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California energy policy impacts manufacturing jobs

Posted by Gino DiCaro, VP, Communications on Sept. 4, 2014

This week, Chris Busch, the Director of Research at Energy Innovation: Policy and Technology LLC wrote a piece that appeared in both LiveScience and Essentially the piece praised California's bold energy policies and claimed that our state's economy is flourishing because of them.  Of specific note was a chart that showed our employment growth and a timeline of a few of California's energy requirements. Those policies include the Low Carbon Fuel Standard, the 33 percent renewable power mandate, the state's carbon cap-and-trade system, and California's building energy performance standards.

The chart compared California's total employment growth since December 2009 to that of the United States. In aggregate numbers we are in fact outpacing the country. But what types of jobs are we growing? We know from a chart we did a few weeks ago that most of our growth is coming from sectors that pay less. This week we charted the same dates and numbers as Mr. Busch but added a percentage growth for California's manufacturing job growth vs. the U.S.

The results show a large deficiency in manufacturing in California.  At an average $77,000 salary and tremendous ripple effects in the economy, can we afford to ignore such a deficiency? What state revenues are we losing out on by not keeping pace with national manufacturing growth? California's energy policies drive some of the highest industrial electricity rates in the country. Those costs will discourage manufacturers from choosing to invest in California, especially those looking to invest, re-shore, or scale up somewhere in the U.S.

Before concluding that California energy policies do not hurt jobs, we suggest that Mr. Busch and others account for the quality, as well as the quantity, of jobs we are losing and gaining in the state.


Chris Busch's chart 

Carbon Info chart on jobs


CMTA's chart with manufacturing:

CHART - US jobs and mfg vs CA jobs and mfg


* We used the same data source as Mr. Busch but we didn't include government in our total employment numbers, which might be why our percentages for "private sector" jobs are higher than their "total employment".

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California opinion leaders say 'Lead in a smarter way on energy policy'

Posted by Gino DiCaro, VP, Communications on July 25, 2014

California wants to lead in everything. We should. We have abundant resources. We have a large pool of talent to innovate new products. We have the eighth largest economy in the world. We have capacity to scale up and make our products here and improve middle class opportunities exponentially.

Because California wants to lead in bold initiatives meant to get the rest of the country to follow, we must also lead in the smartest possible way.

California's most significant and groundbreaking initiatives include policies to reduce our dependence on fossil fuels. The rest of the country is watching. We have the highest renewable portfolio requirement, the first economy-wide carbon cap-and-trade system, the lowest carbon fuel standard and numerous other California-only policies that come at a price. We don’t have an energy plan that seeks to integrate these policies in a cost-effective and technologically feasible manner. In other words we aren't leading, we're implementing laws, closing our eyes, and hoping ... and now the word is getting out about mounting cost increases. Those spikes will be felt in the entire state economy, for our manufacturing sector that lags the country in growth, but also among our poorest consumers who need to buy essentials and depend on a future with higher wage jobs.

The lack of a well-implemented statewide energy plan to control costs is bubbling up among opinion leaders, including three previous governors. We thought we’d make sure we highlighted the recent pieces here:



Governors George Deukmejian, Pete Wilson and Gray Davis 
Comprehensive energy plan must balance environment and economy
Sacramento Bee, July 13, 2014

Energy, the economy and the environment – the three are inextricably linked. Energy prices impact the economy, but energy production impacts the environment.

This important interrelationship was understood to be fundamental to the formation of energy policy when each of us served as governor of California. It was true then, and it is true now. Because of this, effective energy policy in our state requires a careful balancing of coequal economic and environmental interests.

Perhaps no one appreciates the challenge of achieving this balance more than we do. As three former governors, each of us had to grapple with tough issues during our tenures, and our collective experience includes lessons learned from energy policy decisions. Based on this experience, we believe that California is at a pivotal moment when a long-term energy strategy is urgently needed – especially if California hopes to increase its economic competitiveness while achieving its clean energy and environmental goals.


Daniel Oaxaca — Founder and Executive Director at the San Gabriel Valley Conservation Corps
Striking a Balance Between Protecting Our Environment and Rebuilding Our Economy
San Gabriel Valley Examiner, July 23

Teaching today's youth to care for the environment will go a long way in building healthy communities. Likewise, creating a business landscape with job opportunities and economic growth is the platform from which our youth can become strong, independent, responsible citizens. Both environmental and economic priorities must be pursued equally in order to ensure prosperity for future generations in California.

The San Gabriel Valley Conservation Corps (SGVCC) holds a unique role in influencing the lives of disadvantaged youth, and we are committed to creating a balanced economic and environmental approach toward improving quality of life. You can't have one without the other, but we are seeing state policies that are more and more dismissive of their economic consequences.


John Husing -- Chief economist of the Inland Empire Economic Partnership
Op-Ed: Economics & Politics, Inc.
Redlands Daily Facts, June 16

Clean energy is golden for the local economy” (June 12) shows a misunderstanding of my research for the Inland Empire Economic Partnership on poverty, public health and regulation and underscores our difficulty in addressing the catastrophic fact that 800,000 Inland residents now live in poverty (19 percent) including 26.5 percent of our children.

