May 8, 2018 – Desert Sun – Sammy Roth reports – Californians have more options than ever for buying energy.
Rooftop solar and batteries have made it possible for homeowners and businesses to generate and store their own electricity. Community-led energy programs, which started in the Bay Area and are now rolling out in the Coachella Valley, have allowed cities to abandon their traditional electric utilities. And corporations looking for cheaper, cleaner energy are increasingly buying power directly from big solar and wind farms.
While those innovations have generally been celebrated for democratizing the energy landscape — and taking control away from monopoly utilities — the state’s top utilities regulator is worried they could have dangerous unintended consequences.
Michael Picker, president of the California Public Utilities Commission, sees the seeds of another energy crisis in the growing universe of energy options. He’s concerned about the state’s ability to guarantee reliable electricity service as consumers ditch investor-owned utility companies like Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric, which are heavily regulated. In a world where most Californians don’t buy electricity from those regulated monopolies, he asks, how will state officials ensure that the lights stay on, and that California meets its clean energy targets?
“These are electricity markets. There’s no guarantee that everybody will be successful,” Picker said in an interview with The Desert Sun. “There’s a lot of ways people can fail.”
The changes Picker is worried about are happening quickly — especially the growth of community choice aggregators, or CCAs, in which city or county governments choose what kind of electricity to buy for their communities and how much to charge, cutting out the utilities. There are already 10 CCAs operating in the state, including a program in the city of Rancho Mirage that launched last week. Three other Coachella Valley cities — Cathedral City, Palm Desert and Palm Springs — plan to launch a joint CCA in August.
Between CCAs, rooftop solar and another energy-choice program called “direct access,” the big utilities could lose 85 percent of their electricity sales in the next decade, state officials have estimated.
Picker said Californians should “absolutely” worry about a repeat of the early-2000s energy crisis, when electricity shortages led to rolling blackouts for millions of people. The utilities commission released a report making the case for concern last week.
“In the last deregulation, we had a plan, however flawed. Now, we are deregulating electric markets through dozens of different decisions and legislative actions, but we do not have a plan. If we are not careful, we can drift into another crisis,” the report said.
But that’s a controversial opinion. Supporters of greater consumer choice say rooftop solar and community-led energy programs should be welcomed, not feared.
Nicole Capretz, a prominent activist who has helped lead the push for a city-run energy program in San Diego, sees Picker’s warnings as part of a “fearmongering campaign.” She noted that the utilities commission’s report on consumer choice was edited by a member of Picker’s staff and hasn’t been endorsed by the other four commissioners.
“It’s intended to create fear so that the state can take back control. That’s what it feels like,” Capretz said. “Based on what they presented, it doesn’t feel like there’s any evidence to support that conclusion…it’s pure speculation.”
One reason for the differing opinions: Nearly two decades later, experts still disagree about the causes of the early-2000s energy crisis.
The crisis started with state lawmakers voting to deregulate the electricity industry, which they thought would lead to more choice and lower energy rates for homes and businesses. But Enron and other power companies manipulated the market, withholding electricity supply to artificially raise prices. That manipulation forced the big utility companies to pay sky-high prices for energy. They couldn’t recoup those costs from homes and businesses because state law barred them from raising electricity rates.
At the height of the crisis, Pacific Gas & Electric filed for bankruptcy, and Edison came perilously close. Gov. Gray Davis faced a recall campaign and was voted out of office, with Californians choosing Arnold Schwarzenegger as his replacement.
For Picker, one of the main lessons of the crisis is that decentralized authority can be dangerous in the electricity sector. He thinks state policymakers need a plan to make sure the lights stay on, electricity prices don’t rise and California meets its clean energy targets, even as responsibility for those objectives shifts from the big regulated utilities to local governments and even individual homes and businesses. Such a plan could involve more regulation of the locally run energy programs known as CCAs.
Ralph Cavanagh, co-director of the energy program at the nonprofit Natural Resources Defense Council, agrees with Picker that there’s reason for caution.
“The utilities are less and less important in driving resource procurement and ensuring resource adequacy. That doesn’t automatically translate into a crisis, it just means you have to pay careful attention,” said Cavanagh, who was part of a committee that advised the authors of public utilities commission’s report.
But critics say Picker doesn’t know what he’s talking about.
Paul Fenn — who helped create the concept of community choice nearly 25 years ago in Massachusetts, and who now runs the California-based consulting group Local Power — said the early-2000s energy crisis was caused by profit-seeking companies like Enron that manipulated the deregulated market, and by the utilities commission’s inadequate oversight of that market. He said the commission’s recent report on consumer choice “is full of revisionism about the energy crisis, and appears oblivious to the continuing role of (Picker’s) own agency acting as handmaiden to the utilities.”
The commission “should examine its own role in discouraging innovations by CCAs rather than flirt with an illegal and dangerous dream of re-establishing its discredited empire,” Fenn said in an email.
Capretz, the San Diego community choice advocate, noted that California passed a law allowing local governments to form CCAs in 2002, as the energy crisis wound down.
“It was intentionally designed with the energy crisis in mind,” she said. “State regulators wanted to allow for local governments to still be able to control their energy destiny, and determine what supply of electricity was on the grid, and what the cost of that would be.”
One of Picker’s main concerns is whether CCAs will be able to sign long-term contracts for reliable electricity, given their short credit histories. For now, the community-run energy programs have largely relied on short-term contracts, leaving them vulnerable to the fluctuating price of natural gas and other market uncertainties, Picker said.
At the same time, the public utilities commission is already taking steps to ensure CCAs are planning for the long term. And the CCAs are on board with that, Capretz said.
“Community choice programs are regulated…they are part of the system,” she said. “I don’t have a problem having a discussion about potential issues or challenges, but to me where they took it too far was then creating this fear around an energy crisis.”
The California Community Choice Association, the main statewide advocacy group for CCAs, said it is reviewing the utilities commission’s report and will publish a response in the next few weeks. The group said in a written statement that “highly regulated locally controlled CCAs were designed to help correct the problems from the energy crisis and they are performing as intended — delivering reliable, affordable and clean energy to local customers, while exceeding the state’s (greenhouse gas) goals.”
Rancho Mirage, which launched its community choice program last week, is offering electricity rates it says are 5 percent lower Southern California Edison’s, with 50 percent of the electricity coming from renewable sources like solar and wind, compared to just 28 percent for Edison. Of the 15,000 homes and businesses in Rancho Mirage served by Edison, fewer than 60 opted out of the city-run program before the May 1 start date.
Isaiah Hagerman, Rancho Mirage’s director of administrative services, said he thinks the competition created by community choice “will be good for the state of California.”
“The more CCAs the better,” he said.
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