Hydropower

Chamber of Commerce Calls for Energy Changes in California

The California Chamber of Commerce wants changes that would be beneficial for renewable energy facilities in that state.

SACRAMENTO, California – “California’s energy crisis is the state’s largest economic challenge since the recession of the early 1990’s,” says president Allan Zaremberg. “Its successful resolution is critical to California’s business climate.” One short term solution is to “provide incentives for businesses that generate their own power to make their excess energy capacity available” to the utilities, while longer term options include exploring opportunities to provide tax incentives for the development of new electrical generation. The Chamber has been working with Governor Davis, the Public Utilities Commission and the Independent System Operator to discuss the effects of the energy crisis on businesses in California. It supports the system of private utilities rather than a government-run system but, to achieve that, utilities must be made credit-worthy. “At the most fundamental level, California’s energy crisis can be best represented as an acute imbalance between supply and demand,” explains Zaremberg. “It is this imbalance that has greatly contributed to the skyrocketing wholesale price of electricity and which must be addressed in the long term for us to get out of this mess.” “In the short-term, the problems that must be addressed include matching the retail price of electricity, which has been frozen, to the wholesale price that has skyrocketed due to the supply/demand imbalance, the high price of natural gas and the shortage of hydroelectric power,” he says. The price imbalance has pushed the two major utilities to the brink of bankruptcy, and the state must negotiate long-term contracts on their behalf. Utilities must be allowed to enter into long-term contracts with energy suppliers, which will guarantee a predictable price and reliable source of electricity for business and residential users in the state, and demand must be reduced through aggressive conservation efforts aimed at all classes of customers. Curtailment programs for large industrial and commercial consumers must be developed, and the legislature must approve temporary variances from air quality and water quality regulations to users that curtail their consumption as part of an interruptible program. “Clearly, the most important component of a long-term solution equalizing electric supply and demand is developing new generation or supply in California,” adds Zaremberg. The Chamber wants to streamline the approval and environmental review processes for new power plants, supports the development of new generation and conservation techniques, and wants real-time metering to allow consumers to make choices about their use of electrical energy based on the real-time price of electricity. “Our options are limited and the longer the state waits to implement the necessary relief measures, the more likely it becomes that the state will end up as the utility,” he adds. “There is no question that deregulation as written and implemented was a failure in California.” Utilities were required to sell much of their generating capacity but then were not allowed to enter long-term contracts as a hedge against price spikes. The spot market drove up prices for last-minute energy demands. The price of electricity would have increased 20 percent even without deregulation because demand outstripped supply on the west coast. No new power plants were built in the decade before deregulation, but private investors have applied to build 20 new facilities since then.