Somewhere in California right now, there is a dead battery that is going to change everything in the Golden State.
For years, Californians have been told that the state must lead on climate change policy, even as the policies drove up the cost of energy and everything powered by it. Residential electricity rates here are more than 50 percent higher than the national average.
Everybody seemed to be fine with it until the power went out. Historians may someday identify the turning point in state politics as the exact moment that a Californian plugged an iPhone into the wall and it didn’t charge.
The connection between the massive electricity shutdowns and climate change policies has been highlighted by two Republican lawmakers who represent the fire-devastated town of Paradise. Sen. Jim Nielsen and Assemblyman James Gallagher announced that they will introduce a bill in January that will require utilities to redirect the money they’re spending to comply with the state’s mandate for ever-increasing use of renewable energy. They want that money to be spent on hardening the grid and managing vegetation near power equipment.
California law first established a renewables portfolio standard (RPS) in 2002. It called for 20 percent of retail electricity sales to be generated by “RPS-eligible” sources, primarily wind and solar energy, by the end of 2017. In 2015, the state passed another law to increase the requirement for RPS compliance to 50 percent by 2030.
Last year, the state enacted Senate Bill 100, the “100 Percent Clean Energy Act,” which increased the RPS obligation for electricity sellers to 60 percent by 2030. It also established a state policy that “RPS-eligible and zero-carbon resources” supply 100 percent of all retail electricity sales in California by December 31, 2045.
“RPS-eligible” refers to the fact that electricity generated by renewable hydropower and nuclear energy don’t count toward the requirement, even though they don’t generate any greenhouse gas emissions.
The RPS laws aimed to create a market for solar and wind power by forcing utility companies to sign long-term contracts to procure it. The consequence of this has been to force ratepayers to pay higher rates. Even though the price of solar and wind power has come down, utilities that signed contracts years ago to comply with the RPS requirement are locked in at the higher prices.
Potentially, a bankruptcy court could relieve the utilities of their obligations under those old contracts.
And this explains why politicians in California who supported laws like SB100 are trying so hard to bail out the investor-owned utilities. A recent law signed by Gov. Gavin Newsom stuck ratepayers with half the cost of filling up a wildfire liability fund and created a more reliable path for utilities to recoup wildfire losses by charging their customers.
If the idea of requiring utilities to comply with a renewables portfolio requirement was to forcibly create a market for a product that the market wasn’t buying, bankruptcy could undo the whole scheme. A bankruptcy court can set aside current contracts and force the negotiation of new ones. Investors who plowed money into companies that plowed money into solar and wind energy projects will lose much of their cash crop.
You can follow the drama by watching the performance of so-called yieldcos, investment vehicles that own long-term contracted assets in the renewable energy space. They generate stable cash flows for investors, as long as the long-term contracts aren’t canceled by a bankruptcy court and replaced with new contracts at the current, lower prices for renewable energy.
The threat to the long-term contracts was made clear by Nielsen and Gallagher, who said they’ll introduce a resolution urging the judge overseeing Pacific Gas & Electric’s bankruptcy to rescind the company’s electricity contracts. PG&E has acknowledged that some of the older contracts have locked the company into paying higher prices for power than they would pay if they negotiated new contracts in today’s market.
If they paid less for power, they’d have more money to pay for hardening the grid and managing vegetation, or for paying refunds to angry ratepayers who are sitting in the dark with dead phones.
Senate President Pro Tem Toni Atkins reacted furiously to the proposal from the GOP lawmakers. She denounced the idea of “backsliding on renewable energy” and declared, “Replacing clean energy sources with more energy generated from fossil fuels exacerbates the climate change that is causing the extreme weather and wildfires we are facing.”
But that ignores the fact that California could have reliable electricity from hydro and nuclear power without increasing greenhouse gas emissions, not to mention the fact that the whole state only accounts for 1 percent of global GHG emissions and our RPS doesn’t affect the climate at all.
The RPS standard is a very costly subsidy for wind and solar power. Every dollar that a utility spends on overpriced old contracts for renewable energy is a dollar that it doesn’t have available to upgrade its equipment to reduce fire danger.
The fires caused by old equipment are a consequence of the state’s decision to micromanage how utilities spend their (or your) money.
There’s no reason to stick with the requirements in SB100. What Atkins called “backsliding” could also be called a reasonable adjustment to reflect current costs and conditions.
Politicians like Atkins are desperately trying to sustain an unsustainable policy that is driving electricity rates to insane heights, harming consumers and businesses.
California needs reliable and affordable electricity. We should all be able to agree on that.
Susan Shelley is an editorial writer and columnist for the Southern California News Group. [email protected] Twitter: @Susan_Shelley
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