BILL NUMBER: SB 1368	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  AUGUST 21, 2006
	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  
load-serving  entity,  including electrical
corporations, community choice aggregators, electric service
providers   as defined  , and  any  local
publicly owned electric  utilities   utility
 , 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 by 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 the PUC, by February 1,
2007, at a duly noticed public hearing and in consultation with the
Energy Commission and the State Air Resources Board, to establish a
greenhouse gases emission performance standard for all baseload
generation of load-serving entities. The bill would require the
Energy Commission, by June 30, 2007, at a duly noticed public hearing
and in consultation with the PUC and the State Air Resources Board,
to establish a greenhouse gases emission performance standard for all
baseload generation of local publicly owned electric utilities.
 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  , as defined, 
baseload generation. 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   authorize
 the PUC to review any long-term financial commitment proposed
to be entered into by an electric service provider or community
choice aggregator  in order to enforce the bill's requirements
 . The bill would require the PUC to adopt rules to enforce
these requirements for  electrical corporations, electric
service providers, and community choice aggregators  
load-   serving entities  and would require the PUC to
adopt procedures  , for all load-   serving entities,
 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 PUC,
in a duly noticed public   hearing and in consultation with
the Energy Commission and the State Air Resources Control Board, to
reevaluate and continue, modify, or replace the greenhouse gases
emissions performance standa   rd when an enforceable
greenhouse gases emissions limit is established and in operation,
that is applicable to load-   serving entities. 
   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  and
continue, modify, or replace  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   local publicly owned electric
utilities  .  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. 
New long-term financial commitments for electrical generating
resources that eliminate all emissions of greenhouse gases, or that
substantially reduce emissions of greenhouse gases, should be
encouraged. 
   (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
  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  
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 
 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   an annualized  plant capacity factor
of at least 60 percent.  
   (b) "Combined-cycle natural gas" system of generation means the
use of a natural gas combustion turbine generator and a steam turbine
generator in a single plant to produce electricity. 

   (b) 
    (c)    "Community choice aggregator" means a
"community choice aggregator" as defined in Section 331.1.

   (c) 
    (d)    "Electrical corporation" means an
"electrical corporation" as defined in Section 218.

   (d) 
    (e)    "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) 
    (f)    "Energy Commission" means the State
Energy Resources Conservation and Development Commission.

   (f) 
    (g)    "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) "Load-serving entity" means a "load-serving entity" as defined
in subdivision (j) of Section 380. 

   (h) 
   (i)    "Local publicly owned electric utility"
means a "local publicly owned electric utility" as defined in Section
9604.

   (i) 
    (j)    "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) 
    (k)    "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) "Plant capacity factor" means the ratio of the electricity
produced during a given time period, measured in kilowatthours, to
the electricity the unit could have produced if it had been operated
at its rated capacity during that period, expressed in kilowatthours.


   (l) 
    (m)    "Powerplant" means a facility for the
generation of electricity, and includes one or more generating units
at the same location.  
   (n) "Zero- or low-carbon generating resource" means an electrical
generating resource that will generate electricity while producing
emissions of greenhouse gases at a rate substantially below the
greenhouse gas emission performance standard, as determined by the
commission. 
   8341.  (a) No  load serving entity 
load-serving entity or local publicly owned electric utility 
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 commission, pursuant to subdivision (d), for a
load-serving entity, or by  the Energy Commission  ,
pursuant to subdivision (e), for a   local publicly owned
electric utility  .
   (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   commission pursuant
to subdivision (d)  .
   (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  
load-serving entities  . The commission shall adopt procedures
 , for all load-serving entities,  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 
 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
 this section, including those costs incurred for electricity
purchase agreements that are approved by the commission that 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.  
   (6) A long-term financial commitment entered into through a
contract approved by the commission, for electricity generated by a
zero- or low-carbon generating resource that is delivered to
consumers of this state on a cost-of-service basis, shall be
recoverable in rates, in a manner determined by the commission
consistent with Section 380. The commission may, after a hearing,
approve an increase from one-half to 1 percent in the rate of return
otherwise allowed on an investment in zero- or low-carbon generation
resources authorized pursuant to this subdivision.  
   (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
  load-serving  entity, and any other matter the
Energy Commission determines is relevant under the circumstances.

