As we move into the second of the CA Legislature’s two-year term, there are a number of carry-over bills and a few new ones popping up on the docket that will be interesting to watch over the year, some of which we’ll cover here. However, there are four big areas that will drive this years trends and will have the biggest effect on the sector.
The Timing: Election 2018 – While 2018 is a midterm election nationally, it’s the equivalent of a general election in state politics, and two of the major powerhouses that have pushed the California clean economy are moving on. As Governor Jerry Brown heads into his legacy year, there is little left on his personal energy agenda beyond regionalization (more on that below) and his swan song, the Global Climate Action Summit in September. And former Senate leader, Kevin de Leon, is challenging Diane Feinstein from within the Democratic Party for her seat in the US Senate. With California’s jungle primary system, it’s quite possible that de Leon will be running against DiFi twice – once in the June primary and again head-to-head in general. The governor’s desire for any final crown jewels to be set before GCAS, and de Leon’s need to focus solely on his campaign heading into November, makes it extremely likely that any and all 2018 energy legislation will be pushed over the line before the June recess.
The Crown Jewel: SB100 – SB100 – a requirement for all California utilities to procure 100% of electricity for the state from renewable sources – got caught up in some last minute (rather ugly) politics in the Assembly just before the end of of the session last September, revolving around bills ostensibly around CASIO expansion and largely stuffed with pork, political payouts, and bad politics. It is extremely likely that this will happen again this year. Climate and clean energy advocates who want SB100 will need to fight hard to both push SB100 as a requirement for passage of any regionalization legislation, but simultaneously decouple them enough that SB100 moves to the governors desk even if CAISO expansion negotiations fail. It’s a thin needle to thread, but de Leon and Brown have a lot to gain and much less to lose this time around.
The White Whale: CAISO Regionalization – If there were a state policy equivalent to the complexity and competing stakeholders of the comprehensive immigration national debate, it would be merging the California ISO (CAISO) with the balancing authorities of other western grid states into a cohesive western Regional Transmission Operator (RTO). From labor, utilities, climate change warriors, consumer advocates, financiers, and energy developers, CAISO regionalization involves tradeoffs in multiple areas of the economy, starting with California giving up some of it’s autonomy and authority over its intrastate grid management. And thus, the debate and legislation is going to be filled with pork, passive-aggressive soundbites, and other standard features of zero-sum politics. However, over the 4 years the legislature has been grappling with this, there have sprung up competing interests outside of California – the mountain west transmission group (MWT) is looking to join the southwest power pool (SPP) and the need for CAISO to become a reliability coordinator after leaving Peak Reliability next spring – that make 2018 a fish or cut bait year for this initiative.
The Silent Tsunami: CCAs – Community Choice Aggregation (also known as Community Choice Energy) was enabled in 2002 passage of AB117 as a (politically brilliant) way for the legislature to leave the door open to electricity market deregulation after the electricity crisis of 2000-2001 without ever saying the words “deregulation” again. It would be over 8 years before the CPUC certified the first CCA implementation plan for Marin Clean Energy in 2010. However, in the following 8 years, CCAs have started forming at a rapid clip and CPUC staff found that they could be serving 85% of the total load within the next eight. While the CPUC is concerned about this from a regulatory perspective, the politics are getting ugly between the utilities and CCA advocates due to the Power Charge Indifference Adjustment (PCIA). Utilities contract capacity (generation) to serve their expected load from power producers through PPAs that are typically 25 or 30 years long. If half that load departs to purchase power from a CCA, the utilities are still on the hook for the contracted capacity and payments. The PCIA is the charge to former utility customers to cover the cost of the contracted payments. That’s all fine from a financing perspective, but politically, the utilities are well aware that the more CCAs expand, the greater pressure there will be from constituents to not have to pay extra for power they aren’t using. This is why the addition of a 400MW capacity requirement for the IOUs in the regionalization bills was seen as a direct threat to CCAs – those contracts would have been included in the PCIA calculation of new CCAs, making them less competitive or even viable. Capacity requirements, renewable requirements, and the PCIA are all part and parcel to the underlying debate over the future of the state’s electricity market and the role of utilities in it. This debate isn’t politically public on it’s own (yet), but the battles and skirmishes will be seen in multiple areas of multiple bills over the next few months.