Colorado: Support a Just and Equitable Transition via Securitization

By Julia Prochnik - Natural Resources Defense Council, April 24, 2019

Utility securitization can be a prescription for lowering energy costs and reallocating funds previously committed to expensive fuels and reinvesting them in lower cost clean energy infrastructure. Securitization is also a useful financing tool to help fund a Just and Equitable Transition to clean energy infrastructure.

Securitization is a financing tool that has existed in the financial sector for decades and is a special type of utility bond offering that gets funds from private investors at a very low interest rate. It can be used to replace more expensive capital and costs that utilities pass on to customers.  Securitization provides a lower cost to customers. 

Legislation is needed, in Colorado and elsewhere, to guarantee a regulated dedicated rate and an unavoidable charge with Public Utility Commission oversight to ensure that the bonds are paid in full.  This dedicated rate along with other conditions allow for high credit score on the bonds to get the lowest interest rate from investors and therefore the lowest costs for customers. 

For example, when a utility says they need to securitize something, they are looking into refinancing their costs of raising capital at a secured lower bond rate, just as you would with decreasing interest charged on a credit card. The regulated utility can then repurpose the money raised into a variety of cleaner operations and transition funds. 

A Just and Equitable Transition builds from the indigenous and labor movement to create a just transition.  Adding equity expands the policymaking to include diverse community voices and help make change livable for all impacted.  

Just and Equitable Transition describes both where we are going and how we get there. If the process of transition is not just, not fair, the outcome will never be. This type of transition sits at an intersection of labor, finance, social impact, equity and the environment. 

A Just and Equitable Transition for coal communities is... 

Communities who have hosted the fossil fuel facilities that powered our country for decades are now adapting to either forced or chosen changes in direction. For example, Navajo Generating Station coal plant is closing because its generation is more expensive than other alternatives means a loss of jobs and property tax revenue, as well as lost businesses that served the power plant or mining workers. 

In designing these changes, we must not only consider environmental impacts, but also the well-being of our families and communities directly affected by the reduction in fossil fuel extraction.

My colleagues note in their “steel for fuel” article, solar and steel can form a bond where local communities form new partnerships to maintain their livelihoods. 

Colorado is demonstrating leadership by supporting legislative and regulatory changes to ensure a resilient clean economy for affected communities.

A transition is never perfect or easy, but with political support, investment, and community involvement, a Just and Equitable Transition is possible. 

Disclaimer: The views expressed here are not the official position of the IWW (or even the IWW’s EUC) and do not necessarily represent the views of anyone but the author.