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HomeMy WebLinkAbout1994-12-13 - AGENDA REPORTS - DEREGULATION CA UTILITIES (2)AGENDA REPORT �er ity anager Ap al Item to be presented by: Jan Heidt NEW BUSINESS DATE: December 13, 1994 SUBJECT: DEREGULATION OF CALIFORNIA UTILITIES DEPARTMENT: City Council BACKGROUND Councilmember Heidt received a letter from the Local Government Commission, dated November 30, 1994. The letter pertains to the proposed deregulation of California utilities by the California Public Utilities Commission. Councilmember Heidt will present this issue to the Council at this meeting. RECOMMENDATION Council discuss. ATTACHMENT Letter dated November 30, 1994 agnrpt.util.dmg Continued To: --,d --� Agenaa Item: 1111111111111 ;;;111111 `111 : sa►� LOCAL GOVERNMENT COMMISSION 909 12th St. • Suite 205 a Sacramento, CA 95814 • 916-448-1198 November 30, 1994 Board of Direcmrs Supemisor Gary Paton aan-peoiOn County of Sunni Cror C°"ndlmember N.L.ue rayl°" Councilmember Janice Heidt City o(Oakland s°pemiF°r Bit Ce°te. City of Santa Clarita County of Rl Durad° 23920 Valencia Blvd. Suite 300 Mayor Rick Cole Santa Clarita, CA 91355 City of Pasadena _ Mayor Had Conklin Dear Councilmember Heidt: City of Sanaa Barbara Mayor Rosemary Corbi" You may be aware that the California Public Utilities Commission CPUC has City of Richmond proposed the deregulation of California utilities. This could be very benefical to Supervisor city ofIoryboll the State's ratepayers by lowering utility rates. However, there are also serious, C°uncilmemberRuth Oalanter unintended impacts to local government which must be addressed in the process city of Los Angeles of deregulation. Mayor Jerry Harman City if E"°ndido A very significant problem has arisen already - before deregulation has even been Counnlmember John Heilman adopted. Anticipating deregulation, major California utilities have closed or `i'y `if `"e't Hotyw(vid curtailed the activity of their biomass plants. This has, to date, resulted in a loss S"pciv,km Lionenc``. La"fen' of 250 jobs and sent almost 778,000 tons of wood waste to landfills, County 9f San Luis Obipo Mayor John Lom,vilte City of Rata The impact of this trend on cities and counties 'struggling to meet AB 939 Councilmember Mike McGinnis recycling mandates could be staggering. Biomass plants save. an estimated 4.2 CitvofCut. million tons annually of landfill capacity (while they generate up to $110 million Mayor O>,, r A. Rios in local taxes and provide electricity to 800,000 homes). Even more significant is CtynfwM... i"Ahe the impact of the closure of these plants on composting. Composting facilities Mayor Grace n Bewh cbell Glyay Huntington are now beginning to receive a large influx of wood waste which previously was burned for energy. This is creating an excess supply of compost and driving Executive Director Judith A. Corbett markets down. Chippers used by biomass plants, which have been serving double duty in the preparation of compost, are rapidly being idled - leaving some communities with no place to process their compostable materials. Deregulation is currently being examined by the CPUC, the California Integrated Waste Management Board and the State Legislature. Now is the time to make sure that local government concerns are included in the debate. Enclosed are a model resolution, a fact sheet, and sample letters for your use. We ask that you send copies of your resolution and letters to the LGC. We will be calling in the next few days to answer any questions you might have. Sincerely, 1/,,�— JJA4 (��i� �l 1N, E C E 4 V E D JUDIT144A. CORBETT U �'�4 Executive Director CITY COUNCIL ^1;Y OF SANTA CLARHA Ric 916-418-5246 Printed on recyLW paper CPUC PROPOSAL AFFECTS LOCAL GOVERNMENTS TOO! Last April, the California Public Utilities Commission (CPUC) unveiled a radical plan to de -regulate the state's electric utility industry. While the plan was touted as one that would reduce California's electric rates and allow customers to choose sources of power, the plan has come under attack from a broad coalition including renewable energy developers, advocates for the elderly and the poor, unions, consumer ratepayer advocates, electric utility shareholders, timber companies and more. Local governments have been noticeably absent. However, the potential impact of the CPUC plan is already being felt in some California communities because utilities are shutting down "biomass" power plants, which will make it harder for local governments to meet the landfill diversion requirements of AB 939 and have a negative impact on the beneficial re -use and composting