BUSINESS

Edison will spend $12 billion on electric system over next three years

Southern California Edison plans to spend $12 billion over the next three years to modernize the electric grid — costs that critics contend aren’t justified and are in part the result of the utility’s own mishaps.

The state’s second-largest investor-owned utility is spending the money as it moves to adjust to changes in technology from rooftop solar and other innovations, Ted Craver, chief executive of parent company Edison International, told the Los Angeles Area Chamber of Commerce this week.

Most of the yearly $4 billion will be spent on upgrading electric poles, transformers, wires and cables. Roughly $240 million a year, or about 6%, will go toward new power generation, he said.

“Our challenge is to provide electricity with little environmental impact without choking out economic growth and job creation,” Craver said, speaking in downtown Los Angeles at the State of L.A. Infrastructure Summit.

“Today, perhaps more than any other state in the U.S., California has made greenhouse gas reductions a priority,” he said. “This state has one of the most ambitious renewable energy mandates.”

On Oct. 7, Gov. Jerry Brown signed legislation that increases the state’s mandate for clean energy from 33% by 2020 to 50% by 2030, which Craver said his company supported.

But critics of Edison and the state’s other investor-owned utilities contend that the strategies the power companies continue to pursue contradict their stated support of California’s plan.

For instance, Edison wants the California Public Utilities Commission to approve three natural gas-fired plants to help replace power loss from the broken San Onofre nuclear plant. Edison closed the plant after a faulty replacement steam generator leaked.

The commission is expected to vote this month on the proposal for the new natural gas plants, which are part of the utility’s move to buy 2,211 megawatts to supply 950,000 average homes.

Customers already are on the hook for about $3 billion in costs to close the nuclear facility. That is in addition to the $12 billion that Craver outlined for chamber members. Edison will receive a 10.5% return on almost half of the $12 billion in spending.

“The SCE procurement strategy is a disaster from a cost and environmental standpoint,” said Bill Powers of Powers Engineering, which participates in state regulatory hearings on utility matters. “There is overwhelming investment in conventional natural gas-fired generation and transmission with only a sprinkling of local clean-energy resources — even though, by state law, clean energy resources must be first in line to meet any new need.

“The gas plants that SCE will contract for,” Powers added, “will triple greenhouse gas emissions from power plants in the L.A. Basin, [increasing emissions] by more than 2 million tons per year, at a time when Gov. Brown is presenting California as a model to the world on how to address climate change.”

In written comments to commission members ahead of their decision on the gas plants, Powers stated that Edison had the opportunity to contract for more energy storage rather than build more carbon-emitting power plants but opted not to do so.

Michael Aguirre, a San Diego lawyer who has been one of Edison’s staunchest critics in the San Onofre fiasco, said the utility continues to spend money on more projects that will transmit electricity from out-of-state sources built by out-of-state companies rather than tapping in-state solar and wind projects that have lower transmission costs.

“They’ll spend $12 billion of utility customers’ money to build a system that will serve the utilities [because they get a return on the construction costs] and will not provide the least-cost renewable energy to the utility customers,” Aguirre said. “The customers are being crippled by the onerous prices and rates.”

Robert Laffoon-Villegas, an Edison spokesman, defended the expenditures and the new natural-gas plants. He said they are necessary to ensure reliability of the electric grid.

Natural-gas plants in particular, Laffoon-Villegas said, are needed to supplement the power system when solar and wind production are low or unavailable.

“Renewable resources can fluctuate with the weather and do not always supply electricity when customers need it,” Laffoon-Villegas said. “Natural gas plants are needed to help integrate renewable resources and maintain local reliability. They are even more important with 50% renewables than they are for the 33% goal.”

Utilities in California and throughout the nation are grappling with the rapidly changing electric industry as innovations with rooftop solar and other individualized or “distributive” resources become increasingly cost-effective.

Edison is not alone in its planned investments over the next three years.

Craver said the utility industry trade association, the Edison Electric Institute, projects that the nation’s power companies will spend $300 billion over the next three years on capital projects.

About $100 billion of that will go to new power plants, such as natural gas-powered facilities, as well as solar and wind farms. Utilities expect to spend about $150 billion on wiring the system and the rest for the natural gas system.

Craver said Edison’s investment over the next three years will enable the utility to prepare for a future in which individuals may play a role in selling electricity on the market.

“Someday, there may be a marketplace where customers sell the power they generate while others are buying it,” Craver said. “Think Bitcoin or EBay, platforms that match buyer or seller on an individual basis. We’re preparing for that day when we may provide that platform using our network.”

ivan.penn@latimes.com

Twitter: @ivanlpenn

Copyright © 2016, Los Angeles Times

UPDATE

3:33 p.m.: Updates with additional details and background

Originally posted Nov. 3 at 12:46 p.m.

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