03/11/2016
1
1
Newsha K. Ajami,
Director of Urban Water Policy,
Water in the West
Stanford University
The State of Water in California
2Source: U.S. Drought Monitor, February 28, 2015
http://droughtmonitor.unl.edu/Home/StateDroughtMonitor.aspx?CA
• Uncertain and extreme climate
• Decentralized utility system
• Many orphan and underfunded projects
03/11/2016
2
A Challenge or An OpportunityUrban re-invention is costly and requires rethinking of current financing mechanisms.
– Some of the financing options include:– Municipal bonds– State revolving funds– Public-Private Partnerships (PPP)– Tax initiatives– Public benefit funds
– Funding gaps include – Conservation and efficiency efforts, – Water research and development, – Monitoring and data management, – Capital investment for innovative water systems
– In California, State General Obligation (GO) bonds, while only 3% of annual water spending, cover about 10% of capital investment in various water projects.
California’s Reliance on GO water Bonds
Bond financing is unreliable and expensive:- Californians pay $80 annually / household to pay back water
bonds
- Between 2008-2011, 18% of statewide annual water-related spending in California covered Debt service on GO water bonds
ReNUWIt Year 3 Renewal Review Site Visit 4
Source: PPIC (2014)
0.0
0.5
1.0
1.5
2.0
2.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Bill
ions
of $
2012
per
yea
r
Total water bond spending ($2012 billions)
Bond spending on water sector ($2012 billions)
Bond debt repayment ($2012 billions)
Projected repayment ($2012 billions)
03/11/2016
3
Public Financing Mechanism
• Public Benefit Charge can create a sustainable pool of monies to :– Invest in R&D, – Reduce the cost of new technologies, and – Attract private capital
Looking to the
electricity sector for
solutions
Image Source: https://www.flickr.com/photos/gi/197751467/
6
03/11/2016
4
Water Electricity
Number of Utilities in California
2,000+ 50+
Utility Landscape Highly decentralized, mostly Publicly Owned Utilities
Dominated by three major Investor Owned Utilities
Characteristic of the Good
Economic CommodityPublic GoodHuman Right
Economic Commodity
Approach to Efficiency Mostly Voluntary Mostly Mandatory
Recent Public Benefits Funding Mechanism
Municipal Bond (e.g. GOB)
Public Goods Charge
7
8
GO Bonds Public Goods Charge
Funders Taxpayers Ratepayers
Reliability of
Funding
Unreliable
(depends on voter
approval)
Reliable
(fees generated every
billing cycle)
Order of Funding Money is borrowed
up front and
taxpayers repay the
bond later
Ratepayers are charged
up front and see results
later
Nature of
Funding
One time lump sum
to projects
Continual income
Provisions for
Low Income
Communities
No Possibly
03/11/2016
5
Public Goods Charge
• Created during deregulation of the state’s electricity market in the 1990s to ensure that research and development did not stop
• A per-usage fee on customer utility bill, usually 1-2% of the bill ($1/$2 dollars)
• Raised money for three program areas to transform the state’s electricity sector
• In place from 1998-2012
9
10
03/11/2016
6
IOU Public Purpose Program Surcharge Components
0
0.001
0.002
0.003
0.004
0.005
0.006
0.007
0.008
0.009
Commercial A Residential DR
cen
ts/
kW
h
Rate Schedule
Procurement EE Surcharge
Non-Low Income (PGC)
Low Income
11
Energy Efficiency
57%
RD&D
16%
Renewables
27%
Image Source: http://www.zeiss.com
Image Source: Getty CreativeImage Source: www.wnergy.nd.edu
03/11/2016
7
Energy Efficiency Program
• Received the majority of PGC funds• Programs administered by the IOUs • Funds distributed to
– IOUs themselves– Statewide programs– Local government partnerships – Third/local party implementers
• Money allocated to various programs– Residential– Agriculture– Commercial – Industrial
13
Image source; www.gracelinks.org
Image source: www.oge.com
03/11/2016
8
Renewable Energy Program
15
• Goal: to augment the state’s energy supply with renewable energy sources
• Provided fiscal incentives to– Renewable energy generators– End-use customers
16
Image Source: www.solarauthority.com
Image Source: UTS San Diego Image Source: www.energy.ca.gov
Image Source: www.indianaffairs.gov
03/11/2016
9
Renewable Energy Program
17
40%
2%6%
27%
25%
New Renewable Facilities Consumer Education
Customer Credit Emerging Renewables
Existing Renewables
Research and Development:Public Interest Energy Research
(PIER)
18
“To fund research…that is not adequately provided by competitive and regulated markets”
“Develop and bring to market energy technologies that provide increased environmental benefits, greater
system reliability, and lower system costs”
Energy Efficiency
Renewable Energy
Energy Infrastructure
03/11/2016
10
POUs- Public Goods Charge
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Modesto IrrigationDistrict
SacramentoMunicipal Utility
District
Turlock IrrigationDistrict
Dis
trib
uti
on
of
Pu
bli
c B
enef
its
Sp
end
ing
Low Income
Energy Efficiency
Renewables
RD & D
19
PGC Successes
• Decreased per-capita energy use• Customer and state economic benefits• Environmental benefits from decreased
energy use and increased renewables• Increased rate of innovation• Fee serves as a signal for conservation
20
03/11/2016
11
PGC Successes
21
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000C
umul
ativ
e E
ffic
ienc
y an
d C
onse
rvat
ion
Impa
cts
(GW
h)
Public Goods Charge Era
Despite many successes, the PGC for electricity was not renewed…
• The California Energy Commission could not demonstrate substantial benefits
• Energy landscape different when PGC was enacted than when it expired
• Process by which funding was allocated for PIER program was not economical
22
03/11/2016
12
A PGC for Water?
23
A PGC for Water?
• Like the PGC for electricity- a small, usage related fee on customer water bills
• 1% -2% of customer bills• Money could be used to support Public
Purpose Projects such as– Innovation: research, demonstration and
dissemination of new technologies and management practices
– Conservation and efficiency– Ecosystem restoration
24
03/11/2016
13
Governance
25
Statewide
Local
Regional
Hybrid
Lessons Learned from PGC for Electricity
Transparency and record keeping
Reevaluate program priorities
Research and development clearly defined
26