Deja vu: State law again forces utilities to vastly overpay for energy

In the winter of 2000-01, California was caught up in a wrenching energy crisis when a flawed energy deregulation plan and a lack of power-generating capacity forced utilities to vastly overpay for energy on the spot market, to the benefit of Enron and other companies gaming the situation. Did the state learn from this and strive to protect ratepayers? Nope. In fact, it’s happening all over again — this time as an outgrowth of AB 32′s requirement that the state gradually switch to cleaner but much costlier sources of energy.

The Sac Bee’s Dan Walters lays out this nightmare deja vu scenario in his column today — but he doesn’t note the parallels to 2000-01:

While the technological pathway to a low-carbon society is clear – more solar panels, more windmills, more battery-powered cars, more trolleys and trains and so forth – the costs of massive conversion will be hefty.

One hint comes from a report prepared by the Division of Ratepayer Advocates, an internal watchdog at the Public Utilities Commission, which is goading utilities to meet the tough renewable standard.

The division’s report says, in effect, that the PUC’s pressure on utilities is causing them to sign renewable energy procurement contracts at costs that are well above those from standard, gas-fired power plants.

A PUC allocation mechanism designed to hold down those costs has been totally consumed by the flood of contracts, the report says, and the PUC “has approved nearly every renewable contract filed by the utilities, even when contracts rate poorly on a least-cost, best-fit basis.”

So far, the utilities are committed to spending – and their ratepayers to financing – at least $6 billion in above-market power costs, with more to come.

$6 billion! $6 billion that’s coming out of ratepayer pocketbooks! That is not a small sum.

More from Walters:

California’s average retail electric rate of 13.24 cents per kilowatt-hour is already the ninth highest in the nation, 50 percent above average. And when those “renewable portfolios” come online, power bills will ratchet rapidly upward.

All toward what end? Well, of course, AB 32 was how California helped save the world. It inspired the rest of the globe to shift to cleaner energy, thus reducing the release of emissions that contribute to global warming.

Except, of course, it didn’t. So the only upside from AB 32 was that it made Arnold and the green-blooded Dem lawmakers from the Bay Area and West L.A. feel good about themselves.

The parallels with the 1996 law that set up a flawed energy deregulation plan in California are obvious. Both it and AB 32 were rushed to passage without full consideration of the real-world effects. Both it and AB 32 led to lawmakers patting themselves on the back and telling the world they were visionaries positioning California for a better future.

And both blew up, providing a way for private energy suppliers to grossly overcharge state utilities — and once again forcing Californians to spend billions more on energy because of the incompetent trendiness of those they elected to run the state.

But at least we’ll have all those green jobs, right? Well, no. No, we won’t.

Thanks so much, Arnold, thanks so much, state lawmakers, thanks so much, California media green cheerleaders. Y’all are doing a wonderful job.


One thought on “Deja vu: State law again forces utilities to vastly overpay for energy

  1. Pingback: Gov’t Forces Utilities to Pay Extra for energy–Creates $6 Billion Tax for consumers

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