No More Good Money After Bad: It's time to End California Long Term Investments in Coal Power

Are California’s publicly owned utilities attempting to skirt the greenhouse gas emission standard with their investments in dirty out-of-state coal plants?  

NRDC and the Sierra Club want to be able to answer that question, one way or the other. That’s why we’ve asked California regulators to tighten the greenhouse gas emission performance standard (EPS) to ensure there is no question how it applies to out-of-state power imported by publicly owned utilities, so that regulators and the public can clearly see whether utilities are making investments aimed are extending the lifespan of polluting power plants.

We expect the California Energy Commission (CEC), which has jurisdiction over the publicly owned utilities (POUs), to issue a notice soon that provides insight into key issues and additional questions to consider before the new rules are issued that will have a major impact on how POUs provide power to millions of Californians in the future.

In December, the Commission unanimously approved our petition to begin a rulemaking to strengthen its regulations under SB 1368, which prohibits any entity providing electricity to California consumers from investing in power plants that release more global warming pollution than a combined-cycle natural gas power plant – unless they capture and sequester that pollution.

Since SB 1368 became law in 2006, none of the California POUs have established clear timelines for either exiting or meeting the EPS at the coal plants from which they receive power: New Mexico’s San Juan Generating Station, Utah’s Intermountain Power Project, Arizona’s Navajo Generation Station and Oregon’s Boardman Plant.

California municipalities and public utilities investing in coal include:

• City of Anaheim
• Burbank Water and Power
• Glendale Water and Power
• Los Angeles Department of Water and Power (LADWP)
• Modesto Irrigation District, City of Santa Clara and the City of Redding (through MSR, their joint power agency)
• Pasadena Water and Power
• City of Riverside
• Azusa, Banning, Colton, Glendale, Imperial Irrigation (through the Southern California Public Power Authority)
• Turlock Irrigation District

Meanwhile, the California Public Utilities Commission already has strengthened its rules for the investor-owned utilities it regulates, and recently prohibited Southern California Edison (SCE) from continued investment in the Four Corners Power Plant, prompting SCE to divest its last coal investment in March. The only remaining investor-owned utility reliance on coal is San Diego Gas and Electric’s contract with the Boardman plant, which expires in December 2013.

The law prohibits new long term financial commitments to dirty coal plants- investments that increase the plant’s capacity or extend the life of one or more generation units beyond five years are precluded.

Utilities are allowed to request EPS exemptions for investments necessary to ensure reliable service, avoid significant financial harm, or if they are legally obligated to contribute to share of a larger investment, but no utility has requested such an exemption and doing so would require analysis of the contractual obligations of the requesting utility to ensure no other option was available.

There has been no CEC oversight of these investments.  The Commission’s current rule doesn’t require municipal utilities to seek guidance about potential investments in advance and not one public utility has submitted any compliance filing or request for review for potentially covered procurements at these facilities, none of which meet California’s EPS.

It’s important to clarify the EPS now because recent and upcoming U.S. EPA regulations will require owners of existing coal-fired power plants to decide whether to make significant capital investments in environmental compliance retrofits, or pursue a strategy that could lead to retirement, more pollution controls, or cleaner re-powering of the power plants.

LADWP has promised to get out of the Navajo coal plant in 2015 and Los Angeles Mayor Villaraigosa has gone even further, promising to exit coal entirely by 2020.  LADWP should also be commended for its recent advances on renewable energy and energy efficiency. Still, there are reasons to be worried that the utilities may not all willingly end dirty coal investments, given that the several California POUs, including LADWP, have joined utilities nationwide in launching legal attacks on EPA’s Mercury and Air Toxics Standards, which beginning in 2016 would reduce dangerous mercury pollution emitted by coal- and oil-burning power plants by 90%.

NRDC believes leaving coal plant investment decisions solely to California’s public utilities, without clear criteria from state regulators for evaluation of those investments, leads to policy risks and jeopardizes the long-term horizon of developing a low-carbon economy.

We want the California Energy Commission to issue rules that:

• Clearly articulate a set of criteria for the public utilities to consider in determining whether a particular investment is subject to the requirements of SB 1368 and the EPS.
• Require the public utilities to submit compliance filings with the CEC for all past and planned investments in plants not meeting the emission performance standard so it can independently determine compliance.   

California has made clear, both through the SB 1368 emission standards and the groundbreaking Global Warming Solutions Act (AB 32) greenhouse gas pollution reduction law, that coal without carbon capture and storage is an unacceptable energy source. The state is also leading the nation with a 33% Renewable portfolio Standard.  To comply with these statutes, all California utilities must get out of dirty coal plants and replace them with cleaner energy sources.

Some if the POUs have responded to our petition by launching efforts to persuade the Commission and lawmakers to repeal the emission performance standard.