Little Hoover Eyes Cost Unknowns, Consumer Hurdles

By Published On: October 31, 2014

After trying to pinpoint the cost of meeting the state’s renewable energy and greenhouse gas reduction goals, the Little Hoover Commission remains flummoxed, according to a report the panel released Oct. 24. “We all will be much better off if we have a steely-eyed review of the costs so that the benefits can be fully seen and understood,” states Revisiting California’s Energy Future. The commission report also bemoans the inadequacy of the cost savings estimates from energy efficiency programs, as well as uncertainty over the price tag of the state’s carbon-lite renewable resources mandate. In 2012, the commission asked the governor’s administration to total the expected costs of reaching a 33 percent renewable standard and cutting greenhouse gases to reach 1990 levels, plus attaining other energy goals. The California Public Utilities Commission provided to the Little Hoover Commission in April estimates of how electric utility rates are likely to increase—but those estimates were squishy, in part because much of the underlying data was confidential utility information. CPUC Energy Division director Ed Randolph told the Little Hoover Commission that annual rate hikes over the next five years overall should run between 2.35 percent and 4.2 percent, although the expected increases are to include expenses unrelated to improving the environmental performance of the state’s grid, such as salaries, benefits, and system maintenance. The utilities commission noted that a little more than half of future rate increases—56 percent—could be considered reliable, while the remaining 44 percent are uncertain. Some of the uncertain components of future rates include costs passed through directly to ratepayers, such as increases in the cost of natural gas. In that context, “The answers are less elusive than the political will to get it done,” the Little Hoover Commission commented. The report also questions efficiency savings after the CPUC Oct. 16 approved giving the state’s three investor-owned utilities $1 billion for their 2015 efficiency programs. The decision came even though the three over-collected more than $300 million from ratepayers in 2013. Concerns were raised at the CPUC meeting about lack of program effectiveness, including shaky savings methodology estimates (Current, Oct. 17, 2014). The latest Little Hoover Commission report points out that California is home to some of the top technology companies in the world, yet ratepayers’ ability to get up-to-date energy data and decide how to use and save energy remains constrained. It does acknowledge the CPUC’s effort to reform rates, but questions the speed of a decision and its likely reach to consumer-driven energy use technologies. “In California, the state needs to get out of the way and give consumers more options,” including widespread use of rates reflecting real-time costs, the report states. The Little Hoover Commission highlights a key concern of regulators, utilities and other stakeholders:—whether the decades-old regulatory scheme is “nimble enough” to effectively deal with a quickly changing, technology-driven electricity system. To answer its ongoing questions about the costs and other impacts of an evolving energy system and to improve planning, the report recommends the following: • The governor mandate through executive order an assessment of the cost and reliability impacts of the state’s clean energy policies and evaluation of whether the state goals are being met; • The state chief prioritize current and future energy goals as part of a public process; and • The governor and Legislature work together to develop a comprehensive plan to modernize the energy governance structure. There have been multiple efforts over the years to overhaul the state’s energy agencies, including housing them under a state Department of Energy and trading off responsibilities to eliminate overlap. None of these efforts have come to fruition to date. The Little Hoover Commission plans to revisit the topic of energy costs and adapting to increased use of technology next year.

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