Why should CPUC cause ratepayers spend Billions for power California doesn’t need?
Yesterday, the Los Angeles Times printed a feature article written by Ivan Penn and Ryan Menezes that called into question the state Public Utility Commission’s continuing approval for electrical power generating stations that push capacity well beyond regulatory requirements. This excess costs California Consumers billions of dollars.
Why Is This?
A clear answer from the PUC may not be forthcoming soon but the Times noted that by 2020, California will be able to produce at least 21% more electricity than it needs, and that doesn’t count the exploding installation rate of solar PV panels on residential and commercial rooftops. What’s wrong with having too much capacity when most of us remember the de-regulation-caused blackouts of 2001?
For starters, Californians use 2.6% less electricity now than in 2008, yet pay $6.8 billion more for their electricity. Part of the reason a glut contributes to this is that infrastructure owned by utilities has to be paid for whether it runs at 100% of capacity or not. When it doesn’t (say, when too many plants run too few hours) utilities may save on fuel but don’t save on debt service, operations, and maintenance costs. That contributes to more spinning reserve with less assignable billings to pay for it. The regulator’s 15% required power cushion is more than being met, but at a huge cost to consumers because PUC-regulated investor-owned utilities are guaranteed a minimum return on such generation investment. That minimum guarantee is not bad policy—until it grows well beyond 15%.
Generating plants that are operable but aren’t fully utilized fall under the definition of “stranded assets,” and the California regulatory model covers investor-owned utilities for such costs at ratepayers’ expense. Such action is a preservation of a centralized generation model in the face of other, less expensive alternatives.
Solar PV already beats coal hands-down in producing electricity. It’s close to beating natural gas, too. This may already be happening in cases where natural gas plants don’t run near their design capacity. The cheapest power is likely to be that which is generated on rooftops, because much of that daytime gain is used on-site. When it’s not, and that rooftop is inter-tied to the utility grid, it can supply nearby residents and businesses. Excess power to the grid is quickly being adapted to handle large scale storage, so increased local surplus from intermittent renewables can be stored.
Distributed solar on rooftops require less transmission infrastructure to be built than new power plants do. They also export more of their catch during summer grid peaks when imported capacity would be more expensive. Solar panels last longer with less maintenance than thermal power plants and do not pollute like fossil plants can, both before and after combustion.
The Advantage of Renewables
The capper is that renewable fuels (sun, wind, AND geothermal heat pumps) don’t cost a dime. As has been suggested many times, combination gas/electric utilities would do well to finance renewables on their customers’ properties in exchange for on-bill financing that could bring more perpetual cash flow than continuing to build generating stations beyond necessary capacity.
Good strategy by the PUC and strong questions put to the utilities themselves by skeptics could help deliver us from the generation glut and its higher cost to ratepayers. Distributed Energy Generation (DER) has been a recognized concept for some time. It means that on-site electrical (and thermal) generation of energy is recognized as a way to reduce grid loads and greenhouse gas emissions in a state that says it’s concerned with both. The PUC could do much more to help accelerate these policies if it followed 2012’s AB 2339 that called for regulatory agencies to lower barriers and increase geo heat pump (GHP) installations in California. While solar PV and electric cars grab lots of looks and headlines, the reality of zero net energy (ZNE) homes equipped with GHPs do better at reducing CO2 emissions.
It may be time to reduce the protection of investor-owned utility business models to the extent that’s safe, while funding the expansion of renewables and distributed energy resources with ratepayer cash. This would keep utilities in the long-term cash flow game while they help fund the defensive strategy against climate change, that would ultimately cost us all more money.