Tag Archives: California

California already paid for utility assets once: Why do we have to do it again?

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Rather than focus on CCA procurement, the CPUC would better serve the state to use the provisions of AB 57 (e.g., PUC Section 454.5(b)(6)) and its other authorities, including those still in force from AB 1890 (1996). PG&E and SCE already collected $7 billion on an accelerated basis during the “competitive transition period” from 1998 to 2001 towards their legacy utility-owned generation resources such as Diablo Canyon, San Onofre and their hydropower generation.  SDG&E completely paid off its generation portfolio in 1999 this way. Further, PG&E had already recovered its entire investment in Diablo Canyon by December 31, 1997 prior to the start of the opening of the restructured market. (I tracked the CTC accounts throughout the period, reporting to the CEC in 2001, and calculated the return on investment in Diablo Canyon for settlement discussions in 1996.) If the Commission wanted to repay the debts incurred during the 2000-01 energy crisis, the better solution, which it did in part with SCE, would have been to simply establish a “regulatory asset” with no connection to the generating facilities which had already been paid off. As it is, customers-bundled and departed–are paying twice (and THREE times in the case of Diablo Canyon) for the same power plants.

The IOUs currently lack any real incentives to control their portfolio costs, as evidenced by their bundled portfolio plans for PG&E and SCE. Those plans say nothing about minimizing costs or managing risks except to avoid incurring shareholder penalties for missing the RPS mandates. In fact, PG&E has accrued a 3.3 cents per kilowatt-hour premium above the market value of its RPS portfolio to protect against a potential “price spike” between now and 2027. It is no wonder that customers have become unhappy with how the IOUs have managed their generation portfolios.

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CCAs reach RPS targets with long-term PPAs

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As I listen to the opening of the joint California Customer Choice En Banc held by the CPUC and CEC, I hear Commissioners and speakers claiming that community choice aggregators (CCAs) are taking advantage of the current market and shirking their responsibilities for developing a responsible, resilient resource portfolio.

The CPUC’s view has two problems. The first is an unreasonable expectation that CCAs can start immediately as a full-grown organization with a complete procurement organization, and more importantly, a rock solid credit history. The second is how the CPUC has ignored the fact that the CCAs have already surpassed the state’s RPS targets  in most cases and that they have significant shares of long-term power purchase agreements (PPAs).

State law in fact penalizes excess procurement of RPS-eligible power by requiring that 65% of that specific portfolio be locked into long-term PPAs, regardless of the prudency of that policy. PG&E has already demonstrated that they have been unable to prudently manage its long-term portfolio, incurring a 3.3 cents per kilowatt-hour risk hedge premium on its RPS portfolio. (Admittedly, that provision could be interpreted to be 65% of the RPS target, e.g., 21.5% of a portfolio that has met the 33% RPS target, but that is not clear from the statute.)

 

Make “Sustainable Food” the Economic Engine of Downtown Davis

 

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Many communities around the region, such as Sacramento and Woodland, have jumped on the “farm to fork” bandwagon to promote their relationships with agriculture. Davis can distinguish itself from the crowd by taking this a step further to promote itself as the center of “sustainable food.” In doing this, Davis can develop placemaking that is the key to economic development and vitality.

Davis is home to one of the top-rated food production research universities in the world in UC Davis. The City of Davis should leverage this position and strengthen its relationship to reinvigorate the downtown. The City has an opportunity as part of its Downtown Davis or Core Area Specific Plan to define a vision to achieve that goal.

Sustainable food minimizes damages to the planet in its cultivation, production, preparation, consumption and disposal. It is largely plant-based because this is the most direct way to deliver calories and protein to our diets. Animal production has much higher waste products, resource consumption, greenhouse gas emissions, and tainted food per calorie or gram of protein. For example, based on U.S. Department of Agriculture statistics, beef production emits four times as much greenhouse gases (GHGs) per calorie than soybeans or wheat and twice as much GHGs per gram of protein. Given California’s goal to be a “net carbon zero” emitter by 2045, the state will need to take a wide range of steps to cut emissions across the board, including in food production and consumption. Sustainable food is also more ethically consistent and healthful than our current food production and consumption patterns.

