California credit fund running out

Just 18 months into the competitive electricity market, the California Energy Commission (CEC) is talking about slashing the $0.015/kWh customer credit for renewable energy because state funding is running out. The CEC says it is the popularity of green energy that is to blame. It is estimated that more than 100,000 customers have now signed up for green energy, including wind power, almost double the 55,000 at the end of 1998.

If the current sign-up rate continues, the funds set aside for the credit will run out by February, says Marwan Masri, head of the CEC's renewable energy program. By June, the deficit would be $11 million. The credits, set up under the state's 1996 restructuring legislation -- and which total $75.6 million over four years, were established to subsidise renewable energy during the transition to a fully competitive market and are scheduled to expire in 2002. Most marketers pass on the credit to customers, allowing them to make green energy a cheaper option than conventional energy, at least for the moment.

Cut back the credit

The possibility of reducing the credit had been anticipated. "We always knew that as the market grew, this would happen," says Masri. The pro-green energy Center for Resource Solutions, which manages America's voluntary "green-e" certification system for power from renewable sources, agrees the news is no surprise. "Everyone always knew this was coming down the pike," says the centre's Meredith Wingate. One solution, says the CEC, is to adjust the credit monthly so that as much money is disbursed as possible, but so that the fund is not overdrawn. If approved, this flex-price solution would surely damage the state's new and fast growing green power market since most green marketers -- without the deep pockets of the long established sellers of conventional energy and in a business where margins are thin -- would find it hard to guarantee future prices to their customers. The more likely solution, it seems, is for the CEC to set a lower but fixed credit.

Either way renewables advocates are not happy with the idea of a lower tax break for selling green power. "It's going to have a detrimental effect on the market," says Wingate. "The price of renewable power is going to go up for sure." The CEC held a workshop on the matter in late September and was accepting public comments up to October 1. A decision is expected at the CEC's next meeting on November 17 -- and the new credit could go into effect by December, says Masri.