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Big Electric Shocks Big Oil

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When California Governor Jerry Brown signed Senate Bill 350 on Oct. 7, it looked like a huge win for the oil industry. The original version of the bill included a mandate to cut the state’s petroleum consumption 50 percent by 2030. Days before the floor vote, State Senate President Pro Tem Kevin de León, chief architect of the bill, announced that he was dropping that provision as a concession to Democrats from oil-producing parts of the state. “Big Oil might be on the right side of their shareholder reports, but we’re on the right side of history,” de León said as he announced the compromise. “Ultimately, California is going to demand that an industry which represents most of the problem has an economic and moral duty to be part of the solution.”

It was no idle threat. SB 350 envisions cutting greenhouse gas emissions to 40 percent below 1990 levels by 2030 and 80 percent by 2050. Language in the bill directs regulators to help reach those ambitious goals by making it easier for the state’s 23 million drivers to opt for vehicles that run on electricity instead of gasoline. The law requires the California Public Utilities Commission to solicit proposals from electric companies for “multiyear programs and investments to accelerate widespread transportation electrification to reduce dependence on petroleum.”

Environmentalists, who helped draft the law, were delighted. “The media was focused on the fight over cutting petroleum consumption by 50 percent, but this is going to do a lot of the same thing,” says Laura Wisland of the Union of Concerned Scientists.

California’s three large private utilities, which were also involved in crafting the bill’s language, were pleased, too. The electric companies see a chance to grab a piece of the $55 billion the state’s drivers spend each year filling up. “We really need to have a big push for charging,” Tony Earley, chief executive officer of PG&E, said in an Oct. 15 appearance at San Francisco’s Commonwealth Club. “The charging station ought to be part of our grid infrastructure.”

Thanks to SB 350, it will be. Until 2014, utilities were blocked from owning or operating any charging stations, a step regulators took to foster competition in the emerging market. Under the new law, the utilities will be key to speeding up the switch to electric vehicles. PG&E has proposed installing thousands of charging stations in Northern and Central California over the next three years. To jump-start demand, PG&E teamed up with Ford Motor and General Motors to offer discounts on electric cars to the utility’s workers, who have bought more than 700 of the vehicles under the program.

The push for electric cars will help offset the drop in electricity demand expected under other provisions of SB 350. By 2030, all buildings in California must double their efficiency. “Even with mass adoption of electric vehicles, we anticipate 1 to 2 percent growth in load, perhaps even flat to declining load,” says Pedro Pizarro, president of Southern California Edison. The company hopes to install 30,000 electric vehicle chargers in office buildings, apartment complexes, and parking lots in the next four years at a cost of $355 million.

Despite the electric companies’ new passion for greener cars, they aren’t cozying up to rooftop solar, which eats into their bottom lines. California, which accounts for half the installations in the U.S., already gets 5 percent of its power from rooftop solar. The state’s utilities “are trying to smother that in its crib,” says Michael Brune, executive director of the Sierra Club. PG&E, SCE, and San Diego Gas & Electric have all petitioned the utilities commission for rules changes that would make solar installation less attractive. Homes and businesses with rooftop solar panels would pay an extra fee to connect to the grid. They’d also pay more to buy power and earn less for selling their excess electricity back to the utilities. That would make converting to solar power two to three times more expensive for the consumer, according to Bernadette Del Chiaro, executive director of the California Solar Energy Industries Association.

Pizarro says nonsolar customers subsidize solar users by as much as $17 billion a year by covering grid upgrades, maintenance, and other costs. The utilities’ proposals, he says, are simply about making the industry “stand on its own two feet.” (San Diego Gas & Electric didn’t respond to requests for comment.) Stalling the growth of rooftop solar would make it difficult, if not impossible, for the state to meet SB 350’s central goal of having 50 percent of all power consumption come from renewable sources by 2030, no matter how many electric vehicles are on the road. The CPUC, whose commissioners are appointed by the governor, must rule on the issue by Dec. 31.

The oil industry says it will oppose utilities’ proposed charging station networks. “There have been numerous policies and proposals to reduce the role that petroleum products play in California’s energy economy over the years,” says Catherine Reheis-Boyd, president of the Western States Petroleum Association. “We are confident that the Public Utilities Commission will protect the interest of all ratepayers and that policymakers will protect the interest of taxpayers as the costs of electrification become clearer.”

