WHY SIERRA CLUB CALIFORNIA OPPOSES PROP 7

It is precisely because Sierra Club supports increasing renewable energy that we also oppose Prop 7. This initiative has a great goal -- 50% renewable energy by 2025-- but the tools it relies on have been tried and have failed.

California has no lack of ambitious clean energy goals. The state's Energy Action Plan calls for 33% renewable power by 2020, and utility companies are required by law to get 20% of their electricity from renewable sources by 2010. These are high bars compared to the state's 11% renewable supply when the law went into effect in 2003, and the paltry 2% of renewable energy nationally. Despite California's mandate, renewable energy has not increased by even 1% over five years. The main problem has been bad rules that undermine renewable energy, a problem that Prop 7--despite numerous policy "tweaks"-- would repeat.

Prop 7's key "repairs" always seem to miss the mark:

* It removes the penalty cap of $25 million per utility for not meeting renewable targets; sounds great until you realize that no penalty has ever been imposed.

* It requires regulators to consider environmental and other benefits-- up to a 10% premium-- when evaluating renewable contracts; but existing rules already do the same thing.

* It requires city-owned utilities, or "muni's", to comply with state targets; however Sacramento and LA--the cities with the largest muni's-- have voluntarily adopted renewable targets exceeding the state mandates.

The creators of Prop 7 completely missed the boat on the real reason why renewable energy is not growing in California. Current rules make every renewable contract compete against projected future prices of electricity from natural gas power plants. The projection is just a guess, since no one really knows what natural gas will cost in the next 10 or 20 years. In general, the state's guesses have been low; thus renewables like wind and solar are competing against a fictional low price. The second problem with using natural gas as a measuring stick for "competitive" pricing is that natural gas prices go up and down like a roller coaster. Renewable projects can take years to develop, and every year the forecasts change. A developer has to take a big gamble on what the natural gas "future price guess" will be when their contract to deliver power gets signed. The third problem, and biggest irony, is that actual natural gas power plants don't have to take any risk on natural gas prices. That is because their contracts, and state "cost recovery" regulations, allow them to pass through any fuel cost increases directly to the consumer. The only ones taking the risk are the renewable generators.

To build renewable generation, we need to be willing to pay the real costs plus allow generator companies to make a fair profit. This is how everything else in the utility system is funded, from transmission wires to nuclear power plants. And that is the main reason why everything else get built, while renewable energy does not. Prop 7, with only slight modification, would continue the current discriminatory system.

In addition to not fixing the problems, Prop 7 would make some things worse for renewable energy. It lowers the penalty rate for utilities failing to meet renewable energy targets from 5 cents to only 1 cent per kilowatt-hour; it writes five loopholes into law for avoiding payment of penalties; it creates new regulatory problems for cities with "community choice" clean energy plans; and it requires 2/3rds of the state legislature to repair any flaw--no matter how minor.

Some supporters of Prop 7 have stated a number of misleading things about the ballot initiative, and the opposition. They commonly claim, incorrectly, that Prop 7 "applies only to large utilities", as if to imply that it only goes after the big, bad boys. In fact, it would apply to utility companies of all sizes--big and small -- and a whole range of operations, including private electric service providers, community choice aggregators, city-owned utilities, and independent power producers.

Supporters argue that Prop 7 would not hurt small solar installers, because they are "excluded from Prop 7". He fails to mention, or perhaps to realize, that this "exclusion" is precisely the problem. Prop 7 redefines renewable energy in California as "solar and clean energy facilities", and then, using confusing terminology, appears to exclude smaller plants under 30 megawatts from counting as "solar and clean energy plants". Many solar facilities receiving rebates from the California Solar Initiative -- nearly all of them smaller than 1 megawatt-- also rely on selling the "green" credits, a technique that helps make this expensive power source pencil out. If small solar is disqualified as renewable, then the market for "green credits" from these facilities may be adversely affected. This would put large segments of the solar market at risk, especially as rebates continue to decrease and green credits become more important for solar projects.

Proponents claim that the argument that Prop 7 would raise rates is "also false", even though the text of the initiative has specific allowance -- in Section 3: Purpose and Intent -- for up to a 3% rate increase, referred to as a "cap". This represents up to $1 billion in potential extra utility costs per year. Renewable energy generally costs more than electricity from conventional cheap, dirty power plants. We think it's worth the price, but it is misleading to say Prop 7 won't raise rates.

Proponents have suggested that utility companies are the only real opponents of Prop 7, but this is far from the truth. In fact, it is opposed by major environmental groups, by the California Public Utilities Commission, and by sellers of renewable energy. Environmental advocates tried to get sponsors to fix Prop 7, but were rebuffed. This pushed the environmental community into a corner where they opposed Prop 7, but for very different reasons than the utility companies. Some proponents charge that opponents are being led by the firm hired to run the anti-Prop 7 campaign. But environmentalists’ concerns about this initiative were expressed verbally and in writing months before even the proposition signatures were submitted.

There is no doubt that the utilities funding the anti-Prop 7 campaign want to build more conventional power plants. It is also true that nuclear is being repackaged as an "answer" to the climate crisis, often by people who don't even believe in global warming. However, any argument that defeating Prop 7 would somehow give nuclear a boost is, at best, questionable. Currently, it is illegal to build a nuclear plant in California, and the costs of a new one would be staggering. In any case, the ballot initiative is only concerned with displacing fossil fuel and says nothing at all about nuclear power. Its 50% renewable target leaves open the question of where the 50% non-renewable portion comes from. Under Prop 7, raising the renewable target again, in order to get rid of nuclear power, would require that pesky 2/3rd vote of the legislature. This political gamble--together with our climate protection laws-- might have the unintended effect of tying us to nuclear power.

On the nuclear issue, as well as on other points, Prop 7 advocates are strong on promises but lacking on delivery.

There are better options to Prop 7, and the Sierra Club California is working to realize them. For example:

* We have prepared policy recommendations for fixing the state's renewable energy laws and submitted these to the governor and key legislators

* We are working for legislation that would raise the state's renewable target to 33% by 2020, a goal supported by the governor, regulators, and Democratic leadership in the state legislature.

* Activists are pushing for community choice clean energy plans that would allow cities to get over half their electricity from renewables.

* We are working on plans for a California "Feed-in Tariff" for renewable energy, fixed long-term payments that have proved very successful in other countries, and that are gaining support in several US states.

For those who are interested in promoting renewable energy, we urge them to walk away from failed policies and join us in learning about-- and helping to create-- effective solutions.