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Will your energy costs be increasing?

California EnergyUpdate on California's energy infrastructure plans

With less than six years remaining to meet California’s ambitious 33 percent renewable energy goal by 2020, as mandated by the state’s Renewables Portfolio Standard (RPS), energy providers, businesses and consumers are coming to terms with key RPS programs and mandates.

For businesses and other energy users, it's a certainty the RPS will increase energy costs; by how much remains to be seen. A 2009 PUC impact analysis of the RPS found that even if California made no further investments in renewable energy, average electricity costs would still rise by 17.7 percent by 2020 compared to 2008 rates in real terms.

However, several national and state-level cost studies have documented that a renewable energy mandate may dampen fossil fuel prices, especially natural gas, as well as electricity prices. For example, the Department of Energy's Lawrence Berkeley National Laboratory found "each 1% reduction in national gas demand is likely to lead to a long-term (effectively permanent) average reduction in wellhead gas prices of 0.8% to 2%."

What is California's new renewable energy standard?

Originally established in 2002, the RPS is designed to increase total renewable energy production statewide, and applies to all electricity retailers in the state including publicly owned utilities, investor-owned utilities, electricity service providers, and community choice aggregators. All of these entities must adopt the new RPS goals of 25 percent of retail sales from renewables by the end of 2016, and 33 percent by the end of 2020.

Further definition about the RPS came in Oct. 2013, when law AB327 was signed, which makes the 33 percent mandate “a floor, not a ceiling.” AB327, which replaces rate regulations enacted a decade-plus ago, also contains such key provisions as:

  • A $10 per month per ratepayer fee to the state’s Public Utilities Commission (PUC) for grid maintenance.
  • New rules for solar power users, who currently can sell their excess electricity back to the state’s grid.
  • PUC-mandated changes to the state's rate structure. According to an analysis by the Los Angeles Times, coastal residents might see higher bills while people in hotter climates like San Bernardino and Riverside counties, the San Joaquin Valley and the Mojave Desert might see rate relief. 

Does your business support alternative energy? Potential good news...

Businesses should note that California maintains more than a dozen major RPS programs to support energy efficiency and alternative energy. That’s potentially good news if you offer products or services supporting such energy types. For example, the state’s $400 million New Solar Homes Partnership offers incentives to encourage solar installations.

Additional information on the RPS programs can be found through the California Energy Commission.

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The information contained herein may not represent the views and opinions of California Bank & Trust, a division of ZB, N.A. or its affiliates. It is presented for general informational purposes only and does not constitute tax, legal or business advice.
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