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

June 14, 2013 | 2:47 pm
Laura Wisland
Former Contributor

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.


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.