Facing Sweltering Summers, California’s Newsom Floats Plan for State to Buy Energy

June 2, 2023 By Adam Beam 3 Comments

SACRAMENTO, Calif. (AP) — For most of the year, California’s quest to rid itself of fossil fuels seems on track: Electric cars populate highways while energy from wind, solar and water provides much of the power for homes and businesses.

Then it gets hot, and everyone in the nation’s most populous state turns on their air conditioners at the same time. That’s when California has come close to running out of power in recent years, especially in the early evenings when electricity from solar is not as abundant.

Now, Democratic Gov. Gavin Newsom wants to buy massive amounts of renewable energy to help keep the lights on. The idea is to use the state’s purchasing power to convince private companies to build largescale power plants that run off of heat from underground sites and strong winds blowing off the coast — the kinds of power that utility companies have not been buying because it’s too expensive and would take too long to build.

“We laid out the markers on solar and wind, but we recognize that’s not going to get us where we need to go,” Newsom said during a news conference last week. “The issue of reliability has to be addressed.”

There’s a lot at stake, not just for the future of clean energy, but for Newsom himself. The Democratic governor, now in his second term and widely seen as a future presidential candidate, insists California will be carbon neutral by 2045. But this goal is often mocked in the summer when, to avoid rolling blackouts, state officials turn on massive diesel-powered generators to make up the state’s energy shortfall.

Demand for electricity in California has increased as the state takes step to move away from fossil fuels, including banning the sale of new gas-powered cars by 2035. California will need to add about 40 gigawatts of new power over the next 10 years, according to the California Independent Systems Operator, which manages the state’s power grid. One gigawatt is enough to power about 750,000 homes.

If the state buys lots of power from offshore wind and geothermal sources, it could mean they don’t need those emergency diesel-powered generators anymore. Wind is typically strongest in the evenings, and geothermal energy is available all the time.

This would be a big change for California, where up to now utility companies have been responsible for buying their own power. Customers would have to pay for the new power the state buys through a new, still undetermined, charge on their electric bills.

Californians already pay some of the nation’s highest energy bills. But one consumer advocacy group said Newsom’s proposal could be better for customers in the long-run. State regulators would not decide what the charge will be until the power projects are up and running — potentially several years away.

“There’s nothing free here, it’s just a question of what’s the most efficient way to develop resources,” said Matthew Freedman, staff attorney with The Utility Reform Network, a group that advocates for affordable and reliable energy. “It’s our hope that this arrangement will result in lower total costs across the state.”

Newsom’s proposal has the support of some of the state’s largest investor-owned utilities, including Pacific Gas & Electric. PG&E spokesperson Lynsey Paulo called Newsom’s proposal “likely the most efficient way to achieve a clean energy future,” saying that the state should make sure the power it buys is distributed fairly among utilities in the state.

Publicly-owned utilities, like the Los Angeles Department of Water and Power, fear the state’s entrance into the energy market will create new competition, potentially increasing prices for everyone in a market already struggling with a lack of supply.

Patrick Welch, legislative director for the California Municipal Utilities Association, said if California starts buying power the state would be competing with utilities “and that could further drive up prices.”

“In the past two or three years, the market for new resources has gotten incredibly tight,” he said. “That tightness is really impacting the price of energy and particularly during the summer months.”

Democratic lawmakers have changed Newsom’s proposal to ease some of those concerns. While Newsom wanted the state to buy any type of power, lawmakers say it should be restricted to offshore wind and geothermal — two power sources that the utility companies currently aren’t buying. The proposal is pending in the legislature.

“When you leave stuff vague, then it creates uncertainty. And at this point in time, uncertainty is not good in the investment world,” said Assemblymember Steve Bennett, a Democrat and chair of the budget subcommittee that is vetting Newsom’s proposal.

Advocates say California is in a prime position to try something like this. Last year, five companies spent more than $750 million to lease areas off the California coast for offshore wind projects. These projects could collectively generate close to 5 gigawatts of energy, according to Alex Jackson, director of American Clean Power Association, which represents these companies. That’s enough to power more than 3.5 million homes.

