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  








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            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  








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            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  








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            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