Juice: Sharpening Pencils

By Published On: November 18, 2011

I’m getting a taste for the utility procurement process. In a moment of enthusiasm, I sought a bid for installing solar panels on my rooftop. The bid’s in, so now I’ve got to decide what to do. A key difference is that I know about the cost to me of putting solar on my rooftop. Meanwhile, I know nothing about the cost of renewable power purchase contracts entered by my utility, even though I wind up paying for them as a ratepayer. My proposed system is supposed to cut my current $1,728/year electricity tab in the first year to just $540 and keep it from increasing beyond $1,001/year in a decade. If all goes as promised, by then I would have fully recovered my initial investment in solar and all future savings would be money in the bank. Without the photovoltaic system, the solar company said I will pay Southern California Edison $2,919/year in year ten and $5,228/year by year 20. With the solar panels, by then I’d be saving a cool $3,267/year. That’s more than dinner and a show. The numbers are all there, unlike with utility deals approved behind closed doors by the California Public Utilities Commission. Regulators, politicians, and renewable energy advocates promised that renewable energy--big or small--would protect ratepayers like me against rising energy costs, plus boost the economy. Instead, it became evident last week that in the face of pressure to meet environmental objectives, regulators apparently have been approving renewable power purchase agreements with something less than a sharp pencil. The bid I received clearly outlines the cost of the installed system and guarantees a rate of power production. If the system falls short, I would be reimbursed for the difference between actual performance and the guaranteed minimum production, assuming the company is still around. Uncertainty about who stands behind the system through its warranty period is one of my concerns, but at first blush the biggest question I had was about the bid’s projection that my electricity bill would rise by 6 percent/year ad infinitum. Would I really see my power bill approach $3,000 in ten years and then double in another ten? That’s double today’s inflation rate. Ouch. Figuring that past is prologue, I dug through my filing cabinet and found records going back to 2004, when I paid a total of $1,316 for power. Weather aside, over the seven intervening years my total bill appears to have increased 31 percent, or about an average of 4.5 percent/year. That’s after adding insulation and weather stripping, exterior window shades, a new high-efficiency furnace, and ductwork to a 1970 addition that previously was heated with an electrical baseboard system. I also switched out most of the lighting to compact fluorescent bulbs and have tried to buy Energy Star equipment. That cost thousands of dollars on top of my electricity bills, though I’m hopeful it will pay back eventually in energy savings. Additionally, my daughters graduated from high school and went onto college during those years. I no longer have to routinely turn out lights they’ve left burning. So a little digging through my own records and a bit of reflection showed me that the 6 percent/year increase is probably not unreasonable. The question is why? Over the same period, the Consumer Price Index has increased at an average rate of around 2.5 percent/year. Electricity bills are poised to rise even more as that state pursues a 33 percent renewable energy standard, deeper investments in energy efficiency, a greenhouse gas emissions trading system open to speculators, and grid modernization. The goals are laudable, but here’s the rub. Ratepayers got a glimpse of what probably has been going on for the better part of a decade last week when the CPUC approved a 250 MW solar thermal power procurement deal between Pacific Gas & Electric and Abengoa Solar. That was after its own staff said its cost was clearly out of line. However, commissioners acted under pressure after the Spanish company had spent $70 million and five years to get the project ready to build and after the CPUC’s sister agency, the California Energy Commission, and federal officials hustled to get it licensed and qualified for a $1.2 billion loan guarantee. Putting the kibosh on the deal would have been like me telling the solar company to go ahead and process my solar rooftop agreement--and in the interim me paying to reroof--and then calling the deal off when the installers showed up in their truck. State officials need to do more homework on cost earlier in the process, before companies and government agencies spend a lot of time and money to ready projects for installation. Commissioner Catherine Sandoval was right on the money when she observed that the current plant licensing and utility power procurement process is “backwards.” Cost needs to be set on an equal footing at the get go, rather than only being seriously examined at the end of the process. From a consumer viewpoint, her remarks--and CPUC member Mike Florio’s “no” vote--provided a long-awaited breath of fresh air. The backwards nature of the procurement process is partly responsible for the out-of-step increase in the cost of power for average Californians. More will become known when the CPUC releases the aggregate cost of past renewable energy procurement contracts next year under a law, SB 836, authored by Sen. Alex Padilla (D-San Fernando). Until last week’s relatively frank discussion of the PG&E-Abengoa deal, the cost of previous contracts involved in getting the state’s utilities to nearly 20 percent renewable energy have been shrouded in secrecy on grounds the information constitutes a trade secret that, if revealed, could tilt the playing field in negotiations between utilities and project developers. The only problem is that just like with my potential solar agreement, it’s the consumer who foots the bill and has been left in the dark when it comes to knowing what state mandates are really costing. Ratepayers value a clean environment, but have a right to know what it costs. We know it’s not free, but it’s clear that more public information on the expense of projects will help drive down costs. Padilla’s bill will help. The state’s energy establishment also should work to reform the power procurement and plant licensing process as Sandoval suggests. It’s time for regulators to sharpen their pencils just like I’m sharpening mine in considering a solar rooftop.

Share this story

Not a member yet?

Subscribe Now