Mary Nichols, who as head of the state’s Air Resources Board has helped craft the governor’s climate policies, chuckles when asked why the oil companies didn’t try to block the electrification language in SB 350. “Perhaps they should be asking their lobbyists that question,” she says. “The language of the bill was out there in plenty of time for people to see it. I’ve been accused of brilliant strategy, creating this diversionary battle so the really important part of the legislation could go through, but I really can’t take credit for this.”


12 Comments on "Big Electric Shocks Big Oil"

  1. makati1 on Thu, 22nd Oct 2015 7:46 pm 

    Ap, in response to your comment of the other day, I know I was born into the top point odd zeros one percent of the world’s population. For that I am eternally thankful, but it was not a decision of mine, just luck. Yes, I am making the best of that opportunity, but I also know I can live in the 3rd world and enjoy the days, weeks, months, years, decades I have left with a good degree of certainty. I hope to be of use to my friends and neighbors here as a resource of experience, education and the various tools for survival I have accumulated.

    I am paying our caretaker’s daughter’s college tuition, and will do so for his son, if the college is still functioning in a few years. It takes 1% of my income to do so. I spend more on wine. That is how easy it is to help someone in the 3rd world. In the US, I could not even afford her books.

    As I said, I have been living here for more than seven years. I know my new country, it’s problems and it’s benefits. The choice is not even in question. The Us holds nothing but trouble and pain in ever increasing amounts in the years to come. If the Us stopped meddling in the affairs of the Philippines, it would be more peaceful here. Perhaps the new President here will change that. We shall see.

  2. rockman on Fri, 23rd Oct 2015 7:00 am 

    Nothing wrong with these efforts by politicians in office today. But time will tell what the politicians will do over the next 15 years since their actions will be driven by public opinion at that time. Obvious why the CA motor fuel industry might not be pleased with the plan. But a far as the oil/NG producers go the new CA rules aren’t even a subject for conversation in my part of the world. With the exception of the refineries in Washington state (which has 20% of US refining capacity) it wouldn’t even a big concern for most of the refiners in the country. Certainly not in Texas where most of the refinery products go somewhere other than CA…including a very significant amount being exported.

    The big what-if will be how correct they are in predicting the decrease in retail/commercial electricity demand in CA. Might happen…might not. And if demand doesn’t decrease significantly in those sectors and there’s a surge of demand from electric vehicles rate payers in CA could see some shocking bills. If you notice a critical part of the plan is the utilities getting into the recharging business. I can see the motivation behind that move: unlike private companies the utilities are guaranteed revenues. A revenue stream much of which could be paid by all CA electric consumers and not just the drivers.

    It’s ultimately up to the voters of CA to decide the path they are on. Which, despite an earnest desire to not be a significant part of the GW problem, will be determined by personal economic conditions. In the end the bulk of the financial burden will likely fall on the citizens and not the petroleum industry.

  3. BobInget on Fri, 23rd Oct 2015 8:24 am 

    The tax loophole that can save you big bucks off a Tesla Model X

    A small business owner with substantial federal tax exposure could place an order for Tesla’s new seven-seater Model X and collect up to $35,000 in tax and government rebate benefits. (Marcio Jose Sanchez / Associated Press)
    Charles Fleming and Jerry HirschContact Reporters

    Elon Musk and Tesla Motors, masterful at mining state and federal tax incentives, may have lucked into a tax loophole. The company’s new $100,000-plus Model X electric SUV qualifies for a $25,000 federal tax deduction.

    That’s on top of a $7,500 federal tax credit and a $2,500 California rebate given to buyers of battery-electric vehicles.

    The right buyer, a small-business owner with a substantial federal tax exposure, could place an order for the new seven-seater and collect up to $35,000 in tax and government rebate benefits.

    The windfall could produce a public relations backlash among people who may object to tax cuts for the rich.

    “This is a high-priced vehicle that only wealthy people can buy,” said Karl Brauer of Kelley Blue Book. “There are a lot of people who believe we have already done enough to help Tesla.”

