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New Renewable Energy Rule Adopted for California’s Publicly Owned Utilities

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On Wednesday, the California Energy Commission adopted regulations that clarified how the state’s more than 40 publicly owned utilities (POUs) will participate in the country’s largest renewable energy purchase program. The law, called the Renewables Portfolio Standard (RPS), previously required privately-owned utilities to source 20% of their electricity from renewables by 2010. In 2011 the standard was raised to 33% by 2020 and for the first time, included the POUs as mandatory participants. For the past two years, the Energy Commission has been developing the rules and regulations that will shape the RPS program for the POUs.

POU2

RPS compliance trajectory for the POUs between 2011 and 2020

What does the RPS mean for the POUs?
In the graph to the right, the green area shows the cumulative amount of renewables that POUs are expected to procure to meet RPS requirements. By 2020, the POUs will be delivering enough renewable electricity to power approximately 3 million households!

As you can see, the POUs have quite a bit of time in the first two compliance periods (2011-2013 and 2014-2016) to get their programs in order. It’s important to clarify that while the POUs must procure a cumulative amount of electricity for each compliance period, they can determine their rate of investment within that timeframe. In other words, they will not be required to show specific percentages for the years between 2013, 2016, and 2020 but they must procure a total amount within each compliance period equivalent to the area under the curve in this graph. This is an important way of making sure the POUs make progress between the years, but have the flexibility to determine their own individual rate of progress.

The importance of POUs in California’s clean energy future
Collectively, the POUs supply about a quarter of all the electricity used in the state. A few large ones play major roles in shaping California’s electricity mix. For example, the Los Angeles Department of Water and Power is the largest POU in the country and the third-largest utility in California. The Sacramento Municipal Utility District is number five in the state, and the Imperial Irrigation District is number six.

In the past, the POUs have generally relied on a dirtier mix of resources to supply electricity than their privately-owned counterparts. They therefore have an important role to play in helping the state transition away from fossil fuels and meet statewide greenhouse gas emissions goals. By 2010, the POUs still relied on coal and natural gas for two-thirds of their retail sales, and supplied about half of the coal-fired electricity consumed in the state. But, this is changing…

How are the POUs doing so far?
RPS-investments-by-contract-typeTo gain a better understanding of how prepared the POUs are to meet the 33% RPS, we released a report last summer that analyzed the progress made by the top-ten largest POUs since 2003, and the degree to which these investments promoted the development of new renewable energy projects. For a quick summary of the report and its findings, you can check out my blog post or download the utility-specific fact sheets, which provide details on each POU’s investments.

We found that collectively, these utilities increased their clean energy investments from 4% to nearly 19% of retail electricity sales by the end of 2010. However, the degree to which these investments promoted the development of new clean energy resources varied significantly among the utilities. The graph to the right (click it for a larger view) shows how each utility has done so far.

Full steam ahead
Now that the RPS program rules have been adopted by the Energy Commission, the POUs have the regulatory certainty they need to start making renewable energy investments. Our report shows that for many POUs, investing in renewables is nothing new. But some will need to make a deliberate effort to get on board. For updates on how the POUs’ renewable energy and other clean energy investments are progressing, check out the Energy Commission’s “Tracking Progress” webpage.

The Energy Commission should be proud of the work accomplished so far to get the POU RPS program on its feet. There were many stakeholders including UCS involved in shaping these rules, and some of the issues were highly technical. It’s never easy to balance good policy development with the strong opinions of utilities and public interest groups, and the CEC struck a reasonable balance between allowing the POUs to autonomously develop their own programs, while ensuring all utilities in California are subject to the same rules and expectations. I look forward to watching the POUs play a larger role in our state’s clean energy transition.

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About the author: Laura Wisland is a senior energy analyst and an expert on California renewable energy policies. She holds a master’s degree in public policy. See Laura's full bio.

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2 Responses

  1. Richard Solomon says:

    Thanks for the info and the links to more info. It is good to see the CEC is increasing its requirements in a flexible, realistic way.

    Nat gas is better than coal but it still produces some co2, etc. And the extraction process for nat gas is problematic as well. Thus, I hope for more use of renewables like wind and solar in the years to come.

    Can you provide a summary of the progress/lack of progress being made by the large private, investor companies like PG&E and Southern Calif Edison? Those of us who live in the Bay Area depend on PG&E for our power.

    • Hi Richard,

      The UCS report mentioned in the blog- The Clean Energy Race- contains information on the types of renewable energy contracts the three investor-owned utilities (IOUs) relied upon through 2010. The California Public Utilities Commission (CPUC), which regulates the three IOUs in the state, tracks their progress with a spreadsheet located on their website. You can find that spreadsheet and other summary reports here: http://www.cpuc.ca.gov/PUC/energy/Renewables/. According to the CPUC, the three IOUs collectively sourced 19.8% of their 2012 retail sales with renewables. Pacific Gas & Electric is currently at 19% renewables; Southern California Edison is at 20.6%; San Diego Gas and Electric is at 20.3%.