BILL NUMBER: SB 1250 CHAPTERED 09/27/06 CHAPTER 512 FILED WITH SECRETARY OF STATE SEPTEMBER 27, 2006 APPROVED BY GOVERNOR SEPTEMBER 27, 2006 PASSED THE SENATE AUGUST 31, 2006 PASSED THE ASSEMBLY AUGUST 30, 2006 AMENDED IN ASSEMBLY AUGUST 24, 2006 AMENDED IN ASSEMBLY AUGUST 21, 2006 AMENDED IN ASSEMBLY AUGUST 14, 2006 AMENDED IN SENATE MAY 26, 2006 AMENDED IN SENATE APRIL 26, 2006 INTRODUCED BY Senator Perata (Coauthor: Assembly Member Levine) FEBRUARY 8, 2006 An act to amend Sections 25620, 25620.1, 25620.2, 25620.5, 25620.8, 25620.11, 25742, 25744, 25746, 25747, 25748, and 25751 of, to add Sections 25620.15 and 25740.5 to, and to repeal Sections 25620.9, 25745, 25749, and 25750 of, the Public Resources Code, and to amend Sections 381, 399.8, and 895 of, to amend and repeal Sections 399 and 399.4 of, and to repeal Sections 383, 383.6, 384.1, 399.1, 399.2, 399.3, 399.6, 399.7, and 399.9 of, the Public Utilities Code, relating to energy, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST SB 1250, Perata Energy: cost-effective energy efficiency programs: renewable energy resources. (1) Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including electrical corporations. Existing law requires the PUC to require Pacific Gas and Electric Company, San Diego Gas and Electric, and Southern California Edison to identify a separate electrical rate component to fund programs that enhance system reliability and provide in-state benefits. This rate component is a nonbypassable element of local distribution and collected on the basis of usage. Existing PUC resolutions refer to the nonbypassable rate component as a "public goods charge." The public goods charge moneys are collected to support cost-effective energy efficiency and conservation activities, public interest research and development not adequately provided by competitive and regulated markets, and renewable energy resources. The moneys collected by the public goods charge for renewable energy are required to be transferred to the State Energy Resources Conservation and Development Commission (Energy Commission), for deposit in the Renewable Resource Trust Fund, for use for the renewable energy resources program. Some of the money in the fund, and in the accounts in the fund, is continuously appropriated to the Energy Commission for specified purposes related to renewable energy resources. The moneys collected by the public goods charge for public interest research and development are required to be transferred to the Energy Commission, for deposit in the Public Interest Research, Development, and Demonstration Fund, for use for specified purposes, including the public interest energy research, demonstration, and development program. (2) Under the Reliable Electric Service Investments Act, the Energy Commission is required to hold moneys collected for renewable energy and deposited in the Renewable Resource Trust Fund and moneys collected for public interest research, development, and demonstration and deposited in the Public Interest Research, Development, and Demonstration Fund, until further action by the Legislature. The act requires the Energy Commission to create an initial investment plan, in accordance with specified objectives, to govern the allocation of funds in the Renewable Resource Trust Fund and Public Interest Research, Development, and Demonstration Fund, collected between January 1, 2002, and January 1, 2007. The act requires the Energy Commission, on or before March 31, 2006, to prepare an investment plan proposing the application of moneys collected between January 1, 2007, and January 1, 2012, in accordance with specified objectives. The bill would revise and recast the public interest energy research, demonstration, and development program, and the renewable energy resources program, including the purposes for which money in the Renewable Resource Trust Fund may be used, thereby making an appropriation. The bill would make other related changes, including in the Reliable Electric Service Investments Act. (3) The Reliable Electric Service Investments Act requires the Governor to appoint an independent review panel to prepare and submit to the Legislature and Energy Commission, by January 1, 2005, a report evaluating the energy efficiency, renewable energy, and research, development, and demonstration programs funded by the public goods charge and to make recommendations relative to specified matters. This bill would delete these requirements. (4) The Reliable Electric Service Investments Act was enacted in 2 separate bills, each containing identical language. This bill would repeal duplicative sections of the act. (5) Existing law requires the PUC, in evaluating energy efficiency investments under its existing statutory authorities, to ensure that no energy efficiency funds are used to provide incentives for the purchase of new energy-efficient refrigerators. This bill would delete that refrigerator purchase restriction. (6) Existing law establishes a surcharge on all natural gas consumed in the state to fund certain low-income assistance programs, cost-effective energy efficiency and conservation activities, and public interest research and development (natural gas public goods charge). Existing law requires a public utility gas corporation, as defined, to