BILL NUMBER: SB 1368	ENROLLED
	BILL TEXT

	PASSED THE SENATE  AUGUST 31, 2006
	PASSED THE ASSEMBLY  AUGUST 30, 2006
	AMENDED IN ASSEMBLY  AUGUST 30, 2006
	AMENDED IN ASSEMBLY  AUGUST 24, 2006
	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, 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 authorizes the PUC to establish rules for
all public utilities, and the Legislature has established procedures
for rulemaking proceedings before the PUC. 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 the 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, as defined, and
any local publicly owned electric 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. The bill would require the PUC, by February 1,
2007, through a rulemaking proceeding 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
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 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,
through a rulemaking proceeding 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 standard 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 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 local publicly owned electric utilities.
   (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.


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 to zero- or low-carbon generating
resources 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 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 an
annualized plant capacity factor of at least 60 percent.
   (b) "Combined-cycle natural gas" with respect to a powerplant
means the powerplant employs a combination of one or more gas
turbines and steam turbines in which electricity is produced in the
steam turbine from otherwise lost waste heat exiting from one or more
of the gas turbines.
   (c) "Community choice aggregator" means a "community choice
aggregator" as defined in Section 331.1.
   (d) "Electrical corporation" means an "electrical corporation" as
defined in Section 218.
   (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.
   (f) "Energy Commission" means the State Energy Resources
Conservation and Development Commission.
   (g) "Greenhouse gases" means those gases listed in subdivision (h)
of Section 42801.1 of the Health and Safety Code.
   (h) "Load-serving entity" means every electrical corporation,
electric service provider, or community choice aggregator serving
end-use customers in the state.
   (i) "Local publicly owned electric utility" means a "local
publicly owned electric utility" as defined in Section 9604.
   (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.
   (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.
   (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.

   (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 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 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 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 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 contracted for, on
behalf of 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 return on
investment by the third party entering into the contract with an
electrical corporation with respect to 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 entity, and any
other matter the Energy Commission determines is relevant under the
circumstances.
   (d) (1) On or before February 1, 2007, the commission, through a
rulemaking proceeding, 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. Enforcement of the
greenhouse gases emission performance standard shall begin
immediately upon the establishment of the standard.  All
combined-cycle natural gas powerplants 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 injected in geological formations, so
as to prevent releases into the atmosphere, in compliance with
applicable laws and regulations shall not be counted as emissions of
the powerplant in determining compliance with the greenhouse gases
emissions performance standard.
   (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.
   (e) (1) On or before June 30, 2007, the Energy Commission, at a
duly noticed public hearing and in consultation with the commission
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. Enforcement of the greenhouse gases emission
performance standard shall begin immediately upon the establishment
of the standard. All combined-cycle natural gas powerplants 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 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 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 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.
   (f) The Energy Commission, in a duly noticed public hearing and in
consultation with the 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 local publicly owned electric utilities.
   (g) The commission, through a rulemaking proceeding 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.