BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1368|
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THIRD READING
Bill No: SB 1368
Author: Perata (D)
Amended: 4/24/06
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 6-1, 4/4/06
AYES: Escutia, Alarcon, Dunn, Kehoe, Murray, Simitian
NOES: Cox
NO VOTE RECORDED: Battin, Bowen, Dutton
SENATE ENV. QUALITY COMMITTEE : 5-1, 4/24/06
AYES: Simitian, Chesbro, Escutia, Kuehl, Lowenthal
NOES: Runner
NO VOTE RECORDED: Cox
SENATE APPROPRIATIONS COMMITTEE : 8-5, 5/25/06
AYES: Murray, Alarcon, Alquist, Escutia, Florez, Ortiz,
Romero, Torlakson
NOES: Aanestad, Ashburn, Battin, Dutton, Poochigian
SUBJECT : Electricity: emissions of greenhouse gases
SOURCE : Author
DIGEST : This bill requires the State Energy Conservation
and Development Commission to set emission (e.g.,
pollution) standards for those entities providing
electricity in the state. The bill requires the Public
Utilities Commission to prohibit electricity providers and
corporations from entering long-term contracts which do not
CONTINUED
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meet the State Energy Conservation and Development
Commission's standard.
ANALYSIS : Existing law provides that the Public
Utilities Commission (PUC) has regulatory authority over
public utilities. Existing law provides for the State
Energy Conservation and Development Commission, referred to
as the California Energy Commission (CEC).
The bill requires the CEC to set standards for greenhouse
gas emissions from powerplants. The standard may not
exceed the average emissions of a comparable combined-cycle
natural gas plant. The bill directs the CEC, when setting
the standard, to consult with the Air Resources Board.
The bill prohibits certain electricity providers from
making a long-term commitment to electricity supplies
unless the electricity generated under the commitment meets
the CEC's emission standard. "Long-term" is defined as
three years. The electricity providers covered under this
provision are electrical corporations, electrical service
providers, community choice aggregators and local public
electricity utilities.
Under the bill, the PUC may not approve a long-term
commitment that violates the CEC's standard. The PUC may
adopt rules to monitor and enforce the prohibition among
corporations, providers, and aggregators. The CEC is to
enforce the prohibition among local public utilities.
Background
The terms "global warming" and "global climate change"
refer to the rise in the average temperature of the earth's
climate due to an accumulation of "greenhouse gases" in the
atmosphere. GHGs include carbon dioxide (CO2) , methane,
nitrous oxide, hydrofluorocarbons, perfluorocarbons and
sulfur hexafluoride.
While the political debate over the existence, cause, and
effects of global warming, and what to do about it,
continues, the prevailing wisdom among climate scientists
is that global warming is occurring and that measures
should be taken to address its effects.
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SB 1771 (Sher), Chapter 1018, Statutes of 2000, required
the CEC, in consultation with other state agencies, to
update California's inventory of GHG emissions in January
2002 and every five years thereafter. The inventory is to
include all emission sources in the state that were
identified in the CEC's 1998 report, "Historical and
Forecasted Greenhouse Gas Emissions Inventories for
California," including power plants.
According to the CEC's 2002 report, "Inventory of
California Greenhouse Gas Emissions and Sinks: 1990-1999,"
current research has largely supported earlier scientific
findings that GHG emissions from human activities have been
steadily increasing since the industrial revolution. In
addition, the United Nations-sanctions technical body, the
Intergovernmental Panel on Climate Change, reported in
1999: "There is new and stronger evidence that most of the
warming observed over the last 50 years is attributable to
human activities."
California has seen a modest increase in GHG emissions over
the last decade. This increase is in the consequence of
several divergent forces within California, some leading to
increases in GHG emissions, and others negating those
increases.
Several key California industries emit only moderate
amounts of CO2. With a relatively temperate climate,
California uses relatively less heating and cooling energy
than other states. As a leader in implementing aggressive
efficiency and environmental programs, California has been
able to reduce CO2 emission rates in all sectors, as well
as reducing energy demand and air pollution emissions.
However, California leads the nation in vehicle miles
traveled. As a result, CO2 emissions from the
transportation sector are increasing.
California uses fossil fuels differently than the United
States as a whole. Compared to most other states,
California uses less fossil energy to generate electricity.
This lower reliance on fossil fuels is due to the
availability of hydroelectric and nuclear power, and the
continuing and growing use of renewable energy. The
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predominant fossil fuel for electricity generation in
California is natural gas, which emits relatively less GHG
than oil or coal, the predominant fuel in many other parts
of the country. As a fraction of its total fossil fuel
use, California uses more fossil fuels (primarily gasoline)
in the transportation sector.
The Governor announced ambitious goals and schedules for
reducing GHG emissions in an Executive Order last year.
The strategy for achieving these goals is expected to rely
heavily on achieving reductions in the utility sector,
primarily electric generation. In its 2005 Integrated
Energy Policy Report, the CEC recommended setting a GHG
standard for utility procurement at level no higher than
emission levels from new combined-cycle natural gas
turbines. The CPUC has also indicated its intention to
introduce GHG factors into utility procurement and place a
cap on utility GHG emissions. The purpose of this bill is
to prevent long-term investments in power plants with GHG
emissions in excess of those produced by a combined-cycle
natural gas power plant.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
Fiscal Impact (in thousands)
Major Provisions 2006-07 2007-08
2008-09 Fund
Electricity costs -- Unknown, see below
-- GF & SF*
Develop & pro-
mulgate regulations $50
Special**
*The costs paid by departments would be financed with
the General Fund and all special funds which are used to
finance operations within buildings.
**These costs are likely financed by the Energy Resources
Products Account
The bill imposes some costs on the CEC and ARB to develop
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emission standards and promulgate regulations. These costs
are unknown, but could be in excess of $50,000. These
costs would likely be borne by special funds, primarily the
Energy Resources Products Account. The PUC says it will
incur no new net costs to monitor or enforce the bill's
provisions.
In addition, to the extent the regulations limit the number
of suppliers who may provide power to the California
market, the bill could increase wholesale electricity
costs. If these costs are reflected in the electricity
rates the state pays, then the state's long-term utility
costs would rise, potentially beginning in the budget year.
These costs, potentially major, could be charged to the
General Fund and most special funds.
SUPPORT : (Verified 5/25/06)
E2 (Environmental Entrepreneurs)
Natural Resources Defense Council
Pacific Gas and Electric Company, if amended
Sacramento Metropolitan Air Quality Management District
Sempra Energy, if amended
Sierra Club California
The Utility Reform Network
Union of Concerned Scientists
OPPOSITION : (Verified 5/25/06)
California Municipal Utilities Association
Center for Energy and Economic Development
Southern California Edison
Sustainable Environment and Economy for California
Western States Petroleum Association
NC:cm 5/26/06 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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