BILL NUMBER: SB 1368	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  AUGUST 7, 2006
	AMENDED IN ASSEMBLY  JUNE 22, 2006
	AMENDED IN SENATE  APRIL 24, 2006

INTRODUCED BY   Senator Perata
   (Coauthor: Assembly Member Levine)

                        FEBRUARY 21, 2006

   An act to add Chapter 3 (commencing with Section 8340) to Division
4.1 of the Public Utilities Code, relating to electricity.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1368, as amended, Perata  Electricity: emissions of greenhouse
gases.
   (1) Under existing law, the Public Utilities Commission (PUC) has
regulatory authority over public utilities, including electrical
corporations. Existing law requires the PUC to review and adopt a
procurement plan and a renewable energy procurement plan for each
electrical corporation pursuant to the California Renewables
Portfolio Standard Program.
   Existing law requires the State Energy Resources Conservation and
Development Commission (Energy Commission) to certify eligible
renewable energy resources, to design and implement an accounting
system to verify compliance with the renewables portfolio standard by
retail sellers, and to allocate and award supplemental energy
payments to cover above-market costs of electricity generated by
eligible renewable energy resources.
   Under existing law the governing board of a local publicly owned
electric utility is responsible for implementing and enforcing a
renewables portfolio standard that recognizes the intent of the
Legislature to encourage renewable resources, while taking into
consideration the effect of the standard on rates, reliability, and
financial resources and the goal of environmental improvement.
Existing law requires the governing board of a local publicly owned
electric utility to report certain information relative to renewable
energy resources to its customers.
   Existing law defines an "electric service provider" as an entity
that offers electrical service to customers within the service
territory of an electrical corporation, excluding electrical
corporations, local publicly owned electric utilities, and certain
cogenerators. Provisions of the existing Public Utilities Act
restructuring the electrical services industry require that electric
service providers register with the PUC and require the PUC to
authorize and facilitate direct transactions between electric service
providers and retail end-use customers. However, other existing law
suspends the right of retail end-use customers other than community
aggregators, to acquire service through a direct transaction, until
the Department of Water Resources no longer supplies electricity
under that law.
   Existing law defines a "community choice aggregator" and
authorizes customers to aggregate their electric loads as members of
their local community with community choice aggregators.
   The existing restructuring of the electrical industry within the
Public Utilities Act provides for the establishment of an Independent
System Operator (ISO) as a nonprofit public benefit corporation.
Existing law requires the ISO to ensure efficient use and reliable
operation of the transmission grid consistent with achieving planning
and operating reserve criteria no less stringent than those
established by the Western Electricity Coordinating Council and the
American Electric Reliability Council.
   Under existing law, the State Air Resources Board, the Energy
Commission, and the California Climate Action Registry all have
responsibilities with respect to the control of emissions of
greenhouse gases, as defined, and the Secretary for Environmental
Protection is required to coordinate emission reductions of
greenhouse gases and climate change activity in state government.
   This bill would prohibit any load serving entity, including
electrical corporations, community choice aggregators, electric
service providers, and local publicly owned electric utilities, from
entering into a long-term financial commitment, as defined, unless
any baseload generation, as defined, complies with a greenhouse gases
emission performance standard  that   the bill would
require to be  established  b   y March 31, 2007,
 by the Energy Commission, by regulation, at a duly noticed
public hearing and in consultation with the PUC, the ISO, and the
State Air Resources Board. The bill would require that the greenhouse
gases emission performance standard not exceed the rate of emissions
of greenhouse gases for combined-cycle natural gas baseload
generation  , as of March 31, 2007  . The bill would
prohibit the PUC from approving any long-term financial commitment
by an electrical corporation unless any baseload generation supplied
under the long-term commitment complies with the greenhouse gases
emission performance standard. The bill would require the PUC to
review any long-term financial commitment proposed to be entered into
by an electric service provider or community choice aggregator. The
bill would require the PUC to adopt rules to enforce these
requirements for electrical corporations, electric service providers,
and community choice aggregators and would require the PUC to adopt
procedures to verify the emissions of greenhouse gases from any
baseload generation supplied under a contract subject to the
greenhouse gases emission performance standard.
   The bill would require the Energy Commission to adopt regulations
for the enforcement of the greenhouse gases emission performance
standard with respect to a local publicly owned electric utility. The
bill would require the Energy Commission, in a duly noticed public
hearing and in consultation with the PUC, the ISO, and the State Air
Resources Board, to reevaluate the greenhouse gases emission
performance standard when an enforceable greenhouse gases emissions
limit is established and in operation, that is applicable to the
electricity sector. The Energy Commission would be required to report
its findings and any recommendations to continue, modify, or replace
the greenhouse gases emission performance standard to the
Legislature for action.
   (2) Under existing law, a violation of the Public Utilities Act or
an order or direction of the commission is a crime.
   Because certain of the provisions of this bill are within the act
and require action by the commission to implement its requirements, a
violation of these provisions would impose a state-mandated local
program by creating a new crime.
  (3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) Global warming will have serious adverse consequences on the
economy, health, and environment of California.
   (b) The Governor, in Executive Order S-3-05, has called for the
reduction of California's emission of greenhouse gases to 1990 levels
by 2020.
   (c) Over the past three decades, the state has taken significant
strides towards implementing an environmentally and economically
sound energy policy through reliance on energy efficiency,
conservation, and renewable energy resources in order to promote a
sustainable energy future that ensures an adequate and reliable
energy supply at reasonable and stable prices.
   (d) To the extent energy efficiency and renewable resources are
unable to satisfy increasing energy and capacity needs, the Energy
Action Plan II establishes a policy that the state will rely on clean
and efficient fossil fuel fired generation and will "encourage the
development of cost-effective, highly-efficient, and
environmentally-sound supply resources to provide reliability and
consistency with the state's energy priorities."
   (e) California's investor-owned electric utilities currently have
long-term procurement plans that include proposals for making new
long-term financial commitments to electrical generating resources
over the next decade, which will generate electricity while producing
emissions of greenhouse gases for the next 30 years or longer.
   (f) The Public Utilities Commission (PUC) and State Energy
Resources Conservation and Development Commission (Energy Commission)
both have concluded, and the Legislature finds, that federal
regulation of emissions of greenhouse gases is likely during this
decisionmaking timeframe.
   (g) It is vital to ensure all electricity load serving entities
internalize the significant and underrecognized cost of emissions
recognized by the PUC with respect to the investor-owned electric
utilities, and to reduce California's exposure to costs associated
with future federal regulation of these emissions.
   (h) The establishment of a policy to reduce emissions of
greenhouse gases, including an emissions performance standard for all
procurement of electricity by load serving entities, is a logical
and necessary step to meet the goals of the Energy Action Plan II and
the Governor's goals for reduction of emissions of greenhouse gases.

