New California Law Revises Electricity Rates, Cements Renewable Mandates

New California Law Revises Electricity Rates, Cements Renewable Mandates
November 5, 2013

California Gov. Jerry Brown signed legislation making sweeping changes to California’s electricity rate structure and cementing stringent renewable power mandates.

Coastal Rates Rise
Assembly Bill 327, authored by Assemblyman Henry Perea (D-Fresno), revises residential electricity rates and differentiates between inland and coastal areas. The legislation will lower electricity rates for inland customers in the southern part of the state, while raising rates for people along the coast. The revision is designed to ease the burden of high electricity prices for people who use more electricity to cool their homes. 

While recognizing the good intentions behind the bill, analysts pointed out it will merely lead to more electricity consumption, which is at cross purposes with other state policies.

“While the electricity rate incentive by itself would likely not drive massive emigration to the hotter climates, it won’t help and just makes the net incentive to relocate stronger. Other factors, such as relative real estate prices, are already contributing to such movements, although some choose to leave the state altogether,” said Tom Tanton, president of T2 & Associates, an energy and technology consulting firm.

“Worse, the movement will just exacerbate the need for additional generation capacity in inland regions and overtax the transmission grid, which are both made worse by the push for more renewables, which provide little if any dependable on-peak capacity,” Tanton added.

Feed-In Tariff Cap Removed
The bill also addresses net metering, also known as feed-in tariffs, which require utilities to purchase at very high prices excess electricity generated by individuals with solar panels on their homes or businesses. 

Prior to passage of AB 327, state law required California’s major utilities to purchase excess solar power up to 5 percent of the utilities’ total electricity portfolio. AB 327 removes the cap.

Higher Prices Passed to Consumers
Studies reveal feed-in tariffs are very costly to Californians.

An October California Public Utilities Commission study found the tariffs will cost electricity customers $1.1 billion per year by 2020. Lower and middle income households will bear the brunt of these costs, according to the report.

“California's net metering program forces utilities to pay up to four times as much for power as wholesale prices. This raises prices for all electricity customers in the state," said Jay Lehr, science director the Heatland Institute, which publishes Environment & Climate News.

Alyssa Carducci (ad.carducci@gmail.com) writes from Tampa, Florida.