If approved, the next step is getting the permits and building the turbines and the infrastructure necessary to transport the power to the grid. It would be easier for these companies to sell all of their power to the state instead of selling pieces of it to multiple utilities.

“We do think there is real advantages of having a single buyer,” Jackson said.

Another area ripe for new energy development is the Salton Sea, a large saltwater lake in Southern California that has been slowly drying up. Beneath the surface of the lakebed, heat from the Earth warms underground water. Geothermal power plants use steam from this water to spin turbines that generate electricity. The water also contains lots of lithium, which is used to make batteries that power cell phones and electric cars.

There are only a few companies capable of building these large, complex power plants that take many years to build.

Click here to read the full article in AP News

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Californians Urged to Conserve Electricity Amid Heat Wave

August 19, 2022 By Staff Report 6 Comments

Californians were urged to conserve electricity to prevent mass power shutoffs Wednesday as a heat wave scorched the northern part of the state, prompting warnings that lightning, thunderstorm winds and parched vegetation could ignite wildfires.

The heat wave was most extreme in the state’s interior, chiefly the Central Valley, where some locations hit 105 degrees (40 Celsius). The wildfire risk was focused on northern counties.

The California Independent System Operator, which manages the state’s power grid, called for voluntary electricity conservation from 4 p.m. to 9 p.m., when it said most people return home and switch on air conditioners, turn on lights, and use appliances. Late afternoon through the early evening is the period when the grid is most stressed due to high demand while solar energy production is decreasing.

Officials asked for voluntary power conservation to prevent the power shutoffs seen in previous years.

Pacific Gas & Electric last year turned off power to about 37,000 people in central and northern California as high winds toppled trees, downed power lines and ignited fires that forced people to flee from their homes.

In Sacramento County, officials opened police stations, libraries and other government buildings to people seeking refuge from the triple-digit weather.

Janna Haynes, a spokesperson with Sacramento County’s Department of Human Assistance, said separate cooling centers where people can get water, and snacks, and have access to outlets to charge their phones will remain open at least through Friday.

“We’ve activated the cooling centers several times this summer, but this is the worst and longest weather event that we’ve had so far this year,” Haynes said.

She said social workers were going out and offering the most vulnerable homeless people vouchers to motels.

Tony Sainz, who supervises a group of construction workers with the city of Sacramento, said his crew of carpenters, painters, and building maintenance workers try to finish up any outdoor work by 11 a.m. to stay out of the harshest heat. After that, the crew works in their shop, where they keep a freezer stocked with electrolyte freezer pops, Sainz said.

Sainz said he is lucky his house is surrounded by trees and near a river, which helps keep it cool. The family keeps the AC at 75 degrees (24 Celcius), he said.

Warm summers, Sainz said, are part of living in Sacramento and something he has learned to tolerate. So much so, that he said, he planned to go for a run after work Wednesday even though it was 97 degrees (36 Celsius).

“I run with three water bottles in my running vest and a cooling shirt and a hat that keeps the sun off your head. I stay hydrated and have electrolytes with me,” he said.

The heat “is one of those things that’s not in my control. You can’t fight it,” he added.

On Wednesday, red flag warnings for fire danger were posted for the northern Coast Range, eastern Shasta County and the Mount Lassen area.

Click here to read the full article in AP News

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Newsom Has a Plan to Keep the Lights On in California — Using Fossil Fuels

June 30, 2022 By Sammy Roth 6 Comments

A controversial plan from Gov. Gavin Newsom would reshape how business is done on the California power grid, potentially helping to extend the life of beachfront gas plants and the Diablo Canyon nuclear plant, making it easier for solar and wind farm developers to sidestep local government opposition, and limiting environmental reviews for all kinds of energy projects.

State lawmakers could vote as early as Wednesday night on the polarizing legislation, whose text was revealed late Sunday.

The bill would give the Department of Water Resources unprecedented authority to build or buy energy from any facility that can help keep the lights on during the next few summers — including polluting diesel generators and four gas-fired power plants along the Southern California coast that were originally supposed to close in 2020 but were rescued by state officials.

