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California Energy Markets / Bottom Lines

[October 6, 2017 / No. 1457]

An Insider's View Into How Two Key Energy Bills Died

Gov. Jerry Brown's effort to propose a bill in the final days of the legislative session to revamp governance of the California Independent System Operator was problematic and caused a lot of collateral damage in the Legislature, according to Kip Lipper, a top consultant to Senate President Pro Tem Kevin de León.

Lipper, who discussed key energy bills of the recent legislative session at an Oct. 4 luncheon the Power Association of Northern California held, echoed questions raised earlier by ratepayer advocates and other interest groups over the bill package, which was introduced Sept. 8 by Assm. Chris Holden (D-Sacramento), a week before a deadline for all bills to pass both houses (see CEM No. 1454 [14]).

"This is a long, complicated and controversial issue," Lipper said, stressing that he was speaking on his own behalf and not for his boss or the Senate. "To bring it into the last week of the legislative session and simply drop it into a bill is the equivalent I think of legislative malpractice."

The main bill in the package, AB 813, would have, as Lipper put it, extinguished the authority of the Senate to confirm members of the CAISO Board of Governors, and eliminated the authority of the Senate to confirm and conduct oversight of CAISO board members. The bill was designed to pave the way for regionalization of the grid, if a newly mandated Commission on Regional Grid Transformation made certain findings by the end of next year.

It was championed by the Natural Resources Defense Council, which contends a single, independent regional body would be a more efficient operation than the 38 different balancing authorities currently operating in the West. NRDC and other proponents argued that an integrated Western grid would allow for more renewable power to flow into California, and would provide a larger market for California entities to sell excess renewable power.

But there was not a lot of time to vet the proposal, said Matthew Freedman, a staff attorney for The Utility Reform Network who has worked on renewables portfolio standard and clean-energy issues at TURN and in Sacramento for almost 20 years.

"The notion that you'd do a megabill that nobody has seen until three or four days before the end of session creates its own set of problems and rarely leads to well-thought-out policy," said Freedman in apresentation at the lunch.

'A megabill that nobody has seen until three or four days before the end of session creates its own set of problems and rarely leads to well-thought-out policy.'

Lipper questioned the costs of the proposal and its potential risks, especially now, in light of the U.S.Department of Energy's Sept. 29 filing at the Federal Energy Regulatory Commission proposing anew grid-resiliency rule to provide support for baseload coal and nuclear plants. FERC officially noticed the DOE submittal and is planning a hasty 60-day review; the commission asked for stakeholder comments within three weeks (see CEM No.1456 [13]) and story at [17]).

An expanded grid would include several coal plants in states outside California. Under the proposed rule at FERC, does this mean California customers would have to pay for coal plants in Utah or other Western states, Freedman asked.

This is among the questions stakeholders in California would like answered before the grid is expanded, hesaid.

Most importantly, Lipper said, for those in Sacramento who worked through the energy crisis, "the loss of oversight and control of California over its power grid is a very significant question that needs to be addressed."

One of the reasons the grid-expansion bill imploded is that there wasn't time to work through amendments that different interest groups wanted, Freedman said. The bill came out on a Friday, which meant that to make a deadline to be in print for 72 hours before a vote, amendments would have had to have been negotiated by Monday. That time frame made it a tall order to work out four or five major new provisions that different constituents were pushing for, Freedman said.

Investor-owned utilities were not planning to oppose the bill, but when they saw the accelerated procurement provisions they sought a provision that would pause new CCA formation, Freedman said after the presentation, which in turn led CCA interests to oppose the bill.

In the end, the bill stalled. Had it moved forward, the proposed new rule at FERC would have thrown a new twist into the expansion proposal, with the biggest fear being that California would not be able to control its own grid or policies.

Another key energy bill that failed passage was SB 100, which would have set a goal of 100 percent renewable and carbon-free generation by 2045.

"This bill is meaningful -- significant and symbolic," Freedman said. It would have accelerated the RPS to 60 percent by 2030 (up from 50 percent by 2030 currently), but did not alter other rules of the RPS program, thereby avoiding big fights over RPS procurement buckets and other compliance rules, he said.

"Amazingly, SB 100 ended up a clean bill," Freedman said, with not a lot of special-interest provisions -- a rarity for a big bill like this. "Unfortunately, it died in the end because it got caught up in the political crosswinds associated with the ISO expansion."

A sticking point for SB 100 was concern from the International Brotherhood of Electrical Workers that third-party distributed energy resources would somehow cannibalize utility grid investments, thereby causing electrical line workers to lose their jobs.

An amendment supported by labor never made it into the bill, which led labor to oppose it.

The CAISO expansion bill and SB 100, both of which are two-year bills, "are not dead dead, in the sense that they could not be resuscitated next year," Lipper said, noting that next year both De León and Brown will be in the final year of their terms, typically a time lawmakers take up so-called legacy bills, they may get another chance.

Another key focus of lawmakers was cap and trade. The Legislature passed key measures to extend cap and trade, AB 398, from Assm. Eduardo Garcia (D-Coachella), and to establish a statewide program to monitor criteria and toxic air pollutants, AB 617, from Assm. Christina Garcia (D-Sacramento). Brown signed both those bills in July. -Mavis Scanlon


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