A fund that helps the state’s largest utilities buy renewable energy at above-market rates won’t last much longer, possibly providing the big power firms with a loophole to get out of looming renewable energy mandates.
The state’s three main investor-owned utilities, Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric, get $770 million over eight years between them to purchase renewable energy at above-market rates to help them meet state mandates.
The mandates, established in 2002, require that 20 percent of power comes from renewable sources by 2010. Because demand for renewable energy is increasing, its price is going up, doubling between 2002 and 2007.
Meanwhile, utilities complain, the state’s method of determining market rates sets the price benchmark artificially low. As a result, the utilities will run through the renewable kitty faster than expected, and in fact, could spend the whole amount, on just a few projects. The CPUC says the money will run out in the next 12 to 18 months.
“Utilities are required to try and meet the 20 percent renewables (mandate) by 2010 but if they run out of this funding, they don’t have to purchase renewable energy above the market price,” said Cheryl Lee, a policy analyst at the California Public Utilities Commission. “That could possibly be used (as a) reason for non-compliance” with state mandates.
An April report by the CPUC to the California legislature said the commission was concerned that the above-market funds “will be exhausted prior to the state achieving its 20 percent by 2010 goal.”
The Center for Energy Efficiency and Renewable Technology in Sacramento thinks the $770 million cap should be raised. It also thinks raising the market price of electricity will close the loophole that utilities could use to get out of buying renewable energy.
“The price is not necessarily tied to what’s going on in the market,” said Rachel McMahon, director of regulatory affairs at CEERT, and that means utilities are hard pressed to find renewable electricity at the “market price.”
Whatever the CPUC decides to do to insure utilities can meet the renewable goals, the CPUC could turn to rate-payers to continue funding renewable energy beyond the $770 million cap. Utilities still aren’t sure what they’re expected to do when the money runs out.
“We don’t know yet,” said Valerie Winn, manager of renewable energy policy and planning with PG&E. “To the extent we ultimately exhaust all of the (above market funds), the commission could still approve contracts we submitted to it. But they will likely want to look at it and say, “How much of an additional burden is this adding to customers?”
By Lindsay Riddell
20 June 2008
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