Those decisions would be exempt from the normal public input process under the California Environmental Quality Act — and from approval by agencies such as the California Coastal Commission and local air quality management districts.

A separate provision would allow companies building solar farms, wind turbines and lithium-ion batteries — as well as electric lines to connect those facilities to the grid — to opt in to an accelerated approval process that doesn’t require sign-off from county governments. State officials would be required to conduct environmental reviews and approve or deny those projects within nine months. Legal challenges to any project approvals would need to be resolved by state courts within another nine months.

The legislation is technically a follow-up to the state budget approved by lawmakers earlier this month. It’s part of the Newsom administration’s frenetic effort to address twin challenges: the risk of blackouts and the growing dangers of the climate crisis.

It’s been almost two years since brief rolling blackouts roiled the state on two brutally hot August evenings when there wasn’t enough electricity supply to power millions of air conditioners after the sun went down and solar panels stopped generating.

Electric utilities have managed to keep the lights on since then — barely. But preventing outages is only getting harder as fossil fuel emissions heat the planet, extreme drought drains hydropower reservoirs and worsening wildfires disrupt power lines.

Newsom responded last month by asking lawmakers to approve a $5.2-billion “strategic electricity reliability reserve” that would pay for emergency power supplies over the next few years. But he surprised many observers with Sunday’s proposal to let the Department of Water Resources secure those supplies through a special review process at the California Energy Commission, which critics say could limit opportunities for public input and lead to more pollution in low-income communities of color.

The strategic reserve “is an insurance policy that will only be used when we face potential shortfall during extreme climate-change driven events (e.g. heatwaves, wildfire disruptions to transmission),” the Newsom administration says in a bill summary.

Click here to read the full article in the LA Times

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Sempra To Give Record Profits To Investors On Heels of SDG&E Customer Bill Spikes

April 18, 2022 By Camille von Kaenel Leave a Comment

Sempra Energy, the parent company of San Diego Gas & Electric, is paying out its highest profits ever to its investors this month.

The payout to investors on Friday comes on the heels of a massive spike in bills for many SDG&E customers, who already shoulder the highest per-unit electricity prices in the country. SDG&E executives blamed inflation and an unusual spike in the cost of natural gas for the higher utility bills. The spikes came after the utility raised its rates for the year.

The payout also comes as consumer advocates say SDG&E’s rates and profit margins, which the utility is negotiating with a state regulator, are too high.

Sempra, whose subsidiaries include SDG&E and SoCalGas, made more money in 2021 than in 2020, bringing in $2.64 billion compared to $2.34 billion, according to a February earnings report. The company’s Texas utility and its subsidiary focused on infrastructure provided most of the growth in earnings, although SDG&E makes the most money for Sempra.

SDG&E brought in earnings of $819 million in 2021, a slight decline from its earnings of $824 million in 2020.

After the report came out, the value of the Sempra stock rose sharply and reached a record high of $170.76 on April 1.

Investors will get $1.145 for each share they own, up from $1.10 in 2021. Over the year, the company projects the dividend per share to be $4.58, more than ever before and the 12th consecutive annual increase.

CEO Jeffrey Martin touted a “long-standing commitment to return value to our shareholders” during an investor call in February.

In an emailed statement, Sempra spokesperson Patricia Kakridas said that “every investment is made with our consumers best interest in mind,” citing the company’s efforts to strengthen grid security and reliability.

Kakridas did not respond to questions from inewsource regarding how Sempra would make it easier for customers feeling pressure from the high price of electricity.

The steady increase in dividends is on par with those paid out by Edison International, which owns Southern California Edison, the utility supplying much of Southern California. The company paid out $0.70 per share to investors in January.

Pacific Gas & Electric Co. will pay its first dividends in May after a four-year pause following a series of wildfires sparked by its faulty equipment.

Edward Lopez, the executive director of the Utility Consumers’ Action Network, said the record dividends showed that SDG&E is profitable for its investor, Sempra.

“Unfortunately, those profits are borne upon the backs of SDG&E customers,” Lopez said.