   (i) A greenhouse gases emission performance standard for new
long-term financial commitments to electrical generating resources
will reduce potential financial risk to California consumers for
future pollution-control costs.
   (j) A greenhouse gases emission performance standard for new
long-term financial commitments to electric generating resources will
reduce potential exposure of California consumers to future
reliability problems in electricity supplies.
   (k) In order to have any meaningful impact on climate change, the
Governor's goals for reducing emissions of greenhouse gases must be
applied to the state's electricity consumption, not just the state's
electricity production.
   (l) The 2005 Integrated Energy Policy Report adopted by the Energy
Commission recommends that any greenhouse gases emission performance
standard for utility procurement of baseload generation be set no
lower than levels achieved by a new combined-cycle natural gas
turbine.
   (m) As the largest electricity consumer in the region, California
has an obligation to provide clear guidance on performance standards
for procurement of electricity by load serving entities.
  SEC. 2.  Chapter 3 (commencing with Section 8340) is added to
Division 4.1 of the Public Utilities Code, to read:
      CHAPTER 3.  Greenhouse Gases Emission Performance Standard for
Baseload Electrical Generating Resources

   8340.  For purposes of this chapter, the following terms have the
following meanings:
   (a) "Baseload generation" means electricity generation from a
powerplant that is designed and intended to provide electricity at a
plant capacity factor of at least 60 percent.
   (b) "Community choice aggregator" means a "community choice
aggregator" as defined in Section 331.1.
   (c) "Electrical corporation" means an "electrical corporation" as
defined in Section 218.
   (d) "Electric service provider" means an "electric service
provider" as defined in Section 218.3, but does not include
corporations or persons employing cogeneration technology or
producing electricity from other than a conventional power source
consistent with subdivision (b) of Section 218.
   (e) "Energy Commission" means the State Energy Resources
Conservation and Development Commission.
   (f) "Greenhouse gases" means those gases listed in subdivision (h)
of Section 42801.1 of the Health and Safety Code.
   (g) "Load serving entity" includes every electrical corporation,
community choice aggregator, electric service provider, and local
publicly owned electric utility serving end-use customers in
California.
   (h) "Local publicly owned electric utility" means a "local
publicly owned electric utility" as defined in Section 9604.
   (i) "Long-term financial commitment" means either a new ownership
investment in baseload generation or a new or renewed contract with a
term of five or more years, which includes procurement of baseload
generation.
   (j) "Output-based methodology" means a greenhouse gases emission
performance standard that is expressed in pounds of greenhouse gases
emitted per megawatthour and factoring in the useful thermal energy
employed for purposes other than the generation of electricity.
   (k) "Plant capacity factor" means the ratio of the total
electricity that a powerplant produces during a year (or other
appropriate period of time determined by the commission or Energy
Commission) compared to the total potential electricity that would
have been produced if the powerplant operated at 100 percent capacity
during every hour of the year (or other appropriate period of time
determined by the commission or Energy Commission).
   (l) "Powerplant" means a facility for the generation of
electricity, and includes one or more generating units at the same
location.
   8341.  (a) No load serving entity may enter into a long-term
financial commitment unless any baseload generation supplied under
the long-term financial commitment complies with the greenhouse gases
emission performance standard established by the Energy Commission.

