A California advocacy group says that utilities should be obliged to obtain a minimum amount of their electricity from in-state renewable generation, in order to protect against volatile fuel and emissions credit prices.
SAN FRANCISCO, California – The percentage should increase over time to create demand for new renewable generation, says The Utility Reform Network (TURN), which adds that programs to aggressively promote conservation and price responsive demand should also be vigorously pursued. “The continuing price instability for fossil fuels and emissions credits demonstrates the need for efforts to accelerate the development of renewable energy technologies and efficiency programs,” it says in its report, “The 5 Cent Plan for California’s Energy Crisis.” The state government took the first step toward developing renewable energy through passage of AB 995 earlier this year and its continuing ratepayer support for public goods programs. “But these programs will not be sufficient to meet the challenge,” explains TURN. “The Commission or the Legislature should therefore specify a minimum percentage of renewable resources for inclusion in the core supply portfolio. The development of these renewable supplies will provide badly needed resource diversity and serve as a hedge against fluctuations in fuel and emissions credit prices.” “A substantial portion of the new generation could be supplied at very competitive (and non-volatile) prices as a result of the facilities’ receiving incentive payments from the California Energy Commission,” it explains. The CEC plans to spend $675 million of ratepayer funds on renewable energy programs between 2002-2007, and coupling these planned expenditures with a minimum renewable component would ensure that the bulk of the economic benefits are passed on to core customers. The group argued that the state legislature could further direct the CEC to condition the issuance of renewable production incentives on the willingness of the generator to sell a portion of their facility output at cost to serve core customers. The CEC’s renewable investment plan must be approved next year, so there is ample opportunity to include such conditions in the 2002-2007 program design. “Another important response to the crisis should come from programs to facilitate energy conservation and price responsive demand,” it adds. “These efforts could be developed as part of the portfolio of resources for meeting core needs at reasonable cost.” The CEC must design programs with $50 million in state funds, and the utilities should cooperate and provide incentives for demand responsiveness linked to procurement savings. Existing energy efficiency programs should be monitored and changed, if necessary, to achieve maximum reduction in peak power demand. The utilities should also encourage it customers to use distributed generation technologies, which would result in future demand reductions for centralized generation and reduce the volatility of wholesale prices. The group called for “preferential treatment” of renewable energy technologies such as solar photovoltaics (PV). The report was issued by TURN in an effort to get electric rates under control. The proposal calls for utilities to be required to sell electricity at 5 cents per kWh, which the group notes is dramatically different from proposals from the utilities that would involve increases of up to 35 percent. “The time for debate about deregulation is over,” says TURN’s executive director Nettie Hoge. “The time for action is here, and the bottom line is no rate increases.” TURN’s proposal, like that of Governor Gray Davis, requires that utilities stop divesting their generation assets. TURN wants the profits from those facilities, which were paid for by ratepayers, to benefit ratepayers, and would set rates for residential customers on a cost-based formula, with large commercial and industrial customers free to broker their own deals. “Now that California’s deregulation experiment has blown up in our faces, consumers expect action from their elected representatives, who forced deregulation on us despite widespread opposition,” adds Hoge. “While looking at a long range strategy to get us out of the mess they created, leaders can easily implement these reforms guaranteeing that consumers will pay no more than 5 cents a kwh for the electricity they need.” If utilities are unwilling to provide residential electric service at reasonable rates, TURN says California should create a new public power entity that would be responsible for serving residential customers. “We are tired of being guinea pigs,” Hoge explains. “Consumers can’t pay their electric bills with promises that deregulation will work. We need reasonable rates and we need them now.” TURN is a consumer advocacy group that intervenes in utility applications to the state Public Utilities Commission. “Clearly, there are a number of potential options available for addressing the issue of electricity procurement for small consumers in the future,” it concludes. “While any of these could be made to work, TURN believes that the five-cent per kWh ‘standard offer’ provides the greatest promise.”