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CMUA urges policymakers to evaluate existing environmental mandates before imposing new requirements

From the June 25, 2013 issue of Public Power Daily

Originally published June 25, 2013

By Robert Varela
Editorial Director
The California Municipal Utilities Association (CMUA) is calling on policymakers to evaluate existing and pending environmental mandates on utilities before imposing new requirements on electric utilities in the state, Sacramento Municipal Utility District General Manager and CEO John DiStasio said at APPA’s National Conference June 18. CMUA also recommends that the state’s utilities be given adequate time and flexibility to implement existing mandates, he said. The recommendations are based on an analysis showing that existing and proposed mandates would have a significant impact on California’s publicly owned utilities and their customers.

The analysis by Navigant Consulting is not a cost-benefit analysis and is intended to point the way forward, not look back at past decisions, DiStasio said. CMUA "doesn’t want to play ‘gotcha,’" it wants an intellectually honest discussion of how best to proceed, he said. CMUA and its members remain supportive of the state’s energy policy goals and have developed seven specific recommendations to allow utilities to implement existing goals and requirements, and new ones, in the most cost-effective manner.

The analysis commissioned by CMUA was the first serious examination of the cumulative effects of state, regional and federal mandates on the state’s utilities, Navigant Managing Director Patrick Mealoy said at the National Conference session entitled "The Cumulative Impacts of State Environmental Mandates on Cost, Complexity and Local Governance: A Case Study."

The study found that statewide electricity costs are projected to increase by several billion dollars by 2020, due to both "business as usual" and the existing and proposed mandates. On average, the increase in electricity rates from 2010-2020 will be above the rate of inflation, with mandates accounting for a large part of that increase, Mealoy said. That would be "the largest and fastest increase in electricity costs (and rates) in California in at least 30 years," he said. Electricity rates for publicly owned utilities in California were below inflation for the 20-year period of 1990-2010. Increases in rates and bills may vary significantly based on service area, level of consumption, and utility pricing structures, the analysis found.

CMUA and Navigant identified approximately 35 recent or potential mandates that affect electric utilities, including 20 recently approved state mandates and five recently approved federal or regional mandates. Navigant then evaluated in detail six mandates seen as likely the most costly (the first three approved and the next three potential):
  • 33 percent renewable energy portfolio by 2020;
  • Phasing-out once-through cooling of power plants;
  • Greenhouse gas cap and trade;
  • 40 percent renewable portfolio by 2025;
  • 12,000 MW of distributed generation;
  • and Delta outflow changes that could affect hydroelectric generation.
Going from 20 percent renewables in 2010 to 33 percent in 2020 was the most costly mandate, the analysis found. Navigant projected that it would cost public power ratepayers in the state several billion dollars by 2020, and several times more than that by 2030, Mealoy said. Once-through cooling compliance costs would affect only one publicly owned utility in California, but were estimated to be in the billions by 2020 and 2030. The analysis determined that California’s greenhouse gas cap-and-trade program would have only a small financial impact, assuming that utilities continued to receive free allowances after 2020, he said. However, if the free allowances were to end, costs for public power utilities were projected to be hundreds of millions of dollars per year.

Should the state set a renewable portfolio standard of 40 percent by 2025, the added cost for publicly owned utilities would be several billion dollars more, Mealoy said. A large scale build-out of distributed generation would also be significant, with an estimated price tag in the billions by both 2020 and 2030, he said. Delta outflow changes, which would reduce hydroelectric power in peak summer months, would have a smaller monetary impact, but provide a good example of the need for better coordination between the state's energy, water and environmental agencies. The potential changes would mean that thermal units would have to run more often in the summer, which would conflict with greenhouse gas and air pollution reduction goals.

To calculate the statewide costs, multiply those estimates by four, since public power serves about one-quarter of the state, Mealoy said.

The management challenges of complying with the mandates create as much concern as their costs among senior managers of public power utilities, Navigant found. The mandates will affect all management areas and create real governance problems, Mealoy said. Some utilities "will have zero control over resource planning."

DiStasio outlined seven steps CMUA is recommending:

1. Provide time to implement and harmonize existing mandates before adding new ones.
2. Consider impacts on the whole electricity system.
3. Make policies "technology neutral."
4. Articulate individual policy goals; allow implementation options.
5. Factor in the costs of existing mandates if new ones are proposed.
6. Consider existing infrastructure and contracts when evaluating new policy.
7. Allow local innovation.


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Senior Vice President, Publishing 
Jeanne Wickline LaBella

Editorial Director
Robert Varela

Editor, Public Power Daily
Jeannine Anderson

Communications Assistant
Fallon W. Forbush

Manager, Integrated Media 
David L. Blaylock

Integrated Media Editor 
Laura D’Alessandro