Gov. Jim Justice has signed into law bills designed to help the coal, oil and gas industries while letting a solar-friendly bill become law without his signature.
Justice on Wednesday signed into law Senate Bill 542, which requires coal-fired power plants owned by public electric utilities to keep at least 30 days of coal supply under contract for the lifespan of those plants. The bill requires public electric utilities to give notice to the West Virginia Office of Homeland Security and Emergency Management, the state Public Service Commission and the Legislature’s Joint Committee on Government and Finance before announcing the retirement or proposed shutdown of an electricity-generating unit.
SB 542, which passed through the Legislature with support from the West Virginia Coal Association and the United Mine Workers union, is a gutted version of the original bill that would have made further-reaching reforms to keep West Virginia’s dwindling fleet of coal plants operating as long as possible. Those reforms included requiring in-state power producers to maintain 2019 coal consumption levels and file compliance plans every three years with the long-dormant state Public Energy Authority specifying their fuel supply and how 2019 coal consumption levels would be maintained.
The original version of the bill required a 90-day supply, but the required supply was shortened to come closer to what representatives from Appalachian Power, FirstEnergy and Dominion Energy previously told the Senate Energy, Industry and Mining Committee they currently keep under contract.
Justice also signed into law Senate Bill 718, which makes changes to the state’s coal severance tax rebate program approved in 2019 designed to encourage economic development in the coal industry.
SB 718 expands the base period for coal severance tax rebate calculation. It institutes a base period consisting of the five previous years for calculating rebates. The current base period is either tax year 2018 or the second year of a two-year period for an eligible rebate recipient who produced coal for only two years before investing in new machinery and equipment.
The 2019 law provided for tax rebate opportunities for coal companies that made a qualifying capital investment demonstrated by buying new equipment, real property and reporting an increase in employees.
SB 718 requires that there be an increase in coal production and the number of full-time employees across all the taxpayer’s mines in order to qualify for the tax rebate. It also expands rebate eligibility to investments in repairing and refurbishing coal equipment. The previous legislation allowed for rebates only for investments in new equipment.
Senate Finance Committee counsel noted at the committee meeting from which the bill originated in March that the legislation came at the request of the Governor’s Office, after several months of negotiations with industry representatives.
Also becoming law at the stroke of Justice’s pen was House Bill 2581. HB 2581 changes the methodology for valuing producing oil and natural gas wells, allowing the state Tax Department limited latitude to propose rules for approval by a legislative rule-making committee.
The new law directs the Tax Department to propose emergency rules by July 1 on valuation of properties producing oil, natural gas and or natural gas liquids. It does this while providing for a tax on net profit by defining net proceeds for oil and natural gas as actual gross receipts based on sales volume minus royalties and operating costs for expenses, including lease-operating, lifting, compression, processing and transportation.
The Senate Judiciary Committee had removed that methodology from the bill, but the full Senate restored it.
Some House and Senate members had voiced concern about a Tax Department estimate of the original bill that county school boards and commissions would absorb a loss of $9 million in property tax revenue during the first full year of effect. An impetus for the bill was a 2019 West Virginia Supreme Court ruling in which the court held, in part, that the Tax Department improperly imposed a cap on gas well operating expense deductions.
Becoming law without Justice’s signature was legislation to encourage retail-customer investment in solar energy by exempting solar power purchase agreements from the Public Service Commission’s jurisdiction. House Bill 3310 specifies that solar energy facilities located on and designed to meet only the electrical needs of the premises of a retail electric customer do not constitute a public service, nor is the output subject to a power purchase agreement with the retail electric customer.
Under a power purchase agreement, a developer arranges designing, permitting, financing and installing a solar energy system on a customer’s property at little or no cost. The customer buys the system’s electric output from the solar services provider for a predetermined period at a fixed rate, usually lower than the local utility’s retail rate, while the solar services provider gains tax credits and income from electricity sales.
The bill’s exemption of power purchase agreements from Public Service Commission jurisdiction would be conditional. One condition would be that the aggregate of all power purchase agreements and net metering arrangements for any utility not exceed a cap of 3% of the utility’s aggregate customer peak demand in the state during the previous year.
That cap already exists for net metering, a billing mechanism that credits customers who generate their own electricity from solar power for returning the electricity they don’t use back into the grid.
Another condition sets individual customer onsite generator limits so that solar energy facilities meet only the electrical needs of the retail electric customer’s premises, not to exceed 25 kilowatts for residential customers, 500 kilowatts for commercial customers and 2,000 kilowatts for industrial customers.
The bill has no tax credit provisions and does not provide any state subsidies.
Justice also signed into law a bill to create a cost savings program to reduce energy usage in state government buildings. House Bill 2667 aims to reduce energy usage in all state buildings by 25% below 2018 levels by 2030.
The bill also requires annual reports to the Legislature on building energy performance compared to similar buildings in similar climates. Under the bill, the West Virginia Office of Energy is slated to audit at least 20% of energy-metering devices at state buildings each year so that all devices are audited by the end of 2026.
The legislation directs the state to establish a program for measuring and benchmarking the energy efficiency of all state buildings by July 1. The bill also requires the government to compile and submit energy-usage data for all state buildings to a U.S. Environmental Protection Agency-operated benchmarking tool by Oct. 1 and again each subsequent year.
Energy benchmarking refers to measuring a building’s energy use and comparing it to the energy use of similar buildings.
The net benefit to the state from the bill would be a 9-to-1 return on investment, according to a West Virginia Department of Commerce estimate projecting a five-year project cost of $300,000.