California’s Controversial Energy-Grid Bill Advances

LOS ANGELES (CN) – In an effort to transform California’s relationship to energy markets in the western region of the country, lawmakers on Tuesday advanced a bill that would merge California into a regional energy market.

Under the terms of Assembly Bill 813, California would be lumped together with up to 13 western states in a regional energy grid, forming a wholesale electricity market stretching from Canada to Baja California.

Thirty-eight separate operators – known as “balancing authorities” – stretch across the interconnected western United States and make up approximately 20 percent of all the electric capacity in the United States and Canada, according to a state analysis on the bill.

The BAs ensure a real-time balancing of power system demand and supply across the region.

The bill would turn over decision-making power for California’s portion of that energy transmission from the nonprofit California Independent System Operator (CAISO) to the multistate organization.

Whether the bill will benefit consumers and the environment is a matter of considerable debate.

Governor Jerry Brown and several prominent environmental groups – including the Natural Resources Defense Council (NRDC) and the Environmental Defense Fund – are backing the idea, claiming it will cut costs for consumers and bring more clean energy into the state.

But opponents of the bill – at least 65 of which are listed in the state analysis – say deregulation of the market threatens the state’s transition away from reliance on fossil fuels, opens it up to malicious speculation and would cost residents billions of dollars in fees.

The Senate Energy, Utilities and Communications committee approved the hotly contested energy bill in a 6-1 vote Tuesday, sending it on its way to the Senate Judiciary Committee. If the committee approves it, it will go to the full Assembly for a vote.

Melanie Cain, committee assistant for the Senate committee, said in an interview the votes in favor of the bill were “courtesy votes to move it out of committee” by next week’s deadline.

Senator Andy Vidak, R-Hanford, cast the lone “no” vote.

“I agree that…grid regionalization could become a boondoggle as big as the so-called ‘Energy (partial) De-Reg’ debacle 22 years ago,” Vidak, who represents California’s 14th District, said in a statement on his website.

Vidak’s comment refers to the state legislature’s past unanimous approval of deregulation of the state’s electric power system.

CAISO, whose board members are appointed by the governor, was created after the deregulation incident.

“The politicians who try to force this issue onto us will ultimately pay the price as Gray Davis did,” Vidak said, referring to the former California governor who was ousted by a recall.

Liza Tucker, taxpayer advocate with nonprofit Consumer Watchdog, said in an interview that the prior legislative approval “opened the door to market manipulation by Enron,” drove a major utility company into bankruptcy, caused blackouts and forced California residents to overpay billions of dollars.

Consumer Watchdog released a 48-page report, “Betting Against The House: How California’s Leaders Could Gamble Away Our Energy Future On A Western Power Trading Casino,” on Monday that claimed AB 813 undermines California’s control of carbon emissions and pollution from power plants and will lead to the overturning of California laws.

If passed, the bill would eliminate California’s control of its own electricity market and force the state to buy power generated in other coal-heavy states, Tucker said

According to the state analysis of the bill, several opposing parties submitted concerns regarding the Trump administration’s “continued efforts to prop up coal and the risks of these efforts to undermine California’s climate policies.”

“It is the same bag of goods sold by Enron that put prices through the roof,” Tucker said. “We’ll be paying more for transmission than if we had our own systems.”

Enron was a U.S. energy-trading and utilities company that facilitated one of the biggest accounting frauds in history, using false narratives to inflate revenues.

The scheme doesn’t make sense to Tucker, since California’s three major investor-owned utilities are on track to generate half their retail sales from green energy sources by 2020, already operating mostly free of coal.

Californians could end up paying the lion’s share of multibillion-dollar transmission lines carrying coal power from nearby states, Tucker said.

“Billionaire investors, energy companies, and Wall Street banks see big profits off power exports to California that a regional power trading market would facilitate,” Tucker wrote in the report. “They see big opportunities in building expensive new transmission lines underwritten largely by Californians to vastly expand a speculative commodities market in which contracts for electricity, whether dirty or clean, are bought and sold like pork bellies.”

Billionaire investor Warren Buffet, whose Berkshire Hathaway company owns Pacific Northwest energy company Pacificorp, would be part of the reorganization scheme.

Ralph Cavanagh, energy program co-director at NRDC, disagreed with Tucker’s findings.

He said in an interview the bill enjoys broad support from solar energy producers, independent energy producers and environmental groups who claim it would reduce energy transmission costs.

“This bill will end the severe fragmentation of the state’s power grid,” he said, adding that state ratepayers could see at least $1.5 billion in savings.

Tucker disputed that number and said none of Cavanagh’s claims have been proven.

Governor Brown said he supports the bill because California could draw electricity from other states when green energy sources such as solar and wind are unreliable.

And the American Council on Renewable Energy (ACORE) said in an April 13 statement that the bill would “unlock” the state’s energy system’s potential to “evolve into a modernized, decarbonized and high-performing” energy grid.

According to ACORE, the unified grid would allow the state to adjust to shifts in energy demand and support other states in their bids to transition toward renewable energy.

Assemblymember Chris Holden, D-Pasadena, authored AB 813.

Tuckers’s report calls out Holden as the fourth largest recipient in the Assembly of contributions from energy companies. He received a total of $71,750 between 2011-2018, according to campaign finance documents.

Holden’s office did not return a request for comment.

A December 2017 Los Angeles Times profile of Consumer Watchdog raised concerns about the donors who funded the organization.

Between 2012 and 2015, Consumer Watchdog accepted $260,000 in donations from political and corporate strategist Chris Lehane’s nonprofit, Main Street American Values, according to the LA Times, with one $45,000 payment made only weeks before Consumer Watchdog lent public support to one of Lehane’s clients, Airbnb.

Tucker did not respond to a request for comment about the organization’s funding.

Jamie Court, president of Consumer Watchdog, said in a phone interview Monday that California officials haven’t learned the lesson of the previous deregulation crisis.

“We’re flying the red flag and letting legislators know who they’re in bed with,” he said. “This opens the door to Enron all over again.”

 

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