BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 107| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 107 Author: Simitian (D) & Perata (D), et al Amended: 8/29/06 Vote: 21 SEN. ENERGY, UTIL. & COMMUNICATIONS COMM. : 7-3, 4/26/05 AYES: Escutia, Alarcon, Bowen, Dunn, Kehoe, Murray, Simitian NOES: Morrow, Battin, Cox NO VOTE RECORDED: Campbell SENATE APPROPRIATIONS COMMITTEE : 8-5, 5/26/05 AYES: Migden, Alarcon, Alquist, Escutia, Florez, Murray, Ortiz, Romero NOES: Aanestad, Ashburn, Battin, Dutton, Poochigian SENATE FLOOR : 25-14, 5/31/05 AYES: Alarcon, Alquist, Ashburn, Bowen, Cedillo, Chesbro, Ducheny, Dunn, Escutia, Figueroa, Florez, Kehoe, Kuehl, Lowenthal, Migden, Murray, Ortiz, Perata, Romero, Scott, Simitian, Soto, Speier, Torlakson, Vincent NOES: Aanestad, Ackerman, Battin, Campbell, Cox, Denham, Dutton, Hollingsworth, Maldonado, Margett, McClintock, Morrow, Poochigian, Runner NO VOTE RECORDED: Machado ASSEMBLY FLOOR : 51-28, 8/31/06 - See last page for vote SUBJECT : Renewable energy SOURCE : Author CONTINUED SB 107 Page 2 DIGEST : This bill accelerates the Renewables Portfolio Standard (RPS) requirement from 2017 to 2010. The RPS is a program that requires investor-owned utilities to, among other things, achieve a 20 percent renewable electricity portfolio. The bill also makes other several other changes. Assembly Amendments make further changes to the RPS program and add provisions relating to the Public Interest Energy Research, Demonstration and Development Program. ANALYSIS : Existing law: 1. Requires retail sellers of electricity, except local publicly owned electric utilities (munis), to increase their existing level of renewable resources by one percent of sales per year such that 20 percent of their retail sales are procured from eligible renewable resources by 2017. 2. Exempts munis from the statutory requirements of RPS and instead requires munis to implement and enforce their own RPS program that recognizes the intent of the Legislature to encourage renewable resources. 3. Allows the California Energy Commission (CEC) to award SEPs to generators of eligible renewable resources to cover above market costs of renewable energy, but Supplemental Energy Payments (SEPs) may not be paid to one project for more than 10 years. This bill accelerates RPS to require retail sellers of electricity to procure at least 20 percent of their retail sales from renewable power by 2010 instead of 2017. Clarifies existing rules to allow renewable power to count toward a retail seller's RPS even if the associated electricity is not delivered to the retail seller. Specifically, this bill: 1.Requires all retail sellers of electricity except local SB 107 Page 3 publicly owned electric utilities (munis) to procure at least 20 percent 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 percent 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 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 SB 107 Page 4 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 of 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 percent 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 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. Comments The purpose of this bill is to accelerate the state's existing RPS requirements so that 20 percent of retail sales of electricity in California come from renewable SB 107 Page 5 resources by the year 2010 and to address issues that may make compliance with the RPS difficult. In 2002, the Legislature approved SB 1078 (Sher), Chapter 516, Statutes of 2002, which creates California's RPS. Under RPS, all retail sellers of electricity are required to increase their renewable procurement each year by at least one percent of total sales, so that 20 percent of their sales are from renewable energy sources by December 31, 2017. Once a 20 percent portfolio is achieved, no further increase is required. Munis are not required to meet the same RPS, but instead must implement and enforce their own RPS program that recognizes the intent of the Legislature to encourage renewable resources. RPS also allows new renewable energy providers to apply to CEC for SEPs. SEPs will be awarded to renewable energy providers to cover the difference between the prices they bid in a competitive solicitation and a market price established by the PUC. RPS requires investor owned utilities (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. If no PGC funds are available, the retail energy providers are not required to purchase additional renewable power. The "Energy Action Plan" adopted by PUC, CEC and the Power Authority pledges that the agencies will accelerate RPS implementation to meet the 20 percent goal by 2010, instead of 2017. The Governor has also endorsed "20% by 2010" and proposed an additional goal of 33 percent by 2020. PUC believes this accelerated goal can be mandated without additional legislation. Currently, two of the three major IOUs appear to be able to meet the 20 percent by 2010 goal. Pacific Gas & Electric's current baseline of renewable power is at 13 percent, while Southern California Edison already has 18 percent of eligible renewable power in its portfolio. San Diego Gas & Electric (SDG&E) currently only receives 5.5 percent of its electricity from renewable resources. Complying with the new standard: Currently, provisions in the RPS statute may prevent some retail sellers from SB 107 Page 6 meeting any mandate to procure 20 percent of their electricity from renewable resources by 2010. Transmission constraints will limit SDG&E's ability to buy new renewable electricity and have that electricity delivered to its service territory. The current RPS statute requires that SEPs procure their renewable resources through contracts that are at least 10 years in length, but because of the long-term uncertainty of direct access markets in California, SEPs may not be able to sign enforceable contracts of that length. This bill attempts to address the problems with transmission constraints by clarifying that electricity from eligible renewable resources does not have to be delivered to the service territory of the retail seller and instead only requires that the electricity be provided to the retail seller at a location within California. This provision maintains the RPS's objective of reducing consumption of fossil fuels within California, but allows for more flexibility in the delivery of electricity. If the renewable electricity were actually provided to the retail seller in another IOU's service territory, the retail seller and the IOU will merely arrange to swap other electricity. This type of swapping had been a common practice in the past. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes 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]. 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] SUPPORT : (Verified 5/26/05) (Unable to reverify) SB 107 Page 7 Clean Power Campaign East Bay Municipal Utility District Independent Energy Producers Sierra Club California The Utility Reform Network Union of Concerned Scientists OPPOSITION : (Verified 5/26/05) (Unable to reverify) California Council for Environmental and Economic Balance Calpine Constellation New Energy Pacific Gas and Electric Company Sempra Energy Southern California Edison ASSEMBLY FLOOR : AYES: Arambula, Baca, Bass, Berg, Bermudez, Blakeslee, Calderon, Canciamilla, Chan, Chavez, Chu, Cohn, Coto, De La Torre, Dymally, Evans, Frommer, Goldberg, Hancock, Jerome Horton, Shirley Horton, Jones, Karnette, Klehs, Koretz, Laird, Leno, Levine, Lieber, Lieu, Liu, Matthews, Montanez, Mullin, Nation, Nava, Negrete McLeod, Oropeza, Parra, Pavley, Richman, Ridley-Thomas, Ruskin, Saldana, Salinas, Torrico, Umberg, Vargas, Wolk, Yee, Nunez NOES: Aghazarian, Benoit, Bogh, Cogdill, Daucher, DeVore, Emmerson, Garcia, Haynes, Houston, Huff, Keene, La Malfa, La Suer, Leslie, Maze, McCarthy, Mountjoy, Nakanishi, Niello, Plescia, Sharon Runner, Spitzer, Strickland, Tran, Villines, Walters, Wyland NO VOTE RECORDED: Vacancy NC:cm 9/8/06 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****