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The California Current: Weekly Digest (October 4, 2013)

[The following is a weekly digest of California energy news excerpted from Calwatchdog.com.  This inaugural report will be followed by updates from the world's 8th largest economy every one-to-two weeks, depending on  developments.   MasterResource welcomes Mr. Lusvardi to our team (bio below).]

California Dems pass pro-fracking bill; CPUC Blacks-Out Green Power Prices from Consumers; Rooftop Solar to Cost Other Customers $1.1 Billion per Year

A Pro-Fracking Bill Disguised as an Anti-Fracking Bill

Can you imagine California’s Democratic-controlled legislature and Governor Jerry “Moonbeam” Brown passing a pro-fracking bill?  Neither could the mainstream media in California that reported state officials had passed an anti-fracking bill on Sept. 20 sponsored by State Senator Fran Pavley (D, Los Angeles County), the leader of the green voting block in both houses of the legislature.

State Senate Bill 4 (SB 4) was reported by green reporter Chris Clarke on his Re-Wire blog at the KCET public television website as requiring:  (1) a scientific assessment of fracking, (2) frackers to apply for permits, (3) fracking to continue while state crafts further regulations, (4) fracking permits to be provided to nearby property owners within 30 days; and (5) regulation of injecting acid into the ground, not fracking per se.  A legislative analysis of SB 4 can be found here, including a list of those who supported or opposed the bill. 

SB 4 was amended ten times.  It was opposed by the Sierra Club, the Center for Biological Diversity, Physicians for Social Responsibility and a number of oil companies and the state Chamber of Commerce.  The California League of Conservation Voters and the National Resources Defense Council pulled their support at the last moment when fracking moratorium provisions were removed.  Who supported and opposed the bill is not a good indicator of whether the bill was pro or anti fracking.  If Republicans had supported SB 4 this would have been a signal for California’s environmentalists to oppose it. 

The reality of what SB 4 provided was the opposite of what was reported.

SB 4 contained: (1) no moratorium on fracking as originally proposed in the initial draft of the bill; (2) fast-tracked fracking by allowing property owners only within about 1,500 feet (about 4.5 city blocks) of a well head to be informed in 30 days; (3) exempts fracking from environmental clearance under California’s tough California Environmental Quality Act (called CEQA) if the project does not exceed pre-set thresholds; (4) Allows frackers to protect trade secrets of the formula they use for hydraulic fracturing of underground rock formations; and (5) Does not hold up continued fracking projects for a scientific study of fracking.

To read more see “CA Democrats Pass Pro-Fracking Bill.”

New Green Power Prices Not Divulged Until 3-12 Years After Project

One of the provisions that made Texas electricity deregulation work from 2002 to 2007 was the requirement of a “Price To Beat” so that a pricing bubble didn’t occur as in the California Energy Crisis of 2001.

California is currently undergoing a radical transformation of its Renewables Portfolio Standard (RPS).  But it is doing so while cloaking what the prices will be for consumers for new green power plants coming online.  This would not mean as much if green power stayed at 17 percent as it is today instead of the 51 percent of RPS recently adopted under California Assembly Bill 327.

At issue is the California Public Utilities Commission’s (CPUC) policy of allowing regulated monopoly Investor-Owned Utilities (IOU’s) such as Pacific Gas and Electric (northern California), Southern California Edison, and San Diego Gas and Electric, to shroud what the new prices for green power are from customers for 3 to 12 years after a project comes online.

The Federal Energy Regulatory Commission (FERC) releases price data a quarter year after start-up of a new power plant.  But most consumers don’t know what FERC even is let alone where to find such information on the world-wide web, buried in layers of windows on the FERC website.

The CPUC requires three types of annual reports that contain pricing data. But the CPUC allows IOU’s to “black out” the prices in reports released to the public. 

In California, firms bid for use of transmission capacity rather than for supply or consumption of electricity.  Ninety percent of the electricity market works on long-term contracts and price-responsive demand at the retail level.  The California Independent System Operator (ISO) runs a balancing spot market for the other 10 percent of demand.  Since price enters the system mostly at the retail level it is critical to let customers know what they can expect to pay in the future for green power as part of the total energy mix. 

Even where prices are sometimes shown, they are blended prices based on green power being only 17 percent of the whole power mix (conventional power and green power).  Transmission line costs for new green power projects can run one-half to two thirds of the total price for green power because green power often has to be put in dedicated transmission lines because of its unpredictable variability when the sun doesn’t shine and the wind doesn’t blow.  Not reporting grid integration costs together with generation prices is misleading.

Oddly, non-transparent green power prices are the product of a state government dominated by liberal elected officials at nearly every level of government in California.  Historically, liberal or “Progressive” government in California has wanted greater transparency about public utilities.  But not in liberal-Democrat controlled California.  For more read “CPUC Blacks Out New Green Power Prices from Consumers.”

Rooftop Solar: A Cost Shifting Scheme

A recent report by the CPUC – “California Net Energy Metering (NEM) Draft Cost Effectiveness Evaluation” (Sept. 26), reported that net-metered solar energy rooftop systems will shift $1.1 billion per year in extra costs onto other electric ratepayers by 2020.  Net metering is where excess electricity from rooftop solar panels results in rolling electric meters backwards.  Property owners receive a credit on their electricity bill for the excess electricity they generate.

