JUICE: Aftershocks

Tensions between the California Public Utilities Commission and the Energy Commission publicly emerged again this week. During a joint commission meeting on the Energy Action Plan update, the tectonic plates of the regulatory body and the planning agency ground against each other, creating a series of small policy temblors. Different pressures and priorities for the agencies - which only months ago touted newfound cooperation and collaboration - have caused growing rifts over the role of qualifying facilities, cogeneration, commitments to the state renewables portfolio standard, and demand response. Add to that months of turmoil over transparent decision making and transmission siting turf. CEC member John Geesman railed against the CPUC's deviation from the Energy Commission's 2005 Integrated Energy Policy Report's pro-QF stance at an April 24 joint hearing. Following Geesman's unadulterated criticism, Energy Commission member Jim Boyd joined Geesman, saying that their agency and its staff support cogeneration "as a very effective way to work out of the morass we have worked our way into." Boyd explained that the IEPR policy supporting the struggling QF industry (also known as combined heat and power systems) was critical after "four years of hell to move this subject along." Under fire, the CPUC disputed the Energy Commission's assertion that it is wiggling out of cogen support in federal hearings. Sean Gallagher, CPUC Energy Division director, said his argument before the Federal Energy Regulatory Commission merely focuses on why QFs should get market rates under the federal Energy Policy Act. State regulators, Gallagher added, will separately address the policy issues during an upcoming QF proceeding. However, market rates are lower than current avoided price payments to QFs (Circuit, March 31, 2006), leading Geesman to remark that the CPUC defense "didn't pass the smell test." An irritated CPUC president Mike Peevey later noted that his agency has "kept many [QF] projects open and alive in face of unremitting opposition." But, he added, "We are not going to write a blank check." The rift over the payment formula for cogeneration has been going on for decades. Investor-owned utilities say it is too generous. Generators insist that lowering the price paid will effectively squelch the shrinking QF sector. Other interagency disagreements focus on how to carry out policies on which the two agencies otherwise ostensibly agree. For instance, although both agencies want demand-response programs, the CEC and the CPUC do not see eye to eye on details - including who should be covered, whether the programs should be based on an opt-in or an opt-out strategy, or the length of a trial period. The CEC maintains that there are only minimal reductions in peak usage where demand-response programs are made up of customers who opt in. The agency notes that voluntary critical peak pricing in Southern California Edison territory produced no peak-power reductions in 2005. "We are in a more precarious position than we realize," said CEC chair Joe Desmond when addressing current demand-response results. The CEC would like demand-response programs, particularly for critical peak pricing, to run as an opt-out program for all metered customers. (Under critical peak pricing, ratepayers are given a discounted rate 99 percent of the time and face high rates at times of maximum consumption. Under an opt-out program, customers are included in the program unless they ask to be put under standard rates.) CPUC member John Bohn said the critical peak-rate design created "winners and losers" because some businesses can't shift their energy use and would pay more for pricey peak power. CEC member Art Rosenfeld retorted that any rate structure creates winners and losers. "The majority would be better off" under peak pricing, he said, adding that those who did not like the rate structure could opt out of the program. The CEC also wants a critical peak-pricing trial period to last a year instead of a shorter period because it believes that would result in more savings. For example, if a pilot project ran only during the summer and did not carry over into the cooler season, utility bills could be higher because of peak pricing kicking in more often on hot days. The CEC would also like to see all ratepayers subject to some form of real-time pricing, which offers a variety of fluctuating rates over different time periods. However, the Energy Commission has no control over which programs will be adopted and who will be covered because, unlike its sister agency in San Francisco, it's largely a policy-making body. Demand-response program specifics will be decided by the CPUC in an upcoming proceeding, according to Gallagher. Customers need advanced meters installed in order to use real-time pricing. Pacific Gas & Electric is moving ahead on advanced-meter installations. Peevey said that the Northern California utility will begin installing advanced meters in the sun-belt areas of its territory, not the fog belts, to increase efficiency. San Diego Gas & Electric is following in PG&E's footsteps. Another rift is in how the two agencies view the negligible growth in new renewable supplies under the renewables portfolio standard. "We need to recognize when policy goes astray," Geesman said. To highlight the renewables portfolio standard program's pitfalls, Geesman pointed to the recent announcement by PG&E that it had contracted for 1,180 MW of new gas-fired power supplies - with nary a renewable electron in sight. "The PG&E process is an abject failure," Geesman said. Two weeks ago, the CEC released a report showing a one-tenth of 1 percent increase in new wind, solar, geothermal, and other alternative supplies since enactment of the renewables portfolio standard in 2002 (Circuit, April 14, 2006). The CEC assesses the renewables portfolio standard program by counting actual green megawatt-hours, while the CPUC counts green contracts, not delivered or deliverable green energy. The CPUC has stretched the RPS parameters to ensure that 20 percent of the utilities' portfolio includes tangible green power by 2010. Neither regulators nor staff seem overly concerned about the current utility shortfall with regard to the 1 percent annual increase requirements. Part of the shortfall in real renewables growth is attributed to a lack of incentives, because utilities can pass on higher gas costs to ratepayers and there has been no hint of any potential CPUC penalty for noncompliance under the renewables portfolio standard. In addition to the differences on critical topics, the two agencies play different roles. The CPUC is a regulatory body that sets rates and develops and implements rules carrying out statutory mandates. The CEC is largely a planning agency. Thus, the former agency's decisions carry greater weight and are subject to far more pressure from lobbying representatives from utilities, large and small consumers, and generators. The CPUC also ends up in the courts more often and faces more legal threats. So far, the Schwarzenegger administration has failed to give the CEC more authority for regulation through repeated attempts at energy agency reorganization. Finally, another point of contention noted this week is whether the CPUC will continue to make decisions about power supply contracts behind closed doors. Its sister agency has hammered at it to open decision making to sunshine, as required by regulations and the state Public Records Act. In late February, a court dismissed lawsuits brought by the three investor-owned utilities that attempted to require the CEC to keep certain data confidential. A Sacramento Superior Court rejected efforts to keep aggregated customer data supplied for forecasting hidden from the public. It also refused to require that Edison's annual peak-demand data be kept secret on competitive grounds. Later, utilities, consumer advocates, the CEC, and others filed conflicting briefs asking the CPUC to expand or restrict public access to data used in procurement decision making. Neither Edison, SDG&E, nor PG&E appealed the court ruling. Not pursuing the legal challenge is seen as an opportunity for more open, public decision making. CPUC member Dian Grueneich told Geesman that the transparency issues will be decided in the upcoming hearing on the subject. While I have bottles of water, camping food, a couple of extra flashlights, and shoes under the bed as a bit of earthquake insurance, I realize that the tectonic plates have to, and will, move. It's a good thing. It makes mountains. And so does interagency prodding and clashing, especially if it shakes things up enough to keep another big crisis at bay, achieving the joint goal of keeping the lights on in a less polluted state.

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JUICE: Aftershocks

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