The governor’s proposed budget revision providing $5.2 billion—with the lion’s share going to the Department of Water Resources—to add 5,000 megawatts of state-owned emergency fossil-fired generation to shore up reliability came under attack during a June 1 Assembly Budget Subcommittee hearing. Critics said it would undermine the state’s clean energy efforts and raises many questions. Also facing protests was a trailer bill to allow renewable and storage projects to seek state certifications from the California Energy Commission under an accelerated environmental review in place of local permitting.

Lawmakers, the Legislative Analyst Office, and environmental and ratepayer advocates took issue with giving the DWR $4.25 billion to keep online gas-fired power plants on the coast that use large qualities of seawater for cooling. The plants are supposed to be shut down to protect the marine environment. DWR’s allocation also would be used to add significant amounts of polluting diesel-fueled generation and to expand existing gas plants. Another $950 million would go to the CEC for diesel backup and fossil plants with emissions controls.

“This is a big train wreck,” Assemblymember Bill Quirk (D-Hayward) said of giving DWR power procurement authority again, 20 years after the state’s energy crisis. “This is not what they do for a living,” he said of the agency, noting Californians got saddled with $40 billion in overpriced secret power contracts in 2001-02 that DWR signed at the height of the crisis because of power shortages.

DWR Deputy Director Ted Craddock said emergency fossil power is “a bridge to the future.”

Others called for oversight of DWR’s new power procurement authority and for resource priorities to be articulated.

“We need guard rails” on the Department, said Merrion Bergeson NRDC senior scientist, to ensure Californians benefit and that long-term, not short-term, generation investments are made. Any increase in pollution in disadvantaged communities must be prohibited, she added. She also noted the “glaring lack” of funding for demand response, which would receive only 5% of DWR’s strategic reliability funds, with polluting diesel backup generation getting far more.

CEC Commissioner Siva Gunda told the budget subcommittee that because of supply chain issues, projected higher summer temperatures, more wildfires, and decreased hydropower there is an estimated 7,000 MW shortfall this summer in the “worst of the worst” case scenarios. The shortage is projected to rise to 10,000 MW by the summer of 2025, he said. The 5,000 MW of emergency fossil procurement will help fill the projected gap, he said.

But the Legislative Analyst countered that the big new procurement funding proposal raises a lot of questions about how to ensure and balance reliability, the environment and affordability. Analyst Ross Brown noted also that there was insufficient information on the magnitude of the reliability problem and pointed out that the expanded and new fossil generation won’t be online for several more summers. He also said the cost effectiveness of the DWR procurement proposal is unknown, as is how much it will reduce outages on the system.

Jan Smutny-Jones, who represents gas and renewable generators as executive director of the Independent Energy Producers, said he was “generally supportive” of DWR procurement. The additional power also is needed because the U.S. Department of Commerce’s investigation of whether China is evading anti-dumping restrictions by making solar panels in Southeast Asia has caused many projects “to come to a grinding halt,” he told lawmakers.

But Smutny-Jones said caution is needed with DWR power purchases because it won’t be part of a competitive market and there needs to be a lid on prices.

Also worrisome from the committee’s and LAO’s perspective is that language is proposed to allow the CEC and DWR to waive requirements of the California Environmental Quality Act, Public Contract Code, and Administrative Procedure Act to advance funded projects. In addition, Gov. Gavin Newsom’s May budget revision would allow energy developers to avoid local permitting and seek certifications for renewable projects from the CEC.

A trailer bill would allow CEC to shorten its permit reviews under CEQA from one year to 270 days while including Environmental Impact Reports, according to CEC Executive Director Drew Bohan. The CEC could permit solar photovoltaic and land-based wind resources over 50 megawatts and energy storage up to 200 MWh. The pending provision also would apply to CEC authority over transmission lines connecting to a 50 MW or greater sized thermal power plant to the first point of interconnection with the existing transmission grid, according to commission staff. In addition, the CEC’s authority would be expanded to include facilities that manufacture, produce, or assemble products, components, or systems for use in renewable or zero-carbon technologies.

Local agencies worry about lost permitting and related revenue, as well as losing say over projects impacting their communities.

However, Melissa Cortez, California Wind Energy Association lobbyist, supported allowing CEC siting of wind and solar projects over 50 MW. “We need to look at new ways to get projects permitted,” she said.

More time is needed for legislative scrutiny

Assemblymember Luz Rivas (D-San Fernando Valley) objected to the power provisions being put into the revised budget and not undergoing review in legislative policy committees to fully air the issues.

Quirk asked Committee Chair Richard Bloom (D-Santa Monica) about getting more information on the proposals. Bloom said there was a possibility that the controversial funding provisions would not be included in the budget expected to be passed this month. Lawmakers, he said, may get until August to better understand the implications of the provisions.

A provision strenuously objected to by public power agencies would put their planning reserve authority in the hands of the CEC. That would undermine local boards’ ability to participate in the grid operator’s reserve planning, complained Greg Cook, representing the agencies.

Welcome funding provisions were the $1.2 billion to cover struggling ratepayers’ unpaid utility bills and $970 million to support solar and storage installations, with 70% of the money going to low-income residences.

Matt Freedman, The Utility Reform Network attorney, applauded the $1.2 billion set aside but insisted that arrearages have soared. He said instead that $2 billion is needed to cover 80% of the debt. That would enable struggling customers to focus on other needs, including housing and food, while lowering the amount other ratepayers pay to cover the unpaid bills.

NRDC’s Bergeson was among those pleased with the billion dollars for solar and storage. But she said $1 billion alone is needed to just advance community solar for those unable to put solar on their residences. 

Legislation passed last week, AB 2316, would aim to create community solar projects with at least half of the power generated serving low-income customers or service organizations. No funding was specified, however.