The biggest electricity users in California could buy power from a seller other than one of the three big utilities under legislation offered yesterday that was framed as a way to expand renewable energy.
S.B. 286 from Sen. Bob Hertzberg (D) would lift a limit on the share of the Golden State’s electricity market that can participate in a program called "direct access," where electricity customers contract with an energy service provider. The portion that can participate last year was capped at about 12 percent of statewide electrical demand.
Hertzberg said eliminating the cap would allow more businesses to take part in a system that’s benefiting customers like Google and the University of California. He added that the legislation would allow energy users to reduce energy costs, make the state more business-friendly and increase access to renewable energy.
"The concept is simple and proven: Give energy users more choices and they’ll have greater control over costs," Hertzberg said in a statement.
The bill comes as California is seeking to shrink its greenhouse gas emissions and grow the portion of power it makes from green sources. Right now, the state requires the largest utilities by 2020 to generate one-third of their power from green sources. Gov. Jerry Brown (D) wants that to climb to 50 percent by 2050.
The bill is likely to face significant opposition, said V. John White, director of the Center for Energy Efficiency and Renewable Technologies, or CEERT. Utilities dislike these kind of programs because they threaten utilities’ market share, he said.
"They’re very aggressive in arguing why it shouldn’t be allowed," or if it is, why big payments are needed to cover their costs, White said. "Direct access represents an ideological challenge to the utility business model."
Utilities Pacific Gas and Electric Co. and Sempra Energy, parent of San Diego Gas & Electric Co., said they could not comment because they needed to fully review the new measure. Southern California Edison Co. did not respond to requests for comment.
Consumer groups have also opposed direct access, White said, because they fear it will load added costs on ratepayers who stay with the utilities. The legislation limits the program to commercial and industrial customers.
Technology companies support bill
The program has been restricted in California as a side effect of the 2000-01 energy crisis, when there were rolling blackouts. The state with a few exceptions barred electricity customers from contracting with providers other than utilities. It was opened up partly through legislation in 2009. That measure put the cap in place, however.
In other states where direct access exists, there are protections built in to protect utilities and residential consumers, said Andrea Deveau, executive director of TechNet, a trade group that represents about 70 companies, including energy service providers and technology giants like Google and Apple. Utilities in those states typically bill energy service providers an amount meant to cover potential losses for utility investments in infrastructure they need to pay off, Deveau said.
But White said that usually makes it more expensive for energy service providers, which want to have lower prices in order to compete with utilities. Energy service providers already are required to meet the same mandates as the utilities in terms of the portion of renewable power and cutting greenhouse gas emissions.
"This has been a source of contention," White said. "It becomes quite a barrier."
TechNet wants the cap lifted. There’s a lengthy waiting list of companies that want to participate, Deveau said. In addition to the energy service providers that are part of the trade association, there are companies with investments in clean technology that could be packed with electricity sales, she said. There could also be packages that included energy storage, she said.
The waiting list for direct access is 6 billion kilowatt-hours, which represents about 25 percent of California’s power load, Hertzberg’s office said.
How much should be green?
Companies like Apple and Google, which have made hefty investments in building clean power plants, also could obtain for their own use the electricity generated at one of the facilities they’ve helped fund. Those companies could also sell the excess power, though they would have to become energy service providers and follow state rules on those to do so.
Deveau previously worked for Direct Energy, an energy service provider. When she was there, she said, there were customers that included universities and large retailers that expressed interest in becoming energy service providers.
"There’s a variety of entities asking for the bill," Deveau said. "We’re supporting that effort."
Through direct access, companies could buy 100 percent clean power, something they can’t do with the utilities right now, Deveau said.
But White noted that there is nothing in the measure requiring green power or limiting the expansion to companies that contract for renewable energy. He argued that there’s not much reason to expand the program without the green component.
"Why do you want to allow this if the customers aren’t going to do any more to clean up the grid, meet climate goals?" White said.
He said CEERT would favor a measure that would lift the cap on direct access but require that energy service providers sell energy that’s greener than what the utilities offer. He said some companies that are electricity buyers are less interested in price and more in the value of trying to obtain a better product.
"If it were framed that way, there might be more appetite for it," White said.