Assembly Bill 1373, the latest clean energy legislation out of Sacramento, is likely to raise electricity bills so much that even the legislative staff reviewing the bill for the Senate Appropriations Committee expressed concerns about it.
"The State of California is an electricity customer, purchasing roughly one percent of the state's electricity. As such, the state incurs costs when rates increase. To the extent this bill results in increased electricity rates, there could be additional costs on the state as a ratepayer," the staff wrote, describing the fiscal impact of the bill as including "unknown, potentially significant ongoing costs" to taxpayers.
The customers who buy the other 99% of the state's electricity can expect a similar jolt. "These costs come home to roost on electric utility customer bills," the Senate staff wrote.
AB 1373 authorizes the California Department of Water Resources to spend — and borrow and spend — taxpayer money to become a "central procurement entity" for off-shore wind and geo-thermal energy. According to the bill's author, Assemblymember Eduardo Garcia, D-Coachella, "the state's energy needs require a statewide, centralized response in order to ensure that Californians can keep the lights on while meeting our clean energy goals."
The problem the bill is meant to address is the inability of utilities to finance the construction of off-shore wind energy projects, which are viewed by investors as too costly and too risky. So this bill authorizes the DWR to "procure" the energy, stepping into the energy market in a way that, according to the Senate analysts, "can have the unintended effect of reducing supply in the energy market and increasing prices overall."
Following the energy crisis of 2000-01, when blackouts and brownouts plagued the state, California lawmakers mandated utilities and other "load-serving entities" to procure enough power to meet specified resource adequacy requirements. But as subsequent laws added additional, ever-increasing mandates for procuring renewable energy, the challenge of meeting both the resource adequacy and renewable energy requirements simultaneously became more and more daunting, and more and more costly.
There's no reason to believe that a state takeover of energy procurement will magically reduce costs and risks. More likely, it's another example of government rushing to buy with your money what the market has rejected as a bad bet. The Department of Water Resources will spend money and issue bonds to bring these new green energy projects online, and if the California Public Utilities Commission determines that the spending and borrowing is "just and reasonable," the cost is "recoverable" by adding "nonbypassable charges" to customer utility bills. That means even customers who have installed solar panels and enjoy a credit balance from net metering will have to pay them.
The state's "incredibly ambitious clean energy targets," as the staff analysis for the Assembly Committee on Utilities and Energy described them, require nearly 86 gigawatts of new resources by 2035, more than double the current resources, "an enormous goal."
It's fair to ask whether off-shore wind, geo-thermal and similar clean energy projects will ever be reliable enough to replace the natural gas, nuclear and hydroelectric facilities that largely power the state now, and whether these projects are worth what they will cost California's residents and businesses, already struggling with high energy prices.
Unfortunately, state lawmakers pay little attention to the economic burden caused by their "ambitious" goals.
—The Editorial Board, Southern California News Group
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