Designing Electricity Rates for An Equitable Energy Transition

November 5, 2021
Severin Borenstein, E.T. Grether Chair in Business Administration and Public Policy, Faculty Director, Energy Institute at Haas Professor, University of California, Berkeley
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This presentation examines the causes and distributional consequences of the high prices for residential electricity charged by California’s investor-owned utilities (IOUs). It also considers reforms that would improve both the efficiency and equity of residential electricity pricing. We estimate avoidable (marginal) costs of electricity and demonstrate that IOU prices are two to three times higher than these cost estimates. California’s electricity prices are high because nearly all fixed costs are recovered through volumetric prices, because of subsidies for low-income households and customers with rooftop solar, and because rates are used to fund objectives not directly related to the provision of electricity. Prices are set to rise further due to wildfire mitigation and other factors. High and rising prices undermine efforts to decarbonize transportation and buildings through electrification. Moreover, we show that the current rate structure is highly regressive, more so than other ways of raising revenue, like a sales or income tax. We discuss the viability of alternative ways of recovering the costs of the electricity system that are more efficient and more equitable, with a focus on the creation of income-based monthly fixed charges on electricity bills.

Severin Borenstein is Professor of the Graduate School in the Economic Analysis and Policy Group at the Haas School of Business and Faculty Director of the Energy Institute at Haas.  He is also Director emeritus of the University of California Energy Institute (1994-2014).   He received his A.B. from U.C. Berkeley and Ph.D. in Economics from M.I.T.  His research focuses on business competition, strategy, and regulation.  He has published extensively on the airline industry, the oil and gasoline industries, and electricity markets.  His current research projects include the economics of renewable energy, economic policies for reducing greenhouse gases, alternative models of retail electricity pricing, and competitive dynamics in the airline industry.  Borenstein is also a research associate of the National Bureau of Economic Research in Cambridge, MA. He served on the Board of Governors of the California Power Exchange from 1997 to 2003. During 1999-2000, he was a member of the California Attorney General’s Gasoline Price Task Force.  In 2010-11, Borenstein was a member of U.S. Secretary of Transportation Ray LaHood’s Future of Aviation Advisory Committee.  In 2012-13, he served on the Emissions Market Assessment Committee, which advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases.  In 2014, he was appointed to the California Energy Commission’s Petroleum Market Advisory Committee, which he chaired from 2015 until the Committee was dissolved in 2017.  From 2015-2020, he served on the Advisory Council of the Bay Area Air Quality Management District. In 2019, he was appointed to the Governing Board of the California Independent System Operator.

 

Reliability, Renewables, and Regionalism–A Perspective on Key Energy Issues in California

October 29, 2021
Jan Schori, California ISO Board of Governors
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This presentation will provide a personal overview of key energy issues in California, with some lessons learned as a result of 40 years of practical experience in the industry, and a few newcomer insights into the California Independent System Operators’ (ISO) objectives with a focus on today’s energy mandate–reliability and fighting climate change through transformation of our energy supply to renewable sources of power. The ISO manages the flow of electricity across the high-voltage, long-distance power lines for the grid serving 80 percent of California and a small part of Nevada. It also operates competitive wholesale power markets designed to promote a broad range of resources at lower prices.

Jan Schori was appointed to the California Independent System Operator (ISO) Board of Governors by Governor Gavin Newsom in February, 2021. After completing her legal education at UC Davis’ Martin Luther King School of Law, Jan began her professional career with the Sacramento Municipal Utility District (SMUD) as an attorney in 1979. Jan spent 15 years on the legal team at SMUD and held the role of General Counsel and Secretary for six years. In 1994, Jan was promoted to general manager and chief executive officer and held that role for more than 14 years, making Jan the longest serving CEO in SMUD’s history. During her tenure as CEO, SMUD earned a reputation for its renewable energy commitment and strong energy efficiency programs, and was ranked first in the country for commercial customer satisfaction by JD Power & Associates. After retirement from SMUD, Jan was elected in 2009 to the North American Electric Reliability Corporation’s (NERC) board as an independent trustee and served in this role for 12 years. She also chaired Valley Vision and served on the boards of CalCEF Ventures and CalCEF Innovations. She continues to serve on the Climate Action Reserve (CAR) Board of Directors as a board and executive committee member and Audit Committee chair.