Sustainable food has been in the press frequently of late, with numerous stories in the Bay Area media. San Francisco has become the venture capital center of the world—especially for sustainable food–but real estate is becoming too expensive there to allow an industry that focuses on physical products sufficient space. Davis is close enough to that center for easy communication, but still has comparatively inexpensive land.

Creating a sustainable food ecology in Davis would have five aspects:

  1. Supporting innovation in sustainable food production and distribution
  2. Providing sustainable infrastructure to support companies that are innovating
  3. Serving and delivering sustainable food locally
  4. Preparing food that is consumed locally in a sustainable manner
  5. Attracting sustainable food-oriented tourism

The City can focus development of a sustainable food industry hub in the “Flex District” proposed for the G Street Corridor in the Downtown Plan. This area could house a wider range of facilities, such as test labs, within easy access distance of the UCD campus and the Capitol Corridor train to the Bay Area. Larger research facilities can be housed in other parts of the City where larger, industrial facilities are more appropriate.

Part of the attraction to companies locating here could be a sustainable infrastructure configuration starting in this district, with a district energy network and electric microgrid supporting fully electrified space conditioning and water heating systems. The other sustainability attributes identified in the Downtown Davis Plan should be incorporated and highlighted.

We can also encourage existing restaurants to serve more sustainable food on their menus, and attract new restaurants to cater to the new sustainable food businesses and their employees. The investors and workers at these companies are much more likely to follow their ethical beliefs in their consumption choices. The City could provide incentives through reduced fees to existing businesses, and evaluate how to speed the start up of new businesses.

As part of establishing a sustainable environment, the City should facilitate switching restaurants to more sustainable preparation practices. This includes switching from natural gas to induction cooktops and convection ovens, district water heating and space conditioning, and better management of waste. (Yes, we may need to recruit chefs for this new challenge.)

Finally, Davis can become a sustainable food destination. Less than 20% of our downtown visitors are from out of town according to analysis by consultants to City working on the Downtown Davis Plan. Given our location on the Capitol Corridor train route and Interstate 80, the community has much room for growth in tourism to boost our economy beyond UCD students’ parents visiting in September and June.

Davis already has a core attraction in its world-famous Farmers’ Market. With the addition of plant-based oriented restaurants and closer integration with the Mondavi Center entertainment area, a visitor could easily spend a whole day in Davis with a quick trip on the train from the Bay Area. Implementing this vision just needs closer coordination with UCD to bring events to Mondavi and the new Shrem Art Museum on Saturdays and setting up an electric bus shuttle between there and downtown.

UCD’s Robert Mondavi Institute for Wine and Food Sciences provides an example of how local development can be both sustainable and invigorating. That locale now has a microgrid that relies on renewable power. Both UCD and the City could benefit from a closer relationship centered around sustainable food in several dimensions.

Implementing all of this vision requires going beyond the form-based zoning codes that will come out of the Core Area Specific Plan. The City needs a comprehensive economic development plan, direction and resources for its economic development staff, and a willingness to focus on removing the barriers to bringing and supporting these businesses in Davis.

(with Anya McCann, COOL Cuisine)

Why the CPUC’s RA Market Report gives the wrong reliability price metric

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In its annual report on resource adequacy (RA) transactions, the CPUC reports the wrong result for the market price to be used for valuing capacity from the RA market data. The Commission’s decision issued in the PCIA rulemaking on establishing the CCA’s “exit fee” uses this value in error. In the CAISO energy and ancillary services markets, the market clearing price used to set the value of the energy portfolio is determined by the highest accepted bid in a single hour, and then averaged across all hours. In contrast, the average reported RA price in The 2017 Resource Adequacy Report incorrectly reports the average of all transactions. This would be equivalent to the CAISO reporting the average of all accepted bids, including those at zero or even negative, as the market clearing price.

The appropriate RA price metric is the highest RA transaction price for each month. This price represents the market equilibrium point at which a consumer is willing to pay the highest price given how low a price a supplier is willing to provide that quantity of the resource. (The other transactions are called “inframarginal” and such transactions are common in many markets.) In a full auction market, all transactions would clear at this single price, which is why the CAISO reports a single market clearing price for all transactions in a single hour. That should also be the case for the RA market price, except the time unit is a month.

