Testimony of Aaron Johnson, Division of Ratepayer Advocates

Division of Ratepayer Advocates

 

Senate Energy, Utilities and Communications Committee,
Sub-Committee on Alternative Energy
AB 32 Oversight: Electricity Sector GHG Reductions

 

August 28, 2007

 

  • The Division of Ratepayer Advocates
    Independent utility consumer advocate located within CPUC
    Statutory mandate to advocate for lowest-cost energy services
  • Ratepayers will shoulder the financial burden of AB 32 compliance
    Ratepayers generally have limited ability to adjust electricity usage when prices rise, so AB 32 compliance costs can be easily passed on to them
    DRA supports the State’s policy goals to reduce GHG emissions now to provide long-term rate stability for utility customers
    Minimize cost by promoting most cost-effective approaches
  • Compare costs of emission reductions from electricity sector with other sectors
    Opportunities for additional emission reductions from CA utilities seem limited
    California utilities are generally clean, among cleanest in the nation
    Many existing programs to reduce emissions from the electricity sector
    Is money spent on additional emissions reductions from the electricity sector the most cost-effective way to reduce overall CA emissions?
  • Allocation of emissions credits is key issue, presents significant risk
    Ratepayers bear the cost if the California program gets it wrong
    Europe provides example of windfall profits for limited emissions reductions
    Possibility exists that a trading system will simply increase costs for ratepayers without resulting in meaningful reductions
  • Slow, careful implementation necessary with opportunities for revision
    Past experiences illustrate difficulty of creating functioning electricity markets
    AB 1890 and the energy crisis – unanimity does not mean it will work
    ISO wholesale market redesign – still a work in progress
    Tracking and verification need to be better before knowing what will be achieved by emission reductions expenditures
  • Keep pushing forward with existing programs that reduce emissions
    Renewable Portfolio Standard (RPS): Concerns about increasing contract costs temper enthusiasm
    Energy Efficiency (EE): Keep programs cost-effective; CPUC poised to raise program costs by 25% through overly-generous utility incentives
  • Regional initiatives have potential to spread costs and reduce ratepayer impacts
    Support Western Climate Initiative
    Regional initiative includes CA, AZ, NM, OR, UT, WA, BC and Manitoba
  • Align utility and ratepayer financial incentive to reduce emissions
    Current power procurement mechanisms flow all costs, high and low, directly to ratepayers without utility risk or profit
    Utilities need financial stake in cost of emissions reductions to ensure they act in best interests of utility customers