Lopez said he wished that the California Public Utilities Commission, which regulates investor-owned utilities, would take note of the record payouts to investors when considering the utilities’ demands for higher rates.

He said his organization had received many calls from people looking for relief from high bills.

Betty Thompson, who’s lived in Fallbrook since 1989, is currently negotiating with SDG&E over a roughly $200 spike in her bill in December and January, even though she was traveling and out of the home for most of the time. Thompson called the bill “ridiculous,” noting that customers don’t have options to get electricity elsewhere.

“We’re stuck with it,” Thompson said.

“I hope there’ll be enough protests against the company that they will not get a raise in their rates,” she added.

SDG&E will determine its rates after it outlines its upcoming costs to the utilities commission in a state-mandated proceeding no later than May 16.

Click here to read the full article at KPBS

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What Can We Expect in a Frackless California? Economic Devastation, More Energy Imports.

November 19, 2021 By Kerry Jackson 4 Comments

Care to guess the last time the governor’s office issued a new fracking permit? It was February.

Now that’s a meaningless fact without context, so let’s put it perspective: Even though “Newsom endorsed an end to fracking” while running for governor in 2018, says California political legend Dan Walters, his administration early on increased the flow of fracking permits.

But then Newsom later “came under heavy pressure to match his words with action,” Walters continues.

By November 2019, Newsom had set ​a moratorium on fracking projects. Before permits would be issued, Lawrence Livermore National Laboratory researchers would review plans to ensure they met regulatory requirements. Yet it wasn’t terribly long before “the state issued 48 new permits for hydraulic fracturing,” according to the Associated Press.

Then the recall collar got tight in April. The governor’s response was to ban new fracking anywhere in the state by 2024. Even though he previously said he didn’t think he had the authority to prohibit the process and asked the Legislature to do it for him. And even though a legislative attempt never made it out of committee.

So can we expect in a frackless California?

Energy analyst and author Michael Shellenberger says Newsom’s fracking prohibition is simply “​​bonkers.” Assemblyman Rudy Salas, a Bakersfield Democrat, called it “an abuse of power” that will “put the lives, economy and well-being of thousands of California families in jeopardy.” Western States Petroleum Association President and CEO Catherine Reheis-Boyd says it’s an “arbitrary” action that will impose “big impacts on Californians.”

Both the Western States Petroleum Association and the board of supervisors in oil-rich Kern County, which produces roughly two-thirds of the crude that California doesn’t import – making the county the seventh highest oil-producing region in the U.S. – have sued the governor over his order. It’s an existential matter for each party.

In “The Killing of Kern County,” Joel Kotkin, presidential fellow in Urban Futures at Chapman University and executive director of the Urban Reform Institute, usefully explains for the many in Sacramento who are missing the point that oil (and agriculture) are the foundations holding up the county’s economy. Despite what’s at stake, Kotkin believes Newsom is more “interested in flattening the area’s aspirations” than unlocking its potential, which the governor once pledged to do.

Regulators, for instance, turned down 21 fracking applications in Kern County in a single month over the summer. With one of every seven workers in the county either employed by or reliant on the oil industry, the denial of so many jobs is not an insignificant blow to the economy.

The energy producers of the WSPA are also at risk. Court rulings in Newsom’s favor make the next step – the complete shutdown of oil production across the state – much easier to take.

Maybe the oddest part of any California energy story is the fact that officials and activists seem to have no reservations about importing what they consider “dirty” energy from other states. That reliance is only going to grow as long as Sacramento is at war with fossil fuels.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

This article was originally published by the Pacific Research Institute

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Will Huntington Beach Spill Trigger the End of Oil in California?

November 16, 2021 By Kerry Jackson 5 Comments

A recent San Diego Union-Tribune story asked the question that’s been on a lot of minds recently: After last month’s Huntington Beach spill, is oil in California at its end?

Given the state’s focus on the environment, the answer is likely a booming “Yes.”

Three years ago, Rep. Ro Khanna and Rep. Barbara Lee sent then-Gov. Jerry Brown a letter, asking him to end “the issuance of new permits for fossil fuel development and infrastructure” because doing so would “establish the standard for climate policy worldwide.”