The Role of Distributed Energy Resources and Customer Participation in California’s Clean Energy Future

October 22, 2021 – 10:30am to 11:50am PST
Darcie Houck, Commissioner, California Public Utilities Commission
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California has been at the forefront of clean energy policies and grid modernization initiatives for decades; however, meeting the state’s ambitious 2045 renewable energy and zero-carbon goals, while maintaining affordable rates and a reliable electric grid, will require broad changes in the way we consume energy and interact with the electric grid. This presentation will discuss the role of distributed energy resources in meeting the state’s changing electric grid needs, current opportunities and ongoing policy developments to support widespread load flexibility, and ongoing efforts to make clean energy technologies and programs accessible to all Californians.

Commissioner Darcie L. Houck was appointed to the California Public Utilities Commission (CPUC) by Governor Gavin Newsom on Feb. 9, 2021. She formerly served as Chief Counsel for the California Energy Commission since 2019.

Commissioner Houck was an Administrative Law Judge at the CPUC from 2016 to 2019, a Partner at Fredericks Peebles & Morgan from 2005 to 2016, and Staff Counsel and Policy Advisor at the California Energy Commission from 2000 to 2005.

Commissioner Houck is an expert in nuclear decommissioning, environmental equity, and safety policy. She has an extensive background representing Native American tribes throughout the country on matters involving energy, natural resources, land claims, and water rights, among others.

Commissioner Houckis a member of the California Indian Law Association, California Lawyers Association, Schwartz-Levi Inn of Court, Women Lead and the Association of Women in Water, Energy, and Environment. She earned a law degree from the University of California, where she also earned a Master of Science in community development.

Environmental Justice and Climate, Air Pollution, and Economic Decisions in the U.S. Power Sector

October 15, 2021
Ines Azevedo, Associate Professor of Energy Resources Engineering, Senior Fellow at the Woods Institute for the Environment and the Precourt Institute for Energy
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Electricity generation is a large contributor to PM2.5 air pollution. However, the demographic distribution of its resulting exposure is largely unknown. We estimate the health effects from air pollution from electricity generation in the US, for each of the seven Regional Transmission Organizations, for each US state, by income and by race. Exposures are higher for lower-income than for higher-income, but disparities are larger by race than by income. Geographically, we observe large differences between where electricity is generated and where people experience the resulting air pollution health consequences: for 36 US states, most of the health impacts are attributable to emissions in other states. Then, we discuss the issue of improved air quality and human health, which are often discussed as “co-benefits” of mitigating climate change, yet they are rarely considered when designing or implementing climate policies. We have developed and implemented a model that optimizes emissions reductions costs from the U.S. power sector for climate and health benefits under retirements and new plant construction decisions. We determine the best locations for replacing power plants with new wind, solar, or natural gas to meet a CO2 reduction target in the United States. We employ a capacity expansion model with integrated assessment of climate and health damages, comparing portfolios optimized for benefits to climate alone or both health and climate. The model estimates county-level health damages and accounts for uncertainty by using a range of air quality models (AP3, EASIUR, and InMAP) and concentration−response functions (American Cancer Society and Harvard Six Cities). We find that reducing CO2 by 30% yields $21−68 billion in annual health benefits, with an additional $9−36 billion possible when co-optimizing for climate and health benefits. Total health benefits equal or exceed climate benefits across a wide range of modeling assumptions. Our results demonstrate the value of considering health in climate policy design and the need for interstate cooperation to achieve additional health benefits equitably.

The Energy Equity Gap: Unveiling Hidden Energy Poverty

October 1, 2021 | 10:30am to 11:50am PST
Destenie Nock, Assistant Professor, Engineering and Public Policy, Assistant Professor, Civil and Environmental Engineering, Carnegie Mellon University
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Income-based energy poverty metrics miss people’s behavior patterns, particularly those who reduce their energy consumption to limit financial stress. Using a residential electricity consumption dataset, we determine the outdoor temperature at which households start using home cooling systems. Using this inflection temperature, we calculate the relative energy poverty within a region, which we define as the energy equity gap. In our study region, we find that the energy equity gap between low and high-income groups ranges from 4.7°F to 7.5°F. In 2015-2016, within our population of 4,577 households, we found 86 energy-poor and 214 energy-insecure, meaning they are at risk of heat-related illness and death. In contrast, the traditional income-based energy poverty metric identified just 141 households as energy insecure. Only three households were defined as energy-poor or energy-insecure by both our temperature-based measure and the traditional income-based measure. This minimal overlap shows the value of considering consumer behavior when identifying energy poverty and energy insecurity.

