New Incentive for Utilities to Choose Clean Energy

SAN FRANCISCO (December 16, 2004) -- The California Public Utilities Commission (CPUC) today approved a new policy to protect consumers from the risk of higher energy bills associated with global warming. The CPUC ruled that heat-trapping power plant emissions will likely be regulated in the future and that the cost of regulation should be factored into utilities' investment choices. The policy creates a new incentive for utilities to invest in cleaner energy resources, according to NRDC (Natural Resources Defense Council).

"The investments that utilities make today will affect their customers' bills and the quality of the environment for 30 to 40 years or more," said Devra Bachrach, NRDC staff scientist. "It is very likely that global warming pollution will be regulated during this time period, exposing bill payers to serious financial risk. The commission's decision will protect consumers and reduce their overall long-term costs for power."

If the added cost associated with global warming pollution is not factored into decisions about building new power plants, then consumers may be locked into paying higher prices. For example, coal-fired power plants emit about twice as much carbon dioxide -- the leading global warming pollutant -- as natural gas-fired plants, and renewable resources and energy efficiency emit little or no carbon dioxide. Since power plants can be expected to operate for 30 years or longer, dirty energy sources could increase costs considerably.

"One of the biggest lessons of the recent energy crisis was that it's essential to hedge financial risks," said Sheryl Carter, director of NRDC's Western Energy Program. "During the crisis, customers unexpectedly faced much higher bills. The commission's decision today establishes new guidelines for utility investments focused on energy efficiency, renewables and clean power plants. This is a central part of the state's effort to avoid another crisis and to protect customers from unexpected bill increases."

The new rule means that utilities can no longer continue to assume that global warming pollution will cost nothing over the coming decades. It directs their investments towards less polluting resources and protects consumers against a major financial risk.

"NRDC applauds the Public Utilities Commission, and in particular President Peevey, for their leadership on this issue," said Bachrach. "We also commend PG&E, which was the first utility in California to recognize the financial risk associated with global warming pollution and to begin taking steps to protect customers."