BILL ANALYSIS SB 107 Page 1 Date of Hearing: August 30, 2006 ASSEMBLY COMMITTEE ON APPROPRIATIONS Judy Chu, Chair SB 107 (Simitian) - As Amended: August 29, 2005 Policy Committee: UtilitiesVote:7-3 Natural Resources 6-3 Urgency: No State Mandated Local Program: Yes Reimbursable: Yes SUMMARY This bill accelerates the state's Renewables Portfolio Standard (RPS) to require retail sellers of electricity to procure at least 20% of their retail sales from renewable power by 2010 instead of 2017. Specifically, this bill: 1)Requires all retail sellers of electricity except local publicly owned electric utilities (munis) to procure at least 20% of their sold electricity from eligible renewable resources by 2010 instead of 2017. 2)Requires the PUC's flexible rules for compliance with the RPS to: a) Apply to all years before and after a retail seller procures at least 20% of total retail sales of electricity from eligible renewable resources. b) Address situations where, as a result of insufficient transmission, a retail seller is unable to procure eligible renewable energy resources sufficient to satisfy their RPS obligations. In this regard, the PUC is required to make a finding that the retail seller made all reasonable efforts to ensure sufficient transmission, including, for an investor-owned utility (IOU), constructing transmission facilities. 3)Declares that the PUC's flexible rules for compliance with the RPS do not revise existing statutory requirements that the PUC's approval of an IOU's procurement plan eliminate the need for after-the-fact reasonableness review of an IOU's actions SB 107 Page 2 in compliance with the procurement plan. 4)Changes the definition of "eligible renewable resource" to allow renewable power that is produced outside of California from a facility that commences operation after January 1, 2005, to count toward a retail seller's RPS if the associated electricity is delivered to an in-state location, and it complies with California environmental quality standards. 5)Requires each municipal utility to annually prepare a report to the California Energy Commission (CEC) on the mix of eligible renewable resources used in their portfolio and on progress toward meeting their RPS. 6)Defines Renewable Energy Credit (REC) to mean a certificate that one unit of electricity was generated by an eligible renewable energy resource and includes all renewable and environmental attributes associated with the production of electricity, except for emission reduction credits. 7)Requires the CEC to develop a system to certify, track and verify RECs produced by renewable energy resources. 8)Allows the PUC to authorize the use or RECs to meet the RPS requirements. 9)Allows the PUC to authorize a procurement entity to enter into contracts for renewable energy on behalf of a retail seller. 10)Requires the PUC, by June 30, 2007 and in consultation with the CEC, to report on the impact of allowing Supplemental Energy Payments (SEPs) to be applied to renewable energy procurement contracts of less than 10 years. 11)Limits SEPs paid to facilities outside California to 10% of funds available. 12)Makes numerous other clarification and changes regarding SEPs, RECs, and compliance with the RPS standard. 13)Incorporates technical and clarifying changes to the provisions of SB 1250 (Perata), which authorizes the continued expenditure of monies collected pursuant to current law for the Public Interest Energy Research (PIER) program and the Renewable Research Development and Demonstration (Renewable SB 107 Page 3 RD&D) program and provides policy directions for these programs. 14)Requires the PUC, by January 1, 2008, to report on the feasibility of performance-based incentives for solar energy systems of less than 30 kilowatts. FISCAL EFFECT 1)The PUC indicates an ongoing need for six positions at a cost of $660,000 for increased compliance workload related to the accelerated RPS, the procurement entity, the SEPs, and to implement the REC program [Public Utilities Reimbursement Account]. 2)The CEC believes it will incur additional one-time costs of around $250,000 to modify its planned system for tracking and verifying RECs to verify the delivery of electricity and ongoing costs of around $150,000 to ensure that out-of-state suppliers of renewable energy qualifying toward the RPS comply with California environmental quality standards. [Energy Resources Programs Account] COMMENTS 1)Background . SB 1078 (Sher), Statutes of 2002, created California's RPS, under which the IOUs are required to increase their renewable procurement by at least 1% each year such that 20% of their sales are from renewable energy sources by December 31, 2017. Once a 20% threshold is achieved, no further increase is required. The PUC is required to adopt comparable requirements for direct access providers and community choice aggregators. Munis are not required to meet the same RPS as the IOUs, but instead must implement and enforce their own RPS program that recognizes the intent of the Legislature to encourage renewable resources. The RPS also allows new renewable energy providers to apply to the CEC for Supplement Energy Payments (SEPs) to cover the difference between the prices they bid in a competitive solicitation and a market price established by the PUC. The RPS requires IOUs, and certain other retail energy providers, to buy renewable electricity to the extent Public Goods Charges (PGC) funds are available to pay for SEPs. (The PGC is a separate electricity rate component that funds energy SB 107 Page 4 efficiency, renewable energy research, and related programs.) If no PGC funds are available, the retail energy providers are not required to purchase additional renewable power. 2)Accelerated RPS Compliance : The "Energy Action Plan"(EAP) adopted by the PUC, the CEC and the Power Authority (PA) pledges that the agencies will accelerate RPS implementation (consistent with this bill) to meet the 20% goal by 2010 instead of 2017. The governor has also endorsed "20% by 2010" and proposed an additional goal of 33% by 2020.Currently, two of the three major IOUs appear able to meet the 20% by 2010. Pacific Gas & Electric's (PG&E) current baseline of renewable power is at 13%, while Southern California Edison (SCE) already has 18% of eligible renewable power in its portfolio. San Diego Gas & Electric (SDG&E) currently only receives 5.5% of its electricity from renewable resources. 3)Amendments . The August 29 amendments are reflected in Summary points 3, 10, 11, and 12 above. Additional amendments were technical and clarifying. 4)Opposition . The Clean Power Campaign is opposed to provisions providing the IOUs with additional flexibility, and the opportunity to delay, by up to three years, the accelerated RPS standard. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081