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Good news for consumers in trouble -- An RPS for California

In the midst of California's electricity crisis, an aggressive Renewables Portfolio Standard (RPS) has been introduced in the California senate -- legislation which if passed obliges sellers of power to include a minimum standard of electricity from renewable sources such as wind in their supply portfolios. Specifically, 20% of the state's electricity must come from renewable sources by 2010. Meanwhile California wind projects are still owed more than $500 million for their output in back payments.

California's electricity crisis is still headline news across America and power plant development has all but come to a halt. But there is a glimmer of hope for wind power from within the troubled Golden State. On April 30, details of an aggressive Renewables Portfolio Standard (RPS) were introduced in the California senate -- legislation which if passed obliges sellers of power to include a minimum standard of electricity from renewable sources such as wind in their supply portfolios.

The bill, S 531, requires that 20% of the state's electricity comes from renewable sources by 2010 -- and the proportion of green power must remain at least one-fifth until 2020. That is double the 10% of green energy now consumed in California, the world's sixth largest economy. The provisions of the bill, for implementation by mid-2002 if passed, also require that each separate retail seller prove that 10% of its sales are from renewables by 2003. An aim of the legislation is to "protect the health and welfare of the people."

It is proposed that retail electricity suppliers be required to buy a renewable energy credits to prove they have supported the production of a specified amount of power from qualifying renewables facilities. The tradable credits are to be certified by the state and tracked centrally by an electronic accounting system to ensure compliance. Stiff penalties for not complying with the requirement are proposed. Each retailer will have to divulge the sources of their power.

Broad backing has been marshalled for the "California Renewables Portfolio Standard Program" from the Centre for Energy Efficiency and Renewable Technology. CEERT's members include heavyweights such as the Florida energy giant FPL, technology company Honeywell, the large geothermal business CalEnergy, wind power developers SeaWest Energy and Enron Wind, and most of the state's environment groups -- the Sierra Club, the Environmental Defence Fund, the Union of Concerned Scientists and the Natural Resources Defence Fund.

The San Francisco-based Energy Foundation is funding a huge publicity campaign in support of the bill. Byron Sher, a Democrat from Stanford who has been at the forefront of efforts during the state's energy crisis to boost efficiency and renewables, had introduced an outline of the bill in February but the specifics were not finalised until the end of April.

The timing of the bill is important, says renewables consultant Nancy Rader, who drafted details of the bill. "The opposition has yet to rear its head," she says. That is in large part because many of the bill's potential opponents are preoccupied with the crisis, she says. The bill may thus have a better chance of surviving intact.

Still in limbo

Meanwhile California wind projects are still owed more than $500 million for their output. "There has been no attempt by the state, SCE or PG&E to make back payments," says Jack Raudy of the renewables creditors committee, whose members include wind operators FPL Energy, Enxco, Coram Energy, CalWind Resources and Wintec. The companies were, however, paid for their April output by Southern California Edison (SCE) and by Pacific Gas & Electric (PG&E), which declared bankruptcy under the federal Chapter 11 bankruptcy law in April. It was the first time they have been paid since October or November.

Wind plants and the state's other renewables "qualifying facilities" (QFs) are also still waiting for some inkling of the future. In a highly-publicised proposal in March that went nowhere, the state Public Utilities Commission had proposed that QFs should be able to sign five year contracts with the utilities for $77/MWh or for a ten year deal for $69/MWh. The plan died within weeks.

As of mid May the courts had given several renewables QFs -- none of them wind -- permission to break their contracts with the utilities and sell power on the open market. And the Federal Energy Regulatory Commission (FERC) ruled that QFs can sell any extra electricity -- in excess of their contractual obligations with the utilities -- on the spot market. Although the decision does not immediately affect wind, it is a sign of FERC's thinking. The federal body also made it clear that it would not stand in the way of judges in California who allow the QFs to opt out.

In addition, Republican Congressman Joe Barton of Texas, chair of the House of Representatives energy subcommittee, introduced legislation last month that would allow all QFs to sell power to third parties for as long as they are not paid by the utilities. The Electricity Emergency Relief Act may change as it wends its way through Congress. But as it stands, it is good news for the financially strapped wind operators. "Barton's bill is fair, just and reasonable," says Fred Noble of Wintec, one of SCE's debtors.

Silver lining

The state's crisis has brought most energy development to a halt. "The market's crazy," says Steve Jones, power broker with Tenderland Corp, the green retailer currently co-developing the 36 MW repowering of Alta Mesa IV in San Gorgonio.

Jones sees tremendous opportunity in the short term to pay down the capital costs of a new wind project quickly, by selling electricity for as much as $0.12/kWh to $0.50/kWh. But the long term picture remains uncertain, especially since banks interested in renewables may have wind projects already in their portfolio that are owed back payments.

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