California’s budget process is being used – or misused – to make a major change in how the state procures electric power. What could go wrong?
California’s governors and legislators have, as often noted in this space, developed a bad habit of using the state budget to make sweeping changes in state law while minimizing or ignoring traditional legislative procedures.
They do it with so-called “budget trailer bills” that are often passed in batches coincident with the budget each June after minimal hearings and debate. Like the budget, they take effect immediately and are shielded from being challenged via referendum.
It can take weeks or even months for those outside the Capitol to figure out the real-life impacts and decipher the dense legalese of trailer bills, which often run hundreds of pages.
The Legislature is once again plowing through the latest budget, this one proposed by Gov. Gavin Newsom for the 2023-24 fiscal year, prior to the last frantic – and largely secret – negotiations on a final version.
Dozens of would-be trailer bills are kicking around, some of them legitimately attached to the budget, and some just using the process to minimize scrutiny.
One of the most complex, potentially important trailer bills, not yet formally introduced, would overhaul how electrical energy is procured. It would make the state Department of Water Resources the state’s central purchaser of power, citing the need to construct or acquire enough non-polluting generation to meet the state’s self-proclaimed goal of becoming carbon-neutral by 2045.
What could possibly go wrong?
California’s track record on managing the state power supply is, to say the least, spotty.
A quarter-century ago, California experimented with what was termed “deregulation,” but really wasn’t, of electricity, and it quickly became one of the worst human-caused disasters in state history. It allowed power suppliers to game the system, pushed costs through the ceiling, drove one utility, Pacific Gas & Electric, into bankruptcy, almost did the same to another, Southern California Edison, and was a major reason voters recalled a governor, Gray Davis.
The Department of Water Resources became, for a time, the state’s central power buyer because its water supply system was, and is, a major generator of electricity and a major purchaser.
After the experiment was repealed, California returned to its previous system, based on purchases by utilities such as PG&E and SCE and regulated by the California Public Utilities Commission. But a few years later, the state embarked on its quest for carbon neutrality, greatly complicating the situation.
Simultaneously, the state is trying to phase out power from generation by hydrocarbons, such as natural gas, while increasing the overall supply in expectation that demand will grow as other activities, such as transportation, make the same transition to electricity.
It hasn’t gone smoothly. The state has flirted with blackouts on hot days when air conditioning imposes huge demands and has been forced to keep the Diablo Canyon nuclear plant and several gas-fired generators, which had been scheduled for closure, online to avoid shortages.
So would making the state water agency the electric power czar again be the solution to meeting deadlines for decarbonization?
The Legislature’s independent budget analyst, Gabe Petek, is one skeptic. His office issued a report urging lawmakers to take enough time to analyze such a major change and questioning its necessity and its potential effect on California consumers, who are already paying some of the nation’s highest power rates.
Petek’s report also questions the need to use a fast-track budget trailer bill for such a momentous change, saying “Ultimately, ensuring it (the Legislature) has the time and opportunities for developing a greater understanding, sufficient input from stakeholders, and thoughtful deliberation will be vital to ensuring it can make an informed decision on these important proposals.”