It’s the Capitol: CEC Renewable Fund Surplus Targeted

By Published On: April 1, 2011

Lawmakers zeroed in on whether a ratepayer-funded California Energy Commission program to advance alternative energy technologies merits reauthorization March 29. The Renewable Resource Trust Fund was targeted by legislators during the third hearing on extending the entire Energy Commission’s public goods-funded program because a substantial amount of money remains unspent every year. Last year, for example, the fund started with a balance of $138 million and ended the year with a $93.7 million surplus. “The large balance raises a red flag, [a] possibility of over-budgeting,” Tiffany Roberts, Legislative Analyst Office analyst, told the Senate Energy Utilities & Communications Committee. She added that the surplus funds may represent a disconnect between the statutory parameters of the public goods program and the renewable industry needs. In addition, the renewable fund balance has been diverted to the state’s deficit-ridden general fund the last three years. Another $20 million from the fund is to be redirected as a loan this coming fiscal year under a budget trailer bill approved March 24. “Is there a better mechanism to avoid the sweeping of funds?” into the general fund, asked Senator Alex Padilla (D-Pacoima), committee chair. This resource trust fund and other programs funded by public good charges were created during the state’s deregulation effort. The overall program is set to expire at the end of this year unless reauthorized by two-thirds of the Legislature. The Energy Commission defended its use of funds in the renewable account but noted its effectiveness has been hampered by statutory limitations and no direct requirement that it help promote the state’s 20 percent renewable mandate. “There’s no strategic program to focus on market barriers,” said Panama Bartholomy, Energy Commission efficiency and renewables division deputy director. For instance, he also noted that the commission is restricted in the technologies it supports. The Renewable Trust Fund was meant to be a temporary financial boost to biomass, solar thermal, and wind technologies to help make them viable. Today only biomass and solar thermal projects receive the subsidy. The fund gives performance-based incentives to 680 MW of biomass and 400 MW of solar thermal. The Energy Commission discontinued subsidizing wind projects because it discovered the incentives covered all or nearly all or more than the cost of projects. In addition, it found a number of projects underperformed because the owners didn’t have any financial incentive to assure the projects produced power (Current, March 18, 2011). Biomass facilities were singled out this week to be weaned off the program because the bulk of the subsidized projects are under contract with Pacific Gas & Electric. The fund receives money from all investor-owned utility ratepayers. The industry remains dependent on subsidies for the foreseeable future largely because of fuel cost to transport the wood debris from forests, farms, and cities. Fuel cost represents half of a biomass producer’s operating costs, which the current [utility] contracts don’t recognize, said Julie Malinosky Ball, California Biomass Energy Alliance lobbyist. According to the Energy Commission, last year 20 percent of the resource fund incentives--nearly $10 million--went to PG&E. Another 16 percent--more than $4.5 million--was sent to San Diego Gas & Electric, while 9 percent--$2.7 million--went to Southern California Edison. Part of the Renewable Resource funding also goes to the new solar homes program. However, the recession halted most new construction. By last July, only 27 MW had been installed on new homes, representing less than 7 percent of the 400 MW goal by 2016. Several bills would extend the program, ranging from one year to 10 years. In spite of ongoing program criticism, sources say the Energy Commission’s public goods charge programs, which also include its $62.5 million Public Interest Energy Research effort, will be extended.

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