BILL ANALYSIS
SB 1368
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Date of Hearing: June 29, 2006
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Loni Hancock, Chair
SB 1368 (Perata) - As Amended: June 22, 2006
SENATE VOTE : 21-13
SUBJECT : Electricity: emissions of greenhouse gases.
SUMMARY : Requires the California Energy Commission (CEC) to set
greenhouse gas emission standards for those entities providing
electricity in the state. The bill also requires the California
Public Utilities Commission (PUC) to prohibit electricity
providers and corporations from entering long-term contracts
which do not meet the CEC's standard provided under this bill.
EXISTING LAW :
1) Requires the Secretary of the Resources Agency to establish a
non-profit public benefit corporation, known as the
California Climate Action Registry (Registry) to administer a
voluntary greenhouse gases (GHG) emissions registry.
2) Requires the CEC to qualify third-party organizations to
provide certification services and technical assistance to
Registry participants. The CEC is required to provide
technical guidance to the Registry on protocol development.
The CEC is required to periodically update the state's
inventory of GHG emissions and serve as an information
clearinghouse for information on climate change issues.
3) Requires the Registry to develop and adopt protocols to
report and certify forestry sector projects and entity-wide
GHG emissions inventories with the intent of fostering carbon
sequestration and other co-benefits in California's forests
through sustainable forest management practices.
4) Requires the California Air Resources Board (ARB) to adopt
regulations to reduce the emissions of GHG's from motor
vehicles, starting with the 2009 model year. The regulations
would take effect no sooner than January 1, 2006. The ARB
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adopted regulations in 2004, but these regulations are
currently the subject of legal challenges in both federal and
state courts.
THIS BILL :
1) Makes extensive legislative findings concerning the adverse
consequences of global warming, the historic context of
California's promotion of energy efficiency, conservation,
and renewable energy resources, and the necessity for
reducing emissions of greenhouse gases with respect to both
electricity consumption and production, including
establishing performance standards for procurement of
electricity by load serving entities.
2) Provides various definitions, including: "load serving
entity" which refers to every electrical corporation,
community choice aggregator, electric service provider, and
local publicly owned electric utility serving end-use
customers in California; and, "long-term financial
commitment" which means either an ownership investment in
baseload generation or a contract with a term of five or more
years, which includes procurement of baseload generation.
3) Prohibits a load serving entity from entering into a
long-term financial commitment unless any baseload generation
supplied under the long-term financial commitment complies
with a GHG emission performance standard.
4) Prohibits the PUC from approving a long-term financial
commitment by an electrical corporation, unless any baseload
generation supplied under the long-term commitment complies
with the GHG emission performance standards established by
the CEC.
5) Authorizes the PUC to review any proposal for a long-term
financial commitment by a electric service provider or a
community choice aggregator, in order to enforce the
requirements relating to GHG emission performance standards.
6) Authorizes the PUC to adopt rules to enforce GHG emission
performance standards for electrical corporations, electric
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service providers, and community choice aggregators. To this
extent, the bill requires the PUC to adopt procedures to
verify the emissions of GHG's from any baseload generation
supplied under a contract subject to the GHG emission
performance standard in order to ensure compliance.
7) Authorizes the CEC to adopt regulations to enforce this act
with respect to a local publicly owned electric utility. The
CEC is also authorized to apply the procedures for verifying
emissions of GHG from baseload generation to ensure
compliance by publicly owned electric utilities with GHG
emission performance standards.
8) Requires the CEC, in consultation with the Independent
Systems Operator and the ARB, to establish a GHG emission
performance standard for all baseload generation at an
emission rate of GHG that is not higher than the emission
rate of GHG for existing combined-cycle natural gas baseload
generation.
9) Requires the CEC to establish an output-based methodology to
ensure that the calculation of GHG emission for cogeneration
plants recognizes the total usable energy output and includes
all GHG's emitted by the facility in the production of both
electrical and thermal energy.
10)Requires the CEC, in calculating GHG emissions of biomass
facilities, to consider net emissions from the process of
growing, processing and generating the electricity from the
biomass feedstock.
11)States that carbon dioxide captured from a power plant shall
not be considered to have been emitted from such power plant
if it is permanently disposed of in geological formations in
compliance with applicable regulations.
12)Requires the CEC to consider the effects of the standard on
system reliability and overall costs to electricity
customers.
13)Requires the CEC to re-evaluate the GHG gas emission standard
when and if an enforceable GHG emission limit applying to the
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electricity sector is established and in operation.
FISCAL EFFECT : According to the Senate Appropriations Committee
Analysis, the bill imposes some costs on the CEC and ARB to
develop emission standards and promulgate regulations. These
costs are unknown, but could be in excess of $50,000.
COMMENTS :
1) Climate Change and Greenhouse Gas Emissions
The term "greenhouse gas emissions" refers to gases, such as
water vapor, carbon dioxide, nitrous oxide, methane,
hydroflurocarbons (HFCs), and perflurocarbons (PFCs) that when
allowed to build up in the atmosphere, cause a rise in the
average temperature of the earth's surface. In California,
nearly 40% of our GHG pollution comes from our 24 million motor
vehicles and over 30% comes from our growing population of power
plants that burn natural gas<1>.
