California Wants to Reinvent the Power Grid. So What Could Go Wrong?
LOS ANGELES — Two decades ago, when California deregulated the delivery of electric power, lawmakers, regulators and even some environmentalists hailed the decision as a way to lower consumers’ bills.
The strategy proved disastrous. The plan resulted in an energy crisis that sent power bills soaring, prompted billions in penalties against utilities and banks for manipulating the new electricity market, and led Congress to enact laws to help prevent it all from happening again.
Now the state’s leaders have a new proposal for an energy makeover, this time to create a single authority to manage the electric grid for most or all of the West. This plan, too, promises to cut costs for consumers — by as much as $1.5 billion a year — while helping to bolster use of carbon-free power sources.
Gov. Jerry Brown has made the plan a signature effort in the waning months of his tenure, pressing state legislators to enact it. California already receives power produced in other states, but Mr. Brown wants to create a single authority that would manage the flow of electrons across the region.
“Implemented correctly,” he has written of the plan, “a regional grid will enable greater renewable development, lower costs and carbon emissions, and improved electricity reliability.”
Critics, invoking the earlier fiasco, warn that the latest plan will again cost consumers and may even increase, not reduce, greenhouse gases.
They worry that the proposal will actually increase the use of coal and natural gas at a time when California and hundreds of cities across the country are working toward producing 100 percent of their electricity without carbon emissions.
Their concern is based on the potential partnership with some Western states like Wyoming that rely heavily on coal for power production. “It makes us very nervous that regionalization is going to accelerate coal use,” said Matthew Freedman, the staff lawyer for the Utility Reform Network, a consumer-advocacy group based in San Francisco.
The state’s electricity grid is currently run by the California Independent System Operator. It oversees a market for companies looking to buy and sell power, and coordinates the flow of electricity by ordering utilities to put more onto the grid or to throttle back when it risks an overload.
Although it is the largest in the West, California’s electric grid manager is just one of 38 in the region. Under the new proposal, which is subject to federal approval, those that opt into the regional system would all operate under one electric grid manager.
California would surrender its governor’s right to appoint the agency’s board members and the State Senate’s role in confirming them. The current grid operator would devise a plan for selecting members of a new, wholly independent board.
While California would yield some state control, the proposed shift is meant to increase efficiencies across the region, lowering the cost of generation. And backers say a single entity could apply a uniform clean-energy policy across more territory, carrying out Mr. Brown’s vision on a wider scale.
Assemblyman Christopher Holden, a Democrat from the Los Angeles area, sponsored the bill. As he sees it, President Trump’s decision last year to withdraw the United States from the Paris climate agreement has given California a strong leadership role in helping to curb carbon emissions and address climate change.
“To be able to address climate change, California can’t do it by itself,” Mr. Holden said. “Any other state that would want to participate, states that share our green renewable strategies, are welcome.”
It would be optional for utilities to turn their power management over to the new grid operator, but the prospect of efficiencies that could lower the cost of providing power — potentially reducing consumer rates and increasing profits — would be an incentive.
“This is not either-or, it’s not local versus regional — it’s getting the best out of both,” said Ralph Cavanagh, staff lawyer for the Natural Resources Defense Council and a longtime proponent of the measure. “You will use the existing system more efficiently.”
For example, at certain times of the year, California produces more solar and wind energy than it can use, and must pay other states to take it to avoid overloading the system and causing blackouts. A regional grid would enable better coordination with other generation sources without additional payments.
As for the potential for energy companies in coal states to send more power from fossil fuels to California customers, Mr. Cavanagh said market dynamics would preclude that, since the low cost of solar and wind energy is making other generation sources uncompetitive. “The operating cost of renewables is zero,” he said. “The Trump administration has a coal agenda, and that’s exactly why we should push back.”
But Mr. Trump’s position on coal and other fossil fuels is exactly the reason that critics say this is the worst time to risk California’s clean-energy goals by loosening its control. Because the regional operation has to be approved by the Federal Energy Regulatory Commission, and California is ceding more control of the operator, the new Western grid would be more firmly in the federal government’s hands.
California law mandates that at least 50 percent of the state’s electricity generation come from carbon-free sources by 2030. Lawmakers are considering a separate bill that would increase the mandate to 100 percent.
In a regional market, a significant potential player would be a utility called PacifiCorp, a unit of Warren E. Buffett’s Berkshire Hathaway Energy. PacifiCorp operates in a half-dozen Western states, including Wyoming, which produces more than 80 percent of its electricity from coal, and Utah, where the share is almost 70 percent.
“We see it as throwing a lifeline to those coal plants,” said Travis Ritchie, a staff lawyer for the Sierra Club. “This whole thing really caught our attention because it was PacifiCorp. They were the ones who pushed grid regionalization.”
In addition, the bill excludes power generated from carbon-free sources outside California from counting toward renewable-energy goals. Danielle Osborn Mills, director of the American Wind Energy Association California Caucus, said that language could actually impede the move away from fossil fuels, and create an opening for coal-burning producers like PacifiCorp.
“I think the way it is written now, there’s a threat to the developing as well as existing renewables,” Ms. Mills said. “It seems to run counter to the objectives to open the market.” The bill’s proponents say they are trying to address the issue, but at least for now, the provision remains.
PacifiCorp says it has no position on the legislation. “It’s not just California that would have to be comfortable, but the other states as well,” said Bob Gravely, a company spokesman. “We would not be able to join if the other states that we operate in aren’t comfortable.”
Michael J. Aguirre, a former federal prosecutor and a lawyer who worked on cases during the California energy crisis, said that with improved energy technology for individuals and businesses — through sources like rooftop and community solar arrays, along with storage — there was little advantage to consolidating grid operations.
“We need to make our system more resilient by making it decentralized,” he said. “It’s the difference between having a bunch of centralized computers and a bunch of laptops.”
Mr. Freedman, of the Utility Reform Network, said California should carefully consider such a major move, saying it could be difficult to reverse because the federal government might not allow the state to return to its current grid structure if the new system fell short.
“Once we go down this route, there’s very little California can do to change it,” he said.