Affordable Housing: An Immersive Energy Literacy Environment

September 24, 2021 10:30am to 11:50am PST
Freddy Paige, Assistant Director, Virginia Center for Housing Research, Assistant Professor, Virginia Tech
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Please join in on a conversation about how to discuss energy in an inclusive manner. By design, affordable energy efficient homes can be powerful influencers of Energy Literacy. A limiting factor in a person’s ability to understand energy is energy’s varying form and sometimes invisible presence. The specific Energy Literacy concepts discussed in this conversation will be: human use of energy is subject to limits and constraints, conservation is one way to manage energy resources, electricity is generated in multiple ways, social and technological innovations impact the amount of energy used by society, and energy use can be calculated and monitored. By using immersive technologies, virtual reality, and augmented reality, we have an opportunity to share energy literacy lessons with people even if they do not live in an energy efficient home, YET.

Global Energy Manager’s Workshop 2021 (Online)

On October 19-20, 2021, UC Davis will host the third Global Energy Managers Workshop, where facility managers, students, and faculty from around the world will meet to share and learn about energy-saving, cost management, and carbon reduction strategies.

This year’s event will be online via Zoom. We have an exciting agenda and hope you can participate.

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Evaluating Water Loss Performance Standards – An Economic Leak Loss Reduction Model

Tuesday, August 24 from 10am to 11:30am PST

The UC Davis Center for Water-Energy Efficiency (CWEE) developed an economic optimal leak loss model and performed a study using water utility data from four different states to evaluate the results of the CWEE model and others* (including the State Water Board’s current model). CWEE recently performed a similar assessment tailored for California by comparing economic models using California utility data only. Attend this public webinar to learn about the UC Davis Economic Optimum model and how it compares to the proposed California model.

The purpose of this webinar is to inform stakeholders in the water loss space about the findings of CWEE’s research. This topic is relevant to California utilities and policy makers and will provide data driven science for stakeholders to consider during the upcoming Water Loss Performance Standards rulemaking by the SWRCB. This webinar will be followed up by 1-2 shorter webinars open to the public to provide more in-depth question and answer sessions. Timing currently TBD.

* This work is currently in the peer-reviewed publication process. Learn more about the study and review a related publication here.

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Greening Cement: A Primer on Technologies and Policies to Support California’s Transition to Low-GHG Cement

Thursday, August 26 from 11am to 12pm PST

As California and the nation push towards reducing greenhouse gas (GHG) emissions, cement production has emerged as an area of critical importance. Reducing GHG emissions from cement production is complex due to the ways that cement is produced, and the need for cement to support critical civil infrastructure systems over lifespans measured in decades. At UC Davis, there is ongoing research examining technology and policy drivers to mitigate these GHG emissions while maintaining performance.

In this special webinar, UC Davis faculty will discuss recent developments in sustainable cement, including critical technologies, performance considerations, policy structures, and the importance of stakeholder coordination. A panel of experts in the field will provide feedback and context. There will be time for discussion and Q&As so please bring your experiences and questions to share.

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image of large black pipes and machinery to move them.

The Big Shift: Lessons Learned in Converting UC Davis Buildings from Steam to Hot Water

Thursday, June 17th from 11am to 12pm PST

The Big Shift is a transformative infrastructure project taking place on the UC Davis campus where building heating systems are being converted from steam heat that is generated by natural gas to hot water that is generated by electricity. The Big Shift will help the university achieve its goal of becoming carbon neutral by reducing reliance on fossil fuel.

In this special GEM webinar, UC Davis staff and partners will candidly discuss the project to date and lessons learned, including critical design considerations and the importance of stakeholder coordination. There will be plenty of time for discussion and Q&As so please bring your experiences and questions to share.
Webinar Sponsor: Siemens
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