Los Angeles Uses Municipal Utility For GHG Reduction Targets

In mid-May, Los Angeles' Mayor announced a new climate change action plan that calls for the LA municipal utility to increase its renewable energy portfolio to reach 35 percent by 2020. This in combination with about 50 other proposed actions will work to reduce GHG emissions in the city of angels to 35 percent below 1990 levels by 2030.

In announcing the plan Mayor Villaraigosa said, “We’re setting the green standard in LA. Reducing our carbon footprint by 35% below 1990 levels is the most ambitious goal set by a major American city.”

Democratic Energy notes that both Los Angeles and New York City have recently issued climate change action plans. But unlike New York City's plan, Los Angeles appears to still be on track to reach the GHG reduction targets of the U.S. Mayors Climate Protection Agreement that called for participants to meet the Kyoto Protocol goals (reducing emissions to 7 percent below 1990 levels by 2012. ) "It's very welcome news that Los Angeles has put forward a plan, although not explicitly stated, that will meet the goals of the U.S. Mayor's initiative," said Democratic Energy editor, John Bailey. "Plans are important but if more and more planning takes the place of actual implementation, we will simply not get to where the science is telling us we need to go in terms of reducing emissions," he added. Unlike Los Angeles, the New York City climate change action plan puts NYC on a path to not meet the Kyoto GHG reduction target by 2012.

The Los Angeles plan shows how cities with municipally owned and controlled electric utilities can leverage that entity into a GHG reduction machine. Since 2005, LADWP has more than doubled its portfolio of renewable energy from less than 3 percent to more than 8 percent today by purchasing wind, solar, and geothermal power. However, Los Angeles still generates most of its electricity from coal and natural gas, along with some hydroelectric and nuclear energy. Another key component of their GHG reduction plan is to not renew contracts for power imports from coal-fired plants. The coal fired power would be replaced by cleaner resources, natural gas or renewables.

Since about one-third of the citywide GHG emissions come from the generation of electricity, by expanding its renewable energy portfolio to 35 percent, that policy alone can get LA about one-third of the total GHG reductions that it is seeking by 2030. Cities that don't own their electric systems are often at the mercy of state level policymakers and efforts to adopt state-level renewable energy portfolio standards.

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California Solar Advocates and Legislature Working to Fix TOU Rate Disincentive

Responding to concerns and evidence put forward by solar power companies and advocates, Governor Schwarznegger has pledged to fix a flaw in California's Solar Initiative that has caused a reported 78 percent drop off in proposed photovoltaic installations in the state. A new law that took effect on January 1, 2007, requires interconnected solar projects that receive state incentives to accept "time of use" (TOU) electricity tariffs that can potentially add significant costs to the homeowner or business if their solar system's capacity can't cover all their electricity consumption.

TOU rates mean that consumers and businesses pay different prices for electricity depending on what time of day it is and sometimes TOU rates are adjusted based on the the time of year. The hours when there is the highest demand for electricity are the periods that will have the highest prices for electricity. In California, solar projects are typically matched very well to the peak demand periods when the sun is blazing and the air conditioners are buzzing. If the solar systems don't generate all the required electricity that is needed on-site, the project owners are being forced to purchase very high cost TOU electricity to make up the difference. Under this scenario, many solar systems are no longer economically attractive and people and businesses are choosing to not install the solar projects. In testimony submitted to the PUC, preliminary screening of some proposed solar projects had the owners paying more for electricity with the solar project than they would without it.

This TOU rate requirement for solar incentive recipients poses a substantial barrier to distributed energy development in California and should be addressed as soon as possible.

The Los Angeles Times reported this morning that legislation has been agreed upon and the deal worked out by the governor's office directs the California Public Utilities Commission (CPUC) to vote in June to allow prospective owners of solar energy systems access to the lower rates charged non-solar utility customers. The plan would be in force for two years while a permanent solution can be worked out.