Due to a lack of an auction for the moment, it is possible to manipulate the highest apparent price through a bilateral transaction. Instead, the Commission could choose a price near the highest point, but with sufficient market depth to mitigate potential manipulation. Using the 90th percentile transaction is one metric commonly used based on a quick survey of market price reports.

Why the CPUC has it wrong on the PCIA

Nick Chaset is the CEO of East Bay Community Energy which is a community choice aggregator (CCA) that serves Alameda County. He also was Commission President Michael Picker’s chief advisor until last year when he left for EBCE. He explains in this article how two proposed decisions that the CPUC is considering are fundamentally wrong and will shift cost onto CCA customers. (I testified on behalf of CalCCA in this proceeding. I’ll have more on this before the Commission’s scheduled vote October 11.)

Figure 1 – CPUC’s Proposed Resource Adequacy Value vs. True Market Values

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Figure 2 – GHG Premium Value Missing from CPUC Proposed Decision

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Figure 3 – Falling Utility Rates as Customers Depart Filed in Their ERRA Rate Applications

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Dunning gets it wrong again on VCE

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Valley Clean Energy Alliance (VCE) was in the Davis opinion columns this weekend again. First, Bob Dunning wrote another column in the Davis Enterprise that mischaracterizes the switch to VCE from PG&E as “mandated” and implies that local government didn’t trust Davis citizens to make the right choice. Then, David Greenwald wrote a column in the Davis Vanguard on how Dunning had ignored the authorization of the development and formation of VCE and is late to the game.

In both cases, the distinction between the choice to form VCE made by city councils and the Board of Supervisors after substantial study  is not distinguished from the choice that electricity ratepayers now have as to which entity will serve them. Previously, Yolo County ratepapers had no choice as to who should serve them–it took the formation of VCE to create that choice. If Dunning has a problem with that even offering that choice in the first place, then that’s a much more fundamental problem. But he is not being so transparent in his opposition, with is either disingenuous or ignorant.

I wrote the following email to Bob Dunning (I had an earlier letter to the editor already published in the Enterprise, that I also posted on this blog and the Davis Vanguard.)

You complain that somehow you’ve been “mandated” to sign up with Valley Clean Energy Authority. Yet you fail to ask the question “why was I mandated to sign up with PG&E all of those years?” Why does PG&E get a free pass from your scrutiny?

Instead now, you actually have a choice. We trust that you will make the right choice, whereas before you had NO choice. And you are not “mandated” to join VCE. You can act to switch to PG&E if you so choose. What has changed is the starting point of your choice. The default is no longer PG&E—it’s VCE. There’s nothing wrong with changing the default choice, but we have to start with a default since everyone wants to continue to receive electricity. (The other option is like they did with long distance service in the late 1980s with random assignment as the starting point, but that seems too much bother.)

 Send me your answers in your next column.

As to the Vanguard, I posted:

I think your column misses the fundamental point–contrary to everything that Dunning writes, we DO have a choice–it’s just that the starting point (default) isn’t what he wants. He prefers that the big corporations get the favored pole position.

 

One CEQA reform

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Yet another housing development in Davis is being threatened with a lawsuit under CEQA. Almost every project in town has been sued by a small cadre of citizens, with Susan Rainier the most recent stalking horse. This group was first encouraged by a suit in the 1990s that was settled for more than $100,000 that went to two individuals. (Part of those funds went to start the “Flatlander.”) That pattern has been the modus operandi ever since.

The problem is that these individuals and organizations have rarely been meaningful participants in the planning and permitting process for these projects. A valuable CEQA reform would be to require that any litigant to participate in a meaningful way in the preparation of the EIR, and that the litigant include any document or discussion in the suit that is filed. The intent of litigation in CEQA was to act on a check on failing to address any concerns raised during the deliberative process–let’s make that the case.

The legitimate environmental concerns are to be addressed during the deliberative process. The potential litigants need to develop a record during the deliberative process that fully raises their concerns. A suit should be limited to the issues raised during that process, and the required evidence clearly specified during the process. The litigants can then more fully develop counter evidence in a suit if that is the final outcome.