The CPUC study indicated that the median household income for solar rooftop systems is $91,201 per year compared to $54,283 for all households in California.  Residential solar panel installers typically only consider residential installations economically feasible for larger, more affluent households that have lots of electric gadgets and appliances.  Widowers or a couple living in a large home are typically not considered eligible for solar rebates, tax credits, or other incentives.

Several states have started to adopt ways to tax rooftop solar power system owners to stop profiteering by the relatively rich at the expense of ratepayers with less income.  California recently passed Assembly Bill 327 to charge up to $10 per month to solar homeowners of rooftop solar systems.

The CPUC study reports about two-thirds of the transfer of costs onto other customers comes from residential solar customers, despite non-residential systems accounted for 56 percent of all the installed electricity capacity (page 7 of report).

The residential beneficiaries of solar rooftop energy systems have had their day in the sun as a jobs program to stimulate the economy.  But residential rooftop solar energy is unsustainable without passing the buck onto customers who don’t enjoy such luxury energy saving systems. Those who install energy efficient light bulbs, replace old appliances, and conserve power are also reducing the revenues of utility companies and thus raising electricity rates. But those customers don’t get solar tax credits and incentives and subsidies.

Read the entire article: “Rooftop Solar to Cost Other Customers $1.1 Billion Per Year.”

Other articles of note:

“CA Electricity Duel Pits Imports Against Mass Battery Storage”
“Enviro Policies Spike CA (Wholesale) Electricity Prices 70 Percent

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Wayne Lusvardi is with the Pacific Research Institute, a free market think tank in San Francisco and Sacramento. He writes for their website Calwatchdog.com, concentrating on water and energy issues. 

Lusvardi was a member of the California Energy Crisis Task Force for the state’s largest water agency in 2001.  He is the author of numerous professional journal articles on valuation of non-market properties such as fiber optic easements, nature lands, flood easement dedications, wireless telecom antenna sites, solar and wind farm sites, water rights, and easements within another easement or utility corridor.

3 comments

1 Wayne Lusvardi { 10.05.13 at 2:11 am }

California State Senator Fran Pavley’s Office has sent a correction statewide to newspaper and digital journalists about State Senate Bill 4. The original stories about State Senate Bill 4 were inaccurate.

Here is Pavley’s corrections to the above synopsis and story at Calwatchdog.com:

CORRECTION 1:
“In fact, CEQA applies to all fracking and the bill contains no thresholds for fracking. The thresholds in the bill apply to acidizing, a separate process that was added to the bill to provide more comprehensive regulations than would otherwise have existed. The information appears to have come from a KCET story, which has been corrected: http://www.kcet.org/news/rewire/government/five-things-the-pavley-fracking-bill-does.html

AUTHOR’S COMMENT: Fracking has given way to acidizing with hydrofluoric acid, which is a process that uses substantially less water. The low permeable rock in California’s Monterey Formation makes acidizing work better than fracking. Hydrofluoric acid is potentially highly toxic as a gas but it could not be applied in high concentrations or otherwise it would melt the well casings. And after an acidizing process has been completed the well is backflushed to dilute the acid (the solution to pollution is dilution).

So if acidizing has replaced fracking in California and there is a threshold allowed for acidizing without triggering CEQA, Sen. Fravley’s correction is accurate but misplaced. Sure fracking is still subject to CEQA, but acidizing within threshold levels is not. So the original point of my article that SB 4 is a pro-fracking bill is sustained.

CORRECTION 2:
“In fact, the bill requires disclosure of all chemicals beginning January 1, 2014 and Section 3160(j)(2) makes clear the composition of fluids can’t be withheld as trade secrets:
“(2) Notwithstanding any other law or regulation, none of the following information shall be protected as a trade secret:
(A) The identities of the chemical constituents of additives, including CAS identification numbers.”

Author’s Comments: Once again, Sen. Pavley’s correction is accurate that oil and gas extractors have to disclose the composition of chemicals as my article originally stated. What they don’t have to disclose is the mix or recipe of those chemicals. This is sort of like asking Coca Cola for a list of ingredients but it is the recipe or mix of ingredients that makes the Coca Cola taste and is a trade secret.

Politicians are apparently trying hard to appease their environmental base of constituents by portraying that they are tough on tracking (or acidizing).

SB 4 is a tough bill on fracking and acidizing only because it imposes a lot of permit fees and bureaucratic rigmarole on oil and gas companies that haven’t been needed thus far to protect public health or water quality. Hydrofluoric acid is more of a potential occupational hazard if there is a spill from mishandling it. Existing occupational safety regulations cover this potential safety hazard in California.

2 Wayne Lusvardi { 10.05.13 at 2:12 am }

Here is a link on acidizing that has balanced information:
http://www.rigzone.com/training/insight.asp?insight_id=320&c_id=4

3 Kenneth Haapala { 10.05.13 at 8:39 am }

A useful addition to see where “the leaders” are leading us.

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