of green wastes. The Local Government Commission wants to let you know how to be a player in shaping policy at the CPUC, California Integrated Waste Management Board (CIWMB) and the California Legislature. Here are the facts: The biomass industry generates roughly 800 megawatts of electricity, more than enough for 800,000 households. More importantly, these power plants, and related composting facilities, have created from 3,000 to 4,000 jobs as well as 250 new small businesses that collect wood waste as fuel. The plants also generate approximately $37 million in annual tax payments and remove an amount of air pollution equal to that emitted by 1,500,000 cars. Local landfill capacity is also expanded. The 2.25 million tons of urban wood waste that currently supplies biomass facilities is equal to 8% of the current volume of waste going to landfills. • Biomass power plants are also major generators of local government tax revenue. The Woodland Biomass Power Ltd. plant, for example, is one of the largest tax payers in Yolo County. • These plants, in addition, are credited with providing the most cost effective way to prevent forest fires in rural California counties. According to the U.S. Forest Service, 750,000 tons of dead and dying trees were removed from National Forests and converted to electricity in 1993. The Service has warned the CPUC that its proposal would "increase the risk of catastrophic wildfire..." The State Board of Forestry has pointed out that the biomass industry has provided an immense benefit to the Lake Tahoe basin, where approximately 25 % of the dead trees in the area have been removed, reducing fire risk to this national recreational gem.. • It is estimated that five biomass plants that processed 778;000 tons of potential feedstock have been closed over the past few months. These moves by state electric utilities have resulted in the loss of 258 jobs and idled $25.8 million in equipment assets. Despite this long list of benefits, several biomass plants are being shut -down by the state's utilities because electricity from these generators costs more than some of what is available in today's power markets. These closures have already made composting more expensive for local governments.. Wood and agricultural materials formerly processed by biomass facilities have flooded the immature and unstable composting market, driving down prices and corresponding revenues to local governments. Costs have also increased dramatically for grinders of wood and tree prunings who can no longer rely on biomass facilities as a market for wood waste which cannot be sold to compost and mulch processors. A study released earlier this year by Sacramento -based California Futures predicted the supply of compost would rise 900% by the year 2000. The study notes the oversupply problem which has plagued other markets for secondary materials such as glass and some papers is much worse for compost because of a lack of current market development efforts, What can local government officials dol Enclosed is a model resolution for adoption by your city and county stating the immense economic and environmental benefits the biomass industry provides to your community. You might be interested to know the County Supervisors Association of California agreed to co-sign a fire prevention Strategic Plan that recognizes the critical contributions of the biomass industry on November 17th. Also enclosed is a model letter to be adapted for your use to communicate your concerns about the closure of biomass facilities in your jurisdiction to the following key decision -makers (Sen. Tim Leslie will propose state legislation to protect the biomass industry this coming January): Daniel W. Fessler, President California Public Utilities Commission 505 Van Ness Avenue San Francisco, CA 94102 Jesse Huff, Chairman California Integrated Waste Management Board 8800 Cal Center Drive Sacramento, CA 95826 Senator Tim Leslie California Legislature 1200 Melody Lane Suite 110 Roseville, CA 95678 Ifyou need additional information, please cal Michele Kelso at (916) 448-1198. MODEL LETTER The. California Integrated Waste Management Board (CIWMB) has, over the past few months, certified that California will divert 25% of the state's solid waste away from landfills to meet the important AB 939 legislative mandate designed to clean -up the Golden State and provide jobs and tax revenue in these times of fiscal stress. However, the unveiling of a proposal to de -regulate the production and sale of electricity in this state by the California Public Utilities Commission (CPUC) raises questions as to whether local