collect the natural gas public goods charge from natural gas consumers, as specified. The money from the natural gas public goods charge is deposited in the Gas Consumption Surcharge Fund, and is continuously appropriated to specified entities, including to the PUC, or to an entity designated by the PUC, to fund low-income assistance programs, cost-effective energy efficiency and conservation activities, and public interest research and development not adequately provided by the competitive and regulated markets. Existing law authorizes the Energy Commission, if it is designated by the PUC to receive funds for public interest research and development, to administer the program pursuant to the Public Interest Energy Research, Demonstration, and Development Program. This bill would, if the Energy Commission is so designated, require the Controller to transfer funds to a separate subaccount in the Public Interest Research, Development, and Demonstration Fund to pay the Energy Commission for specified costs. (7) Existing law requires that 10% of moneys collected pursuant to the renewable energy public goods charge are to be used to provide customer credits to consumers who entered into a direct transaction on or before September 1, 2001, for purchases of electricity produced by a registered in-state renewable electricity generating facility. This bill would repeal that provision. (8) This bill would declare that it is to take effect immediately as an urgency statute. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 25620 of the Public Resources Code is amended to read: 25620. The Legislature hereby finds and declares all of the following: (a) It is in the best interests of the people of this state that the quality of life of its citizens be improved by providing environmentally sound, safe, reliable, and affordable energy services and products. (b) To improve the quality of life of this state's citizens, it is proper and appropriate for the state to undertake public interest energy research, development, and demonstration projects that are not adequately provided for by competitive and regulated energy markets. (c) Public interest energy research, demonstration, and development projects should advance energy science or technologies of value to California citizens and should be consistent with the policies of this chapter. SEC. 2. Section 25620.1 of the Public Resources Code is amended to read: 25620.1. (a) The commission shall develop, implement, and administer the Public Interest Research, Development, and Demonstration Program that is hereby created. The program shall include a full range of research, development, and demonstration activities that, as determined by the commission, are not adequately provided for by competitive and regulated markets. The commission shall administer the program consistent with the policies of this chapter. (b) The general goal of the program is to develop, and help bring to market, energy technologies that provide increased environmental benefits, greater system reliability, and lower system costs, and that provide tangible benefits to electric utility customers through the following investments: (1) Advanced transportation technologies that reduce air pollution and greenhouse gas emissions beyond applicable standards, and that benefit electricity and natural gas ratepayers. (2) Increased energy efficiency in buildings, appliances, lighting, and other applications beyond applicable standards, and that benefit electric utility customers. (3) Advanced electricity generation technologies that exceed applicable standards to increase reductions in greenhouse gas emissions from electricity generation, and that benefit electric utility customers. (4) Advanced electricity technologies that reduce or eliminate consumption of water or other finite resources, increase use of renewable energy resources, or improve transmission or distribution of electricity generated from renewable energy resources. (c) To achieve the goals established in subdivision (b), the commission shall adopt a portfolio approach for the program that does all of the following: (1) Effectively balances the risks, benefits, and time horizons for various activities and investments that will provide tangible energy or environmental benefits for California electricity customers. (2) Emphasizes innovative energy supply and end use technologies, focusing on their reliability, affordability, and environmental attributes. (3) Includes projects that have the potential to enhance transmission and distribution capabilities. (4) Includes projects that have the potential to enhance the reliability, peaking power, and storage capabilities of renewable energy. (5) Demonstrates a balance of benefits to all sectors that contribute to the funding under Section 399.8 of the Public Utilities Code. (6) Addresses key technical and scientific barriers. (7) Demonstrates a balance between short-term, mid-term, and long-term potential. (8) Ensures that prior, current, and future research not be unnecessarily duplicated. (9) Provides for the future market utilization of projects funded through the program. (10) Ensures an open project selection process and encourages the awarding of research funding for a diverse type of research as well as a diverse award