GovReport

On California's Future - Energy, Technology, and Infrastructure

Jesus Arredondo

Final Push with New Bill for Pumped Storage

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With COVID-19 stalling most energy matters not related to PG&E, the NextEra backed effort to promote pumped storage in California got new life last week following the “gut and amend” of AB 1720  by Assemblymember Wendy Carrillo (D-Los Angeles). The new bill would direct the California Department of Water Resources (CDWR) to buy pumped storage electricity from the NextEra proposed project.

As proposed, AB 1720 would fast-track the pumped-storage project through the CEQA process, specifically invoking that venture in an effort to start construction. Additionally, if the CPUC does not by March 2021 say whether it’ll order the in-State utilities to buy an unspecified amount of storage capacity, the bill would have CDWR procure those resources.

The legislation is supported by the State Building and Construction Trade Council of California, the Coachella Valley Economic Partnership and the Long Duration Energy Storage Association of California.

The NextEra project has not yet secured state and federal approvals.

AB 1720 contains language from the previous legislation that stalled earlier this year that also promoted pumped storage, SB 597 (Hueso) and AB 2255 (Eggman). AB 1720 is currently on the Senate floor, but the bill will likely be referred to a policy committee for further review.

 July 31 is the last day for policy committees to report fiscal bills to appropriations committees, and this bill is in that category because of the electricity purchases that would be made by CDWR.

California COVID-19 Update – June 29

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The following statistics were gathered from various government websites:
  • State-wide—215,375 confirmed cases, 5,933 deaths (+35 from yesterday-State-wide).        
  • The greater Los Angeles area has 97,894 cases and 3,305 deaths (+20 from yesterday).
  • The Bay Area has 23,738 cases and 568 deaths (+5 from yesterday).  
  • Confirmed cases in 55/58 counties (3 counties have reported no cases).
  • Counties re-opening 51 of 58 (those counties are moving to Phase 3 of 4 as defined by Newsom Administration). Cities, including in the greater Los Angeles Area and several in the San Francisco Bay Area, moving slowly toward Stage 3. Because of a sure in cases, there are recommendations to re-instate “stay at home” in some counties.

Budget Update: Legislature Restores CalGEM Enforcement Positions

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In last week’s final budget, the Legislature restored key cuts for the Department of Conservation’s Geologic Energy Management (CalGEM) division, which regulates the drilling, operation, and permanent closure of energy resource wells.  CalGEM will now receive 25 positions costing $7.2 million in the following categories:

  • 10 positions to assess companies’ financial liability for idled and orphaned wells, an implementation of SB 551 (Jackson);
  • Four positions to strengthen companies’ financial assurance requirements for those wells, an implementation of AB 1057 (Limón);
  • Two positions to improve companies’ transparency surrounding natural gas leaks, an implementation of SB 463 (Stern);
  • Five positions tied to regulatory compliance and oversight;
  • Two positions tied to public outreach and data transparency;
  • Two positions tied to enforcement.
  • The cost of those 25 positions is $7.2 million in the 2020-21 budget year, the source said, followed by $4.5 million in 2021-22 and ongoing.

In January Newsom proposed to send, an extra 128 positions and $24.3 million to implement AB 1057 and other reforms over a three-year period.

But in a reversal last month, Newsom entirely withdrew the proposal — even though that boost wouldn’t have impacted the general fund as the state tries to dig itself out of a $54 billion deficit. The plan would have instead drawn from the Oil, Gas and Geothermal Administrative Fund that’s sourced from industry fees.

Despite Newsom’s reversal, the Legislature proposed going forward with his original plan, which would have provided 53 extra positions costing $13.9 million in the 2020-21 fiscal year.  In final negotiations, 25 positions were restored at a cost of  $7.2 million in the 2020-21 budget year, followed by $4.5 million in 2021-22 and ongoing, according to budget documents.

 

SCE Says Nearly 50% of Electricity Delivered to Customers is Carbon Neutral

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Announcing the release of its 2019 Sustainability Report on June 8, Edison International stated that 48% of the electricity delivered to 15 million customers last year by Southern California Edison (SCE), its largest subsidiary, came from carbon-free sources.

With the announcement, SCE, which is also California’s second-largest utility, is effectively signaling their aggressive effort to comply with the State’s climate goals.

Currently, California law directs utilities to secure 60% of their electricity from the Renewables Portfolios Standard (RPS) loading order-eligible resources by 2030, followed by a 2045 requirement for 100% of electricity to come from zero-carbon sources. The State is weighing whether RPS-ineligible sources, including nuclear power and large hydroelectric power, should qualify for the 40% gap between the two milestones.

The 2019 Sustainability Report states that, of the 48% of the utility’s carbon-free, delivered power:

  • 34% derived from the RPS-eligible sources of solar, geothermal, small hydro (less than 30 megawatts), biomass and biowaste; and,
  • 14% derived from the RPS-ineligible sources of nuclear and large hydro (30-plus MW).

The remaining 52% of delivered power last year was reported to still be coming from natural gas and other sources (assume fossil).