governments will be able to reach the 50% diversion target set for the year 2000. Why? The CPUC plan threatens the state's biomass Power plant operators since it is focused solely on promoting cheap electricity. Already, five such plants have been shut down by utilities. The CPUC plan, though not yet enacted, already threatens 320 MW of biomass projects that local governments can use to satisfy 10% of each county's 50% year 2000 diversion goal. The plant closures occurring today are severely threatening a related industry: composting and mulch operations. These struggling small businesses typically rely on biomass plant revenues to cover start -up and operating costs. California needs private investment in chipping facilities - - which process the wood waste -- if mulching and composting are to be a viable enterprise. Compost could account for an additional 20 to 30% of cost-effective diversion options. All told, then, the CPUC plan disrupts the infrastructure local governments are counting upon to meet well over half of AB 939 diversion requirements over the next five years. L.A. City Councilmember Ruth Galanter summed up what should concern local government officials about the CPUC proposal in a statement this last summer: ...I understand the Commission's proposal relies on the "market" to set the value of environmental investments, and consensus to dictate each utility's environmental commitment. The environment, however, cannot be desegregated, packaged, and sold like widgets to individuals. Because environmental costs and benefits accrue to society as a whole, it is government's responsibility to ensure that every individual pays their share of these costs... Every California citizen benefits from the operation of biomass facilities, whether one breathes cleaner air in the San Joaquin Valley, is protected from wild fires in the northern Sierra, or has a cleaner neighborhood in downtown Los Angeles. We urge you to halt any further closure of biomass facilities and work toward a legislative and/or regulatory solution to this immense local government problem.. MODEL RESOLUTION COMMUNICATING CONCERNS OF CALIFORNIA'S LOCAL GOVERNMENTS ON CPUC ELECTRICITY DE -REGULATION In the matter of communicating the concerns of the City/County of to the California Public Utilities Commission (CPUC), California Integrated Waste Management Board (CIWMB) and the California Legislature regarding the closure or threatened closure of the state's biomass power plants and corresponding impacts upon the ability to comply with the state's AB 939 landfill diversion goals. WHEREAS, the City/County of recognizes that increased competition in a restructured electric utility industry promises benefits in the form of much needed rate relief for California ratepayers, but among the unintended consequences are negative impacts associated with the state's waste management goals; WHEREAS, the state's existing biomass power plants bring immense benefits to the entire state of California, including: the saving of landfill capacity and compliance with AB 939; the generation of major tax revenue to local governments; the generation of electricity from a renewable resource; the creation of jobs as well as small businesses; air quality benefits due to reduced open-field burning of agricultural waste and reduced methane emissions from landfills; and reduction of forest fire hazards in rural counties; WHEREAS, the CPUC has proposed an overhaul of existing regulation of the state's three investor-owned utilities that has destabilized the biomass sector and has caused the utilities to close or curtail at least five existing biomass plants; WHEREAS, significant amounts of wood waste sent formerly to biomass power plants is now being shipped to landfills; WHEREAS, California needs to retain private investment in chipping facilities now associated with existing biomass power plants in order for mulching and composting to be a viable enterprise; WHEREAS, there has been little analysis of the impacts of the CPUC proposal on local governments, the biomass and composting industry or the CIWMB strategy for attaining AB 939's 50% landfill diversion mandate by the year 2000; NOW, THEREFORE, BE IT RESOLVED THAT the City/County of hereby expresses its concern over the impact of the CPUC proposed electric utility restructuring on local governments and encourages protection of the broad social and environmental benefits provided by the biomass industry. Be it further resolved that this resolution be sent to the California Public Utilities Commission, California Integrated Waste Management Board and the State Legislature.