   (d) (1) On or before February 1, 2007, the commission, at a duly
noticed public hearing and in consultation with the Energy Commission
and the State Air Resources Board, shall establish a greenhouse
gases emission performance standard for all baseload generation of
load-serving entities, 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. All powerplants using
a combined-cycle natural gas system for generation of electricity
that are in operation, or that have an Energy Commission final permit
decision to operate as of June 30, 2007, shall be deemed to be in
compliance with the greenhouse gases emission performance standard.
 
   (2) In determining the rate of emissions of greenhouse gases for
baseload generation, the commission shall include the net emissions
resulting from the production of electricity by the baseload
generation.  
   (3) The commission shall establish an output-based methodology to
ensure that the calculation of emissions of greenhouse gases for
cogeneration recognizes the total usable energy output of the
process, and includes all greenhouse gases emitted by the facility in
the production of both electrical and thermal energy. 
   (4) In calculating the emissions of greenhouse gases by facilities
generating electricity from biomass, biogas, or landfill gas energy,
the commission shall consider net emissions from the process of
growing, processing, and generating the electricity from the fuel
source. 
   (5) 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.  
   (6) In adopting and implementing the greenhouse gases emission
performance standard, the commission, in consultation with the
Independent System Operator shall consider the effects of the
standard on system reliability and overall costs to electricity
customers.  
   (7) In developing and implementing the greenhouse gases emission
performance standard, the commission shall address long-term
purchases of electricity from unspecified sources in a manner
consistent with this chapter.  
   (8) In developing and implementing the greenhouse gases emission
performance standard, the commission shall consider and act in a
manner consistent with any rules adopted pursuant to Section 824a-3
of Title 16 of the United States Code.  
   (9) An electrical corporation that provides electric service to
75,000 or fewer retail end-use customers in California may file with
the commission a proposal for alternative compliance with this
section, which the commission may accept upon a showing by the
electrical corporation of both of the following:  
   (A) A majority of the electrical corporation's retail end-use
customers for electric service are located outside of California.
 
   (B) The emissions of greenhouse gases to generate electricity for
the retail end-use customers of the electrical corporation are
subject to a review by the utility regulatory commission of at least
one other state in which the electrical corporation provides
regulated retail electric service.  
   (d) (1)  On or before March 31 
    (e)     (1)     On or
before June 30  , 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  of local
publicly owned electric utilities  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.
 The greenhouse gases emission performance standard established
by the Energy Commission for local publicly owned electric utilities
shall be consistent with the standard adopted by the commission for
load-serving entities. All powerplants using a combined-cycle natural
gas system for generation of electricity that are in operation, or
that have an Energy Commission final permit decision to operate as of
June 30, 2007, shall be deemed to be in compliance with the
greenhouse gases emission performance standard. 
   (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   emissions of greenhouse gases 
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  
emissions of greenhouse gases by facilities generating electricity
from biomass, biogas, or landfill gas  energy, the Energy
Commission shall consider net emissions from the process of growing,
processing  ,  and generating the electricity from the
 biomass feedstock.   fuel source. 
   (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  and implementing  the greenhouse gases
emission performance standard, the Energy Commission  , in
consultation with the Independent System Operator,  shall
consider the effects of the standard on system reliability and
overall costs to electricity customers.  
   (8) In developing and implementing the greenhouse gases emission
performance standard, the Energy Commission shall address long-term
purchases of electricity from unspecified sources in a manner
consistent with this chapter.  
   (9) In developing and implementing the greenhouse gases emission
performance standard, the Energy Commission shall consider and act in
a manner consistent with any rules adopted pursuant to Section
824a-3 of Title 16 of the United States Code. 

   (e) 
    (f)    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   and the State Air Resources
Board, shall reevaluate and continue, modify, or replace 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.  
local publicly owned electric utilities.  
   (g) The commission, in a duly noticed public hearing and in
consultation with the Energy Commission and the State Air Resources
Board, shall reevaluate and continue, modify, or replace the
greenhouse gases emission performance standard when an enforceable
greenhouse gases emissions limit is established and in operation,
that is applicable to load serving entities. 
  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 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.