Tag Archives: CCA

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.

 

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Another bad legislative idea: Pushing RPS purchase

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The California Legislature is considering a bill (AB 893) that would require the state’s regulated utilities (including CCAs as well as investor-owned) to buy at least 4,250 megawatts of renewables before federal tax credits expire in 2022.

Unfortunately, this will not create the cost savings that seem so obvious. This argument was made by the renewable energy plant owners in the Diablo Canyon Power Plant retirement case (A.16-08-006) and rejected by the CPUC in its decision. While the tax credits lower current costs, these are more than offset by waiting for technology costs to fall even further, as shown by the solar power forecast above. Combined with the time value of money (discounting), the value of waiting far outweighs prematurely buying renewables.

The legislature already passed a bill (SB 1090) that requires the CPUC to ensure that GHG emissions will not rise when Diablo Canyon retires in 2024 and 2025 when approving integrated resource plans. (Whether the governor signs this overly directive law is another question.) And SB 100 requires reaching 100% carbon free by 2045. A study just released by the Energy Institute at Haas indicates that renewables to date have depressed energy market prices, discouraging further investment. And the CAISO is “managing oversupply” created by the current renewable generation.

And there’s a further problem–with a large number of customers moving from the IOUs to CCAs across all three utilities, the question is “who should be responsible for buying this power?” The CCAs will have their own preferences (often locally and community-scale) that will conflict with any choices made by the IOUs. The CCAs are already saddled with poor procurement and portfolio management decisions by the IOUs through exit fees. (PG&E has an embedded risk premium of $33 per megawatt-hour in its RPS portfolio costs.) Why would we want the IOUs to continue to mismanage our power resources?

Bob Dunning gets choice on VCEA wrong

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Electricity customers in Davis and Yolo County are in the midst of choosing between the current incumbent electricity utility Pacific Gas & Electric (PG&E) and the new community choice aggregator (CCA) Valley Clean Energy Alliance (VCE). VCE is a joint powers authority (JPA) of the governments of the Yolo County, and the Cities of Davis and Woodland. (The Cities of Winters and West Sacramento have expressed interest in joining VCE as well.) By state law, customers are initially defaulted to the CCA at the outset before being given multiple chances over a six month period to choose to stay with the incumbent investor-owned utility–PG&E in this case.

Bob Dunning in his Davis Enterprise column August 8 confuses a lack of choice with just changing the starting point of the choice. Regardless of whether VCE or PG&E is the default provider, local customers still have exactly the same choice. But by having VCE start as the default provider, we level the playing field with the long-time giant monopoly utility, PG&E. (And customers can return to PG&E after 12 months if they are dissatisfied.) Why should we continue to give the big guy a continued advantage at the outset?

PG&E has all sorts of shareholder money to spend on improving its image and retaining customers. The utility’s biggest problem is that it is spending an additional 3.3 cents per kilowatt-hour to mismanage risk in its portfolio based on calculations I made in the power cost indifference adjustment (PCIA) rulemaking proceedings. Why stay with a company that has such a poor management record?

The 20-year cycle in the electricity world

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The electricity industry in California seems to face a new world about every 20 years.

  • In 1960, California was in a boom of building fossil-fueled power plants to supplement the hydropower that had been a prime motive source.
  • In 1980, the state was shifting focus from rapid growth and large central generation stations to increased energy efficiency and bringing in third-party power developers.
  • That set in motion the next wave of change two decades later. Slowing demand plus exorbitant power contract prices lead to restructuring with substantial divestiture of the utilities’ role in generating power. Unfortunately, that effort ended up half-baked due to several obvious flaws, but out of the wreckage emerged a shift to third-party renewable projects. However, the state still didn’t learn its lesson about how to set appropriate contract prices, and again rates skyrocketed.
  • This has now lead to yet another wave, with two paths. The first is the rapid emergence of distributed energy resources such at solar rooftops and garage batteries, and development of complementary technologies in electric vehicles and building electrification. The second is devolution of power resource acquisition to local entities (CCAs).

