Sunday, April 4, 2010

Cost Increases from AB 32

As an example of how AB 32 is bad for California's economy, and the opposition to its requirements, the Los Angeles City Council rejected a rate increase request for the local city-owned utility, Department of Water and Power (DWP). Some background is probably in order here.

DWP purchases and imports approximately 40 percent of its power from coal-burning power plants in Utah. The power is transmitted via high-voltage power lines approximately 500 miles. Recently, though, the Mayor of Los Angeles, Antonio Villaraigosa, required that Los Angeles "go green" and replace the coal-based power with renewable power. There are also state laws (SB 1368) that require the coal-based power to be reduced and then eliminated, but those laws do not require renewable power as the replacement, simply more efficient power plants. DWP requires a 28 percent increase in power prices to support its replacement power plants to meet the Mayor's goals. That 28 percent increase is very high, especially when one considers the dismal state of the city's finances. Basically, the recession and poor fiscal policies have left the city broke.

One of the mandates of AB 32 is for 20 percent of the state's electric power be provided by renewable sources, by December 31, 2010 (Renewable Portfolio Standard). A further requirement is for 33 percent by 2020. Meeting these percentages means not only building more renewable power plants (solar, wind, geothermal, waste-to-power, landfill gas, etc.) but increasing power prices to pay for the plants. What DWP is proposing is not at all unusual, nor out of line. It costs money to build the renewable power plants, and lots of it.

The sad part of all this is that AB 32 proponents view this as a good thing. They believe (and are on record) that increasing power costs will allow California to "break through" to renewables, and "break free" from the yoke of fossil fuels. The problem is, as they see it, that electric power prices are too LOW, not too high. Higher electric prices will make their dream come true: power from windmills, and solar, and geothermal, and evil fossil fuels can be forever eliminated.

Higher power prices are not good for the economy, for small businesses, or for large businesses, for schools, for hospitals, for any enterprise of any type that purchases electricity. That includes just about every activity in California.

Roger E. Sowell, Esq.
Marina del Rey

No comments: