The CSG West Energy & Environment Committee, chaired by Senator Eric Barlow (WY) and Representative Nicole Lowen (HI), discussed Extended Producer Responsibility (EPR) laws and Energy Infrastructure Securitization with committee members and resource experts Heidi Sanborn, Mark Agnew , and Kevin Ryan.
Extended Producer Responsibility Laws
The CSG West Energy & Environment Committee, chaired by Senator Eric Barlow (WY) and Representative Nicole Lowen (HI), discussed Extended Producer Responsibility (EPR) laws and Energy Infrastructure Securitization with committee members and resource experts Heidi Sanborn, Mark Agnew , and Kevin Ryan.
Extended Producer Responsibility Laws
More states seek to reduce the amount of energy used, material consumed, and landfill waste generated by consumer product packaging. Underpinning these efforts is a commitment to creating a circular economy. A circular economy designs out waste and pollution, keeps products and materials in use, and regenerates natural systems. States are implementing several circular economy strategies including advanced recycling.
Thirty-three states in the U.S. have enacted 139 EPR laws across 19 product categories to date. According to Ms. Sanborn, Executive Director of the National Stewardship Council and the National Stewardship Action Council, when manufacturers take responsibility for the recycling of their products, they:
- Design products to be durable and repairable
- Create safer recycling systems
- Keep product end-of-life costs down
- Directly bear the cost of disposal
More can be done to reduce waste and pollution and relieve communities and consumers of the costs associated with consumer packaging. According to Sanborn, policymakers have tools to choose from, including
- Sales ban (products or chemicals)
- Truth in Labeling
- Right to Repair
- Product stewardship
- Extended producer responsibility
- Deposits to increase collection
- Thoughtful regulation that reduces costs
In weighing the use of these tools, policymakers should first ask questions, such as
- How toxic is it?
- Are there safer alternatives on the market or in the manufacturing pipeline?
- What have other states or countries done with the product/chemical?
- Is the international community limiting shipping and/or disposal?
- How does the state determine whether the product is hazardous? Is that causing problems?
Securitization
Securitization is a financial tool available to utility companies to manage large costs, such as those associated with storm damage, infrastructure upgrades, or transitioning to cleaner energy sources. Securitization can lower borrowing costs which protect utilities from a high debt service, protect ratepayers from increased rates, and allow for a manageable long-term financing for costly and multi-year projects, much like bonds.
Securitization does require legislative authorization and oversight to protect the public interest. As the scale of securitized dollars increases, there have been calls for more transparency and customer representation in the negotiations. It is important to note that while securitization can provide financial relief for utilities and ratepayers, it also involves complex financial transactions and potential risks.
Given the significant extreme weather and fire events experienced across the western United States and Canada, attendees heard about two areas of securitization: cost recovery and interest rate protections, which minimize borrowing costs and impact to rate payers.
- Cost Recovery: This process allows utilities to recover large costs while potentially saving consumers money in the long term. For example, utilities can use securitization to finance costs like repairs for damage done by storms.
Key Take Aways
- Securitization is an important tool for utilities engaged in infrastructure modernization; repairs following major weather, fire and flood events; and to help protect ratepayers from volatility in monthly bills.
- Given the drive to expand and modernize grid infrastructure, including generation, storage, transmission and distribution capacities to onboard more renewable and clean energy sources, securitization is an important financing vehicle for utilities and energy providers.
- Ongoing threats to existing infrastructure from extreme weather, flood and fire events has raised the risk profile of these physical assets significantly.
- Legislative oversight, regulation, and rate payer representation are key elements to ensure the use of securitization is appropriate, transparent and effective in managing the costs of a safe, secure and stable energy system.
RESOURCE: The Rationale Behind U.S. Utility Securitization and Reasons for Recent Growth
Energy Issues Across Our Region
Energy & Environment Committee Co-Chairs, Wyoming Senator Eric Barlow and Hawaii Representative Nicole Lowen, respectively, closed the session with a robust discussion among members and attendees regarding energy issues and promising pathways within their states and provinces. Key discussion points included:
- Small Modular Reactors (SMRs) are a promising source of clean energy in Alberta, Canada, and the U.S.
- The weaponization of energy in the Ukraine/Russia war in terms of direct attacks on infrastructure, the abrupt end to Russian natural gas supplies, and the urgent need of European nations to find alternative sources of energy underscores the need to strategically plan, operate, and secure our energy systems and resources.
- Nuclear and other radioactive waste pollute communities in our region. Until leaders address this health and environmental safety legacy with an acceptable waste management plan, communities may not embrace SMRs.
- Hydrogen, wind, and solar energy development must continue to achieve clean energy goals.
- Advocates of SMRs must message the difference between World War II/Cold War era weaponized, military use of nuclear energy and modern civilian use of SMRs.