By Kennedy Maize
California is beginning a major redesign of statewide energy and climate policy. Democratic Gov. Gavin Newsom has signed a package of bills designed to deal with the state’s soaring electricity and gasoline prices and beefing up wildfire response, while preserving the Golden State’s aggressive stance on trying to contain climate change.
As CalMatters, the state-wide online news service, reported, “California lawmakers passed a multi-bill climate and energy package extending cap and trade to 2045, expanding the state’s wildfire fund, approving new oil drilling, and opening the door to a regional power market.” Newsom, who spearheaded the political maneuvering over the legislation, signed the measures into law last Friday (Sept. 19).
The legislative package attempts a perilous political compromise, keeping the state’s two major energy delivery systems in balance: the important oil and gas industry alongside the state’s electricity system moving rapidly toward renewables.
At the signing ceremony at the Academy of Sciences in San Francisco, Newsom said, “We have to effectively transition. This is not an ideological endeavor. We are in the practical application business. We have got to manifest our ideals and our goals. And so this lays it out, but it lays it out without laying tracks over folks.”
KQED, the state-wide public radio station, commented, “The juggling act is costly, messy, and requires intentional planning and often unsavory compromises.” Newsom signed five bills to push his energy and environmental agenda. KQED noted, “The agreements brought both wins and losses for the state’s powerful utilities and oil and gas companies — and left many environmental justice advocates frustrated over the lack of emphasis on reducing local air pollution in low-income communities.”
Energy prices and their costs are major items of contention in the Golden State. The state has the highest electricity prices in the continental United States, along with the highest gasoline prices. At the same time, the state regularly must cope with savage wildfires, sometime linked to failures in the overhead electric transmission and distribution wires. A common ironic quip among Californians is that the state has only two seasons: wildfire season and mud slide season.
On top of all that, California has been the most aggressive state in trying to reduce greenhouse gas emissions from cars, the electric system, and industry.
As the state’s two giant investor owned utilities – Pacific Gas and Electric in Oakland and Rosemead-based Southern California Edison – cope with the enormous costs of hardening their wires, often by undergrounding them, and with the transition away from fossil fuels, as well as compensating wildfire victims, two important state oil refineries are set to close.
Phillips 66 announced a year ago that it will close its Los Angeles refinery next month. Valero Energy Corp. plans to close its Bay Area refinery by next April. Together, the two constitute about 20% of the state’s refinery capacity.
The key to the legislative passage is extension of California’s venerable “cap-and-trade” program to reduce greenhouse gases. Originally created in 2006 during the Republican administration of Arnold Schwarzenegger and extended under Democratic Gov. Jerry Brown in 2017 with a 2030 expiration date, Assembly Bill 1207 extends the program another 15 years and makes some technical changes.
The cap-and-trade program sets a declining limit on greenhouse gas emissions, covering refineries, power plants, and other manufacturing processes. Companies that get under their caps can essentially sell those reductions through quarterly auction to others that have not been able to meet the targets. The state can award some “free” allowance to prevent lost jobs. The extension cuts back on the number of free allowances, moving more money into the auctions.
The state’s Chamber of Commerce opposed the extension, as did advocates of “environmental justice,” while the oil and gas industry was neutral, which amounted to support.
A part of the legislative package includes SB 237, which would boost oil production from Kern County, the state’s major oil field, by legislatively approving environmental reviews. CalMatters noted that the provision was a product of years of pushing by Republican Sen. Shannon Grove, who represents Kern County. She told CalMatters that the legislatively-approved drilling permits “will result in California-compliant oil that is the most regulated in the world.”
A companion bill, SB 840, to the cap-and-trade legislation defines how the state will spend the excess revenues from the cap-and-trade program, specifying $1 billion a year for the state’s troubled high-speed rail project and another $1 billion for the legislature to divvy up among deserving groups.
Another bill, SB 254, aims at reducing the impact of the costs of wildfires on electric customers. It nearly doubles the state’s $21 billion “Wildfire Fund” by adding $18 billion to a “Continuation Account” in the fund, applying only to new fires after passage of the new law. DailyEnergyInsider describes it: “Ratepayers will pay half the $18 billion via ongoing charges on their electric bills, while participating utilities will pay $3.9 billion into the new account upfront. The remaining funds will come from installment payments of $300 million per year, paid annually by participating utilities.”
A bill that won broad bipartisan support, AB 825, would lay the groundwork for creation of a West-wide regional transmission organization built on the framework of the existing Western Energy Imbalance Market and the California Independent System Operator, one of the nation’s first independent wholesale electric markets. CAISO in a statement said, “Now that AB 825 is signed into law, the ISO will work closely with partners across California and the rest of the region to ensure a more reliable and affordable bulk electric system for the benefit of consumers throughout the West.”
Looking at California’s energy and environmental remake, the Wall Street Journal’s editorial board commented snarkily, “California’s war on fossil fuels is backfiring in spectacular fashion, as gasoline prices, imports of foreign oil and CO2 emissions all increase. The response in Sacramento? Allow more oil drilling and dirtier blends of gasoline in the state. Whatever happened to the climate emergency?”
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