BILL ANALYSIS
SB 1368
Page 1
Date of Hearing: August 16, 2006
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Judy Chu, Chair
SB 1368 (Perata) - As Amended: August 7, 2006
Policy Committee: UtilitiesVote:7-3
Natural Resources 7-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires the California Energy Commission (CEC) to set
greenhouse gas emission standards for entities providing
electricity in the state, and requires the Public Utilities
Commission (PUC) to prohibit electricity providers and
corporations from entering long-term contracts that do not meet
the CEC standard. Specifically, this bill:
1)Prohibits a load-serving entity from entering into a long-term
financial commitment, through ownership or contracts exceeding
five years, unless any baseload electricity generation
supplied under the long-term financial commitment complies
with a greenhouse gas (GHG) emission performance standard,
which is to be developed by the CEC.
2)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 CEC's GHG emission performance standards.
3)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.
4)Requires the PUC to adopt rules and procedures to enforce GHG
emission performance standards for electrical corporations,
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electric service providers, and community choice aggregators.
5)Requires the CEC to adopt regulations to enforce the GHG
emission performance standards with respect to a local
publicly owned electric utility.
6)Requires the CEC, by March 31, 2007, and in consultation with
the Independent Systems Operator and the Air Resources Board
(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, and specifies
a methodology for cogeneration plants and biomass facilities.
7)Requires the CEC to consider the effects of the standard on
system reliability and overall costs to electricity customers.
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FISCAL EFFECT
1)The CEC estimates an ongoing need for four staff positions
(about $400,000) and one-time costs of around $750,000 for
technical contract support, for development of the GHG
standards and regulations, and for monitoring and enforcement
with regard to the local publicly owned utilities. [Energy
Resources Programs Account]
2)The PUC indicates that costs are absorbable, as the bill is
consistent with ongoing activities at the commission.
3)To the extent the bill results in a more expensive portfolio
of procured energy and higher electricity costs, there will be
increased General Fund and special fund costs for electricity
use in state facilities.
COMMENTS
1)Background and Purpose . 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 GHG pollution comes from the state's
24 million motor vehicles and over 30% comes from power plants
burning natural gas. The potential adverse consequences of
global warming from GHG emissions are globally significant,
and recent studies predict major statewide impacts. According
to experts, 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 also be
severe economic impacts from water supply problems, changes in
agricultural production, and increased energy costs, among
other impacts.
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
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specify a GHG performance standard and apply it to all utility
procurement, both in-state and out-of-state, both coal and
noncoal." The CEC further recommended that "any GHG
performance standard?be set no looser than levels achieved by
a new combined-cycle natural gas turbine." 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)Opposition . The Desert Water Agency (DWA) believes that the
bill will limit the ability of California utilities to
purchase generation capacity from coal-fired powerplants
located outside the state. The DWA believes this will increase
the state's reliance on natural gas, thus putting pressure on
natural gas prices and hence electricity costs.
3)Related Legislation . SB 107 (Simitian), pending in the
Assembly, 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.
AB 32 (Nunez), pending in the Senate Appropriations Committee,
in part requires the ARB to report and verify greenhouse gas
emissions and requires ARB to adopt statewide greenhouse gas
emissions limits.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081