Richard G. Lorenz1001 SW Fifth Ave., Suite 2000

Portland, OR 97204(503) 224-3092

rlorenz@cablehuston.com www.cablehuston.com

Legalization of Recreational Marijuana

• Washington = I-502 (2012)• Colorado = Amendment 64 (2012)• Oregon = Measure 91 (2014)• Alaska = Ballot Measure 2 (2014)• Washington D.C. = Initiative 71 (2014)• California?• Medicinal Marijuana is legal in about 20

other states.

How this affects the Electric Industry

• Could trigger an increase in power demand.

• Still illegal under federal law and in other states.

• Raises questions about the availability of federal power marketed by BPA.

• Raises questions about retail rate-making and service obligations.

• Creates low-hanging fruit for conservation. But are they forbidden fruit?

Power Demand• Marijuana production is a power intensive activity.

Consumes about 200W per square foot. On a square foot basis, energy consumption is the same as a data center. A single joint is the equivalent of running a 100 Watt light bulb for about 30

hours. The industry is estimated to have the annual carbon emissions of a million

cars. Growing four marijuana plants uses as much energy as running 29

refrigerators.• Industry reports put power consumption for marijuana at 1%-3% of

total usage. Between $5 and $15 billion.• The Northwest Power and Conservation Council issued a report

estimating total marijuana-related load in the Pacific Northwest at 250MW by 2035.

• Pacific County PUD has received a request for service for 20aMW for a single facility.

• Will the legalization of marijuana production lead to more efficiency in power consumption?

Marijuana Usage and Possession Remains Illegal Under Federal Law

• Marijuana is listed as a Schedule 1 controlled substance under the federal Controlled Substances Act of 1970.

• For the most part, the federal government has not enforced the law in States where recreational marijuana has been legalized.

• U.S. Department of Justice has issued guidelines to states that have legalized marijuana. For example, the DOJ is not prohibiting financial institutions from serving the industry.

• Legislation that has been introduced to allow the Federal government to accommodate state marijuana laws has been unsuccessful. Respect for State of Marijuana Laws Act.

• Local governments may also regulate marijuana businesses. Supported by Washington Attorney General Opinion and Oregon

implementation statute.

Supreme Court Challenge Pending• Lawsuit has been filed by Nebraska and Oklahoma against Colorado

arguing that state legalization violates the Supremacy Clause of the US Constitution.

• The US Supreme Court has original jurisdiction over the case. • The Supreme Court has asked the federal government to state its

position on the issue.– U.S. Attorney General Loretta Lynch is not a proponent of the legalization of marijuana

and has told Congress that the “law is her lodestar.”

• The legal question is whether State legalization is “passive” or “active” regulation. – Colorado argues that it is not required to mimic or enforce federal law, and

that federal government remains free to enforce federal law. – The counter argument is that States are not just decriminalizing marijuana,

they are actively regulating a market for a commodity that is illegal under federal law.

Bonneville Power Administration• The Bureau of Reclamation announced that it would not sell federal water

to marijuana grow operations. Utilities have been asking whether BPA will refuse to sell power to growers?

• The U.S. Department of Energy has provided “guidance” to all Federal Power Marketing Agencies concerning states that have legalized marijuana:1) They may continue to sell to utilities even if some of the power will be resold to

consumers for purposes of marijuana production.2) They may not provide power, transmission or other benefits directly to any

consumer that is using it for an activity that is illegal under federal law.3) The “guidance” provided by the U.S. Department of Energy is subject to change

with a change in administration or a change in law.

• BPA will not provide residential exchange payments for marijuana businesses. June, 2013 Customer Load Eligibility Guidelines: “Farms growing any type of agricultural crop

not recognized as ‘legal’ by the Federal Government (including marijuana and hemp) are not eligible for REP benefits.”

Retail Service Policies• Can utilities provide service to activities that are

illegal under federal law? • Can utilities refuse to provide service to activities that

are illegal under federal law?• Should utilities adopt policies concerning cash

payments? • Should utilities require additional financial security

for service costs?• Should utilities offer amnesty for customers that

were stealing power in the past? • Can or should utilities require an indemnity from

marijuana-related customers?

Retail Rates• Should utilities have separate retail rate for marijuana production?

• Would allow for better tracking of usage and costs.• Would allow for time of day and other rate incentives for usage. • Would allow for utilities to shift legal and financial risk to consumer.

• Any significant load growth could exceed contract period high-water mark. Pacific County PUD adopted a new commercial and Industrial rate schedule

for anticipated load growth in the marijuana industry.• Mason County PUD approved a rate classification for marijuana

growers and processors. The rate falls between commercial and industrial and includes a demand

charge that reflects the peak capacity needs of the facilities. • Boulder County in Colorado—which does not operate a utility—is

imposing a “charge” of 2.16 cents per kWh on all electricity consumed by marijuana growers. Money will be used on efficiency education programs.