(March 18, 2009) A Senate committee is reviewing an energy bill that the California Chamber of Commerce is opposing unless it is amended.
The Senate Appropriations Committee is scheduled to consider SB 14 (Simitian; D-Palo Alto) again on March 23. On March 16, the committee placed the bill on the suspense file, pending a review of the legislation’s fiscal impacts.
Proposals in SB 14 affect existing law dictating, among other requirements, the percentage of electricity that investor-owned utilities must procure from renewable energy resources — the “Renewable Portfolio Standard” (RPS). SB 14 requires that 33 percent of the electricity come from renewable energy sources by the end of 2020, thereby also affecting the California Air Resources Board’s (ARB) implementation of the AB 32 climate change law.
The CalChamber believes that the success of California’s businesses and the strength of California’s economy depend on the state’s ability to develop policies that do not hinder economic growth or limit a company’s ability to innovate in the marketplace. Without amendments, SB 14 could have a negative impact on the economy and innovation.
Need for Cost Containment
Despite many efforts to increase energy efficiency, California remains a high energy cost state. This additional burden on businesses has worsened due to the weakening economy. The CalChamber believes it is necessary to strengthen the cost containment language in SB 14 to ensure that ratepayers will be protected from substantial rate increases. Furthermore, because the AB 32 scoping plan also includes a requirement for 33 percent of energy come from renewable resources, the CalChamber believes SB 14 should uphold the same economic tests used for the AB 32 program.
SB 14 also should include a “cost-effective and technologically feasible” standard to further ensure ratepayers are not exposed to excessive and unnecessary costs.
The RPS and AB 32
Perhaps one of the more complex issues in developing a new RPS mandate is ensuring it does not hinder or conflict with AB 32 requirements. Because the 33 percent RPS proposed in SB 14 would fit directly under the AB 32 program, the CalChamber believes it is necessary to look at the RPS from a greenhouse gas perspective. This overall umbrella will allow the state to connect the many benefits it can extract from a larger pool of technologies.
In order for the RPS to fully take advantage of the greenhouse gas benefits, the CalChamber believes it is necessary to expand the resources eligible under a 33 percent mandate. The existing eligibility does not include large hydro or technologies such as combined heat and power, which is proving to be extremely energy efficient and provides great potential for reducing greenhouse gases. Because the ARB has identified combined heat and power as being an important technology to meeting the state’s greenhouse gas goals, SB 14 should address its ability to play a role in reducing emissions and ensure a new mandate does not hinder such technologies.
New Transmission Needed
The CalChamber believes that the state’s need for updated and new transmission infrastructure cannot be ignored. Increasing renewable development in California will require massive new investment in infrastructure.
The CalChamber believes that the Legislature must keep in mind that the cost of new infrastructure will be in addition to the already-high energy prices ratepayers will be facing in the near future due to various other initiatives — another reason SB 14 must include strong cost containment provisions.
Because California is not on target to meet its existing target, the Legislature must be mindful and honest about the challenges that lie ahead for a 33 percent RPS target. Lack of transmission is the most evident obstacle as it takes years in the current system to choose a location and build transmission infrastructure.
The CalChamber believes it is important to fix the existing problems that are causing delays in the system instead of creating a whole new transmission planning process. In addition, SB 14 should provide utility companies the appropriate amount of flexibility to ensure they are not penalized for not meeting their targets when projects are tied up due to lack of transmission or planning.
Expand Market for Renewable Energy Credits
The CalChamber is reminding policymakers to remember that renewables are intermittent and are not always available when consumers need energy.
Because California’s electricity grid is interconnected to the entire Western region, the CalChamber believes it will be necessary to expand the existing renewable energy credit market to allow out-of-state renewable energy credits. Doing so recognizes the greenhouse gas reduction benefits of reducing energy demand both in and out of state and allows utility companies to contain costs for ratepayers. The CalChamber is very concerned that increasing the renewable mandate without such flexibility in the renewable energy credit market will lead only to a significant cost increase due to the swift increase in the demand for renewable energy.
Action Needed
SB 14 will be considered by Senate Appropriations on March 23. The CalChamber is urging members to contact legislators on the committee and urge them to keep SB 14 on the suspense file.
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Staff Contact: Amisha Patel