recipient base and equally considers research proposals from the public and private sectors. (11) Coordinates with other related research programs. (d) The term "award," as used in this chapter, may include, but is not limited to, contracts, grants, interagency agreements, loans, and other financial agreements designed to fund public interest research, demonstration, and development projects or programs. SEC. 3. Section 25620.2 of the Public Resources Code is amended to read: 25620.2. (a) To ensure the efficient implementation and administration of the Public Interest Research, Development, and Demonstration Program, the commission shall do both of the following: (1) Develop procedures for the solicitation of award applications for project or program funding, and to ensure efficient program management. (2) Evaluate and select programs and projects, based on merit, that will be funded under the program. (b) The commission shall adopt regulations to implement the program, in accordance with the following procedures: (1) Prepare a preliminary text of the proposed regulation and provide a copy of the preliminary text to any person requesting a copy. (2) Provide public notice of the proposed regulation to any person who has requested notice of the regulations prepared by the commission. The notice shall contain all of the following: (A) A clear overview explaining the proposed regulation. (B) Instructions on how to obtain a copy of the proposed regulations. (C) A statement that if a public hearing is not scheduled for the purpose of reviewing a proposed regulation, any person may request, not later than 15 days prior to the close of the written comment period, a public hearing conducted in accordance with commission procedures. (3) Accept written public comments for 30 calendar days after providing the notice required in paragraph (2). (4) Certify that all written comments were read and considered by the commission. (5) Place all written comments in a record that includes copies of any written factual support used in developing the proposed regulation, including written reports and copies of any transcripts or minutes in connection with any public hearings on the adoption of the regulation. The record shall be open to public inspection and available to the courts. (6) Provide public notice of any substantial revision of the proposed regulation at least 15 days prior to the expiration of the deadline for public comments and comment period using the procedures provided in paragraph (2). (7) Conduct public hearings, if a hearing is requested by an interested party, that shall be conducted in accordance with commission procedures. (8) Adopt any proposed regulation at a regularly scheduled and noticed meeting of the commission. The regulation shall become effective immediately unless otherwise provided by the commission. (9) Publish any adopted regulation in a manner that makes copies of the regulation easily available to the public. Any adopted regulation shall also be made available on the Internet. The commission shall transmit a copy of an adopted regulation to the Office of Administrative Law for publication, or, if the commission determines that printing the regulation is impractical, an appropriate reference as to where a copy of the regulation may be obtained. (10) Notwithstanding any other provision of law, this subdivision provides an interim exception from the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code for regulations required to implement Sections 25620.1 and 25620.2 that are adopted under the procedures specified in this subdivision. (11) This subdivision shall become inoperative on January 1, 2012, unless a later enacted statute deletes or extends that date. However, after January 1, 2012, the commission is not required to repeat any procedural step in adopting a regulation that has been completed before January 1, 2012, using the procedures specified in this subdivision. SEC. 4. Section 25620.5 of the Public Resources Code is amended to read: 25620.5. (a) The commission may solicit applications for awards, using a sealed competitive bid, competitive negotiation process, commission-issued intradepartmental master agreement, the methods for selection of professional services firms set forth in Chapter 10 (commencing with Section 4525) of Division 5 of Title 1 of the Government Code, interagency agreement, single source, or sole source method. When scoring teams are convened to review and score proposals, the scoring teams may include persons not employed by the commission, as long as employees of the state constitute no less than 50 percent of the membership of the scoring team. A person participating on a scoring team may not have any conflict of interest with respect to the proposal before the scoring team. (b) A sealed bid method may be used when goods and services to be acquired can be described with sufficient specificity so that bids can be evaluated against specifications and criteria set forth in the solicitation for bids. (c) The commission may use a competitive negotiation process in any of the following circumstances: (1) Whenever the desired award is not for a fixed price. (2) Whenever project specifications cannot be drafted in sufficient detail so as to be applicable to a sealed competitive