Earlier this year, Gov. Gavin Newsom said he’d ​​made it clear he didn’t see a role for fracking in the state’s future and further declared that “California needs to move beyond oil.”

Then last month, Consumer Watchdog, responding to the Orange County spill, argued that it’s become “clear like never before that there is no such thing as safe proximity to oil drilling,” and insisted that “Newsom must stop issuing both offshore and onshore permits immediately.”

If California refuses to capitalize on its bounty of crude, it will have to increase its consumption of oil produced elsewhere, which will mean higher prices in the state that already has the most expensive gasoline and diesel in the country. The loss of a local supply will have no effect on local demand.

Only five other states have more proved crude reserves than California. But in-state production has dropped steadily after peaking about 40 years while it has soared in Texas, New Mexico, North Dakota, and other oil-rich states. The keep-it-in-the-ground crowd, which has nearly unchallenged political clout in Sacramento, considers this a feature rather than a bug.

Seven of every 10 barrels of oil produced in California, and 3 percent of the nationwide total, is pulled out of Kern County. It is seventh among all top oil-producing counties in the country. Roughly 25,000 jobs in the county, many of them high-paying positions, are connected directly and indirectly to the oil-and-gas industry. The benefits of California oil, however, go far beyond Kern County.

Across the state, 50,000 work in the industry. While we think of crude primarily in terms of pumping gasoline, only two-thirds of petroleum consumption is used for transportation, and less than half is burned as motor fuel. Other uses important to the modern California lifestyle include the manufacture of telephones, movie film, cameras, solar panels, wind turbines, and a literal laundry list of everyday household and consumer items.

California will be happy to rely on other states and countries to provide the crude for these wares. It seems the mindset is that what happens outside the borders stays outside. The dirty mining in China and the Third World that’s needed to deliver raw materials used in renewable energy is unnoticed by most Californians, as does the explosion of coal plant construction in China and India.

Maybe most Californians expect that after 2035, demand for gasoline and diesel will fall sharply simply because Newsom issued an order banning the sale of new gasoline-powered vehicles. It takes a certain degree of faith, though, to believe that the ban can realistically be implemented.

None of the above is intended to minimize oil spills. We all would rather the environment and wildlife remain unharmed. There is no way to provide energy without risk. Wind turbines probably chop up more than 1 million birds a year. Solar farms kill animals and destroy their natural surroundings. Both eat up enormous parcels of land, far more than natural gas power plants, and are creating waste disposal problems. They’re also risky because both provide energy only intermittently.

Yet oil is the chosen villain in California. It will be missed when it’s gone.

This article was originally published in the Pacific Research Institute

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

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California ‘community choice’ energy program takes a hit

June 30, 2019 By Chris Reed 5 Comments

The community choice aggregation (CCA) movement has built considerable momentum in California in recent years. In CCA programs, groups of local government agencies team up to take over decision-making on what sources of power to use in the local electric grid – with utilities continuing to hold responsibility for maintaining the grid. 

CCA advocates contend that not only will this lead to use of more environment-friendly types of energy, it will bring down rates for businesses and households by creating competition for utility companies that often have no rivals. Critics say decisions on what types of energy are used are already mostly dictated by state laws requiring a long-term shift to cleaner renewable energy sources. They also question whether local governments have the necessary expertise for the responsibilities they are taking on.

But since the state’s first CCA, Marin Clean Energy, was launched in Marin County in 2010, the programs have proven popular and kept expanding. Nineteen programs serving 10 million of the state’s 40 million residents have been established.

Last week, however, saw the first major bad news for CCAs in years. The Ventura County Star reported some of the local governments in California’s largest CCA – the Clean Power Alliance – were unhappy enough with the cost of power for street, highway and outdoor lighting that they had opted to return to Southern California Edison to provide that power.

The backlash is limited. The alliance includes Los Angeles County, Ventura County and 30 local cities. The cities of Ventura, Camarillo, Moorpark, Oxnard and Thousand Oaks have taken steps to limit their reliance on the alliance, and at least two other cities are considering the same step. They must give six months notice. 