Two years ago, SCE’s power mix was at 36% renewables, while that of PG&E was at 39% and SDG&E was at 44%. All three investor-owned utilities are years ahead of the RPS schedule, with the California Public Utilities Commission scheduled to publish the official 2019 figures this fall.

Commission Says PG&E ‘Making Progress’ but Questions Remain

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Testifying at the Senate Energy Committee Oversight Hearing on June 4, California Public Utility Commission (CPUC) staff said that PG&E is improving resiliency ahead of wildfire season, albeit with big unknowns.

CPUC Deputy Executive Director Rachel Patterson told the Committee that PG&E is “making progress towards readiness, with some major ifs. The very biggest question will be whether the company can bring all of their lines of effort together into smart and competent execution this year.”

CPUC staff said that PG&E has already exceeded its target for installed transmission switches, which enable electricity to be remotely rerouted around faulty lines and reduce the likelihood of power shutoffs. PG&E has also improved its website capability, a sore subject with legislators after online traffic during last fall’s forced blackouts crashed its site.

However, CPUC did say that PG&E is lagging in other areas, adding that the utility hasn’t finished hiring enough public safety specialists for each of its counties – key contacts for officials during emergencies. Installation of sectionalizing devices to also reduce shutoff risk is behind schedule, but it’s still possible the company could install them all by September. Critically, while providers of backup power for substations have been contracted, none of those generators are operational yet.

In previous communications with the legislature, the CPUC’s new Wildfire Safety Division said they had conditionally approved utilities’ fire mitigation plans with full agency approval slated for later this month.

In testimony, CPUC President Marybel Batjer said that they would be closely watching the impact of fire investments on customer rates. At PG&E, for example, she said that the agency estimates an up to 8% increase in electric bills for every $1 billion in company spending.

Board Chair in Hot Water over Tweet

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California Air Resources Board Chair Mary Nichols found herself in an uncomfortable position for a tweet that referenced George Floyd’s last words in a rallying cry for environmental justice.

https://ww2.arb.ca.gov/

Nichols tweeted:  “I can’t breathe’ speaks to police violence, but it also applies to the struggle for clean air. Environmental racism is just one form of racism. It’s all toxic. Government needs to clean it up in word and deed. We who do climate and environmental policy can and must do more.”

Her tweet, which resulted in more than 140 likes as of Monday night, also received a stinging rebuke from Assemblyman Jim Cooper, an African American moderate Democrat and former Sacramento County Sheriff’s deputy.

“How dare you take this moment of pain and anguish our nation is facing to discuss your crooked Enviro policies,” Assemblyman Cooper tweeted. “How dare you use a dying man’s plea for help as a way to discuss your agenda. Have you no shame? How dare you talk about Enviro racism when historically your policies favor your coastal elitists friends. While leaving communities of color out and left to foot the bill.”

While some members of the Legislature commented in support of Nichols’ rescue, members of the Legislative Black Caucus remained critical of her comments.

Nichols later apologized in a tweet saying “I apologize for speaking at the wrong time about the wrong topic. Racism comes in many forms and I believe we must fight every instance of it in our society.”

Commission Approves Utility Bankruptcy Plan

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On May 28, the California Public Utilities Commission (CPUC) approved PG&E’s bankruptcy exit plan, the penultimate milestone for the company before it can close its Chapter 11 case ahead of the State’s June 30 deadline.

CPUC framed their unanimous decision as a protection of PG&E customers, wildfire victims, and clean energy goals. However, they also acknowledged the uncertainty that lies ahead as regulators and lawmakers alike prepare for the possibility of a state takeover of PG&E if the company doesn’t exit bankruptcy on time or commits certain safety violations.

“PG&E has consistently failed to demonstrate that it adequately understands the privilege of being a state-sanctioned monopoly,” CPUC President Marybel Batjer said. Earlier in the year, Batjer helped craft an escalating enforcement process that could ultimately lead to the revocation of PG&E’s operating license.

Batjer added that PG&E’s forthcoming regional restructuring and board overhaul are steps in the right direction to “not merely … improve its safety culture, but to make it the best-run utility in this country.” She said that’s especially important as COVID-19 has forced more people to work and learn from home while relying on PG&E electricity.

PG&E CEO Bill Johnson said in a statement that, “We have heard the feedback in today’s decision and know we must do better as a company…PG&E’s most important responsibility remains the safety of our customers and the communities we serve, and we are committed to doing right by the communities impacted by wildfires.”

Court Backs Off PG&E Mandates 

A day before CPUC’s decision, U.S. District Judge William Alsup temporarily backed off his pending mandates on how the PG&E should survey its power lines.

Alsup did not mince words as he berated PG&E, stating from the outset that, “if ever there was a corporation that deserved to go to prison, it’s PG&E, for the number of people it’s killed in California …  PG&E is a recalcitrant criminal…You’re very good at making excuses, but you’re not good at complying with state law… All I ever hear from PG&E is a broken record.” 

PG&E attorneys argued that Alsup’s proposed requirements would be overly burdensome and didn’t acknowledge the company’s updated procedures following years of fires. After hearing from a CPUC attorney on PG&E changes driven by Governor Newsom and the new CPUC Wildfire Safety Division – its historic fires penalty and forthcoming structural reforms, among other results — Alsup said he didn’t want to “hamper the CPUC.” 