bid. (3) Whenever there is a need to compare the different price, quality, and structural factors of the bids submitted. (4) Whenever there is a need to afford bidders an opportunity to revise their proposals. (5) Whenever oral or written discussions with bidders concerning the technical and price aspects of their proposals will provide better results to the state. (6) Whenever the price of the award is not the determining factor. (d) The commission may establish interagency agreements. (e) The commission may provide awards on a single source basis by choosing from among two or more parties or by soliciting multiple applications from parties capable of supplying or providing similar goods or services. The cost to the state shall be reasonable and the commission may only enter into a single source agreement with a particular party if the commission determines that it is in the state' s best interests. (f) The commission, in accordance with subdivision (g) and in consultation with the Department of General Services, may provide awards on a sole source basis when the cost to the state is reasonable and the commission makes any of the following determinations: (1) The proposal was unsolicited and meets the evaluation criteria of this chapter. (2) The expertise, service, or product is unique. (3) A competitive solicitation would frustrate obtaining necessary information, goods, or services in a timely manner. (4) The award funds the next phase of a multiphased proposal and the existing agreement is being satisfactorily performed. (5) When it is determined by the commission to be in the best interests of the state. (g) The commission may not use a sole source basis for an award pursuant to subdivision (f), unless both of the following conditions are met: (1) The commission, at least 60 days prior to taking an action pursuant to subdivision (f), notifies the Joint Legislative Budget Committee and the relevant policy committees in both houses of the Legislature, in writing, of its intent to take the proposed action. (2) The Joint Legislative Budget Committee either approves or does not disapprove the proposed action within 60 days from the date of notification required by paragraph (1). (h) The provisions of this section are severable. If any provision of this section or its application is held to be invalid, that invalidity does not affect other provisions or applications that can be given effect without the invalid provision or application. SEC. 5. Section 25620.8 of the Public Resources Code is amended to read: 25620.8. The commission shall prepare and submit to the Legislature an annual report, not later than March 31 of each year, on awards made pursuant to this chapter and progress toward achieving the goals set forth in Section 25620.1. The report shall include information on the names of award recipients, the amount of awards, and the types of projects funded, an evaluation of the success of funded projects, and recommendations for improvements in the program. The report shall set forth the actual costs of programs or projects funded by the commission, the results achieved, and how the actual costs and results compare to the expected costs and benefits. The commission shall establish procedures for protecting confidential or proprietary information and shall consult with all interested parties in the preparation of the annual report. SEC. 6. Section 25620.9 of the Public Resources Code is repealed. SEC. 7. Section 25620.11 of the Public Resources Code is amended to read: 25620.11. (a) The commission shall regularly convene an advisory board that shall make recommendations to guide the commission's selection of programs and projects to be funded under this chapter. The advisory board shall include as appropriate, but not be limited to, representatives from the Public Utilities Commission, consumer organizations, environmental organizations, and electrical corporations subject to the funding requirements of Section 381 of the Public Utilities Code. (b) Three members of the Senate, appointed by the Senate President Pro Tempore, and three members of the Assembly, appointed by the Speaker of the Assembly, may meet with the advisory board and participate in its activities to the extent that such participation is not incompatible with their respective positions as Members of the Legislature. SEC. 8. Section 25620.15 is added to the Public Resources Code, to read: 25620.15. (a) In order to ensure that prudent investments in research, development, and demonstration of energy efficient technologies continue to produce substantial economic, environmental, public health, and reliability benefits, it is the policy of the state and the intent of the Legislature that funds made available, upon appropriation, for energy related public interest research, development, and demonstration programs shall be used to advance science or technology that is not adequately provided by competitive and regulated markets. (b) Notwithstanding any other provision of law, money collected for public interest research, development, and demonstration pursuant to Section 399.8 of the Public Utilities Code shall be transferred to the Public Interest Research, Development, and Demonstration Fund. Money collected between January 1, 2007, and January 1, 2012, shall be used