CEC Approves Its 2005 Integrated Energy Policy Report

By Published On: November 28, 2005

The 2005 Integrated Energy Policy Report-which outlines a broad range of recommendations aimed at keeping the state?s energy supplies affordable, reliable, and environmentally sound over the coming decade-is official. After more than a year of work, the commission formally adopted the report November 21. The main policy statement and two other major reports, covering the need for power procurement by investor-owned utilities and construction of new power transmission facilities, are supposed to form the empirical basis for legislative and executive decisions about California’s future energy policy. According to the IEPR, a combination of new energy supplies and infrastructure and efficiency programs will be needed to meet growing demand in California-the world?s sixth-largest economy. “Energy prices in California are higher than ever before,” says the report. “As the state’s demand for electricity increases, California could face severe shortages in the next few years.” Hot temperatures in the summer that cause power demand to spike, persistent dry conditions that diminish hydropower production, and closure of old plants in the heart of California’s major metropolitan areas are chief concerns, the report says. However, some disagreed with specific findings in the report. For instance, Phil Muller, president of SCD Energy Solutions representing Mirant, said that closing down “the Rodney Dangerfields of California’s electric industry-the aging power plants-would leave the state in the lurch. Eventually, the plants will be needed to provide backup power as the state moves increasingly to wind-based generation, he added. California also lacks strategic transmission lines needed to move power from where it is produced to where it is needed, the report notes. It emphasizes the need for speedy construction of new lines. “We’re really pleased about what you have to say on transmission,” said Joe Kloberdanz, San Diego Gas & Electric regulatory manager. The utility’s electricity supply is constrained by lack of transmission. The report also warns that limited supplies of natural gas will keep the price of electricity high. To remedy the situation, the report calls on the California Public Utilities Commission to: ? Require investor-owned utilities to procure enough power-to meet their net short positions and provide for retirement of aging plants by 2012. ? Adopt rules for departing load by the end of 2006. ? Eliminate confidential procurement review groups and establish transparent resource planning and procurement processes. ? Develop “transparent and standardized methods for addressing least-cost best-fit criteria” for renewable power procurement and apply a -renewable-rebuttable presumption” in all procurement. The report also recommends increased state oversight of investor-owned utility energy-efficiency and demand-response programs, as well as establishing state energy-efficiency reporting requirements for publicly owned utilities. The CEC recommends that munis be required to meet the state’s renewables portfolio standard. It also recommends a number of changes to the state’s renewables portfolio standard program, including “a prudent contract-risk margin” of at least 30 percent for investor-owned utilities. The commission wants utilities to overcontract for renewables in the event that not every renewable energy project outlined in procurement contracts is built. It also recommends that the CPUC develop new standardized contracts for wind repowering projects that require high-efficiency turbines and fewer bird deaths. By the end of next year, the report recommends that the Energy Commission and the CPUC open a joint proceeding to make the renewables portfolio standard process simpler and more transparent. The renewables portfolio standard requires utilities to obtain 20 percent of their power from renewable sources by 2017. However, regulators expect utilities to conform by 2010. The CEC recommends a greater emphasis on combined heat and power facilities in utility procurement. Although new nuclear plants cannot be built under current state law, the IEPR addresses existing nuclear issues. It says that the state should seek a refund of money paid to the federal government for development of a long-term nuclear waste disposal facility. The money could be used for storing nuclear waste on-site at California’s nuclear reactors. However, a group of scientists faulted the report for not recommending that the Legislature eliminate the state ban on construction of new nuclear plants in California until a long-term nuclear waste solution is devised. On electric transmission lines, the report recommends that the Legislature transfer siting authority from the CPUC to the Energy Commission and establish a statewide corridor planning process. It also urges the California Independent System Operator to change its tariff structure to encourage new transmission lines that interconnect with renewable generation projects. In its separate 2005 Strategic Transmission Investment Plan, the Energy Commission recommends completion of five transmission line projects: ? The 2,500 kV Palo Verde-Devers #2 line from Palo Verde, Arizona, where there are numerous gas-fired power plants, to Devers, California. ? The San Diego Gas & Electric Sunrise Powerlink 500 kV project, to bring geothermal and solar power from the Imperial Valley into San Diego. ? The Antelope Transmission Project, to bring wind power from the Tehachapi region to the state’s grid. The Imperial Valley Transmission Upgrade Project, to bring renewable power from the valley into Southern California. ? The Trans-Bay DC Cable Project, to increase the capacity to bring power to the San Francisco Peninsula. Finally, in its document 2005 Transmittal of 2005 Energy Report Range of Need and Policy Recommendations to the California Public Utilities Commission, the commission calls on investor-owned utilities to enter into long-term contracts to prevent a growing gap between the demand for electricity and the power generation resources under their control. The 2005 IEPR covers electricity, natural gas, and transportation fuels. It synthesizes 50 staff papers and consultant reports, more than 30,000 pages of docketed materials, 100 comment letters, and discussions that occurred in 60 separate meetings. It now goes to the governor, the Legislature, and the CPUC for action on its recommendations.

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