May 24, 2007 - From the May, 2007 issue

California Energy Commission Weighs In On State's Clean Energy Policies

Now that legislation like AB 32 and AB 1493 has passed, the challenge of implementing and weighing-in on them falls to a vast array of regulatory agencies overseeing a variety of greenhouse gas sources. The California Energy Commission oversees the state's energy policy and will play a key role in reducing pollution and switching to renewable sources. For insight into the role of the California Energy Commission and other state agencies in meeting the ambitious agenda of AB 32, MIR was pleased to speak with Energy Commission Chair Jackalyne Pfannensteil.

Jackalyne Pfannensteil

The utilities industry has perhaps the greatest potential of any agency to curb CO2 emissions. How is the Energy Commission encouraging utilities to mitigate greenhouse gas emissions?

There's a joint proceeding underway between the Public Utilities Commission and ourselves that will determine what the utilities' emission standards should be. From that determination we'll make a recommendation to the Air Resources Board, which has the sole authority to set the standards.

In these hearings, what sort of testimony are you hearing, and how are you breaking down the problem?

One of the first questions we need to address is whether we want to set standards for emissions on a "source" basis, which means setting standards at the generating plants, or a "load" basis, which means that the standards would be based on the sales of the utilities. The load basis is, in some ways, more direct because we're able to work with the individual California utilities; however, the real source of the problem isn't the delivered electricity, it's the generation of that electricity. Another important issue is the wide diversity in utilities in California.

The three large investor-owned utilities constitute about 75–80 percent of the electric sales, while the remainder is made up of municipally owned utilities, the largest two of which are L.A. Department of Water and Power and the Sacramento Municipal Utilities District. The other municipal utilities come in all sizes including many that are very small. There's an enormous difference in size, resource mix, and ability to address global warming.

The L.A. Times editorial page has criticized some of the language in AB 32 and from politicians promising greenhouse gas reductions as "gasbag". You're doing the detail work. What is the relationship between the work being done in the regulatory bodies and political bombast about the greening of the world, state, or cities?

What is "political bombast" to some is policy leadership to others. Those of us who are striving to implement AB 32-regulators and other members of Governor Schwarzenegger's administration-are united in our purpose.

I sit on the Climate Action Team, which is the governor's body that's pulling these various actions together. The regulatory authority under AB 32 is the Air Resources Board, and they're also part of the Climate Action Team discussions, as are the Public Utilities Commission, and a number of other departments and agencies that have some climate-affecting responsibilities.

What are the consequences of the passage of AB 32 for the ARB and the Energy Commission?

AB 32 put a higher level of urgency on most of what we were already doing. It gives us some new initiatives like, for example, the connection between land use and energy. But most of what the Energy Commission does are activities consistent with implementing AB 32. We promote renewable energy, energy efficiency, demand response, green buildings, and alternative transportation fuels. AB 32 has given us an umbrella cause to aim for, and it will accelerate what we are doing. And, in some cases, it will provide additional resources.

You worked for PG&E and have been involved with California energy for over two decades. How has the utility world changed since you began with PG&E in 1980?

The utilities are an integral part of their local communities and will always respond to the concerns and public policies of these communities. They need to be good corporate citizens. PG&E was in a position of environmental leadership in the 1990s and now again recognizes the need to work with the state on climate change.

I believe the utilities in California appreciate the urgency of climate change and are willing to embrace the state's policies (such as the renewable portfolio standard). We have yet to see if they are able to procure renewable electricity for 20 percent of their sales by 2010 as required by the RPS, but they understand the need to do so.

Utilities will always worry about their rates, customer service, reliability, and system integrity-and we want them to do that. But they need to recognize where public policy is going, and I think for the most part they have.


Talk about the Public Utilities Commission. Mike Peavy has talked disparagingly about the power center in the Bay Area, calling it disconnected and bureaucratic. What is your perspective on the PUC and its relationship with utilities on climate change?

The PUC has the primary financial authority over the investor-owned utilities in California. They largely determine the financial health of those utilities. Clearly they listen to Mike Peavy and his colleagues. Mike has been in the forefront on climate issues and has brought the utilities on board.

In this month's verdeXchange Clipper Windpower's James Dehlsen touted the future of wind power generation. How significant might wind power be in California's energy future?

I anticipate that wind will be a major part of our energy future. It largely stands on its own economically and the technology improves all the time. We're fortunate in that California has a lot of very good sites for wind. There are, however, a few concerns with wind generation that we are working to address. First, wind resources aren't everywhere; turbines are frequently placed in remote sites so we need additional transmission lines. Second, the utilities have issues incorporating wind into their system because they don't know when the wind is going to blow, and sometimes it's not there when they need it most. There's also the issue of avian mortality from wind turbines. Further, some folks dislike the look of wind turbines on the landscape. Wind power is going to be a significant part of our energy future, but we need address the public's concerns.

James Dehlsen also talked about the incentives in Europe and the tax credits in the United States, which have been somewhat stimulating but need to be renewed every two years. What sort of regulatory/financial package can California offer to stimulate wind and other renewable resources?

California has incentives to stimulate renewable resources. If utilities purchase renewables that are above the market price, we have funds to supplement the utilities' payments. The Energy Commission is considering whether the current incentives are sufficient or whether we might want to adopt some other form of incentive.

Several recent LNG proposals have failed to get traction. What is the role of LNG in California's energy portfolio?

Every time the Energy Commission has looked at LNG, we've concluded that it makes sense because it would be like another pipeline into the state. The majority of our electricity is generated with natural gas, and we don't want to be short. Clearly the individual projects have to meet very high levels of environmental review as well as safety issues.

As you look out over the next three to five years at the renewable energy world, what will the major issues and opportunities be?

Three years from now I anticipate that renewables will be moving towards something like one-third of our use. This will happen partly because we have become more efficient and have reduced some of our energy use. It's not going to happen overnight, but I think we need to turn the corner on thinking about how we use energy, whether in business or industry, or households. Further, we need to think about the whole community and work on the 40 percent of our greenhouse gas emissions that come from the transportation sector.

What are you looking at globally to set your benchmarks? Are you looking to Europe or anywhere else around the globe to measure California's progress?

The EU has a cap and trade system that is ahead of us, so we're looking at their model with great interest. However, we also believe that the federal government will, in the next few years, move in that direction also. We want to make sure that our program is compatible with the program that the federal government will adopt so we can, eventually, link the two.


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