for the purposes specified in this chapter. (c) In lieu of the Public Utilities Commission retaining funds authorized pursuant to Section 381 of the Public Utilities Code for investments made by electrical corporations in public interest research, development, and demonstration projects for transmission and distribution functions, up to 10 percent of the funds transferred to the commission pursuant to subdivision (b) shall be awarded to electrical corporations for public interest research, development, and demonstration projects for transmission and distribution functions consistent with the policies and subject to the requirements of this chapter. SEC. 9. Section 25740.5 is added to the Public Resources Code, to read: 25740.5. (a) The commission shall optimize public investment and ensure that the most cost-effective and efficient investments in renewable resources are vigorously pursued. (b) The commission's long-term goal shall be a fully competitive and self-sustaining California renewable energy supply. (c) The program objective shall be to increase, in the near term, the quantity of California's electricity generated by in-state renewable energy resources, while protecting system reliability, fostering resource diversity, and obtaining the greatest environmental benefits for California residents. (d) An additional objective of the program shall be to identify and support emerging renewable energy technologies that have the greatest near-term commercial promise and that merit targeted assistance. (e) The Legislature recommends allocations among all of the following: (1) (A) Except as provided in subparagraph (B), production incentives for new renewable energy, including repowered or refurbished renewable energy. (B) Allocations shall not be made for renewable energy that is generated by a project that remains under a power purchase contract with an electrical corporation originally entered into prior to September 24, 1996, whether amended or restated thereafter. (C) Notwithstanding subparagraph (B), production incentives for incremental new, repowered, or refurbished renewable energy from existing projects under a power purchase contract with an electrical corporation originally entered into prior to September 24, 1996, whether amended or restated thereafter, may be allowed in any month, if all of the following occur: (i) The project's power purchase contract provides that all energy delivered and sold under the contract is paid at a price that does not exceed the Public Utilities Commission approved short-run avoided cost of energy. (ii) Either of the following: (I) The power purchase contract is amended to provide that the kilowatthours used to determine the capacity payment in any time-of-delivery period in any month under the contract shall be equal to the actual kilowatthour production, but no greater than the five-year average of the kilowatthours delivered for the corresponding time-of-delivery period and month, in the years 1994 to 1998, inclusive. (II) If a project's installed capacity as of December 31, 1998, is less than 75 percent of the nameplate capacity as stated in the power purchase contract, the power purchase contract is amended to provide that the kilowatthours used to determine the capacity payment in any time-of-delivery period in any month under the contract shall be equal to the actual kilowatthour production, but no greater than the product of the five-year average of the kilowatthours delivered for the corresponding time-of-delivery period and month, in the years 1994 to 1998, inclusive, and the ratio of installed capacity as of December 31 of the previous year, but not to exceed contract nameplate capacity, to the installed capacity as of December 31, 1998. (iii) The production incentive is payable only with respect to the kilowatthours delivered in a particular month that exceeds the corresponding five-year average calculated pursuant to clause (ii). (2) Rebates, buydowns, or equivalent incentives for emerging renewable technologies. (3) Customer education. (4) Incentives for reducing fuel costs that are confirmed to the satisfaction of the commission at solid fuel biomass energy facilities in order to provide demonstrable environmental and public benefits, including, but not limited to, air quality. (5) Solar thermal generating resources that enhance the environmental value or reliability of the electrical system and that require financial assistance to remain economically viable, as determined by the commission. The commission may require financial disclosure from applicants for purposes of this paragraph. (6) Specified fuel cell technologies, if the commission makes all of the following findings: (A) The specified technologies have similar or better air pollutant characteristics than renewable technologies in the report made pursuant to Section 25748. (B) The specified technologies require financial assistance to become commercially viable by reference to wholesale generation prices. (C) The specified technologies could contribute significantly to the infrastructure development or other innovation required to meet the long-term objective of a self-sustaining, competitive supply of renewable energy. (7) Existing wind-generating resources, if the commission finds that the existing wind-generating