Edison blamed for defections from Clean Power Alliance

Most member agencies are satisfied, with many choosing to use the 100 percent clean energy option provided by the alliance even if it carries a cost premium of 7 percent to 9 percent. 

Alliance leaders blame the defections on pricing decisions by Edison that they say were attempts to punish their CCA’s members. Edison said all its decisions had been ratified by the state Public Utilities Commission in a transparent process and challenged claims that the utility subsidized some customers at the expense of others.

But as cities are squeezed by the cost of pensions and look to save money wherever they can, the decisions made by Ventura, Camarillo, Moorpark, Oxnard and Thousand Oaks could be copied by other local governments. And while the cities are retaining use of the Ventura-L.A. CCA for most of their energy accounts, the street, highway and outdoor lighting accounts are among the biggest of all in terms of total bills, and thus most coveted by CCAs. 

Nevertheless, the news continues to be mostly bright for CCAs. In February, the San Diego City Council voted to begin negotiating on establishing a CCA with other local governments. San Diego would be the largest city in the nation with a CCA. The cities of Carlsbad, Chula Vista, Del Mar, Encinitas, La Mesa and Oceanside have expressed interest in joining the regional initiative.

Large utilities split on how to deal with CCAs

The decision was made easier by the surprising decision of the giant investor-owned San Diego Gas & Electric utility to welcome a new era in which it runs the regional grid but others choose energy sources. The utility disclosed in November that it hoped for state legislation “that would allow us to begin planning a glide path out the energy procurement space.” Edison and Pacific Gas & Electric have been far cooler to the CCA movement.

In another sign of CCAs’ acceptance as part of the California energy landscape, in May, Moody’s gave Peninsula Clean Energy aninvestment-grade credit rating. Peninsula serves 300,000 accounts in the Bay Area.

Only one other CCA has such a high rating from Moody’s: the Marin program that launched the movement in 2010. It has about 255,000 customers.

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Green New Deal Would Cause a New Depression

March 15, 2019 By Wayne Winegarden 5 Comments

Solar panelsThe legislation’s title is fitting. The original New Deal failed to create jobs and actually prolonged the Great Depression. This Green New Deal would be no different — it will destroy millions of jobs and push working-class Americans into poverty.

The bill seeks to transition America to nearly 100-percent renewable energy sources. Right now, those sources account for just 11 percent of America’s total energy consumption. To achieve this green future in just a decade, the proposed law would have to create huge subsidies for wind and solar power and place new restrictions on oil and natural gas drilling.

Such subsidies and restrictions have already been tried on much smaller, less ambitious, scales — yet they’ve still failed miserably.

Consider California. Back in 2015, the state passed a bill calling for a transition to 50 percent renewable energy by 2030. The Golden State required power plants to generate more electricity from green energy and lavished millions in subsidies on wind and solar companies.

California consumers are paying the price for those measures. From 2016 to 2017, electricity prices in California “rose three times more than they did in the rest of the United States,” according to policy group Environmental Progress. California now has the highest average electricity prices in the continental United States, according to my recent study from the Pacific Research Institute, a San Francisco-based think tank. The state also has the highest poverty rate and second-highest gas prices nationwide.

This big-government approach to fighting climate change isn’t merely expensive — it’s ineffective. States like West Virginia and Ohio, which haven’t enacted such policies, have actually seen greater emissions declines than the Golden State.

Germany’s renewable-energy push has similarly failed. “An average four-person household has to pay more than double for power in 2017 compared to 2000,” the head of a consumer lobbying group told German radio.

Despite spending billions to phase out fossil fuels and subsidize renewables, Germany is on track to miss both its European Union and national clean energy targets for 2020.

Ontario politicians’ green dreams have also turned into a nightmare for consumers. The Canadian province passed a law promoting green energy in 2009. From 2008 to 2016, electric prices spiked more than 70 percent — prices jumped 15 percent between 2015 and 2016 alone. The provincial legislature recently repealed the law.

The Green New Deal would replicate such failed schemes, but on a much grander scale.

