Showdown on SB722—the 33% RPS Solution in California is at Risk

UPDATE: (Sept 1, 2010) SB722 failed to pass the California Legislature by the deadline for action at midnight this morning.  This means that the 20% RPS standard by 2020 now in law remains the official policy.  Governor Schwarzenegger’s 33% RPS goal was set by Executive Order which can be changed by the next Governor.

While most of the headlines coming out of Sacramento today is focused on the failure to adopt a state budget and close the $19 billion budget gap, behind the scenes work is frantic to get bills adopted by the midnight August 31 end of the legislative session.  One of those bills is SB722 which would put into law the 33% renewable portfolio standard Governor Schwarzenegger approved by executive order.  Without SB722 the 33% RPS standard is at serious risk.

Senator Joe Simitian (D-Palo Alto) is the author of SB722 as he was the earlier bill establishing the 20% RPS standard that went into effect three years ago.  Today, California’s utilities are expected to get 18% of the electricity delivered from renewable sources and pledge to exceed the goal to reach 21% by the end of 2011.

Achieving the 33% RPS target is a daunting goal that will require more investment not just in wind and solar energy resources but the transmission capacity to bring it to market.  Without that transmission California cannot achieve its goals because it is a net importer of energy because its policies prevent the building of either new nuclear power plants in the state and prevent its regulated utilities from buying power from coal fired power plants elsewhere in the WECC.

California only produces about 80% of its energy requirements so to keep the lights on California needs a little help from its friends across the western power grid. While California politicians want to be the leaders in clean and renewable energy, in energy efficiency, in emissions reduction and global warming solutions—all worthy goals—California is dependent upon hydropower from the Pacific Northwest, coal fired generation from Utah, nuclear power from Palo Verde in Arizona and Washington State, and natural gas fired generation from across the west to keep the lights on.

Proposition 23

There is one more problem facing California’s renewable energy goals.  Proposition 23 on the November 2010 ballot would suspend AB32 the California Global Warming Solutions Act and its opponents say it will also derail the states renewable energy goals.   If Prop 23 is approved by voters  it will undermine the authority of the California Air Resources Board which was assigned the task of implementing the Governor’s 33% PRS executive order.

Unraveling the Environmental Chain Stitch

The real worry by environmental advocates is that their efforts to stitch together their policy agenda with a series of legislative and regulatory proposals could now come unraveled with the approval of Proposition 23 this November by voters or the failure of the State Legislature to pass SB722 this session in a form the Governor will sign.

Make no mistake—Sacramento is capable of screwing up a two car funeral!

Laws, sausage and politics are ugly to watch in California so here is the quick version  of how we got to this point.  In 2009, SB 14 (Simitian) and AB 64 (Krekorian) were considered in the State Legislature to increase the RPS to 33% by 2020. AB 64 was dropped, and the Governor vetoed SB 14 saying it was unworkable even though he supported increasing the RPS to 33% by 2020.  Instead he issued an executive order directing CARB to impose a 33% RPS through regulations.   But an executive order can be cancelled by the next Governor and RPS advocates want to adopt it as law.

SB722 this year is designed to achieve that goal, but it has problems.  SB 722 restricts utilities to no more than 10% out-of-state renewable energy credits (RECs) in their procurement target.  SB 722 requires PUC to punish the utility who fails meet the 33% targets in the same manner and to the same extent as contempt is punished by courts of record unless the CPUC finds the reasons for their failure were beyond their control—like there isn’t that much renewable energy available because we can’t build the transmission to get it here!   If SB722 is passed this legislative session the Governor is expected to sign it, but opponents says doing so will help pass Prop 23 if voters feel the Legislature is preempting them.

So what?

The people of California generally support the use of clean and renewable energy, emissions reduction and expanding energy efficiency—we are true believers.  But there is this nagging problem called the Bakersfield Effect which bundles all our fears about rising utility rates, killer regulations hurting job creation, our disgust that the Legislature can’t balance the budget, and our angst that somehow in ways we don’t quite understand the political class is using environmental regulations as a back door way to raise taxes, limit our economic recovery and growth, redistribute income   and stick the government’s nose in every aspect of our business.

SB722 could well be passed in this legislative session and signed by the Governor—but will it survive the voters report card on the economic and rate impact of California’s energy regulatory strategy in Proposition 23 in November?

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