resources are a cost-effective source of reliable energy and environmental benefits compared with other eligible sources, and that the existing wind-generating resources require financial assistance to remain economically viable. The commission may require financial disclosure from applicants for the purposes of this paragraph. (f) Notwithstanding any other provision of law, moneys collected for renewable energy pursuant to Article 15 (commencing with Section 399) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code shall be transferred to the Renewable Resource Trust Fund. Moneys collected between January 1, 2007, and January 1, 2012, shall be used for the purposes specified in this chapter. SEC. 10. Section 25742 of the Public Resources Code is amended to read: 25742. (a) Ten percent of the funds collected pursuant to the renewable energy public goods charge shall be used for programs that are designed to achieve fully competitive and self-sustaining existing in-state renewable electricity generation facilities, and to secure for the state the environmental, economic, and reliability benefits that continued operation of those facilities will provide, during the 2007-2011 investment cycle. Eligibility for incentives under this section shall be limited to those technologies found eligible for funds by the commission pursuant to paragraphs (4), (5), and (7) of subdivision (e) of Section 25740.5. (b) Any funds used to support in-state renewable electricity generation facilities pursuant to this section shall be expended in accordance with the provisions of this chapter. (c) Facilities that are eligible to receive funding pursuant to this section shall be registered in accordance with criteria developed by the commission and those facilities shall not receive payments for any electricity produced that has any of the following characteristics: (1) Is sold at monthly average rates equal to or greater than the applicable target price, as determined by the commission. (2) Is used onsite. (d) Existing facilities generating electricity from biomass energy shall be eligible for funding and otherwise considered an in-state renewable electricity generation facility only if they report to the commission the types and quantities of biomass fuels used and certify to the satisfaction of the commission that fuel utilization is limited to the fuels specified in subdivision (f) of Section 25743. The commission shall report the types and quantities of biomass fuels used by each facility to the Legislature in the reports prepared pursuant to Section 25748. (e) Each existing facility seeking an award pursuant to this section shall be evaluated by the commission to determine the amount of the funds being sought, the cumulative amount of funds the facility has received previously from the commission and other state sources, the value of any past and current federal or state tax credits, the facility's contract price for energy and capacity, the prices received by similar facilities, the market value of the facility, and the likelihood that the award will make the facility competitive and self-sustaining within the 2007 -2011 investment cycle. The commission shall use this evaluation to determine the value of an award to the public relative to other renewable energy investment alternatives. The commission shall compile its findings and report them to the Legislature in the reports prepared pursuant to Section 25748. SEC. 11. Section 25744 of the Public Resources Code is amended to read: 25744. (a) Thirty-seven and one-half percent of the money collected pursuant to the renewable energy public goods charge shall be used for a multiyear, consumer-based program to foster the development of emerging renewable technologies in distributed generation applications. (b) Any funds used for emerging technologies pursuant to this section shall be expended in accordance with this chapter, subject to all of the following requirements: (1) Funding for emerging technologies shall be provided through a competitive, market-based process that is in place for a period of not less than five years, and is structured to allow eligible emerging technology manufacturers and suppliers to anticipate and plan for increased sale and installation volumes over the life of the program. (2) The program shall provide monetary rebates, buydowns, or equivalent incentives, subject to paragraph (3), to purchasers, lessees, lessors, or sellers of eligible electricity generating systems. Incentives shall benefit the end-use consumer of renewable generation by directly and exclusively reducing the purchase or lease cost of the eligible system, or the cost of electricity produced by the eligible system. Incentives shall be issued on the basis of the rated electrical generating capacity of the system measured in watts, or the amount of electricity production of the system, measured in kilowatthours. Incentives shall be limited to a maximum percentage of the system price, as determined by the commission. The commission may establish different incentive levels for systems based on technology type and system size, and may provide different incentive levels for systems used in conjunction with energy-efficiency measures. (3) Eligible distributed emerging technologies are fuel cell technologies