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CA Will Tap Ratepayers to Jumpstart Offshore Wind Industry
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Published 9 months ago on
September 15, 2023

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SACRAMENTO — The California Legislature voted Thursday to give Democratic Gov. Gavin Newsom’s administration permission to buy massive amounts of electricity, a move aimed at avoiding blackouts by shoring up the state’s power supply while jumpstarting the West Coast’s fledgling offshore wind industry.

And the money would come from a surcharge imposed on Californians’ electricity bills. State regulators would decide how much this charge would be. Consumers would not pay it until the wind projects are up and running, likely several years from now.

California already has among the highest electricity rates in the country.

“This legislation … means that every single ratepayer in California, no matter where you live, is going to pay for this,” said Republican state Sen. Brian Dahle, who opposes the bill.

Five companies paid roughly $750 million last year to lease areas off the California coast to build wind turbines. Collectively, those projects could generate enough electricity to power 3.5 million homes, helping the state avoid blackouts during extreme heat waves that have routinely strained the electrical grid of the nation’s most populous state.

But so far, the state’s largest utility companies have not been willing to commit to buying power from projects like those because it would cost too much money and take too long to build. In addition to building the wind turbines, the projects will require improvements at the state’s ports and new power lines to transport the energy from the ocean to the land.

“This is a major, generational series of investments that need to happen, and there’s a real risk it won’t if we can’t provide more certainty,” said Alex Jackson, director of American Clean Power Association, which represents the companies trying to build the wind projects.

Will It Save Ratepayers Money in the Long Run?

Supporters argue the bill will save people money in the long run on their electric bills. California has a law requiring all of its electricity to come from renewable or non-carbon sources by 2045. To do that, supporters say the state will have to invest in offshore wind projects, which typically generate the most power at night when solar energy is not as abundant.

Supporters say it would be more efficient for these offshore wind projects to sell all of their electricity to the state instead of selling pieces of it to multiple utility companies, helping to control costs and keep rates lower.

“The biggest threat to us meeting our climate goals between now and 2045 are rate impacts to ratepayers,” Scott Wetch, a lobbyist representing various construction trade associations, told lawmakers in a recent public hearing. “(This bill) is the only way to bring down those costs on these large, complex, long lead time projects in order to minimize the rate impacts.”

The bill gives the Department of Water Resources the authority to purchase the power — but not forever. Their authority would expire in 2035. Lawmakers would have to vote again to extend it.

California Struggles to Meet Clean Energy Goals

California has moved quickly to end its reliance on fossil fuels in recent years. State regulators have OK’d rules banning the sale of most new gas-powered cars by 2035. But the state has struggled to maintain its clean energy values amid that transition.

An extreme heat wave in 2020 overwhelmed the state’s power grid, leaving hundreds of thousands of homes in the dark for a few hours over two days. Similar heat waves in the following summers prompted regulators to ask consumers to use less energy when demand was at its peak in the early evenings.

Newsom and the state Legislature have since spent $3.3 billion to build a “strategic reliability reserve” that included purchasing diesel-powered generators and extending the life of some gas-fired power plants that were scheduled to retire.

“There are things happening right now in energy policy that give me some pause about the efficacy of our strategy,” Democratic state Sen. Henry Stern lamented during a public hearing on the bill last week.

State law requires utility companies to have enough energy to meet demand. If they don’t, the bill would require those companies to pay a penalty. The Newsom administration has said this will prevent utilities from relying too much on the strategic reliability reserve, which uses gas-powered generators that pollute the air.

Alice Reynolds, president of the California Public Utilities Commission, said the state has completed more than 100 projects that have added 9,000 megawatts of new clean energy in the past three years. The bill lawmakers approved on Wednesday also includes provisions to fast-track new electric transmission projects.

“We need to act quickly and we need to really have all hands on deck,” Reynolds said.

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