If electricity prices surged here, working-class Americans would be clobbered. The poorest 20 percent of U.S. wage-earners spend nearly 10 percent of their income on electricity, while the richest 20 percent spend around 1 percent.

Fossil-fuels help keep energy bills affordable for working families. Natural gas production has surged roughly 50 percent in the past decade, causing electricity and cooking fuel prices to plummet. This production boom saved the average American family more than $1,300 in 2015.

The oil and gas sector also provides good jobs to working-class Americans. Oil and gas firms support over 10 million jobs across the country — the Green New Deal would eliminate nearly all these positions. By comparison, the Great Recession of 2007 to 2009 eliminated fewer than 9 million jobs.

The Green New Deal is an expensive exercise in futility. Its signature policies have already caused energy prices to soar from California to Canada. Scaling up these failed policies would wreck the U.S. economy and destroy millions of workers’ livelihoods.

This article was originally published by the Pacific Research Institute

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Local Energy Programs Are Gaining Popularity

February 22, 2019 By Chris Reed 4 Comments

Power electricCommunity-choice energy programs – in which a local government or coalitions of local governments procure electricity and use the infrastructure of existing utilities to distribute it – are growing in popularity across California.

Proponents say government control will lead to cheaper utility rates and faster adoption of renewable energy.

This month, more than 950,000 homes and businesses in Los Angeles and Ventura will shift to a community-choice program – the Clean Power Alliance. It will be the state’s 20th and largest community-choice provider, which will then provide power to nearly 3.6 million customers in the Golden State.

Those numbers could drastically grow in coming years. Both San Diego Mayor Kevin Faulconer and Dianne Jacob, chair of the San Diego County Board of Supervisors, have endorsed community-choice programs. Many other local governments are watching how the programs work in places that have already adopted them.

SDG&E says it welcomes infrastructure-only role

To the surprise of many industry watchers, one of the state’s three giant investor-owned utilities isn’t fighting this development.

After San Diego began taking steps toward a community-choice program last year, San Diego Gas & Electric made clear its interest in getting out of energy procurement. Earlier this month, Kendall Helm, SDG&E’s vice president of energy supply, told the Los Angeles Times that the decision was straightforward.

“We don’t think we should be signing big, long-term contracts for customers that have made a conscious choice to be served by a different” provider, Helm said. “We think our primary role and our primary value is in the safe and reliable delivery of that power.”

Pacific Gas & Electric and Southern California Edison continue to defend the status quo and to work with the California Public Utilities Commission and SDG&E on “exit fees” assessed to departing customers to make sure they help pay for maintaining energy infrastructure. But PG&E, now in bankruptcy and facing possible dissolution by the CPUC because of repeated scandals, has dropped its once-aggressive opposition to the very idea of community-choice energy, including sponsoring a failed state ballot measure on the issue in 2010.

CPUC president fears programs could fail, cause havoc

But California’s most prominent regulator worries that adoption of community-choice’s programs could have huge unintended consequences.

CPUC President Michael Picker told the San Francisco Chronicle last spring that he worries about things going haywire.

“You’re going to have some failures,” Picker said. “Electric markets can be brutal. So what happens to the customers, midyear, if the company or the program goes away? Where do those customers go?”

In a May op-ed in the Sacramento Bee, Picker urged local officials pursuing community-choice to act with care.

“The last time California deregulated electricity, it did so with a plan, however flawed. Now, electricity is being deregulated de facto, through dozens of decisions and legislative actions, without a clear or coordinated plan,” he wrote. “If California policymakers are not careful, we could drift slowly back into another predicament like the energy crisis of 2001.”

Picker warns that managing California’s power grid requires expertise and will become increasingly difficult as new clean-energy mandates kick in and as new technologies come to the fore.

But these warnings so far don’t seem to resonate with the statewide business community, which so far has not taken a strong, consistent stand on community-choice.

Some local groups have, however. The San Diego Regional Chamber of Commerce, for example, questions the assumptions that community-choice will lead to cheaper utility rates and increased use of clean energy.