The potential adverse consequences of global warming from GHG
emissions are globally significant, and recent studies predict
major statewide impacts. A 2004 study published by the Union of
Concerned Scientists includes modeling data showing that if
there are no further controls on the emission of GHG's
California's summer temperatures could increase by as much as
ten degrees annually in the Central Valley and other parts of
the state by the end of the century. A ten-degree increase in
summer in the Sacramento Valley, for example, would have
profound impacts on the environment and economy of the region.
Predicted temperature rises in California will result in
increased mortality among the elderly and other vulnerable
populations, increased respiratory illness from further
degradation of air quality, and profound transformation in the
landscape, including the potential extinction of several animal
species. There could be severe economic impacts from water
supply problems, changes in agricultural production, and
increased energy costs, among other impacts. Specific examples
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<1> From the California Energy Commission's "Inventory of
California
Greenhouse Gas Emissions and Sinks: 1990-1999", November 2002
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include reduction in Sierra snow pack, more intense rainfall in
some areas, extended droughts in others, greater evaporation of
surface waters, and rising sea levels making vulnerable valuable
wetland ecosystems that rely on a specific fresh water-salt
water balance. Agricultural impacts vary, including predictions
ranging from large decreases to large increases in production,
depending on assumptions of temperature increase, potential
benefits of increased carbon dioxide, and adaptation measures.
Energy needs would substantially increase, particularly in
summer, to keep warmer parts of the state habitable.
Last year, the Governor announced ambitious goals and schedules
for reducing GHG emissions in Executive Order S-3-05. The
strategy for achieving these goals is expected to rely heavily
on achieving reduction in the utility sector, primarily electric
generation. In its 2005 Integrated Energy Policy Report, the
CEC recommended that the state "should specify a GHG performance
standard and apply it to all utility procurement, both in-state
and out-of-state, both coal and noncoal."<2> The CEC further
recommended that "any GHG performance standard?be set no looser
than levels achieved by a new combined-cycle natural gas
turbine."<3> The PUC has also indicated its intention to
introduce GHG factors into utility procurement and place a cap
on utility GHG emissions. According to the author's office, 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.
2) What is a Long Term Contract ?
This bill currently applies to all contracts for baseload power
that are at least five years in length. The PUC's procurement
planning process currently defines "long-term" as five years or
longer. Under PUC rules, long-term contracts require PUC
approval. The Investor Owned Utilities (IOUs) currently plan
their procurement activities based on this five-year period.
The PUC resource adequacy rules require IOUs to have almost all
of the forecasted demand contracted for at least a year in
advance. This means they make very few purchases on the spot
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<2> California Energy Commission, 2005 Integrated Energy Policy
Report, Publication CEC-100-2005-007, November 2005, p.84
<3> Ibid.
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market. Most utilities do have numerous contracts for terms
shorter than 5 years. These contracts would not be subject to
this bill.
3) What is Baseload ?
The bill currently only applies to contracts for baseload power.
Baseload power is defined as electricity generation from a power
plant that is designed to provide electricity at least 60
percent of the total hours in a year (a 60% capacity factor).
Baseload power contracts are for power that is intended to be
operating to meet demand night and day and throughout the year.
This is different from peak power, which is intended to be
available only at those times of the day and year when demand
spikes. Baseload power generally comes from more efficient power
plants and tends to be cleaner and cheaper than peak power.
4) Technical Drafting Error
In its current form, this bill contains a technical drafting
error. The committee may wish to correct the error as follows:
On page 8, line 26, delete ", as of March 31, 2007"
On page 8, line 19, after (1), insert "On or before March 31,
2007, "
5) Related Legislation
In the current legislative session, there are a number of
measures that relate to climate change. Among them are:
a) SB 107 (Simitian). Accelerates the Renewable Portfolio
Standard to require sellers of electricity to procure at
least 20% of their retail sales from renewable power by
2010 instead of 2017.
b) SB 1250 (Perata). Revises the public interest energy
research, demonstration and development program; the
renewable energy resources program, including for the
purposes for which the money in the Renewable Resource
Trust Fund may be used.
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c) AB 32 (Nunez and Pavley). Enacts the Global Warming
Solutions Act of 2006 which among other things, requires
ARB to report and verify greenhouse gas emissions and
require ARB to adopt statewide greenhouse gas emissions
limits.
REGISTERED SUPPORT / OPPOSITION :
Support
American Lung Association
California Coastal Protection Network
California League of Conservation Voters
Calpine
Clean Power Campaign
Coalition for Clean Air
Environment California
Environmental Defense
Environmental Entrepreneurs
Natural Resources Defense Council
Pacific Gas and Electric
Planning and Conservation League
Sierra Club California
TURN
Union of Concerned Scientists
Opposition
California Municipal Utilities Association
Center for Energy and Economic Development
Sempra Energy
Sustainable Environment & Economy for California
Analysis Prepared by : Kyra Emanuels Ross / NAT. RES. / (916)
319-2092