ELECTRICITY: PG&E referendum could stymie Calif. renewables-- analysis

Pacific Gas & Electric Corp.'s Proposition 16 could curtail development of renewable energy in California if it passes in next month's election, according to a report released today by the University of California, Berkeley, law school.

Written by Steven Weissman, a former administrative law judge at the California Public Utilities Commission, the analysis finds that public power agencies are better situated to set renewable energy targets than more heavily regulated investor-owned utilities, which are subject to changes in political leadership. PG&E has spent about $28 million so far on the measure, which would require governments to get a two-thirds vote to embark on or expand existing public power agencies.

Weissman points out that the state's two largest public utilities, the Los Angeles Department of Water & Power and the Sacramento Municipal Utilities District, are pursuing more stringent and voluntary renewable energy targets than the three investor-owned utilities. LADWP and SMUD have respective goals of 35 percent and 33 percent renewables by 2020, while the IOUs' target of 33 percent was set by executive order and could change depending on the outcome of the gubernatorial election in November.

The report adds that removing competition could also remove PG&E's incentive to improve service.

"Without the potential for public power, a monopoly investor-owned utility may be less compelled to heed its customers' concerns about electricity price, service, reliability, or energy source," the report says.

It would be fairer to the public interest if the initiative were written to require a simple majority, the report also finds.

"Proposition 16, itself, is an example of a dominant special interest group opposing public power," Weissman writes. "It is sponsored and heavily underwritten by a utility that is aggressive in opposing the creation of new munis and CCAs [community choice aggregators], as well as opposing the expansion of existing munis. Voters may want to consider whether it is more likely that future public power initiatives will face dominant proponents or dominant opponents."

As well, the proposition is written ambiguously and could lead to litigation or business delays, the report says. The initiative's exemption for public power agencies to expand as long as they are the sole provider within their service territory is unclear because the term "sole provider" is undefined. It could conceivably exclude areas in which schools, hospitals and other large facilities buy electricity from third-party suppliers, or even areas in which homeowners buy solar power from the company that owns their rooftop panels.

Debra Kahn, E&E reporter
05/05/2010