BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 1368|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 1368
Author: Perata (D), et al
Amended: 8/30/06
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
SENATE FLOOR : 21-13, 6/1/06
AYES: Alarcon, Alquist, Cedillo, Chesbro, Dunn, Escutia,
Florez, Kehoe, Kuehl, Lowenthal, Migden, Murray, Ortiz,
Perata, Romero, Scott, Simitian, Soto, Speier, Torlakson,
Vincent
NOES: Aanestad, Ackerman, Ashburn, Battin, Cox, Denham,
Dutton, Hollingsworth, Maldonado, Margett, McClintock,
Poochigian, Runner
NO VOTE RECORDED: Bowen, Ducheny, Figueroa, Machado,
Morrow, Vacancy
ASSEMBLY FLOOR : Not available
CONTINUED
SB 1368
Page
2
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
meet the State Energy Conservation and Development
Commission's standard.
Assembly Amendments further clarify requirements for the
State Energy Conservation and Development Commission and
the Public Utilities Commission and make technical
adjustments.
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).
This bill creates a Greenhouse Gas (GHG) performance
standard for baseload generation.
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 and
production, including establishing performance standards
for procurement by electricity of load serving entities.
2.Provides various definitions, including "load serving
entity," which refers to every electrical corporation,
community choice aggregator, and electric service
SB 1368
Page
3
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 PUC or CEC.
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 GHG emission performance
standards established by CEC.
5.Authorizes the PUC to review any proposal for a
long-term financial commitment by an electrical service
provider or a community choice aggregator, in order to
enforce the requirements relating to GHG emission
performance standards.
6.Requires the 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 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 PUC to establish a GHG emission performance
standard for all baseload generation of load-serving
SB 1368
Page
4
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 the 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 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 greenhouse gases
emitted by the facility in the production of both
electrical and thermal energy.
11.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.
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 the CEC to consider the effects of the standard
on system reliability and overall costs to electricity
customers.
14.Requires the 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.
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
SB 1368
Page
5
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.
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.
SB 1368
Page
6
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
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**
SB 1368
Page
7
*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
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 : (Unable to verify at time of writing)
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 : (Unable to verify at time of writing)
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 8/30/06 Senate Floor Analyses
SB 1368
Page
8
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****