California recently enacted a series of legislations to combat escalating energy expenses
The California Legislature has taken a significant step towards addressing one of the state's most pressing issues – skyrocketing energy costs – by approving an energy and climate package. The package, which is currently under negotiation and may undergo further changes before Gov. Gavin Newsom signs it into law on Oct. 12, aims to reduce electricity costs for Californians who are currently paying roughly twice the U.S. average for their power, with nearly one in five residents behind on paying their energy bills.
The energy and climate package was negotiated by legislative leaders and Gov. Newsom's office. One of the key cost-containment measures highlighted in the package is the use of public financing for grid expansion, known as securitization. This strategy, which has been a point of contention for utilities, is seen as an embodiment of the strategic role of public-sector investment in driving the clean energy transition.
The securitization requirement in the California energy and climate package mandates utilities to finance a portion of grid hardening – a major factor in cost increases – through securitization (bonds). Initially, the amount to be financed through securitization was set at $15 billion, but it has been negotiated down to $6 billion. This requirement, which utilities had particularly resisted, is expected to save billions of dollars a year with the use of public financing for grid expansion.
Senator Dave Min, the person responsible for the passage of bill SB 254, which aims to reduce the costs of California's power grid, has emphasized the strategic role of public-sector investment in the securitization process. This process, a strategy for cost-containment in the California energy and climate package, includes the use of transmission financing, such as the securitization process.
The legislation also seeks to rein in utility spending on grid hardening. The three biggest utilities in California – Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric – have been criticized for driving up rates for their customers. The bill would prohibit utilities from earning profits on some of the investments they make in wildfire-related upgrades.
The California energy and climate package also includes a new "transmission accelerator" that enables utilities to use public financing to expand the state's high-voltage grid. This measure is expected to play a crucial role in addressing the energy affordability issue, which has been identified as one of the top issues the Legislature needed to address due to massive rate increases and customer outrage.
Gov. Newsom has until Oct. 12 to sign the bills into law. If signed, the California energy and climate package will mark a significant step towards making energy more affordable for Californians.
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