Moody’s: Energy edict will hammer SoCal municipal utilities

energy-costs-rising1-300x296Assembly Bill 32, the landmark 2006 law requiring California to begin shifting to cleaner-but-costlier forms of renewable energy, hasn’t hit consumers as hard as some economists feared for an ironic reason: Dirtier “brown energy” got cheaper. The U.S. fracking/shale revolution has sharply reduced the cost of natural gas and thus limited the cost impact of the renewable requirements.

But the honeymoon could be over for millions of Southern California residents served by municipal utilities. Moody’s Investors Service warns they will be hard-hit by the state’s latest edict on increased use of renewable energy to supply electricity:

On Oct.. 7, Gov. Jerry Brown signed a bill requiring all California utilities to generate 50 percent of the electricity they sell to retail customers from renewable energy by 2030. The legislation will be credit negative for municipal utilities if ratepayers balk at higher prices that come with the transition to renewable energy from coal-fired generation.

 

Municipal electric utilities in Southern California would be particularly affected given their reliance on coal-fired generation. Coal-fired generation has historically supplied cities like Los Angeles and Anaheim with more than 40 percent of their electricity. In contrast, Northern California cities such as San Francisco and Sacramento derive all of their electricity from sources other than coal such as solar, hydroelectricity and natural gas.

 

The Los Angeles Department of Water and Power and other Southern California municipal utilities have thus far managed the shift to other sources from coal without major ratepayer protest, allowing them to increase rates and maintain a sound financial performance. But Los Angeles ratepayers are facing a likely 3.4 percent annual water and power rate increase over the next five years to help support the further transition to cleaner energy.

 

For utilities, the Clean Energy and Pollution Reduction Act of 2015 increases the percentage of electricity coming from renewable energy to 50 percent by 2030 up from the current 33 percent by 2020. We expect the utilities will meet the 33 percent requirement. However, ratepayer affordability and technical challenges will become increasingly difficult as utilities reach towards the more significant 50 percent renewable standard.

Infrastructure costs also likely to buffet ratepayers

Moody’s says another factor could also yield future rate shocks:

[Municipal] utilities will face another major challenge in whether the transmission grid can adequately handle the intermittent renewable resources that will begin to dominate California’s power supply mix. LADWP benefits from owning and operating its transmission system and has variable resources such as a pumped storage facility and gas-fired units to balance the system. The city of Anaheim recently added the Canyon natural gas fired unit and Southern California Public Power Authority financed the Magnolia unit in Burbank to help compensate for shortfalls in solar or wind energy. In the long term, the need to successfully integrate more renewables into the grid will likely require similar additional capital investment.

But while customers of the region’s two giant investor-owned utilities — Southern California Edison and San Diego Gas & Electric — won’t be as hard hit by the latest state edict, they will also pay unique bills in coming years not borne by customers of municipal utilities. Unless a California Public Utilities Commission decision is overturned, customers of the two utilities will pick up 70 percent of the $4.7 billion cost of shuttering the broken San Onofre nuclear power plant. SCE owns 80 percent of the plant, SDG&E 20 percent.

7 comments

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  1. Ronald
    Ronald 23 October, 2015, 09:38

    It’s not the oil industry against the activists; it’s the emission crusaders against the economy!

    The “emissions crusade” that started in 2006 when AB32 the Global Warming Initiative was signed into law was at a time that California was contributing a miniscule 1% to the Worlds Green House Gasses. Over the last decade the government has collected billions of dollars as a result of over regulations, cap and trade fees, etc., for the government and dramatically increased the costs for energy and products to all 38 million that live in California.

    Now, further reductions in emissions from our current 1% contributions to the Worlds Greenhouse Gasses will continue to increase the costs for energy and products for all Californians, but the California financially challenged will continue to disproportionally pick up the costs “camouflaged” at businesses.

    Reply this comment
  2. Mstarr
    Mstarr 23 October, 2015, 09:53

    This is all smoke and mirrors compared to the impact that could be made if everyone drastically reduced or eliminated meat and dairy from their diets. Animal agriculture has a much larger impact on the environment. Is sounds crazy, but if you watch Cowspiracy you’ll see what I mean. It’s on Netflix and at cowspiracy.com. If you’re tired of hearing about fossil fuels, investigate and you’ll find that you can make a difference at your very next meal.

    Reply this comment
  3. Queeg
    Queeg 23 October, 2015, 10:59

    Comrades

    Utilities are benevolent monopolies regulated for the common good. Regulated “meant” price, quality, safety, consistency, reliability.

    Plutocrats have added collateral damage pollution protections while substituting in high price, unreliable, debateable quality, enviro animal/bird safety carnage.

    If California is/was one of the world’s bigger economies, risking slow or negative growth like “modern energy” burdened Spain will have California regional and national economic consequences.

    Reply this comment
  4. Spurwing Plover
    Spurwing Plover 23 October, 2015, 16:26

    Windturbines hazerdous to Birds and Bats how about Hot Air then Al Gore,Greenpeace and the Sierra Club could be of good use

    Reply this comment
  5. Spurwing Plover
    Spurwing Plover 24 October, 2015, 07:16

    These back to nature freaks wont be happy until humanity is all been reduced to a primative way of living making sacrifices of virgins and children to their various deites they worship during their Earthday Celebrations just like the pagans did

    Reply this comment
  6. Mr. Whistle
    Mr. Whistle 24 October, 2015, 16:20

    Greens and Radical Dems SCREAM energy crisis.
    We have largest reserves of oil and natural gas.
    Crisis is man made HARMING folks, especially low income or no income people on state, county, federal aid……….
    So, the financial impact of 50% renewables hurts the poor the most. Again, the so called state and federal brain trusts have come up with a way to tax AIR, at the expense of the brain dead lower classes who do not fight back on this, so the checks will keep coming…….

    Questions of the Day. How many people work for the Ca Air Resources Board, and what is the total BUDGET allocation to run CARB?
    Then, figure out the TOTAL amount of money the TAXPAYERS in this state have paid in TOTAL since the ARB came into existence? ARB has been around for over 40 years………………..

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Chris Reed

Chris Reed

Chris Reed is a regular contributor to Cal Watchdog. Reed is an editorial writer for U-T San Diego. Before joining the U-T in July 2005, he was the opinion-page columns editor and wrote the featured weekly Unspin column for The Orange County Register. Reed was on the national board of the Association of Opinion Page Editors from 2003-2005. From 2000 to 2005, Reed made more than 100 appearances as a featured news analyst on Los Angeles-area National Public Radio affiliate KPCC-FM. From 1990 to 1998, Reed was an editor, metro columnist and film critic at the Inland Valley Daily Bulletin in Ontario. Reed has a political science degree from the University of Hawaii (Hilo campus), where he edited the student newspaper, the Vulcan News, his senior year. He is on Twitter: @chrisreed99.

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