Opening up California’s utility procurement process could lead to lower power prices

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California passed AB 57 in 2002 to make the power procurement process for electric utilities confidential (as well as subject only to upfront review rather than ongoing prudence standards). The result has been overly high prices locked in for decades.  A new study on the relative gains to landowners who sell the development rights for oil and gas development in Texas shows that using auctions creates more competition among multiple bidders than bilateral negotiations. As a result, landowners get higher prices for their development rights through an auction. The corollary is that California’s electric utilities probably could lower their power purchase costs by moving to public auctions instead. Yet another reason to repeal AB 57.

Proposed TOU rate revisions are “fighting the last war” in California

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California’s investor-owned utilities (IOUs) have asserted that the underlying costs molding time variant or time of use (TOU) rate structures should be largely, or even exclusively, derived based on conventional fossil generation costs. The IOUs rely on “net load” to determine TOU prices, calculated by subtracting all load met by renewables, nuclear and hydropower generation—the majority of the utilities’ generation fleets.

In theory, net load is the portion of the load served by fossil-fueled generation that has the highest short-run operating costs, and therefore is “marginal.” The infamous “duck curve” shown above depicts the net load (not the metered load.) Yet, the marginal energy generation for most load is no longer served by natural gas; it is now met by renewable energy contracts. The utilities’ net load approach ignores the bulk of their true marginal costs to serve added load, which arise from procuring renewables.[1] The IOUs’ resource procurement has been dominated by adding solar, wind, biofuels, and other renewables since at least 2006 to meet the state’s renewable portfolio standard (RPS), first at 20 percent, then 33 percent, and soon 50 percent.

The tunnel-vision focus on net, rather than the entire, load is especially problematic in the context of State policy to phase-down fossil fuel generation. Eventually, natural gas production will even more significantly diminish, and could disappear from the grid entirely, leaving no price-setting metric under this paradigm. Insistence on the net load approach in the face of this transformation is akin to evaluating the economics of ridesharing based on the exclusive cost of taxis, without consideration of Uber® and Lyft®.

Once fossil-fuel resources are used minimally – an explicit state goal reflected in SB 350 – and potentially no longer on the margin, it is unclear what price benchmark the utilities will propose to set time-variant rates.  Continuing the trend toward fewer fossil-fuel resources is already reflected in pending legislation in Sacramento that proposes a clean-peak standard – AB 1405[2] – and a 100 percent Renewable Portfolio Standard—SB 584.[3] Relying solely on the cost of generation resources that State policy plans to phaseout to define TOU periods is inconsistent with good, long-term, ratemaking principles.  Instead, marginal energy generation costs should be calculated, at least in part, from a set of recent RPS-eligible PPAs, weighted by time of delivery.

Likewise, the marginal energy costs derived using the net load method, which drive the proposed shifts in TOU periods, reflect less than one-third of total average utility rates. The IOUs do not explain why cost differences within a modest component of overall rates should steer determination of TOU periods.

Further, it is not clear why the California Public Utilities Commission (CPUC) should rely on a speculative forecast about load shapes in 2024—seven years from now—to set today’s TOU periods. As the CPUC is well aware, the electricity system is changing rapidly along many dimensions. Infusion of utility-scale renewables, which is driving the IOUs’ rate analyses, is but one factor. Increasing amounts of storage and electric vehicles, shifting work patterns, and other social and economic factors will substantially influence load profiles over the next decade. In 2006, few energy experts foresaw stagnant, or even falling, electricity demand; there is even greater uncertainty today.

[1]This perspective excludes contributions made by utility-scale renewables that meet most of the remaining load, and by customer-side resources.

[2] See http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1405

[3] See https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB584

Enlisting Davis’ Citizen-Analysts | Davis Vanguard

By Richard McCann

Why are we not using Davis’ wealth of human capital to our advantage? Why don’t we assign, and even hire or retain, these individuals to prepare these analyses for commission review?

Source: Enlisting Davis’ Citizen-Analysts | Davis Vanguard