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Signed by Governor Pete Wilson: June 24, 1998Adopted by Energy Commission: December 17, 1997
Publication Number: P105-97-001
State Energy Plan Committee Members
The Executive Summary of this document is available below. Printed copies of this document are available from the Commission publications unit by calling 916-654-5200. Please ask for publication number P105-97-001. Or you can download an Adobe Acrobat version (below). The Notice of Availability is also on line
Download Critical Changes: California's Energy FutureAdopted by Energy Commission December 17, 1997, Signed by Governor Pete Wilson: June 24, 1998. (37 pages, 1,200 kilobytes).
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Message From Governor Pete Wilson
Dear Fellow Californians:
California is the gateway to the new millennium -- a state rich in diversity and vitality of its people, natural resources and energy. During the last seven years, we have built a world class economy, fueled by the most diverse and efficiently-generated energy supplies in the world, while holding fast to a strong environmental ethic which preserves the health and beauty of our state. California's lasting energy legacy is one of accurate and independent information on future energy supplies, prices and demand, government alliances with the business communities promoting energy efficiencies and exportable energy products, an unwavering pursuit of new technologies and achieving competition in our energy markets. Competition no longer ends with petroleum and natural gas. Beginning this year, California consumers will have choices in their electricity suppliers as we become the first state to bring competition to the largest combined private electric utilities in the world. I had the honor of signing the Electricity Industry Restructuring Act (AB 1890) into law in September 1996. This monumental bill provides the framework for lower generation costs, and for the first time, the ability for customers of the state's investor-owned utilities to choose their electricity provider. The California Energy Plan, our state's energy policy, recognizes that leadership, consensus and commitment are key to an aggressive and effective state energy policy. The heart of this plan upholds California's long-standing commitment to environmental quality, economic vitality, and protection of the public interest through technological advancements. It outlines strategies to build on competition in all energy-related markets and addresses the state's complex transportation problems. The plan acknowledges that government bureaucracy must change the way it conducts business by streamlining the energy facilities licensing process, consolidating duplicative state energy-related services, and ensuring that government provides consumers only those services not adequately provided by competitive markets. While California's energy successes are truly global in their scale, we must continue our efforts to build a reliable, secure and environmentally balanced energy network. The California Energy Plan provides a policy framework to meet the energy challenges of the next century and maintain California's rightful place as the front-runner in energy development and technologies.
Sincerely, |
Preface
IN 1974, the California Legislature established the California Energy Commission as the state's primary energy policy-making agency to address the energy challenges facing our state. The Energy Commission was given and retains the responsibility for ensuring California has a reliable supply of energy consistent with protecting the state's environment, public health and safety, and with enhancing the economy.
The Energy Commission prepares a State Energy Plan, commonly called the Biennial Report, which identifies the emerging trends related to energy supply, demand, conservation, public health and safety, and the maintenance of a healthy economy. Adopted by the Energy Commission, and approved by Governor Pete Wilson, this report is the official California Energy Plan.
During the course of this proceeding and the development of this California Energy Plan, several actions affecting the energy industry have occurred. The most significant of these activities was the passage of Assembly Bill 1890 (Brulte) in September 1996 (Chapter 854, Statutes of 1996). This report rests on the public record in the State Energy Plan proceeding and the extensive public record developed in the California Public Utilities Commission's electricity industry restructuring proceeding. In addition, the public records developed for the Energy Commission's Electricity Report and Fuels Report also were used for input.
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Executive Summary
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"California's vitality depends on a reliable, efficient and affordable supply of energy." |
Over the last 20 years, energy systems and services have expanded. California now meets its energy needs using a variety of sources from traditional fossil fuels and nuclear technologies to renewable energy resources, such as wind, solar, geothermal and biomass. Technological advances and government standards and programs have resulted in increased energy efficiency, more product and service options and a cleaner environment. Deregulation has promoted competition in energy commodities such as oil, natural gas and, now, electricity.
