February 24, 2011

California PUC staff question economics of utility renewable deals

Lisa Weinzimer, Platts, www.platts.com 22 February 2011

In its zeal to satisfy California’s renewable portfolio standard, the state’s Public Utilities Commission has approved nearly every renewable power supply contract filed by investor-owned utilities, even when the contracts are not economic, the PUC’s consumer advocate said on Friday.

The PUC’s division of ratepayer advocates said that that commission should be more discriminating in examining utility contracts for renewable resources, and establish a clear cost reporting requirement for those deals.

The DRA report said utilities Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric are almost certain to meet the 20% RPS by the end of the “flexible compliance” period in 2013. Flexible compliance provisions of the RPS allow utilities to delay compliance with the 20% by 2010 requirement if they encounter transmission constraints or other hurdles.

Of the 184 contracts for renewable resources that have come before the PUC since the RPS was established in 2002, only two have been rejected, DRA said.

More than half of approved contracts have prices in excess of the “market price referent,” which is a benchmark for assessing costs based on a price for a new 500-MW natural gas-fired combined-cycle turbine facility. On average, DRA said utility contracts with renewable power project developers are at prices 15% higher than the market price referent.

In addition, the funds set aside for above-market contracts for renewable power have been used, but utilities continue to sign deals and they have exceeded the cost cap set by the Legislature by more than $5 billion, DRA said. Because the above-market funds are paid to project developers only as they come online, much of the money has not been provided, but “when these renewable contracts start delivering energy, costs will impact ratepayers,” DRA said.

DRA said the PUC should “give more weight to prices and more clearly consider costs to ratepayers” when it reviews contracts for renewable resources. It also should increase accountability and transparency by establishing clear costs reporting requirements for utilities, having them outline total costs for RPS contracts so far, and expected total costs of contracts for the next 10 years.

URL to article:  https://www.wind-watch.org/news/2011/02/24/california-puc-staff-question-economics-of-utility-renewable-deals/