It enunciates the widely held view in upscale communities that public health lies in continued aggressive regulation to create an ever-cleaner environment. However, that was not the conclusion of over 1,000 public health professionals and concern citizens who just spent 18 months establishing San Bernardino County’s public health direction. For them, education and poverty topped their priorities. Air quality did not make the list.


Dan Walters -- Columnist
Senate passes bill to make electricity even more expensive
Sacramento Bee -- June 9

There are probably a few people living off the grid in the backcountry of California, but the other 38 million of us depend on our local utilities for electric power. That makes us stakeholders in how that energy is produced, distributed and priced – the latter accounting for many, many billions of dollars.

One would think that the nearly universal experience of buying electricity – not to mention its indispensable economic importance – would make politicians reluctant to mess with it.


San Diego Union editorial
Climate plan faces new challenge: Gas prices
San Diego Union Editorial, July 16

Fear of a gasoline price spike is creeping into Sacramento as California’s gasoline and diesel producers prepare for the first time to pay for the air pollution their products create.

State clean air regulators are getting ready to extend a cap on greenhouse gas emissions to motor fuels in the transportation sector on Jan. 1, 2015. Fuel producers are likely to pass on costs for acquiring necessary pollution allowances to consumers at the gas pump, though at what price is uncertain.

That has led some state lawmakers to seek a delay, in the name of protecting low-income communities in the Central Valley and Los Angeles Basin. Breaking party ranks in an election year, 16 Democrats are seeking a three-year delay on expanding cap-and-trade.


Little Hoover Commission hearing
Rewiring California: Integrating Agendas For Energy Reform.
April 24

The hearing on April 24th in front of the Little Hoover Commission focused on issues raised by LHC’s report, “Rewiring California: Integrating Agendas For Energy Reform.” Three panels provided updates and information on energy planning and governance issues in the state. There were representatives from the California Energy Commission, Public Utilities Commission, and California Independent System Operator, as well as Rob Lapsley, president of the California Business Roundtable on behalf of CARE (Californians for Affordable and Reliable Energy), and Professor Severin Borenstein, director of the University of California Energy Institute at Berkeley, among others.


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Energy: We agree with Environmental Defense Fund -- Understand costs and benefits

Posted by Gino DiCaro, VP, Communications on Oct. 18, 2013

Affordable and reliable energy is essential to California's economy and the prosperity of our workers. Manufacturers are leading the way in investing in energy efficiency and new energy sources to help us meet future energy demands. 

California manufacturers already pay 50 percent higher industrial electricity rates over the rest of the country.  Because of a wide range of new energy policies, those rates are increasing for not just us but the rest of the different rate classes from top to bottom.  Even our poorest will pay in both higher energy costs, as well as fewer job opportunities.  It's not too late to fix this.

It's not just electricity costs of course.  All of our energy needs will be more expensive over the coming months and years.  The total bill is unknown.  The true environmental benefits are not exact.  

California can do this though.  We simply need thorough analysis so we know which policies provide the biggest benefit for the least cost.  This will allow us to prioritize and implement a statewide energy policy that grows our economy, meets our energy goals, and drives our environmental leadership throughout the country.

This is why the Californians for Affordable and Reliable Energy coalition took the time this week to pen the following excellent blog response to the Environmental Defense Fund (EDF) reaction to a preliminary CARE and Navigant Consulting cost assessment study.  We agree with CARE and EDF!  California needs more analysis to ensure our energy cost effectiveness.


Californians for Affordable and Reliable Energy’s (CARE) blog on Environmental Defense Fund Policy Paper

Yesterday, the Environmental Defense Fund (EDF) released a critique of Navigant Consulting’s whitepaper, “Preliminary Assessment of Regulatory Cost Drivers in California’s Energy Market.” The CARE Coalition (Californians for Affordable and Reliable Energy) agrees with EDF’s assessment that the Legislature and state agencies must carefully examine the benefits and costs of our state’s energy programs. But CARE would assert there is a void of information regarding the extent of state program impacts, and we believe that additional information is crucial in order for California legislators and regulators to adequately consider implementation of current programs and adoption of any new energy related mandates.

The CARE Coalition is focused on educating Californians about the energy challenges ahead as they relate to protecting an affordable and reliable supply of fuels and electricity. The California Department of Finance recently reported that unemployment increased for the second month in a row to a level of 8.9%, widening the gap with the U.S. unemployment rate of 7.3%.  At the same time that unemployment is increasing around the state, communities are being informed about increases in energy costs. The CARE Coalition believes that a full investigation of the state’s energy programs is necessary to understand the relationship between job creation and economic growth and rising energy costs.

Another aspect of energy policy that deserves careful examination is to assess the cumulative impact of the broad range of regulatory programs currently being implemented. The groundbreaking nature of many of these programs provides a compelling reason to not only assess the impact of a particular program, but more importantly, determine the impact of all the programs collectively to California consumers and economy.

The Navigant whitepaper encouraged more analysis and an understanding of existing state policies.  We highly recommend that the Legislature and state agencies offer more clarity on the obligations of California ratepayers and taxpayers as existing programs are implemented in the coming months and years. CARE believes that there will be significant impacts on California energy users that cannot be avoided without a coherent strategy that organizes and prioritizes energy actions ahead.

