'Renewables at any cost' bill to be amended: Cost cap issue addressed

By CMTA Staff

Capitol Update, June 21, 2006 Share this on FacebookTweet thisEmail this to a friend

In California, renewable power is an idea whose time has come.  Governor Arnold Schwarzenegger and legislators alike have shown strong support for proposals and legislation encouraging renewable power.  The same goes for the state's energy regulators: both the California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) are bullish on renewables.  

The trend started in 2002, with the enactment of legislation establishing a Renewable Portfolio Standard (RPS).  SB 1078 (Byron Sher, D-Stanford) required investor-owned utilities (IOUs) and certain other retail sellers to increase their level of renewable resources by one percent a year until a 20 percent renewable portfolio is achieved.  The state's joint-agency Energy Action Plan accelerated the RPS goals to 20 percent by 2010, instead of 2017.  Pursuant to SB 1078 the RPS requirement applies only to the extent that Public Goods Charge (PGC) funds are available to pay for costs exceeding a market benchmark price established by the CPUC.

The Energy Action Plan "loading order" further requires that energy efficiency be given highest priority in utility power procurement, followed by renewable power and distributed generation, then traditional power resources, like gas-powered plants.

CMTA supports the goal of ensuring that the state has a diverse portfolio of energy resources.  At the same time, all generation resources, including renewables, should be developed and brought online in a cost-effective manner.  This means a rigorous examination of the cost-effectiveness of resources, and a continuation of the present statutory cap on the PGC charge which funds above-market RPS costs.

AB 2960 (Mark Ridley-Thomas, D-Los Angeles), as amended June 14, codifies the "loading order" with one significant difference: the bill imposes no cost effectiveness constraints on the procurement of renewable power.  The bill does away with the "market price referent," which currently acts a cost cap for renewable power.

Given that the utilities would still be required to purchase renewable power for their customers, the bill is essentially a mandate without a cost cap.  A mandate without a cost cap will put upward pressure on rates  

It appears the bill may be headed in the right direction, however.  

At a Senate Energy, Utilities and Communications hearing on Tuesday, June 20, in response to issues raised by committee members and those testifying against the bill, Ridley-Thomas agreed to have the bill amended to include language requiring that renewable resources be cost effective and not adversely affect the reliability of the system.

The current cost cap on renewables is represented in the form of a market price referent.  And the MPR cap brings us a competitive market place.

Renewable power is a laudable goal but not any price.  The June 12 version of AB 2960 takes the "at any cost" approach to the purchase of renewables.  If the amendments agreed to by Assemblyman Ridley-Thomas are put into the bill as described, the bill will be much improved.

Read more Energy articles

Capitol updates archive 989898989