Contrary to conventional wisdom, electricity demand isn’t immune to price elasticity, and rate designs can encourage conservation. In particular, inclining block rates coupled with dynamic pricing...
East Vs. West: Growing the Grid
The models and motives behind tomorrow’s transmission expansion.
in evaluating costs and benefits under long-term resource procurement plans. Moreover, the new greenhouse ceilings presumably will conform to the PUC’s previously issued “greenhouse gas performance standard.” That standard declares that for any procurement contracts longer than three years, IOUs must maintain greenhouse-gas emissions at levels no higher than expected from a combined-cycle natural gas turbine. When interviewed for this article, Commissioner John Geesman of the California Energy Commission (CEC) confirmed that the CEC had endorsed that standard in its landmark 2005 Energy Policy Report (IEPR), and would apply it in reviewing resource procurement plans, including review of transmission line projects. 17
Consider also the state’s Energy Action Plan, which requires California’s electric IOUs to procure 20 percent of their electric retail sales from eligible renewable resources by 2010—seven years earlier than the 2017 target set by Senate Bill 1078. Moreover, the PUC also reportedly is considering whether it should accelerate that goal to 33 percent by 2010, to conform with the governors signed Executive Order S-3-05. 18
Compare these goals with the progress made so far by the IOUs: Renewables make up 18 percent of load for Southern California Edison, 12 percent for Pacific Gas & Electric, and only 4.5 percent for San Diego Gas & Electric. 19
Thus, you begin to see the pressure building on California utilities, to deliver renewable energy to their ratepayers. And problems can arise even when a utility seeks to build a short-haul transmission line for the sole purpose of gaining access to renewables. The classic example comes courtesy of Southern California Edison, which failed last year in attempts to obtain guaranteed cost recovery before the fact, with costs rolled in to its existing transmission rates, for a new “trunk” line to be built to gain access to anticipated wind power development in the Antelope Valley.
In that case, FERC said the new line would not provide system-wide network benefits, but would operate sole-use facilities benefiting only a single party—the anticipated wind project developer. Thus, FERC would treat the new proposed trunk line as a generation tie, and require the wind plant developers to fund it themselves. Edison, the American Wind Energy Association, and FPL Energy (famous for its wind projects) had complained to no avail that forcing wind developers to fund transmission access would discourage most grid expansions aimed at capturing wind energy potential. 20
The Coal Shadow. At the same time that California utilities are hunting frantically for renewable energy, especially in imports from the Intermountain West, the proposed Frontier, Northern Lights, and TransWest Projects suffered an acute embarrassment: The projects would both begin in, and pass through, areas flush with proposed projects to build coal-fired power plants. Thus, opponents have attacked the Frontier Line as a vehicle for importing dirty coal-fired power into California. 21
At Western Resource Advocates, economist John Neilsen reports that several utilities and developers are rethinking their plans to build coal-fired power plants in Nevada, Utah, New Mexico, and elsewhere in the West, citing concerns about the tightening policies emerging from California on power imports.
In August of