Gas Prices Loom in Showdown on Greenhouse Policy

Environmentalists and the power industry are squaring off in a showdown over the state's greenhouse gas emissions policy as the California Energy Commission prepares to adopt the 2005 Integrated Energy Policy Report. Utilities warn that the commission?s proposed greenhouse gas standard for power procurement could drive natural gas and electricity prices higher. Environmentalists, however, back the commission's proposal and urge the state to set an airtight greenhouse gas standard to spur efficiency and use of renewable resources. At issue is the CEC draft report's stance on greenhouse gases, most notably a recommendation that the state set an emissions performance standard for utility power procurement "no lower than levels achieved by a new combined-cycle natural gas turbine." The draft document also calls for all load-serving entities, including public power agencies, to develop plans to implement Governor Arnold Schwarzenegger's greenhouse gas emissions standards. The Wyoming Infrastructure Authority warned the commission that its proposed performance standard would kill investment in advanced coal. "The proposed . . . standard is highly likely to convince coal plant developers that the California market is closed for the foreseeable future and they will shift resources to more realistic investment targets," said Michael Easley, authority chair. He wrote to the commission that by killing development of a clean-coal demonstration project that would be federally funded (Circuit, Oct. 7, 2005), the standard will create "a very high, if not insurmountable hurdle" to the proposed Frontier Line transmission project, which also would bring wind power to California. State emissions standards already have made the power industry dependent on natural gas, and now the CEC's proposed greenhouse gas policy "will likely create an even greater reliance," said Bernie Orozco, San Diego Gas & Electric director of state governmental affairs, in comments on the draft report. The commission's proposed standard also could hamper construction of new simple-cycle peaking units, as well as biomass and biogas projects, he said, which would threaten to raise the price of electricity for California ratepayers. The performance standard "would compromise the state's goal for a reliable, reasonably priced supply of electricity," according to Gary Schoonyan, Southern California Edison director of regulatory and policy affairs. However, the Center for Energy Efficiency and Renewable Technologies said that high gas prices are due to growing resource scarcity, not any proposed greenhouse gas standards. "Katrina and Rita did not cause the spikes in energy prices and supply constraints. The storm exacerbated an already critical supply situation," said Paul Vercruyssen, CEERT development coordinator. He added that measures "need to be taken immediately by the state to ameliorate the impact of natural gas prices." Ultimately, however, the center urged California to turn quickly to renewable resources to address rising gas prices and to hold fast to the governor?s greenhouse gas emission reduction goals by making sure that any imported coal power meets high environmental standards - - including carbon sequestration. "The IEPR should recommend a crash program designed to bring both Tehachapi wind and Imperial geothermal energy to the grid by the end of 2006, or shortly thereafter, as an appropriate response to the gas crisis," the center said. The commission will have the opportunity to change the document when it publishes a draft final version on November 7 after a committee hearing November 4. The full commission is set to consider the final report at a special meeting on November 21.

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Gas Prices Loom in Showdown on Greenhouse Policy

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