(August 18, 2008) The California Chamber of Commerce is part of a broad coalition opposing Proposition 7, the November ballot initiative that seeks to significantly increase the percent of renewable power that utilities must purchase.
The coalition includes environmentalists, renewable energy companies, taxpayers, labor and utility companies, PG&E Corporation and Southern California Edison Company, as well as many local chambers of commerce.
The CalChamber Board of Directors voted in May to oppose the measure due to its potential to substantially drive up energy prices in the state and its unworkable mandates.
Requirements
Proposition 7, The Solar and Clean Energy Act of 2008, requires all utilities, including government-owned utilities, to generate 20 percent of their power from renewable energy by 2010, a standard currently applicable only to private electrical corporations. Proposition 7 raises the requirement for all utilities to 40 percent by 2020 and 50 percent by 2025 while significantly altering the state’s renewable power and energy markets.
Experts warn that these market changes, combined with language that will eliminate competition from small renewable companies, will lead to price manipulation and significant increases in electric bills.
Renewable power providers and leading environmental organizations also have concluded that the measure could actually disrupt renewable power development in California.
Poorly Drafted
The measure contains a “competition elimination” provision that forces smaller renewable energy companies out of California’s market, costing thousands of jobs. The provision excludes renewable energy produced by facilities of less than 30 megawatts (MW) from counting toward the new renewable goals.
About 60 percent of the renewable energy projects currently under contract with the state’s three investor-owned utilities would fail to meet this arbitrary minimum size requirement and would be shut out of the market.
Significant Rate Increases
Proposition 7 mandates that utilities accept renewable power contracts which are up to 10 percent of the market rate of other energy sources. This “must-take” provision would guarantee that renewable contracts would permanently be locked in at a level of at least 10 percent above market rates.
The measure also forces utilities to sign 20-year contracts without establishing any competitive process to ensure that consumers are receiving power from the most cost-efficient sources.
Renewable power isn’t available at all times of day (particularly during peak demand periods); therefore, utilities still will have to contract for significant backup power from traditional sources.
The non-partisan legislative analyst concludes that Proposition 7 could result in higher electricity rates.
Still Paying off Debt
California consumers are still paying nearly $1 billion per year to pay off the last energy crisis, and this initiative creates market conditions with problems. Doubling the amount of renewable energy utilities must purchase during a short period will create a sellers’ market. The lack of a competitive market will lead to artificially increased prices for renewable power and create an environment ripe for market manipulation.
California is the nation’s clean energy leader, with tough new standards that require utilities to use significantly more renewable power. At a time when businesses are already struggling from a sagging economy, higher energy costs and increased costs of doing business, the last thing businesses in the state need is more costs.
For more information, visit www.noprop7.com.
Staff Contact: Jeanne Cain