BILL ANALYSIS
SB 1368
Page A
SENATE THIRD READING
SB 1368 (Perata)
As Amended August 30, 2006
Majority vote
SENATE VOTE :21-13
UTILITES & COMMERCE 7-3 NATURAL
RESOURCES 7-3
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|Ayes:|Levine, Baca, Cohn, De La |Ayes:|Hancock, Koretz, Laird, |
| |Torre, Jerome Horton, | |Lieu, Nava, Saldana, Wolk |
| |Montanez, | | |
| |Ridley-Thomas | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Bogh, Keen, Wyland |Nays:|La Malfa, Keene, Villines |
| | | | |
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APPROPRIATIONS 13-5
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|Ayes:|Chu, Bass, Berg, | | |
| |Calderon, | | |
| |De La Torre, Karnette, | | |
| |Klehs, Leno, Nation, | | |
| |Laird, Ridley-Thomas, | | |
| |Saldana, Yee | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Sharon Runner, Emmerson, | | |
| |Haynes, Nakanishi, | | |
| |Walters | | |
| | | | |
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SUMMARY : Creates a Greenhouse Gas (GHG) performance standard
for baseload generation. Specifically, this bill :
1)Makes 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
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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, and electric service provider serving end-use
customers in California; and, "long-term financial commitment"
which 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.
3)Prohibits a load serving entity or a municipal utility from
entering into a long-term financial commitment unless any
baseload generation supplied under the long-term financial
commitment complies with a greenhouse gases emission
performance standard, to be established by the California
Public Utilities Commission (PUC) or California Energy
Commission (CEC).
4)Prohibits California Public Utilities Commission (PUC) from
approving a long-term financial commitment by an electrical
corporation, unless any baseload generation supplied under the
long-term commitment complies with GHG emission performance
standards established by CEC.
5)Authorizes PUC to review any proposal for a long-term
financial commitment by an electric service provider (ESP) or
a community choice aggregator, in order to enforce the
requirements relating to GHG emission performance standards.
6)Requires PUC to adopt rules to enforce GHG emission
performance standards for electrical corporations, electric
service providers, and community choice aggregators and to
adopt procedures to verify the emissions of greenhouse gases
from any baseload generation supplied under a contract subject
to GHG emission performance standard in order to ensure
compliance.
7)Authorizes CEC to adopt regulations to enforce this act with
respect to a local publicly owned electric utility. 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.
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8)Requires PUC to establish a GHG emission performance standard
for all baseload generation of load-serving entities at an
emission rate of GHG that is not higher than the emission rate
of GHG for combined-cycle natural gas baseload generation.
9)Requires CEC to establish a GHG emission performance standard
for all baseload generation of municipal utilities at an
emission rate of GHG that is not higher than the emission rate
of GHG for combined-cycle natural gas baseload generation.
10) Requires 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 greenhouse gases emitted by the facility in the production
of both electrical and thermal energy.
11) Requires 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.
12) 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.
13) Requires CEC to consider the effects of the standard on
system reliability and overall costs to electricity customers.
14) Requires CEC to re-evaluate the GHG gas emission standard
when and if an enforceable greenhouse gas emission limit
applying to the electricity sector is established and in
operation.
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. The legislation
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required the California Energy Commission (CEC) to qualify
third-party organizations to provide certification services
and technical assistance to Registry participants. CEC is
required to provide technical guidance to the Registry on
protocol development. 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. SB 1771 (Chapter 1018, Statutes of 2000.)
2)Requires the Registry to develop and adopt protocols to report
and certify forestry sector projects and entity-wide GHG
emissions inventories. The intent of the bill is to foster
carbon sequestration and other co-benefits in California's
forests through sustainable forest management practices. SB
812 (Chapter 423, Statutes of 2002.)
3)Requires the California Air Resources Board (CARB) to adopt
regulations to reduce the emissions of greenhouse gases from
motor vehicles, starting with the 2009 model year. The
regulations would take effect no sooner than January 1, 2006.
The CARB adopted regulations in 2004, but these regulations
are currently the subject of legal challenges in both federal
and state courts. AB 1493 (Chapter 200, Statutes of 2002.)
FISCAL EFFECT : Unknown.
COMMENTS : 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.
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, CEC recommended setting a GHG standard for utility
procurement at level no higher than emission levels from new
combined-cycle natural gas turbines.
PUC has already begun the process of introducing GHG factors
into utility procurement and place a cap on utility GHG
emissions. PUC directed the IOUs to employ a GHG adder when
evaluating fossil and renewable bids for long-term procurement.
SB 1368
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GHG adder requires the utilities to account for the financial
risk associated with GHG emissions when evaluating fossil fuel
generation bids. GHG value is to be calculate on top of the
actual prices of bids to help develop a more accurate price
comparison between and among fossil, renewable and demand-side
bids. GHG adder is an analytical tool only, and does represent a
price that is actually paid to generators or charged to
ratepayers. The effect of the adder is to potentially change
which bids and resources are selected.
On October 6, 2005, PUC issued a Policy Statement on Greenhouse
Gas Performance Standards. The Policy Statement directs staff
to investigate adoption by the PUC of a greenhouse gas emissions
performance standard for IOU procurement that is no higher than
the GHG emissions levels of a combined-cycle natural gas turbine
for all procurement contracts that exceed three years in length
and for all new IOU-owned generation. In effect, Senate Bill
1368 and the PUC Policy Statement mirror each other.
What is a long-term contract: This bill currently applies to all
contracts for baseload power that are at least five years in
length. PUC's procurement planning process currently defines
"long-term" as five years or longer. Under PUC rules, long-term
contracts require PUC approval. IOU's currently plan their
procurement activities based on this five-year period. 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 market. Most
utilities do have numerous contracts for terms shorter than 5
years. These contracts would not be subject to this bill.
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.
For more information on Global Warming and opposition concern,
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refer to the June 22, 2006, Utilities and Commerce Committee
analysis.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083
FN: 0017690