   (b) (1) The commission shall not approve a long-term financial
commitment by an electrical corporation unless any baseload
generation supplied under the long-term financial commitment complies
with the greenhouse gases emission performance standard established
by the Energy Commission.
   (2) The commission may, in order to enforce the requirements of
this section, review any long-term financial commitment proposed to
be entered into by an electric service provider or a community choice
aggregator.
   (3) The commission shall adopt rules to enforce the requirements
of this section, for electrical corporations, electric service
providers, and community choice aggregators. The commission shall
adopt procedures to verify the emissions of greenhouse gases from any
baseload generation supplied under a contract subject to the
greenhouse gases emission performance standard to ensure compliance
with the standard.
   (4) In determining whether a long-term financial commitment is for
baseload generation, the commission shall consider the design of the
powerplant and the intended use of the powerplant, as determined by
the commission based upon the electricity purchase contract, any
certification received from the Energy Commission, any other permit
or certificate necessary for the operation of the powerplant,
including a certificate of public convenience and necessity, any
procurement approval decision for the load serving entity, and any
other matter the commission determines is relevant under the
circumstances.
   (5) Costs incurred by an electrical corporation to comply with the
greenhouse gases emission performance standard are to be treated as
procurement costs incurred pursuant to an approved procurement plan
and the commission shall ensure timely cost recovery of those costs
pursuant to paragraph (3) of subdivision (d) of Section 454.5.
   (c) (1) The Energy Commission shall adopt regulations for the
enforcement of this chapter with respect to a local publicly owned
electric utility.
   (2) The Energy Commission may, in order to ensure compliance with
the greenhouse gases emission performance standard by local publicly
owned electric utilities, apply the procedures adopted by the
commission to verify the emissions of greenhouse gases from baseload
generation pursuant to subdivision (b).
   (3) In determining whether a long-term financial commitment is for
baseload generation, the Energy Commission shall consider the design
of the powerplant and the intended use of the powerplant, as
determined by the Energy Commission based upon the electricity
purchase contract, any certification received from the Energy
Commission, any other permit for the operation of the powerplant, any
procurement approval decision for the load serving entity, and any
other matter the Energy Commission determines is relevant under the
circumstances.
   (d) (1)  The   On or before March 31, 2007,
the  Energy Commission, at a duly noticed public hearing and in
consultation with the commission, the Independent System Operator,
and the State Air Resources Board, shall establish a greenhouse gases
emission performance standard for all baseload generation at a rate
of emissions of greenhouse gases that is no higher than the rate of
emissions of greenhouse gases for combined-cycle natural gas baseload
generation  , as of March 31, 2007  .
   (2) The greenhouse gases emission performance standard shall be
adopted by regulation pursuant to the Administrative Procedure Act
(Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code).
   (3) In determining the rate of emissions of greenhouse gases for
baseload generation, the Energy Commission shall include the net
emissions resulting from the production of electricity by the
baseload generation.
   (4) The Energy Commission shall establish an output-based
methodology to ensure that the calculation of greenhouse gases
emissions for cogeneration recognizes the total usable energy output
of the process, and includes all greenhouse gas emitted by the
facility in the production of both electrical and thermal energy.
   (5) In calculating the greenhouse gas emissions of facilities
generating electricity from biomass energy, the Energy Commission
shall consider net emissions from the process of growing, processing
and generating the electricity from the biomass feedstock.
   (6) Carbon dioxide that is captured from the emissions of a
powerplant and that is permanently disposed of in geological
formations in compliance with applicable laws and regulations, shall
not be counted as emissions from the powerplant.
   (7) In adopting the greenhouse gases emission performance
standard, the Energy Commission shall consider the effects of the
standard on system reliability and overall costs to electricity
customers.
   (e) The Energy Commission, in a duly noticed public hearing and in
consultation with the commission, the Independent System Operator,
and the State Air Resources Board, shall reevaluate the greenhouse
gases emission performance standard when an enforceable greenhouse
gases emissions limit is established and in operation, that is
applicable to the electricity sector. The Energy Commission shall
report its findings and any recommendations to continue, modify, or
replace the greenhouse gases emission performance standard to the
Legislature for action.
  SEC. 3.
   No reimbursement is required by this act pursuant to Section 6 of
Article XIII B of the California Constitution because the only costs
that may be incurred by a local agency or school district 
because, in that regard,   will be incurred because
 this act creates a new crime or infraction, eliminates a crime
or infraction, or changes the penalty for a crime or infraction,
within the meaning of Section 17556 of the Government Code, or
changes the definition of a crime within the meaning of Section 6 of
Article XIII B of the California Constitution.