272 customers with RECs raises concerns regarding both
adequacy of protections for non-participating cost-of-service customers and
fairness to those who have relied on our VRET conditions to guide
utility-offered customer choice programs. Unlike Schedule 272, VRET programs
are subject to guidelines designed to address these concerns, including a
program cap. We share staff’s concerns regarding transparency into the
procurement decisions and the allocation of costs, risks, and benefits between
non-participating cost of service customers and those customers that elect the
voluntary product under Schedule 272.
Yet the commission quickly followed that statement with an acknowledgement “that customers and communities have expressed a desire for access to large-scale green products … and Schedule 272 has provided a simple outlet for some customers.”
Balancing those priorities, the commission allowed PacifiCorp to continue to use Schedule 272, but under a cap that PacifiCorp would face were the program considered a VRET. And it told PacifiCorp “not to consider Schedule 272 an appropriate mechanism to provide community-wide green tariffs.”
Meanwhile, commissioners gave PUC staff permission to look further into Schedule 272 and possibly suggest changes.
PacifiCorp and Facebook (through Vitesse) have both asked the PUC to clarify and reconsider the order, which apparently jeopardizes Facebook’s access to more RECs needed to keep Prineville green.
“Vitesse’s Prineville Data Center campus is growing, and the campus expansion construction efforts are underway,” it said. “Accordingly, Vitesse plans to execute additional Schedule 272 transactions with PacifiCorp in 2021 to maintain its commitment to support its operations with 100% renewable energy.”
PacifiCorp argued, as it has always has, that Schedule 272 isn’t a VRET because it doesn’t offer RECs bundled with energy. Therefore, it shouldn’t face the VRET cap, certainly not without a full investigation.
Lockey also emphasized, in an interview, that Schedule 272 customers continue to receive PacifiCorp’s standard energy mix, paying “all the normal costs, plus incremental costs” associated with sourcing the renewable energy that produces the RECs.
“That's the primary way we ensure there isn't any cost-shifting” to other ratepayers, she said.
In its filing, the utility didn’t broach the possibility of creating a VRET, though Lockey said PacifiCorp “continues to engage with customers” and “wouldn’t rule it out.”
Facebook certainly seems to be expecting one. Even as it asked the PUC not to cut it off from Schedule 272 for now, the company suggested that one solution to its dilemma could be “not implementing the cap until 2022 or until PacifiCorp is further along in implementing its VRET.”