This article was originally published by CalWatchdog.com

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Reduce Wildfire Damage and Lower Energy Bills by Freeing Up Markets

December 13, 2018 By Adam Summers 3 Comments

Power electricShortly before wildfires such as the Camp and Woolsey fires ravaged Northern and Southern California, respectively, Gov. Jerry Brown signed a contentious bill making it easier for the state’s investor-owned utilities — primarily, Pacific Gas & Electric, Southern California Edison and San Diego Gas and Electric — to recover wildfire costs from ratepayers, but don’t expect the flames to die down anytime soon.

The legislation arose out of the calamitous wildfires the state has experienced the past couple of years and utilities’ fears about their abilities to cover potentially billions of dollars in damages. PG&E faces a possible $15 billion liability for wildfires that wreaked havoc on Northern California’s wine country last year, and contends that it might be forced into bankruptcy if the California Public Utilities Commission does not allow it to cover the costs with rate increases on consumers. Senate Bill 901, authored by state Sen. Bill Dodd (D-Napa), largely sidestepped the broader reforms Gov. Brown had sought to reduce liability exposure for the utilities.

California law is unusual in that utilities may be held liable for fire damage caused by their equipment even if they were not negligent in maintaining it and followed all safety rules (such as wind blowing a tree down onto power lines and sparking a blaze). SB 901 did, however, direct the CPUC to consider PG&E’s financial status in deciding its liability for the 2017 fires, and may allow the company to pass along costs it cannot financially bear (however that is determined) in the form of bonds to be paid by ratepayers over time.

The legislation also requires utilities to beef up protections of their equipment, and provides some much-needed relaxing of logging restrictions on private land. A greater focus on wildfire prevention efforts such as removing excess fuel through vegetation clearing and controlled burns is also long overdue, and will be funded to the tune of $200 million a year for five years from the state’s cap-and-trade fund. Environmental policies preventing thinning to keep forests in a “natural” state, as well as drought conditions and a bark beetle infestation that have killed millions of trees, have created tinderbox conditions and significantly exacerbated wildfire damage. The money would go a lot farther, though, if the forest-thinning services were competitively bid instead of just doled out to Cal Fire.

In fact, privatization of wildfire services in general would likely substantially reduce costs. Approximately 40 percent of all wildfire services are already provided by the private sector, according to the National Wildfire Suppression Association, which represents more than 250 companies in 27 states employing about 10,000 private firefighters and support personnel.

The state should also stop interfering in insurance markets. An August study prepared for the California Natural Resources Agency by the RAND Corporation and Greenware Tech noted that insurers complain that the California Department of Insurance prevents them from using probabilistic wildfire models to project future losses and has not allowed them to raise homeowners insurance rates high enough to cover the full risk-based cost of policies in high-risk areas, which would discourage building in the most fire-prone locations.

Despite the significant risk to which it exposes investor-owned utilities in the state, strict liability is probably appropriate under the existing regulatory system. It is the same compensatory standard to which governmental agencies are held, and, as the state courts have noted, the eminent domain powers granted to electric utility companies under the Public Utilities Code and the government-protected monopolies under which they operate make them more akin to public agencies than unfettered private companies. Under such a system, where utilities face no competition and property owners cannot opt out if they are targeted for eminent domain action, it makes sense to spread the costs of wildfires among the utilities and their customers, who all share the benefits of the utilities’ electricity generation and transmission infrastructure.

That said, the existing regulatory system is at fault for creating “too big to fail” regional utility monopolies in the first place. A central planning commission that grants monopoly rights and dictates prices and “acceptable” profit levels sounds more characteristic of a socialist or totalitarian state like North Korea or the Soviet Union, but that is the state of energy markets in California.

A better solution would be to open up competition by eliminating regional government-granted energy monopolies with eminent domain powers and treating the provision of electricity like other goods and services. Fully privatizing the energy and insurance markets and eliminating government monopoly protections would do much more to reduce energy costs, increase innovation and reduce losses from wildfire damage than any measures currently being discussed in Sacramento.

 is a research fellow at the Oakland based Independent Institute.

This article was originally published by Fox and Hounds Daily

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