United States

United States

Utility offers standard price -- Breakthrough in California

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Standard offer contracts for purchase of wind power are coming back into fashion in California after being used to kick-start the state wind market back in the 1980s. Last month, one of the nation's largest utilities, Southern California Edison (SCE), announced a five year agreement to establish fixed prices for existing renewable energy sources. The agreement will help protect California customers from price fluctuations in the nation's largest electricity market.

"This is the most important thing going in California renewables," says Phil Reese of Colmac, a California biomass company selling renewable energy to SCE. "It will go a very long way toward preserving the existing base of the state's renewables as California heads for its 20% renewables portfolio standard by 2010," he adds, referring to a state mandate setting a minimum standard for the volume of renewables in electricity portfolios.

The fixed rate of $0.0615/kWh, expected to be approved by the California Public Utilities Commission (PUC), kicks in next May after the current deal ends. It applies to SCE's wind, solar, biomass, geothermal and small hydro power purchases, and will increase 1% annually for years two through five.


While enthusiastic about the development, Reese does not see it spreading to other states. California, he says, is unique among states with renewables mandates because it is starting out with a very high percentage of renewables in its overall mix compared with other states. Also, California electricity rates, unlike those in most states, are tied to natural gas prices.

"California has a history of screwing up renewables and in general it's a very tough state to do business in for many reasons," says Reese. "But everything in California hinges on the volatility of natural gas prices and that's the key. Renewables don't use gas."

While Pacific Gas & Electric, another major California utility, recently announced a five-year rate of $0.0645/kWh as part of a case settlement, SCE's announcement is completely voluntary.

"SCE might be offering the 6.15 rate to influence the PUC on this point and to avoid a higher fixed-price requirement," says Nancy Rader of the California Wind Energy Association. "At the same time, it's a very reasonable rate and it's hard to see the PUC offering a number other than that based on what gas prices are now."

Leading the nation

SCE's current renewables portfolio can deliver 2588 MW of electricity, with 1021 MW coming from wind. The company leads the nation in renewable power delivery, procuring approximately 13 billion kWh of renewable energy in 2005, more than any US utility or state except for California and enough energy to serve approximately 800,000 homes. More than 150 independent renewable power projects are under contract with SCE.

The utility serves more than 13 million people in a 50,000-square-mile area including central, coastal and southern regions of California, but not Los Angeles. About 800,000 of the company's 4.6 million customers are businesses.

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