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Regulators Forum: Shifting Winds, Shifting Strategies

State regulators grapple with investments, supply planning, and structural issues.

Fortnightly Magazine - November 2005

there is enough spent fuel out there to paint an ominous picture, a solution will open up really quickly.

The biggest obstacle is not waste storage or even capital cost. It's cultural. Rightly or wrongly, nuclear power generates a lot of paranoia along with its electricity. That is something we'll have to overcome.

California

Meeting Tomorrow's Demand

California is America's largest power market, and it also is one of the most progressive. Meeting the state's growing power demand while remaining true to its environmental agenda, however, might prove difficult.

CPUC President Michael Peevey in September explained how the challenges of resource adequacy and reliability are affecting California's long-term policy priorities.

Q: What are the biggest challenges facing California's utility industry? What are CPUC's priorities right now?

A: The biggest challenge in California is resource adequacy-ensuring we have environmentally sound resources to meet the state's energy needs as we grow.

We have made a large commitment to energy efficiency and renewable energy. We've set a policy goal to have the state's utilities depend on renewables for 20 percent of their generation by the end of this decade. That is an ambitious goal that was made more complicated in June when Gov. Arnold Schwarzenegger set forth ambitious goals to reduce greenhouse-gas emissions to year-2000 levels by 2010, and to 1990 levels by 2020-more or less in accord with the Kyoto protocol.

These considerations go into the mix as we look at resource adequacy. Specifically, what is the role of coal in California's future? We've determined there is a role, but it must be as clean as natural gas and the only way to do that is IGCC with sequestration. We are wrestling with this now at the PUC, and our resource adequacy plan will be decided by the time we attend the NARUC annual meeting in November.

Also, California is initiative-crazy. Gov. Schwarzenegger called a special election for November, and one item the consumer and labor groups put there, Proposition 80, would disallow direct access, which we suspended temporarily during the energy crisis. Prop. 80 also would have various other limitations on what the PUC could do, binding us and limiting our ability to act. That creates a certain amount of uncertainty. Until we resolve Prop. 80 and clarify the market structure, it is difficult to predict what will happen. Independent power producers cannot finance plants without signing a 10-year contract for the off-take to utilities, and there is some doubt as to how that will work going forward.

Q: How will California meet those ambitious resource goals?

A: We have a lot of ways to meet our future energy needs. Fortunately this state is blessed with geothermal, biomass, wind, and solar energy. All will play a role.

In our energy action plan, efficiency is our number-one resource. We expect efficiency to offset half of the demand growth in the next 10 years. Demand response will be a big part of that. Then in the loading order comes renewables, and natural gas after that. We will need conventional gas-fired plants, and several are under