that utilize renewable fuels, including fuel cell technologies with an emission profile equivalent or better than the State Air Resources Board 2007 standard, and that serve as backup generation for emergency, safety, or telecommunications systems. Eligible renewable fuels may include wind turbines of not more than 50 kilowatts rated electrical generating capacity per customer site and other distributed renewable emerging technologies that meet the emerging technology eligibility criteria established by the commission and are not eligible for rebates, buydowns, or similar incentives from any other commission or Public Utilities Commission program. Eligible electricity generating systems are intended primarily to offset part or all of the consumer's own electricity demand, including systems that are used as backup power for emergency, safety, or telecommunications, and shall not be owned by local publicly owned electric utilities, nor be located at a customer site that is not receiving distribution service from an electrical corporation that is subject to the renewable energy public goods charge and contributing funds to support programs under this chapter. All eligible electricity generating system components shall be new and unused, shall not have been previously placed in service in any other location or for any other application, and shall have a warranty of not less than five years to protect against defects and undue degradation of electrical generation output. Systems and their fuel resources shall be located on the same premises of the end-use consumer where the consumer's own electricity demand is located, and all eligible electricity generating systems shall be connected to the utility grid, unless the system purpose is for backup generation used in emergency, safety, or telecommunications, in California. The commission may require eligible electricity generating systems to have meters in place to monitor and measure a system's performance and generation. Only systems that will be operated in compliance with applicable law and the rules of the Public Utilities Commission shall be eligible for funding. (4) The commission shall limit the amount of funds available for a system or project of multiple systems and reduce the level of funding for a system or project of multiple systems that has received, or may be eligible to receive, any government or utility funds, incentives, or credit. (5) In awarding funding, the commission may provide preference to systems that provide tangible demonstrable benefits to communities with a plurality of minority or low-income populations. (6) In awarding funding, the commission shall develop and implement eligibility criteria and a system that provides preference to systems based upon system performance, taking into account factors, including shading, insulation levels, and installation orientation. (7) At least once annually, the commission shall publish and make available to the public the balance of funds available for emerging renewable energy resources for rebates, buydowns, and other incentives for the purchase of these resources. (c) Notwithstanding Section 27540.5, the commission may expend, until December 31, 2008, up to sixty million dollars ($60,000,000) of the funding allocated to the Renewable Resources Trust Fund for the program established in this section, subject to the repayment requirements of subdivision (f) of Section 25751. (d) Any funds for photovoltaic or solar thermal electric technologies shall be awarded in compliance with Chapter 8.8 (commencing with Section 25780), as proposed to be added by Senate Bill 1 of the 2005-06 Regular Session of the Legislature, and not with this section. SEC. 12. Section 25745 of the Public Resources Code, as added by Section 2 of Chapter 666 of the Statutes of 2003, is repealed. SEC. 13. Section 25746 of the Public Resources Code is amended to read: 25746. (a) One percent of the money collected pursuant to the renewable energy public goods charge shall be used in accordance with this chapter to promote renewable energy and disseminate information on renewable energy technologies, including emerging renewable technologies, and to help develop a consumer market for renewable energy and for small-scale emerging renewable energy technologies. (b) If the commission provides funding for a regional accounting system to verify compliance with the renewable portfolio standard by retail sellers, pursuant to subdivision (b) of Section 399.13 of the Public Utilities Code, the commission shall recover all costs from user fees. SEC. 14. Section 25747 of the Public Resources Code is amended to read: 25747. (a) The commission shall adopt guidelines governing the funding programs authorized under this chapter, at a publicly noticed meeting offering all interested parties an opportunity to comment. Substantive changes to the guidelines may not be adopted without at least 10 days' written notice to the public. The public notice of meetings required by this subdivision may not be less than 30 days. Notwithstanding any other provision of law, any guidelines adopted pursuant to this chapter or Section 399.13 of the Public Utilities Code, shall be exempt from the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. The Legislature declares that the