It’s the Infrastructure, Stupid: Budget Trailer Bill Makes Energy Developement in California Even More Expensive

The California legislature voted late yesterday on a budget to finally fund all that has been in arrears for the past 95 plus days. Yes, can you imagine being 95 days late on your mortgage? Well, this has become the norm in California. Legislators and the governor have a broken system that fails to enact on time budgets – apparently they have forgotten about the oath to abide by the powers of the State Constitution which requires that the Budget be enacted by June 15 of each year.

I’ll let journalists deal with the vagaries of the process – they are much better at that than I am.

In this arcane process however, there are what are called “trailer bills.” These are tag-alongs to the main budget bill, but provide details of how our taxes are spent – and how they are shifted from program to program. Yes, you thought that transportation funds from your DMV license fee went to roads, right? Wrong. Those funds, unless protected by statute, might go somewhere else.

A great example is the tobacco tax (I am not a smoker, so I shouldn’t care, but I do)… Those funds are supposed to go to fund “stop smoking” programs for kids. Where do they wind up? Many places…

But I want to concentrate on something interesting with the 2010-11 Budget. Do you remember how every legislator has been talking about job creation? How we need to make California more “competitive?”

Well get this… Among the many trailer bills being considered is AB 1615 which addresses many issues related to the energy and water infrastructure sectors. Unfortunately, one particular section increases fees. Please note that this is for all energy infrastructure projects: generation (including renewable power) and transmission.

Like in all regulated industries, certifications and permits are required for all developments – this is a good thing, as we identify hurdles with environmental impacts and other factors like traffic issues that may need to be mitigated.

So, under California law, when seeking certification (energy infrastructure projects go through certification at the California Energy Commission), the fees will go from $100K per project (and $250 per gross MW capacity) for a maximum fee of (not to exceed) $350K per project with an annual permit of $15K -- the new fees will be $250K per project (and $500 per gross MW of capacity) for a maximum fee (not to exceed) $750K per project with an annual permit fee of $25K.

From Assembly Bill 1615

(12) Existing law requires a person to obtain certification from the State Energy Resources Conservation and Development Commission before commencing construction of a thermal powerplant or electric transmission line and requires the person who submits an application for certification for a proposed generating facility to pay a fee of$100,000 plus $250 per megawatt of gross generating capacity of the proposed facility, the total fee not to exceed $350,000. A person who receives certification of a proposed generating facility is also required to pay an annual fee of $15,000. Existing law exempts from those fees a generating facility that uses a renewable resource as its primary fuel or power source. The fees are required to be deposited in the Energy Facility License and Compliance Fund in the State Treasury, for expenditure by the commission, upon appropriation by the Legislature, for processing applications for certification and for compliance monitoring. This bill would increase the amount of the fee for an application for certification to $250,000 plus $500 per megawatt, would increase the limit of the total fee to $750,000, and would increase the annual fee to $25,000. The bill would repeal the exemption from the fee for a generating facility that uses a renewable resource and would require the commission to submit a report, by July 1, 2012, to the Legislature on the impact of these changes.

Did Nevada, Arizona, Oregon, Washington, or New Mexico increase their fees? Nope. Given that California has never produced the power we need to keep our lights on (we go to market for 20-30% of our daily power needs to keep our lights on) – if I were a developer, would I build in California? Nope. I would build in other parts of the West and sell the power to California. Oops! We did that once in 2000-2001… Power prices soared. Yup, you and I – the ratepayers are left holding the bag.

So in their effort to make things more competitive, the legislature just made things worse. Great.