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Glendale Likely to Approve Doomed FiT

06/20/13

  03:14:00 pm, by Jim Jenal - Founder & CEO   , 1194 words  
Categories: GWP, Feed-in Tariff, Ranting

Glendale Likely to Approve Doomed FiT

We attended Tuesday night’s Glendale City Council meeting to share our thoughts with Councilmembers regarding GWP’s proposed Feed-in Tariff.  As might be expected, it was not an encouraging experience - here’s our report.

In our previous post analyzing the proposed FiT, we noted that essentially small players could not produce projects that would pencil out and only the very largest projects - 1.4 MW under the proposed guideline - would be economically viable.  Given the limited size of the overall program - just 4.2MW - three of those largest possible projects would completely subscribe the program.

At the outset of discussion on this item, Glendale Mayor Dave Weaver commented that this was one of the most complicated staff reports he had ever seen and he implored staff to make their presentation something that lay people could understand.  You can watch the full discussion in the clip below - my comments begin around the 11:00 mark.

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However we heard something new during the staff presentation - by Senior Assistant City Attorney Christine Godinez - that surprised us: the contracts being offered under the FiT would not be for a set price for the duration of the contract, nor were they even contracts with an established initial rate that would be subject to an escalation provision going forward.  Instead, we were told that the price would be adjusted every quarter with the new price applied to existing contracts!

We decided to follow-up on that point and spoke today with Ms. Godinez.  She confirmed that payments under 20-year FiT contracts would change every quarter and cited the programs in Anaheim and Riverside (but not LA) as examples of that approach.  Frankly, we do not see how any developer would agree to such an approach when, as Ms. Godinez conceded, the price to be paid could go up or down with no way to predict what it would do in advance.  Think about it, what developer is going to spend hundreds of thousands of dollar to sell renewable energy based on a reimbursement rate that is solely and unilaterally under the discretion of the buyer?  Indeed, does this even meet the definition of a long-term contract when the most important term - price - is undefined?

That got us to wondering what was really going on in Anaheim and Riverside and whether those programs had been successful.  We were able to confirm that both cities have FiT programs that change their rates annually (as opposed to quarterly under GWP’s proposal) but we could not see any evidence of actual FiT installations in either City.  We managed to speak to representatives of both utilities.

Ms. Carrie Thompson, an Integrated Resource Planner for Anaheim, explained that they do adjust their offered price each year but, contrary to what GWP is proposing, that price is then held fixed for the lifetime of the contract.  (The price is presently 4.587¢/kWh - which is roughly where it has been since the program began in 2011.  It is due to increase by 8/10’s of a cent on July 1 - but please, curb your enthusiasm.)  But this is largely a theoretical difference since not a single project application has been submitted to the City since the program went live more than two years ago.  Ms. Thompson, who was extremely helpful - calling us back twice to return our call - noted somewhat wistfully that there is a difference between “designing a program that meets the letter of the law and designing a program that works.”

“Jerry” from Riverside told us that their FiT price of 5.8¢/kWh is the same price they have offered since the program went live in 2011 and that it was tied to the City’s  price for energy under long-term utility-scale renewable energy contracts with remote suppliers.  He said that the City understood that at that price, there would be no developers building projects under the FiT because “it cannot make economical sense."  Indeed, the City, “doesn’t want solar here” and in that sense their FiT “program” has been a success - there are no FiT projects in Riverside.

In other words, GWP is patterning its FiT program on two programs that were designed to fail and which have resulted in the installation of no solar whatsoever within their respective City boundaries!

Two other points - Councilmember Quintero (at 14:18 into the video) pointed out his concern that entrepreneurial individuals who might want to install solar along San Fernando road would be shut out of this program because the rate was too low.  Of course, he is exactly correct - no commercial building owner is going to be able to participate in this program because of the low rate being paid and the tremendous lack of clarity about where payment rates will go in the future.

The second point concerns the comments from GWP’s Chief Assistant General Manager, Steve Lins.  He sought to contradict my statement that there was no net-metered rebate program for commercial customers in Glendale.  No, he said, there was a program - its just that it was over-subscribed last year (i.e., it ran out of funds without notice) and that there would be no funds for it this year because it has been over-subscribed in the past - “a victim of its own success."  Of course, that is not a rebuttal of my assertion that no such program is presently available in Glendale.

In response to Councilmember Quintero’s concern, he responded that under the statute (SB 1332) they could only pay based on their avoided costs.  But that, of course, is a misreading of the statute which makes avoided costs only one component to be considered.  Here is the relevant text of the law:

The governing board of the local publicly owned electric utility shall ensure that the tariff adopted pursuant to subdivision © reflects the value of every kilowatthour of electricity generated on a time-of-delivery basis, and shall consider avoided costs for distribution and transmission system upgrades, whether the facility generates electricity in a manner that offsets peak demand on the distribution circuit, and all current and anticipated environmental and greenhouse gases reduction compliance costs. The governing board may adjust this value based on the other attributes of renewable generation. The governing board shall ensure, with respect to rates and charges, that ratepayers that do not receive service pursuant to the tariff are indifferent to whether a ratepayer with an electric generation facility receives service pursuant to the tariff.

SB 1332 - Public Utilities Code §399.32(d)

Moreover, because GWP released no information - nor held any public hearings - about how it calculated avoided costs, even that assertion is subject to question.  Given that the stated purpose of SB 1332 is to “encourage electrical generation from eligible renewable energy resources… located within the service territory of, and developed to sell electricity to, a local publicly  owned electric utility,” comparing avoided costs from large, utility-scale resources located far away is not an appropriate comparison.

Bottom line: GWP is proposing, and next week the Glendale City Council is almost certain to approve, a program that ignores the intent of the law and may well be in violation of it.  One thing is for certain, very little, if any, renewable energy will be generated as a result of this program.  And apparently - like in Riverside - that is the whole point.

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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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