“Californians are informed about the state's march towards being an environmental trailblazer. Unfortunately, they are uninformed about the associated costs that will be triggered across our economy. Navigant Consulting’s whitepaper brought to light significant questions about cost impacts and potential unintended consequences.  We encourage the state to do a more comprehensive evaluation in order to design a comprehensive energy policy that is consistent with the Governor’s desire to encourage business investment and create jobs” said Rob Lapsley, President, California Business Roundtable.

As a part of our mission to educate, CARE contracted with Navigant Consulting to provide information regarding cost and reliability impacts on consumers as a result of energy policies and mandates.  Navigant and its legacy companies have worked on energy market issues for over 30 years, and in all aspects of the utility planning, operations, and legislative and regulatory compliance, providing Navigant with a comprehensive understanding of the interplay of key market issues and drivers that impact the energy industry. Navigant’s whitepaper relies primarily on previous public reports, studies and statements by California and Federal regulatory bodies for its references including: the California Energy Commission, the California Public Utilities Commission, the California Air Resources Board, the California Independent System Operator, and the Energy Information Administration among others.   

Navigant’s whitepaper warns policymakers and stakeholders that “The cumulative effect on energy costs (electricity and transportation fuels) is only beginning to be understood by those most affected, which speaks to the need for a more informed dialogue.”CARE believes this dialogue is worth having if we truly care about protecting business investment and job creation in the state.  Energy costs and certainty are a major factor for businesses of all sizes that should not be underestimated in the state’s energy planning process.

 The Navigant whitepaper clearly articulates that it is examining the costs and is not a cost/benefit evaluation of recently passed policies and regulations.  It makes clear that the purpose was not to examine already well-documented environmental and related benefits that have been outlined in other studies.  Instead the whitepaper calls for a more detailed and comprehensive review of the cumulative impacts of a much larger list of policies and regulations than just the three examples examined in the whitepaper.

As cost increases are appearing in communities across the state for both fuel and electricity bills, consumers and business groups are asking questions about this trend and wondering what they are facing down the road. We hope the state takes these questions seriously and begins a process to evaluate energy policy impacts and provide more informative analysis regarding what businesses and consumers should expect as a result of California’s energy programs.


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California's clean energy drive will increase prices

Posted by Gino DiCaro, VP, Communications on Aug. 20, 2013

California is a national leader in pushing renewable energy, lower greenhouse gas emissions and energy efficiency.  State manufacturers have contributed to the effort by installing cost-effective technologies and instituting lean manufacturing processes to reduce their demand for electricity, natural gas and transportation fuels.

No other state’s manufacturers have done as much. But with more climate and energy policies being proposed every day, it’s time to take stock of where we are and where we are headed.    

If California wants to be a model for others to follow, energy supplies must be both affordable and reliable to support a massive state economy that includes manufacturing and exporting products.

Successful California manufacturers -- who employ 1.3 million workers at an average $74,000 salary – depend on priced and reliable energy to operate in this state. They need to stay competitive with manufacturers around the country and the world.

Yesterday a group including CMTA, the Little Hoover Commission, the California Small Business Association, the California Business Roundtable, and others gathered to discuss the uncertain costs of California's programs on everyone who pays for electricity, powers a vehicle, or purchases a product in the state.

“There is not a single, credible source of analysis and data that can inform companies and policymakers regarding the cumulative costs of California’s recent energy-related policies,” said Patrick Mealoy of the Navigant Consulting group.  Navigant had examined key cost drivers of three prominent California-only energy programs -- the 33 percent renewable power requirement, the carbon cap and trade auction, and the low carbon fuel standard.

Navigant’s analysis showed that the industrial community alone has dropped 17 percent of its electricity demand over the last two decades.  At the same time, the residential and commercial class grew their demand by about 30 percent.   In part, this means that industry is already lean and spent lots of money retrofitting facilities and finding efficiencies so they could compete with the rest of the country.  Any new efficiencies could be expensive and either raise the cost of goods or cause the loss of jobs in the California economy. 

This month, electricity ratepayers, including manufacturers, will see their first big rate increase due partly from the 33 percent renewable power requirement.  On average it will be a two-digit percentage hike for ratepayers in the Southern California Edison territory.  Industrial electricity rates are already approximately 50 percent higher than the nation. Estimates are far higher than cost of living increases into the future.

Job loss and high energy prices will be unintended consequences of our complex and overlapping clean energy goals.  To avoid this outcome, lawmakers should require robust cost-benefit analysis to show how regulations can be reformed to achieve reasonable goals at the lowest possible costs.    

The Little Hoover Commission might have said it best at the event, “what California really needs is a ‘timeout’ on new energy mandates.”  A timeout so we fully understand what we are getting into can only help make California’s exclusivity a trailblazing success for us and others.

Most of the participants at Monday’s event were part of the simultaneous launch of the Californians for Affordable & Reliable Energy coalition (CARE) – a growing group of companies and trade associations to raise awareness about California’s escalating energy costs. List here  |  Join  here.



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