Wasteful electricity transmission spending is hurting California communities. Our reforms will fix this.
Right now, growing transmission costs threaten to become a crisis in California
Today, transmission charges, called “Transmission Access Charges” or “TAC,” create a massive market distortion that could cost Californians billions of dollars in unnecessary electricity transmission spending over the next 20 years. If we do not fix this problem, soon it could cost more to deliver energy than to generate it. This will only get worse as California moves to clean energy, electric vehicles, and building electrification. Distorted transmission charges steal 3 cents per kWh from clean local energy projects — raising the cost of this energy by as much as 40% and disadvantaging an industry that has the potential to drive economic development for every community in the State.
It wouldn’t make sense to pay the Golden Gate Bridge toll if you don’t cross the bridge. But this is how we are charged for electricity transmission in much of California. Currently, ratepayers pay the same charge for “using” the transmission system whether or not the energy they use travels across it.
This has huge consequences for ratepayers, because it causes community choice aggregators (CCAs) and investor-owned utilities (IOUs) to ignore the transmission costs when they buy energy for customers — so they often end up buying energy from distant sources that need billions of dollars of wires to reach customers. The more utilities buy remotely generated energy, the more transmission has to be built to carry it, driving up California’s energy bills. In other words, utilities buy energy that’s cheaper for them, but more expensive for all of us.
Unlike remotely generated energy, locally generated energy does not require construction of a massive transmission network to move electricity from source to customer. When this major advantage is priced into the total cost of energy (see chart below), clean local energy is much more competitive and actually less expensive in many cases.
Bottom line: the current way of charging for transmission is outdated now that clean local energy provides an efficient alternative to remotely generated energy. Our reform bill, SB 692, will price in the cost of transmission for remotely generated energy correctly so that utilities will buy the energy that is truly most cost-effective for customers. By aligning pricing with reality, this reform will correct the existing market distortion that has led to explosive growth in transmission spending and depressed the development of clean local energy.
This sounds good in theory, but does it work in practice? Yes!
Most of California’s independent municipal utilities have been saving ratepayers money for decades by assessing transmission charges based on actual use of the transmission system. These cost savings make local resources much more price-competitive and help these municipal utilities limit their impacts on the transmission system. Now, the big private investor-owned utilities need to follow suit.
SB 692 will put California on a path to sensible transmission spending in three steps:
- Make it State policy for the cost of electricity to include both the cost of generating energy AND the cost of delivering that energy to consumers. Distributed energy resources (DER) contain the excessive growth in transmission spending, a fact acknowledged by the California Independent System Operator (CAISO) and the California Public Utilities Commission (CPUC), and supported by irrefutable evidence.
- Order regulators to find a comprehensive solution and implement it by 2021.
- If regulators fail, this legislation will order straightforward reforms to fix this problem.
Benefits from this fix:
- Reduce the costs of clean local energy by 3 cents per kWh.
- Save Californians billions of dollars in unnecessary transmission costs over 20 years.
- Keep energy dollars in local communities by spurring investment in local renewables.
- Improve resilience by building more clean local energy resources.
- Protect Californians from unfair transmission costs under a regional electric grid.
The future is in your hands
This is a question of equity, environmental justice, and fundamental fairness. Ratepayers are being extorted by utilities profiting from excess transmission investment, and regulators have failed to make simple reforms to limit excessive transmission growth. This “business as usual” situation is no longer acceptable. Join the Clean Coalition and over 80 groups that support this campaign.
Want to get involved?
Two-page TAC overview
TAC Campaign Q&A
White paper developed on TAC rate design: Outlining the specific cost-shifting impacts, relationship to cost-causation, legal requirements, and specific technical aspects of TAC rate design.
Doug Karpa, Policy Director with the Clean Coalition, presented on the TAC Campaign in a webinar that took place on May 10, 2018.
Previous webinars are available here.
June 15, 2018 letter opposing Assembly Bill 813 on CAISO expansion: Proposed CAISO expansion would not deliver the promised benefits and there are cheaper and more effective ways to address electric transmission issues.
April 25, 2018 comments on CAISO’s second TAC structure straw proposal: Addressing the concerns and issues raised by CAISO with respect to its second straw proposal on the TAC structure.
February 15, 2018 sign-on letter calling for TAC structural change: Submitted by the Clean Coalition; 29 distributed energy resource developers, environmental groups, and energy experts calling for a change in the TAC structure to charge transmission use charges for energy using the transmission grid.
February 15, 2018 Clean Coalition white paper developed on TAC rate design: Outlining the specific cost-shifting impacts, relationship to cost-causation, legal requirements, and specific technical aspects of TAC rate design.
February 15, 2018 comments on CAISO’s first TAC structure straw proposal: Addressing the concerns and issues raised by CAISO with respect to its first straw proposal on the TAC structure.
Previous regulatory filings are available here.
Exploding transmission costs are the missing story in California’s regionalization debate | Utility Dive (July 5, 2018)
Expanding the Energy Imbalance Market Is the Right Way to Regionalize California’s Grid | Greentech Media (March 13, 2018)
Let solar-roof savings shine on all ratepayers | Los Angeles Daily News (June 23, 2017)
California transmission fee overhaul could set a new deal for distributed solar | pv magazine (May 5, 2017)
Level the playing field for clean energy | The Sacramento Bee (March 6, 2017)
Previous media coverage is available here.