In the near term, the most dramatic changes in the energy sector are taking place in the electricity industry. As a result of Assembly Bill 1890 (Chapter 854, Statutes of 1996), many Californians will have the opportunity to choose their electricity provider as of April 1, 1998. By January 1, 1999, they will also be able to shop for other electric services, such as metering options. Because of these changes, this California Energy Plan emphasizes the new competition in electricity generation, in contrast to the discussion of issues in the petroleum and natural gas sectors. However, future state energy policy may emphasize other sectors.
Competitive Energy Markets. California's energy oversight agencies must facilitate competition to ensure that the promise of lower prices and more value-added services are realized. This can be achieved through adoption and enforcement of fair, clear and effective market rules and by ensuring that consumers are provided with sufficient information to make informed energy-related decisions. Government must also reduce unnecessary barriers to market entry and streamline the licensing process for electric generation facilities.
Economic Expansion. California has one of the largest economies in the world. Consequently, California's economy must be robust in the face of uncertainty, providing for economic growth in conjunction with environmental protection for today and for future generations. Main-taining the energy needs of today's economy requires vast quantities of reliable energy at reasonable prices. To maintain or expand California's preeminence as a world class economy requires technological advancements that enhance productivity and improve the environment.
In the energy industry, technological advancement must focus on increasing demand and supply side efficiencies, improving the environment by creating cleaner energy conversion technologies at all levels of energy pro- duction and end use, and satisfying California's mobility requirements through diverse transportation technologies that increase fuel economy, take advantage of cleaner fuels and expand transportation options. Advancements in these areas, among others, will make California a global leader in the world marketplace for energy technologies while benefiting all Californians.
Public Interest. Competition does not provide all the answers to California's needs. Unlike certain com-modities, energy is essential for the health and safety of all Californians. Thus, the state must ensure that the energy infrastructure is safe, clean and reliable. The public interest also demands that energy be available for home, work, recreation and transportation. Communities can help meet these public interest demands through efficient land use designs that reduce total energy demand and the adverse environmental impacts of energy use. California's energy oversight agencies must continue to work together to avoid, where possible, disruptions to the state's energy supplies and to minimize any adverse impacts.To serve the public interest, government will continue to have varying levels of regulatory oversight of the energy industry. The electricity transmission and distribution systems will continue to be fully regulated monopoly services to ensure system safety, reliability and sufficiency. Rate design principles for monopoly services, however, must be crafted to reward utility efficiency without subsidizing competitive service offerings. Government will also remain responsible for emergency planning and enforcement of existing environmental laws applicable to energy facilities.
In other areas, government must evolve to complement and facilitate competition. This will include programs to assist providers of energy efficiency services and renewable energy providers to compete with other energy providers without government subsidies. Although state energy agencies will continue to collect and analyze energy-related information, this information will be used for policy development, consumer education and protection, and energy market monitoring. State programs designed to increase energy efficiency are transforming from subsidy- or mandate-based to market-based.
Energy Risk Management. California has long advocated diversifying its energy resource base as a means to address the risks of supply disruptions or price volatility of a single fuel. For example, the transportation sector currently relies on petroleum products to meet nearly all its energy needs. Fuel supply problems and price volatility pose risks to consumers and to the state's economy.
Adopting strategies to encourage alternative fuels allows consumers and the state greater flexibility in risk management efforts. Such strategies can include improving the efficiency of fuels used, developing different fuels and technologies, and requiring that all fuels meet or exceed the same environmental and performance levels. As the transportation sector diversifies the fuels used and improves fuel efficiency, adverse impacts on the system as a whole can be mitigated.
Government can partner with industry to lower costs, improve availability and remove technology constraints to encourage greater use of alternative fuels and technologies. Educating customers about the benefits of alternatives can significantly assist in greater use.
This California Energy Plan lays out the energy issues facing California in the years ahead and what state government can do to respond to them, with emphasis on the changes in the electricity sector. Part I of this report briefly describes the major issues within seven energy-related government functions and recommends responsive policies and strategies. Part II describes the State's energy system, including a discussion of electricity industry restructuring, the anticipated growth in energy demand, the future supply of petroleum and natural gas, and transportation-related issues.
The strategies contained in this report touch on all the state's energy-related functions and programs. Coordinated efforts among the agencies responsible for energy oversight in the state will be required to implement these strategies.