CPUC Faces Renewable Growing Pains

By Published On: September 14, 2012

The California Public Utilities Sept. 13 postponed voting on troubling, confidential high-priced renewable energy contracts in an evolving energy market. The majority of regulators grappled with rate recovery that Pacific Gas & Electric seeks for renewable energy credits it purchased from Barclays Bank, Sierra Pacific Industries, and TransAlta. They also had difficulty coming to terms with a low performing geothermal deal PG&E signed. Commissioner Catherine Sandoval noted the concerns about approving PG&E’s short-term contracts for the green energy credits that cost “several magnitudes higher than other REC-approved deals.” She was also disturbed by paying top dollar for energy credits not needed by PG&E before 2019--a few years after the contracts expire. Approving such costly deals when renewable prices have been falling, Sandoval said, “is an extremely pessimistic view of the renewable energy market.” At issue has been what price comparison to use--prices at the time the deals were signed or current ones and impacts on the developer to revisions of the state’s renewable energy mandate. “A fair comparison is to look [at the price] at the time the deal was agreed, not at current prices,” said commissioner Mark Ferron. Commissioner Mike Florio noted it was not the responsibility of ratepayers “to indemnify sellers against changes in law and policy.” He said that the impacts of changes could well have been handled contractually. Both Ferron and commission president Mike Peevey want the draft resolution, expected to be voted on at the next CPUC meeting, to be reworked to allow approval for rate recovery for the renewable energy credits--particularly for those associated with the biomass facility. Peevey worried about the job impacts of rejecting the credits associated with Sierra Pacific’s mill. Before the commission are renewable credit deals linked to Sierra Pacific’s biomass facility producing 100 GWh year between 2011-15; 33 GWh/year associated with a wind project in Oregon owned by Barclays for 2010-11; and credits for up to 210 GWh from a wind project in Alberta Canada owned by TransAlta from 2011-14. TransAlta, it was pointed out, is no friend of the commission. It has continued to litigate the CPUC’s claims of excess power prices charged the state during the 2000-01 energy crisis, noted commission general counsel Frank Lindh. The other deal debated by regulators this week was a PG&E contract for a poorly performing 10 MW geothermal project in Lake County owned by BottleRock. Energy division director Ed Randolph called the deal “uncompetitive.” Again the price of the deal is kept from the public. The tension was over how much weight to give to renewable diversity, particularly baseload supplies that are interconnected to the grid. Also at issue was how to balance the developers’ investment and protect PG&E ratepayers from a costly, long-struggling project that is not needed to meet the utility’s renewable obligation. “I think it is a valuable resource for the state,” said commissioner Tim Simon. Florio noted that the underlying contract has been amended four times. The developer is working to increase the plant capacity to 25 MW. Randolph noted, “It has a tough row to hoe.” Peevey again pointed out the job impacts of rejecting the contract.

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