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