"It Ain't Necessarily So"

SB 2X (Simitian) RPS Senate Floor Statement 

Madame President, Senators I rise to oppose SB 2X. It's not that I don’t like the author. Quite the contrary I find him a conscientious legislator. Nor is my objection based on an opposition to the idea of renewable energy. In fact, I actually wrote the first RPS bill in California, which protected consumers from price gouging. Along with Senator Simitian I was a principal co-author of Senator Byron Sher's SB 1078 in 2002. I jockeyed the bill on the assembly floor to a bi-partisan 2/3 majority. So what's different now?

I have more issues with SB 2X than I have time to discuss today. However, I want my concerns on the record so that when this policy comes back in a few years as the "Energy Crisis Part II" it will be noted that someone raised the red flags before the train wreck.

One of my favorite movies as a child was "Porgy and Bess." My favorite character in the cast was "Sportin Life" played by the late Sammy Davis, Jr. I am reminded of the song, "It ain't necessarily so, I say it ain't necessarily so, the things that you liable to read in "Joe's" Bible, ain't necessarily so."

Members, last week in the budget committee we were making severe cuts to services. We reduced glasses, hearing aids, prescriptions and adult day health care. We even cut back on incontinence products for the elderly. Like you I have been inundated with calls from people concerned about the cuts. So today we are about to vote on a bill that could result in a 15% to 20% rate increase[1] to those same people. SB 2X could very well result in a $1.5 billion hit to the general fund without any demonstrable benefits.

The objective of SB 2X is unclear. 33% by 2020 is a great slogan, but what are we trying to achieve? In 2002 we were concerned about the price volatility of the natural gas market, so fuel diversity was the stated goal. But we have since learned that due in part to backup requirements and system demands, intermittent, non-dispatchable resources don't reduce gas consumption. In fact some of the systems with the greatest use of the technologies specified SB 2X have seen actually their gas consumption increase. So if fuel diversity is the goal, the bill fails.

The slogan 33% by 2020 was later used to promote carbon reduction. But we run into the same problem as with fuel diversity. The technologies in SB 2X don't reduce fuel consumption, therefore they don't reduce carbon. As we see with our current RPS goal of 20%, we have actually seen our net gas consumption increase, not decrease as we add more renewables to the system. So if the goal is carbon reduction we would actually be better off using our base load plants more efficiently than the introduction of intermittent, non-dispatchable resources. If carbon reduction is truly a goal, reducing our average base load heat rate would have a much greater impact on carbon reduction than adding 33% of renewables and for a fraction of the cost. Even more problematic, an electric company could fully comply with SB2 X and increase their carbon foot print because the bill does not score carbon reduction or environmental benefits. So again what is the goal?

The current use of the slogan is relating it to jobs. The Division of Ratepayer Advocates, who by the way supported the bill in committee, distributed a report dated February 2011. On page 8 of the report they cite the current above market costs to date for renewables. That number is over $6 billion. That's over $6 billion to almost reach 20%.[2] Let me say this again, these are "ABOVE MARKET COSTS." At this rate the above market costs to get to 33% could exceed $15 billion. How many jobs will be taken out of the economy to finance these over market charges?

California currently has some of the highest industrial rates in the country. The California Manufacturers and Technology Association who opposed the bill in committee stated that California's electricity costs run 18-20% higher than the national average at today's rates. Safeway Stores, the second largest private employer in California also opposed the bill in committee citing costs and unfair treatment of direct generation customers. Safeway reduced their emissions and carbon footprint however, SB 2X actually penalizes them for being good corporate citizens. They reported that they have begun to move jobs out of California to reduce costs.

So this additional $15 billion, coupled with our already high electric rates, will all but eliminate our ability to compete in the manufacturing sector. But here is another point to remember - while people do work in the electricity industry, its purpose is not to create jobs. The electricity sector provides the platform for the delivery of goods and services. Others use that platform to create jobs - not the other way around. Raising rates to create jobs is not sound economic policy. So if the goal of SB 2X was to create jobs, I'm afraid it misses the mark again.

SB 2X calls on the CPUC to balance the cost of the procurement contracts. SB 2X specifically eliminates a consumer protection that was included in Senator's Sher's bill called the Market Price Reference or MPR. The same Division of Ratepayer Advocates report states that "The CPUC has approved nearly every renewable contract filed by the utilities, even when they rate poorly on least-cost, best fit criteria."[3] SB 2X gives the CPUC a blank check to approve contracts with no statutory guidance. In light of their abysmal record thus far, this is a bad idea.