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California heads for toughest mandate yet -- Advocates shepherd in 20% Renewables Portfolio Standard

A tough California renewables portfolio standard (RPS) set to dwarf all other green power mandates was well on its way onto the statute books late last month. According to RPS advocates, two pieces of legislation that have been floating in the state's legislature in a variety of guises for nearly two years have cleared their most difficult hurdle and are on their way to final approval. They have the potential to re-energise California as one of the most dynamic wind power markets in the world.

The two bills, sponsored by state Senator Byron Sher, passed through the California State Assembly's conservative Energy and Utilities Committee August 19. When law, they should work hand in hand. One bill establishes the nation's thirteenth -- and toughest -- RPS, calling on the state's three largest utilities to buy 20% of their energy for retail sales from renewables by 2017 and to do so on a schedule beginning next year. The other approves the use of the state's 3% Public Goods Charge to help offset the cost of new renewables that are above market prices.

Govenor support

California Governor Gray Davis, who supports the legislation as a way to reduce pollution by cutting the use of the state's ageing and polluting power plants, praised legislators for moving the bill out of committee. "California is the nation's leader in renewable energy -- and we intend to keep that title," he said. The RPS mandate will require the installation of several thousand megawatt of green generating capacity, the lion's share of which is likely to be wind power.

Strong opposition from two of California's three large investor owned utilities and from committee chair Rod Wright had stalled the legislation, reports Julia Levin of the Union of Concerned Scientists, one of four groups pushing passage. But Wright, she adds, ended up being an active supporter and co-author of the final legislation.

Levin says the passage in committee sets the stage for approval in both the state Assembly and Senate, which were to vote on the bill before the end of August, the deadline for the passage of new laws this year. "This is a huge victory," Levin says. "It is a highly popular bill with an 80% voter approval rating. The California public gets how important this is to the state's economy and environment."

The originator of the RPS concept, policy analyst Nancy Rader of the California Wind Energy Association, is equally delighted. "It will reverse the decade long development standstill in California, whether or not we make it all the way to 20% in the timeframe established. The 20% requirement, albeit conditioned, dwarfs all other renewables mandates," she says.

Others support the legislation as a way to protect consumers from future electricity price spikes, like those experienced in 2000 and 2001. Matt Freedman of The Utility Reform Network (TURN), a consumer advocacy and utility watchdog organisation in California, says that despite the crisis, 95% of new proposed capacity in California is fuelled by natural gas as "if we learned nothing, and that is driving us to increased support for renewable resources."

In addition, TURN is concerned about how the Public Goods Charge, which is collected from ratepayers at the rate of $135 million each year, is used in the state. California has used the funds to offer production incentives to about 1300 MW of new renewables capacity, but by the end of 2001 only about 200 MW had come online. "That's not working," he says. "New renewable projects are not getting built without long term contracts, but the utilities aren't signing those contracts. While that's not a success, it can be if Public Goods is coupled with an obligation to purchase."

Build rate

Rader estimates the state currently receives about 12% of its energy, or about 6000 MW, from renewable resources, including geothermal and small hydroelectric (hydro will not be allowed to help meet the RPS). Today, Pacific Gas & Electric buys 11-12% of its energy from renewables, says Rader, and Southern California Edison, which is a supporter of the bill, has about 14%. Sempra Energy Resources, which owns San Diego Gas & Electric, buys no renewables at this time. The RPS legislation requires utilities to raise their proportion of renewable energy by 1% a year, but to meet the target by the 2017 deadline, Sempra's growth will have to average 1.75% a year. At 1% a year, PG&E will meet its obligations by 2012.

Exempted are the state's municipal utilities, one of the drawbacks of the legislation, Levin says. While the Sacramento Municipal Utility District already has a self-imposed 20% RPS, the state's largest municipal -- Los Angeles Department of Water and Power -- buys most of its energy from coal and gas generators.

Other issues remain that could still determine the legislation's ultimate effectiveness, including how utilities will organise their solicitations for renewable resources, how each utility's baseline will be set, and price. Those battles are likely to take place in the state's Public Utilities Commission (PUC), which will set and enforce the rules for governing both bills. Rader stresses that since the bill gives utilities some latitude in selecting renewables, it will be up to the wind industry to make sure the PUC evaluates wind's characteristics fairly.

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