PORTLAND, Ore.— Pacific Power has submitted its annual California Energy Cost Adjustment Clause (ECAC) filing. The ECAC accounts for the actual costs of procuring power as well as costs and savings connected to the California Cap-and-Trade Program. The rate impact varies by customer type, but results in an overall 13.6 percent, or $14.5 million, increase in costs to customers.
If approved by the California Public Utilities Commission as requested, these changes would go into effect Jan. 1, 2023.
“We are in a volatile time for energy prices in the West,” said Matthew McVee, vice president of regulatory policy and operations. “Extreme heat in the west and international conflict have both pushed energy prices upward. Likewise, the market for greenhouse gas allowances and credits has also fluctuated. Our 10-state footprint and diverse sources of power generation allowed us to manage costs as well as possible. However, the spike in the cost of electricity we need to buy on the market to serve customer needs, the continuing decline in hydropower generation caused by the long-term drought, and increasing prices for natural gas, which is used in some of our generating plants, exceed prior years’ expectations.”
Pacific Power was able to offset some of these costs and impacts to customers due to its participation in the Western Energy Imbalance Market (EIM). The EIM enables access to even more low-cost, zero-carbon energy across the entire Western U.S. market while reducing emissions and increasing reliability.
In 2021, Pacific Power provided its California customers with over $1 million in savings through its participation in the EIM, according to the California Independent System Operator. Those incremental savings are passed through to customers in the ECAC, but even these savings were insufficient to completely offset the increases caused by market prices.
Greenhouse Gas and Cap-and-Trade
In 2006 the California Legislature passed the Global Warming Solutions Act, requiring the state to develop regulations to reduce GHG emissions by at least 40 percent below 1990 levels by 2030. The California Air Resources Board (ARB) established a Cap-and-Trade Program that caps the GHG emissions that a facility is allowed to emit, and covered entities are required to procure GHG emissions allowances for all emissions that exceed the cap. Under the law, Pacific Power and other California electric utilities were allocated GHG emissions allowances to mitigate compliance costs for retail customers.
Beginning in 2015, electric utilities were required to include Cap-and-Trade compliance costs within their ECAC filings. Revenue from the sale of GHG allowances are then credited to residential and small business customers (less necessary revenue for administrative and outreach costs) through Pacific Power’s California Climate Credit. The California Climate Credit is distributed to customers twice a year in April and October. GHG allowance revenue also supports clean energy and energy efficiency programs.
The upfront costs of the program are included in the ECAC filing rate impacts, but the customer credits are not. If this filing is approved, residential and small business customers will receive a $269 credit in April 2023 and an identical credit in October 2023. Residential and small business customers can also expect to receive their second 2022 Climate Credit of $133 in October of this year. The expanded credits will more than offset the ECAC-related cost increase for residential and small business customers and provide them with relief for their bills.
Helping Customers Manage Higher Energy Costs
Pacific Power’s most vulnerable customers can access a variety of bill support programs through local community action agencies. In addition, the company supports the California CARE program. In 2021, close to one-third of Pacific Power’s 36,000 residential customers received discounts toward their bill payments through the CARE program, which amounted to $3.6 million in bill discounts. Pacific Power’s recent general rate case proposed to increase the amount of the discount offered to CARE-eligible households from 20 percent to 25 percent. If approved, this additional discount would reduce the impact of rate adjustments to the most vulnerable customers.