The California Solar Energy Industries Association (CAL SEIA) filed a joint petition along with Vote Solar and PV Now to the CPUC on March 5, 2007, to request temporary relief from the requirement to use TOU rates for customers participating in the solar incentive program. The advocacy group Americans for Solar Power (ASPV) and San Diego Gas & Electric (SDG&E) filed comments in support of the petition. According to Cal SEIA, Southern California Edison (SCE) was generally opposed to the petition but also suggested that if TOU rates were optional until new rates are developed they would be supportive of that as well.

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Encouraging Energy Conservation Through Inverted Rates - Iowa Utility Tries New Approach

In early April 2007, Waverly Light and Power's Board of Trustees approved a new residential rate structure designed to encourage energy conservation by charging customers higher rates as more electricity is used. This "inverted" rate is going into effect only during four summer months beginning July 1, 2007.

WLP, a municipally-owned utility with about 4,500 customers, experiences the highest demand for electricity during summer and is hoping that this program leads to decreased demand for power. The rate structure after July will look like this:

New WLP Residential Rate Design After July 2007

• Residential customer charge $10 a month
  
• Summer Rates - June through September:
  
  • First 600 kWh used $0.0850/kWh
    
  • Next 500 kWh used $0.1201/kWh
    
  • Next 400 kWh used $0.1600/kWh
    
  • Over 1,500 kWh used $0.1701/kWh
  
  
• Winter Rates - October through May
  
  • flat rate $0.085/kWh for all kWh’s used

"In 1992 we went with a flat rate, following many years of having a six-block, declining block rate that encouraged more usage," said Glenn Cannon, WLP's general manager. "We have numerous programs to help customers reduce usage, but a price signal may be the best way to promote energy efficiency."

Seventy-three percent of WLP customers use under 1,100 kWhs/month during the summer months. These customers will only experience a moderate change in their monthly bills. According to WPL, customer’s using over 1,100 kWhs/month will notice an increase in their bill ranging from $20 topping out at $88 a month for those using around 2,000 kWhs during the summer months.

Democratic Energy notes that some research seems to indicate that time-of-use (TOU) and critical peak pricing are more effective than inverted rates at creating a rate structure that leads to conservation and demand reduction. However, we believe that inverted rates have a role to play in creating an environment where people will be more apt to save energy because of the pricing signals they get.

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Greenhouse Gas Emissions Performance Standard for Power Plants - California

In January 2007, the California Public Utilities Commission (PUC) adopted an interim Greenhouse Gas (GHG) Emissions Performance Standard (EPS) in an effort to help mitigate climate change. The standard is a facility-based emissions standard requiring that all new long-term commitments for baseload generation to serve California consumers be with power plants that have emissions no greater than a combined cycle gas turbine plant. That level is established at 1,100 pounds of CO2 per megawatt-hour. "New long-term commitment" refers to new plant investments (new construction), new or renewal contracts with a term of five years or more, or major investments by the utility in its existing baseload power plants.

The PUC's actions implement Senate Bill 1368 (Perata), which prohibits load-serving entities (investor-owned utilities, energy service providers, community choice aggregators) from entering into long-term financial commitments for baseload generation unless it complies with a GHG emissions performance standard.

The Commission approved a policy statement indicating its intent regarding GHG emissions in October 2005. Since then, Governor Schwarzenegger signed into law SB 1368 and Assembly Bill 32 (Nuñez/Pavley), which requires reporting and verification of statewide GHG emissions.
"The Emissions Performance Standard is a vital step towards achieving the emissions reductions goals of AB 32 and protecting our ratepayers against the risk of high carbon prices in the not-too-distant future," said PUC Commissioner Dian M. Grueneich. "At the same time, this decision leaves the door open to new, advanced technologies and carbon sequestration projects that will allow the energy industry to develop clean and sustainable sources of power."

The adopted emissions performance standard is intended to serve as a near-term bridge until an enforceable load-based GHG emissions limit is established and in operation. At that time, as directed by SB 1368, the Commission will reevaluate and continue, modify, or replace this standard in consultation with the California Energy Commission and the California Air Resources Board.

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