Facing a severe budget crisis, state legislators and other elected officials in Oklahoma are beginning to roll back generous tax incentives previously given to the state’s wind-energy industry.
The move comes as Oklahoma has become the nation’s second-largest producer of wind-powered electricity, behind neighboring Texas.
In 2017, in an effort to increase government revenues, the state legislature ended a program granting $3.3 million in tax credits to wind developers and terminated a five-year property tax exemption for the industry. In addition, Gov. Mary Fallin has proposed a production tax on wind to help close a nearly $1 billion budget gap for fiscal year 2018. Her proposal is being considered by state lawmakers during the current session.
Oklahoma’s shifting political winds are also jeopardizing Wind Catcher, a proposed $4.5 billion project in rural Garfield County. Upon completion, the project would be one of the largest wind farms in the United States, with 800 2.5 megawatt turbines and, because it is located hundreds of miles from the cities and towns needing the power, a 350-mile-long transmission line. Public Service Company of Oklahoma (PSO), the state’s largest utility, has invested $1.3 billion in Wind Catcher so far.
Rushing to Build
In an effort to get the turbines erected before the federal production tax credit for wind energy ends in 2020, PSO violated state rules by not holding an open bidding process to build the transmission line, in order to save time.
In response to that decision, PSO is retroactively asking the Oklahoma Corporate Commission (OCC), the state agency that regulates utilities, for an exemption to the competitive bidding rule, and is requesting the agency approve a rate hike to pay for completion of Wind Catcher. PSO says the additional costs will be cancelled out over the long term because Wind Catcher will save ratepayers money on their electric power bills. OCC is expected to decide on the exemption and rate hike requests this spring.
Oklahoma Attorney General Mike Hunter is fighting Wind Catcher. He says he opposes the project because it did not follow state rules regarding the transmission line and because, contrary to PSO’s statements, the wind farm will cost ratepayers approximately $320 million in increased electricity costs instead of saving money. Hunter previously served on the OCC.
In an attempt to prevent the project from moving forward without further review, Hunter filed a motion with OCC to deny Wind Catcher’s preapproval application in 2017. Normally, before submitting an application to construct new wind turbine, a developer has to seek community input. Wind Catcher’s preapproval application sought to avoid that requirement.
In a public hearing on the project, Hunter argued the company had not proven Wind Catcher would benefit Oklahoma ratepayers.
“The traditional way that these assets are deployed is that the risk is undertaken by the public utility,” Hunter argued before OCC on December 21. “It is deployed, and then the determination of ratepayer benefits is made at the time thereafter.”
Hunter also argued the preapproval application should be denied because PSO did not follow legally required processes.
“We hate that this project was commenced,” said Hunter. “We hate that there wasn’t competitive bidding, which is required by the rule.
“We hate that eight months elapsed from the [inception] of the project until the application was filed, so we’re all being put in a position of being leveraged,” Hunter said.
OCC denied Hunter’s motion to block PSO’s pre-application on December 28, allowing the project to proceed toward construction.
Later on that same day, Hunter filed separate motions with OCC to block PSO’s rate hike request and instead to require PSO to lower its rates to pass along to ratepayers the savings it will receive under the recently enacted federal tax reform law.
“These companies will begin seeing major savings after the tax cut is implemented on Monday,” Hunter said in a press release. “Oklahomans who are customers of these companies should immediately retain the benefits of the savings from the tax cut in the form of lower rates.
“We urge the OCC to act quickly and in the best interests of customers, not company shareholders,” said Hunter.
‘A Preindustrial Technology’
Tim Benson, a policy analyst with The Heartland Institute, which publishes Environment & Climate News, says wind power is expensive and unreliable and doesn’t deserve taxpayer assistance.
“Oklahoma should certainly not be subsidizing an industry like wind power that couldn’t survive without subsidies,” Benson said. “Essentially a preindustrial technology, wind energy is far less reliable and far more expensive than power derived from fossil fuels.
“Because of wind energy’s intermittency, fossil fuels pick up the slack when turbines are idle, which is roughly two-thirds of the year,” said Benson. “Wind energy is also 250 percent more expensive than electricity produced by burning coal and 300 percent more expensive than electricity produced by burning natural gas, according to the Institute for Energy Research.”
James Taylor, president of the Spark of Freedom Foundation, says wind energy subsidies dwarf those for conventional electric power sources.
“EIA reports wind power receives more federal taxpayer subsidies than all conventional energy sources combined,” said Taylor. “It makes little sense for states like Oklahoma to take even more money from taxpayers’ wallets and hand it over to Big Wind.
“Even left-of-center public policy organizations like the Brookings Institution document wind power is substantially more expensive than coal, natural gas, and nuclear power,” Taylor said. “After decades of special-interest subsidies, it is clear wind power is still a bad investment.”
Bonner R. Cohen, Ph.D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.