News

Renewable energy found in the wallets of ratepayers

It all comes down to money. On April 12, Gov. Brown signed into law a bill that increases the state-targeted generation of electricity from renewable energy from 20 percent of total retail sales to 33 percent by 2020, accelerating a renewable portfolio standard already described as one of the most aggressive in the United States.

But a major source of funding – some $350 million collected annually from state ratepayers – feeding the state’s energy efficiency and renewable research efforts is set to expire January next year. The potential loss or reduction of the money could impair the state’s renewable energy efforts.

Known as a “public goods charge,” or PGC, the Legislature has been holding hearings since last year on the merits of its renewal.

Supporters view the charges as integral to California’s ambitious energy goal, an essential supplement to research and development not adequately provided by the market.

“There is research being done by the private sector, but it isn’t necessarily targeted toward achieving the state’s policy goals and isn’t always the most effective,” Julia Levin, deputy secretary for climate change at the state Resources Agency, testified at a recent Capitol hearing.

But in a tight economy, critics wonder if the money is really serving its intended purpose: benefitting ratepayers.

The public goods charge represents 1 to 3 percent of a customer’s electricity bill, and helps support private research grants into the state’s renewable energy efforts and provides incentives to use energy-efficient technology, among other things – popular endeavors in California that have received bipartisan support.

California’s investor-owned utilities, the so-called IOUs – Pacific Gas and Electric, Southern California Edison and San Diego Gas and Electric – currently are required by statute to collect the public goods charge from their customers, representing part of what is collected under “public goods programs charges” and is proportional to the amount of energy used per month.

The levy partly is a legacy of California’s disastrous foray into electricity market deregulation, and was established to ensure continued investment from these companies in public goods programs with direct benefit to ratepayers.

The money is divided between energy efficiency programs directed by the Public Utilities Commission, which regulates utilities, and renewable research and development programs managed by the California Energy Commission, which among other things licenses powerplants.

According to the CEC’s 2010-11 annual report, the public goods charge-funded Public Interest Research Program (PIER) provided $21 million in funding and leveraged $1.4 billion of federal and private funding for 37 research projects last year.

A review of contracts completed through 2002 revealed a benefit-to-cost ratio of between 2- and 5-to-1.

Another study conducted by the CEC projects PIER research incorporated into building efficiency standards resulted in an estimated annual cost savings of $970 million for California ratepayers.

Supporters also describe the public goods charge as essential funding for biomass and biogas, sources of energy that reduce landfill waste and improve California air quality.
“This is definitely more bang for your buck,” said Julee Malinowski-Ball, a lobbyist for the California Biomass Energy Alliance at a hearing, describing the charge as essential for these facilities, “In the end you’ll have cleaner air and healthier forests.”

The IOUs suggest that changes in the state’s energy policy since the PGC’s inception in 1996 have changed the way these companies approach energy efficiency and renewable research.

Legislation like the Global Warming Solutions Act (AB 32) have created pressure to raise electricity rates in order to invest in the resources needed to meet state mandated energy targets and programs. They also assert that CPUC now receives other sources of money toward energy efficiency efforts built into corporate utility rates, making that portion of the public goods charge an unnecessary expense to ratepayer.

Another point of contention is past diversions of several million dollars from the public goods charge toward the General Fund and other state programs. Both the corporate utilities and consumer advocates like The Utility Reform Network (TURN), agree that security from these unsanctioned transfers is an essential part of any legislation renewing the charge.

The Division of Ratepayer Advocates, statutorily responsible for obtaining the lowest possible rate for utility customers, supports the renewal of the PGC in general, but calls for a move away from ratepayer subsidies of energy-efficient products toward a focus on market transformation.

“We still pay people for installing compact florescent lights,” said Electricity Pricing and Customer Programs Branch Program and Project Supervisor William Dietrich. “The market has changed, people are going to continue to buy [CLFs] whether they get a rebate on them or not.”

They would also like to see in the end of incentive programs where, in the past, corporate utilities have been rewarded with ratepayer money despite reaching only part of their allotted efficiency goals.

The only entities in total opposition to the charges renewal are the Howard Jarvis Taxpayer Association and the California Manufacturers and Technology Association.

In their letter in opposition to a bill regarding the charges renewal, CMTA suggest that the state’s energy policies will provide enough financial incentive for corporate utilities to pursue the types of projects currently funded by the public goods charge.

“Cap and Trade is going to supply more money and be a veritable ATM for these types of programs,” said John Larrea, speaking in behalf of CMTA and the California League of Food Processors, at a committee hearing on a bill addressing the charge’s renewal.

The letter also mentions that rates for industries in California are more than 50 percent higher than the average in other states.

Several pieces of legislation from both Houses address the extension of the charge and administrative changes on how the funds are allocated. Despite the charge’s label as a tax, many of the bills are receiving bipartisan support.

A pair of bills authored by Assemblyman Steven Bradford, D-Gardena, and Assemblyman Das Williams, D-Santa Barbara, that renew different aspects of the charge until January 2020, have passed the Assembly 58-14 and 56-16, respectively. Senator Alex Padilla’s, Los Angeles-D, bill regarding the charge has also recently passed the Senate with a vote of 29-8.

Want to see more stories like this? Sign up for The Roundup, the free daily newsletter about California politics from the editors of Capitol Weekly. Stay up to date on the news you need to know.

Sign up below, then look for a confirmation email in your inbox.

 

Support for Capitol Weekly is Provided by: