Juice: Big Energy Bills on Vacation Hold

10 Jul 2018

Before lawmakers went on their month-long summer break at the end of last week, they advanced a pile of energy legislation that is a mix of the old and new.

Awaiting legislators’ return to the state capitol are significant measures to create full blown expansions of the state’s wholesale energy market, clean energy mandate and direct access for non-residential energy customers. They also will vote later this summer on a measure to curb utilities’ massive wildfire liability, plus lesser measures that continue to grow in-state alternative energy resources.

The big bills of the session awaiting final votes on the Senate and Assembly floors are AB 813, SB 100, SB 257 and SB 901.

AB 813 by Assemblymember Chris Holden (D-Pasadena) seeks to have California’s grid operator be on par with the other two regional grids in the U.S.: PJM and MISO.

A new Western Independent System Operator, under the bill, could ultimately replace the 38 balancing authorities in the West with one mega operator.

Proponents promise it would increase trading efficiencies, better integrate excess in-state solar and wind power, and lower transmission costs.

Like last year, the regionalization legislation continues to be attacked by labor unions for threatening in-state renewable jobs and California’s decarbonization laws.

Their boogeyman—real or perceived—continues to be the Federal Energy Regulatory Commission. They say it will have more clout, resulting in interference with California’s clean energy resource choices.

At the same time, AB 813 opponents are okay with reaping grid market efficiencies with an expansion of the real-time Energy Imbalance Market into the day-ahead market. But, it is not clear how much that would insulate California from FERC’s reach. The federal agency is again to be dominated by Trump appointees, assuming former Trump appointee Robert Powelson is replaced.

The second big power bill seeks to control utility wildfire liability. State lawmakers and Gov. Jerry Brown have promised to pass legislation to address utility-sparked wildfires in a hotter, drier climate. The vehicle is SB 901 by Sen. Bill Dodd (D-Napa). The Assembly and Senate have passed differing versions.

In a conference committee that’s to meet later this summer, state leaders pledge they will amend the bill to “continue to ensure that those who cause wildfires are held accountable for damages associated with them,” but also that the responsibility for wildfires is “appropriately” determined.

That vague language is code for state leaders’ intention to shield the state’s utilities from the sort of open-ended liability they now face. Lawmakers openly fret that left unchanged the current liability law could undermine private utilities financial solvency.

Concern first arose after the California Public Utilities Commission denied San Diego Gas & Electric’s request to recover $387 million to cover uninsured liabilities it faced stemming from wildfires in 2007 sparked by its power lines. The concern was compounded by the wildfires of late last year in which utilities, particularly Pacific Gas & Electric, likely face billions of dollars of liability.

Specifically, SB 901 declares that: “Even when utilities operate their systems reasonably and prudently, there is an increasing risk of catastrophic losses given the changing conditions in California. Current legal standards should be refined to prospectively allow the courts to determine the liability of electric utilities when they have acted reasonably in installing, maintaining, and operating their transmission systems.”

However, currently absent from the bill are provisions that would actually implement these stated intentions.

The problem today is that under state liability law courts can hold utilities financially responsible for loss of life and property if their lines ignite wildfires, even if they have operated their systems in accordance with safety standards. This treatment is known as the doctrine of inverse condemnation. Expect lawmakers to eliminate or temper this standard for utilities.

Another big deal on the legislative front is SB 100 by Sen. Kevin de Leon (D-Los Angeles) setting a 100 percent fossil-free portfolio standard. It would up California’s renewable electricity mandate from 50 percent to 60 percent by 2030. By 2045, it also would require another 40 percent of power supplies come from large hydropower and other carbon-free resources.

The fourth major bill of the session is SB 237 by Sen. Bob Hertzberg (D-Van Nuys). It would shake up the state’s power market by eliminating the current ceiling on direct access for businesses in California. Currently, direct access is capped at 13 percent of the state’s total retail electric load.

Hertzberg’s bill expanding direct access comes as businesses clamor for the right to make or purchase their own power supplies in a competitive retail market instead of having to buy power from their local utility. Businesses, he notes, are waiting in line for other businesses to pull out of direct access, just like cars lined up in a crowded parking lot waiting for spaces to open up.

Opening up direct access to all the state’s businesses is not without complications. Among them is what happens when a business chooses to switch back to getting its power from the local utility, or increasingly their local community choice aggregator? How will the needed power be supplied at the drop of a hat when the utilities and aggregators haven’t previously arranged for enough power to meet the company’s needs?

Hertzberg’s bill attempts to address that concern by requiring utilities to enter power purchase agreements that assure resource adequacy in local areas. The cost of that power would be proportionally charged to direct access customers on a non-bypassable basis. The bill also would require the CPUC to make sure that California’s renewable portfolio and greenhouse gas reduction standards continue to be met.

Other active legislation continues the state trend of growing in-state renewable energy resources.

SB 1347 by Sen. Henry Stern (D-Canoga Park) would require the utilities to buy a total 2,000 MW of energy storage. Half of those projects could be utility-owned, with all to come online by 2031.

While the measure awaits a vote, PG&E waits for the CPUC to approve cost recovery for 567 MW of new energy storage projects. Last week, the utility sought the green light for four long-term deals for lithium ion systems. The largest is 300 MW. The second largest, at 187 MW, would be utility-owned.

Last but not least is AB 843 by Assemblymember Eduardo Garcia (D-Coachella). It would require utilities and other load-serving entities to purchase 3,000 MW of geothermal power. They would have to line up 1,500 MW from existing plants by the end of 2020 and another 1,500 MW from new projects that can begin delivering power by 2030.

Garcia’s bill is aimed at promoting geothermal development in the economically depressed area he represents around the Salton Sea. Garcia also notes that geothermal power can help integrate more intermittent solar and wind power into the grid without relying on as many natural gas power plants because their output can be ramped up and down.

However, utilities say they already have enough renewable power lined up to meet the state’s 50 percent renewable energy requirement by 2030 and that the bill would add to the cost of electricity. PG&E, for instance, says it will raise the cost of power for its customers by $300 to $400 million a year.

—Elizabeth McCarthy & William J. Kelly


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