Alsup asked the CPUC to file a brief in two weeks on its efforts. He also asked PG&E, prosecutors, and the court monitor to file briefs in three weeks on possible improvements to its grid inspection and vegetation management practices.

Hearing on PG&E Takeover Bill Delayed 

Also at the end of May, a key vote on legislation allowing the State to turn PG&E into a State-owned, non-profit power agency was postponed. Assembly Utilities & Energy Committee Chair Chris Holden said the author asked for more time to work out the provisions of SB 350, the Clean Energy and Pollution Reduction Act, that would create Golden State Energy.

SB 350’s author, Senator Jerry Hill, said he looked forward to continuing the discussion. “This is important legislation to protect Californians and our State.”

As we have been reporting, the state Legislature is only considering “essential” legislation this session given the diminished timeframe for debating bills due to the pandemic.

Latest Cap & Trade Auction Slumps, Yields Just $25 Million

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The latest California Air Resources Board (CARB) cap & trade auction of greenhouse gas (GHG) permits raised just $25 million on the back of lower emissions and economic activity related to COVID-19 economic downturn.

The May 20 sale of GHG permits raised a fraction of February’s pre-pandemic auction, which netted $612 million for the State. None of the State-owned allowances to cover businesses’ current-year emissions sold, and only 18% of the State’s future-year offerings sold.

The low demand for State-owned allowances is bad news for a host of programs supported by the GHG Fund, including the State’s high-speed rail project, small and rural drinking water systems, and zero-emission vehicle rebates.

In anticipation, Newsom earlier this month proposed a pay-as-you-go model for the Greenhouse Gas Reduction Fund (GGRF) for 2020-21 that would prioritize a handful of programs, including community air pollution reduction plans, wildfire protection, agricultural diesel engine replacement, and funding for impaired drinking water systems. Other efforts, such as rebates for zero-emission vehicles and grants for zero-emission trucks and buses, would take a back seat.

Thanks to a reserve of nearly $550 million left over from last year’s auctions, many of those programs should still receive their full funding this year. However, the ones that are continuously appropriated, including high-speed rail, affordable housing, and drinking water, should see declines as their 60% allocation is based on current-year auction proceeds rather than the overall amount of money in the fund.

California utilities that receive allowances from the state to sell at auction sold 83% of their permits for a total of $297 million, which goes toward “climate credits” that offset utility customers’ bills. The province of Quebec, which holds joint auctions with California, raised $83 million in Canadian dollars, due to the order in which each jurisdiction’s allowances are sold. CARB’s portion of allowances are the last to be sold under auction rules, so the State received the lowest amount of proceeds.

Environmental advocates hope low revenue in the first post-pandemic auction will nudge Newsom and lawmakers to find alternate funding sources for climate programs.

Consumer Watchdog: ‘No More Oil Wells!’

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On May 20, Consumer Watchdog, a nonprofit organization that works on behalf of taxpayers and consumers, transmitted a letter to Governor Newsom requesting he issue an order that no new oil wells be approved without full bonding for their clean-up, as well as a requirement to plug a certain number of idle wells in exchange for a new permit.

In the letter, Consumer Watchdog President Jamie Court and Energy Project Director Liza Tucker stated that, “This is particularly true now that oil companies are on the verge of bankruptcy and collapse. We cannot afford to have them leave any more costs with taxpayers… Many companies don’t want to spend the money to plug either idle or marginally productive wells. The state abets them by allowing idle wells to stay that way for decades.” 

According to the letter, out of a total of 107,000 oil wells in California, around 35,000 are idle and another 35,000 are barely producing. The letter also asserts that it costs approximately $86,000 to plug a well.

Full Text of Consumer Watchdog Letter

Utility Appeals Transmission Line Inspection Requirements

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PG&E is appealing the imposition of strict power line inspection requirements as part of the utility’s criminal probation to the U.S. Court of Appeals for the 9th Circuit.

In their appeal, PG&E argued that the judge overseeing PG&E’s criminal probation for a 2010 pipeline explosion didn’t follow due process ahead of levying the new mandates. The company also argued that the judge’s criticisms of PG&E’s tree-trimming and infrastructure inspection programs weren’t accurate.

Last month, in a surprise move, U.S. District Judge William Alsup ordered PG&E to boost inspection procedures and hire an internal workforce of inspectors to oversee contractors’ tree-trimming work. Those contractors are also now directed to carry “sufficient” insurance in case their work is deficient and results in a wildfire.

In addition to appealing to the 9th Circuit, PG&E also asked Alsup to scrap his conditions, arguing that they interfere with existing state regulations, are “counterproductive to the aim of reducing fire risk,” and are “impractical, dangerous, or impossible to satisfy.” 

Alsup gave PG&E until May 28 to submit plans explaining how it would comply with his order. The judge has not yet scheduled a hearing on the order or PG&E’s appeal.

PG&E’s criminal probation stems from felony convictions after the 2010 San Bruno natural gas pipeline explosion that killed eight people. The company was sentenced in January 2017, with its probation slated to run through January 2022.

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