    But industry analysts said they doubted Tesla built its Model X heavy to qualify for the loophole — since a principal goal in engineering battery electric vehicles is to reduce weight, as a way of extending range.

    The loophole, identified as section 179 of the Internal Revenue Service code, was originally part of a stimulus package meant to encourage small-business owners to spend more freely on heavy equipment — urging farmers to buy new tractors, or contractors to buy new trucks.

    Limited to passenger vehicles weighing more than 6,000 pounds — most passenger cars and light trucks do not qualify — the deduction became known as the “Hummer tax loophole” because it gave write-offs to buyers of the giant, gas-guzzling Hummer H1 and H2 military-style trucks.

    Those road hogs, sold through General Motors dealerships, are no longer being made. But now their namesake loophole appears to apply to the exotic-looking Model X. Tesla’s second in-production car, after its current Model S, the “falcon-wing” SUV is expected to have a gross vehicular weight of a bit more than 6,000 pounds — based on statements Musk has made about his new car’s specifications.

    The deduction could be a boon to sticker-shocked prospective Model X owners, who three years ago began putting down deposits for future deliveries of the futuristic crossovers and are just now beginning to see their orders filled. Six were delivered in a staged ceremony late last month, the first of the coveted cars going to Musk himself.

    Though Tesla has yet to set a manufacturer’s suggested retail price for the base Model X, the first fully loaded “Signature Series” versions of the SUVs cost $132,000.

  4. Mike616 on Fri, 23rd Oct 2015 8:40 am 

    I don’t object to rich people STOPPING their Air Pollution. Not at all.

    Then they also reduce their demand for gas driving prices lower. And California prices are pretty high. You could say Exxon is trying to PUNISH California for it’s Real Innovation, compared to Exxon’s Innovations in Propaganda.

    Really, the problem is a right wing CEO is typically incompetent and lazy. For too long Exxon has been in a monopoly position where the CEO could just get DRUNK every night instead of running an INNOVATIVE Company.

    Those Days are OVER.

  5. Mike616 on Fri, 23rd Oct 2015 8:41 am 

    You can buy a Toyota Prius C for around $20,000.
    Yeah, you’re rich in BRAINS.

  6. Mike616 on Fri, 23rd Oct 2015 8:42 am 

    Solar is Cheaper than Natural Gas in ALL 50 US States.

    Tell me again how Exxon is run by a competent management team, with ZERO investment in Wind and Solar?

  7. Mike616 on Fri, 23rd Oct 2015 8:44 am 

    The right wing philosophy is the Economic Term: FREELOADER.

    Look at BobInget, HYSTERICAL smart people are Solving the Problem of Global Warming instead of making it worse.

    It’s an OUTRAGE.

  8. Davy on Fri, 23rd Oct 2015 9:08 am 

    Mike spare us the propaganda. We are smarter than that. Why not hitch up with Kenz and have coffee together and discuss your dreams.

  9. Mike616 on Fri, 23rd Oct 2015 9:39 am 

    Al Gore: 1000, Repubs ZERO.

    These days the label: Republican: proves you’re an Idiot.

  10. Davy on Fri, 23rd Oct 2015 9:47 am 

    Mik, any American political label proves you’re an idiot. The American political system is fatally flawed in EVERY way. Have you not followed the election circus and the debate debacles? This is not just something to have contempt for this is a fundamentally dangerous existential issue. It is not only in the election circus it is in the Circus tent called congress. Mike have you heard some of these humanoids speak? Democrat or Republican there is no difference. Please spare us your propaganda. You are looking like an ugly Merican.

  11. Kenz300 on Sat, 24th Oct 2015 8:59 am 

    Climate Change is real….. we will all be impacted by it……

    Exxon’s Climate Change Cover-Up Is ‘Unparalleled Evil,’ Says Activist

  12. Kenz300 on Sun, 25th Oct 2015 10:11 am 

    VW should have focused more on ELECTRIC vehicles than TDI diesels — electric vehicles have no emissions…….

    Electric vehicles are the future……….

    I guess there is no such thing as an ethical business….. Business schools once taught a class called Business Ethics. It looks like Universities needs to bring back the Business Ethics classes……..

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