changes made to this subdivision by the act amending this section during the 2002 portion of the 2001-02 Regular Session are declaratory of, and not a change in existing law. (b) Funds to further the purposes of this chapter may be committed for multiple years. (c) Awards made pursuant to this chapter are grants, subject to appeal to the commission upon a showing that factors other than those described in the guidelines adopted by the commission were applied in making the awards and payments. Any actions taken by an applicant to apply for, or become or remain eligible and registered to receive, payments or awards, including satisfying conditions specified by the commission, shall not constitute the rendering of goods, services, or a direct benefit to the commission. (d) An award made pursuant to this chapter, the amount of the award, and the terms and conditions of the grant are public information. SEC. 15. Section 25748 of the Public Resources Code is amended to read: 25748. (a) The commission shall report to the Legislature on or before November 1, 2007, and annually thereafter, regarding the results of the mechanisms funded pursuant to this chapter. The report shall contain all of the following: (1) A description of the allocation of funds among existing, new, and emerging technologies, the allocation of funds among programs, including consumer-side incentives, and the need for the reallocation of money among those technologies. (2) The status of account transfers and repayments. (3) A description of the cumulative commitment of claims by account, the relative demand for funds by account, and a forecast of future awards. (4) A list identifying the types and quantities of biomass fuels used by facilities receiving funds pursuant to Section 25742 or 25743 and their impacts on improving air quality. (5) A discussion of the progress being made toward achieving the targets established under Section 25740 by each funding category authorized pursuant to this chapter. (6) A description of the allocation of funds from interest on the accounts described in this chapter, and money in the accounts described in subdivision (b) of Section 25751. (7) An itemized list, including project descriptions, award amounts, and outcomes for projects awarded funding in the prior year. (8) Other matters the commission determines may be of importance to the Legislature. (b) Money may be reallocated without further legislative action among existing, new, and emerging technologies and consumer-side programs in a manner consistent with the report and with the latest report provided to the Legislature pursuant to this section, except that reallocations shall not reduce the allocation established in Section 25743 nor increase the allocation established in Section 25742. SEC. 16. Section 25749 of the Public Resources Code is repealed. SEC. 17. Section 25750 of the Public Resources Code is repealed. SEC. 18. Section 25751 of the Public Resources Code is amended to read: 25751. (a) The Renewable Resource Trust Fund is hereby created in the State Treasury. (b) The following accounts are hereby established within the Renewable Resource Trust Fund: (1) The Existing Renewable Resources Account. (2) New Renewable Resources Account. (3) Emerging Renewable Resources Account. (4) Renewable Resources Consumer Education Account. (c) The money in the fund may be expended, only upon appropriation by the Legislature in the annual Budget Act, for the following purposes: (1) The administration of this article by the state. (2) The state's expenditures associated with the accounting system established by the commission pursuant to subdivision (b) of Section 399.13 of the Public Utilities Code. (d) That portion of revenues collected by electrical corporations for the benefit of in-state operation and development of existing and new and emerging renewable resource technologies, pursuant to Section 399.8 of the Public Utilities Code, shall be transmitted to the commission at least quarterly for deposit in the Renewable Resource Trust Fund pursuant to Section 25740.5. After setting aside in the fund money that may be needed for expenditures authorized by the annual Budget Act in accordance with subdivision (c), the Treasurer shall immediately deposit money received pursuant to this section into the accounts created pursuant to subdivision (b) in proportions designated by the commission for the current calendar year. Notwithstanding Section 13340 of the Government Code, the money in the fund and the accounts within the fund are hereby continuously appropriated to the commission without regard to fiscal year for the purposes enumerated in this chapter. (e) Upon notification by the commission, the Controller shall pay all awards of the money in the accounts created pursuant to subdivision (b) for purposes enumerated in this chapter. The eligibility of each award shall be determined solely by the commission based on the procedures it adopts under this chapter. Based on the eligibility of each award, the commission shall also establish the need for a multiyear commitment to any particular award and so advise the Department of Finance. Eligible awards submitted by the commission to the Controller shall be accompanied by information specifying the account from which payment should be made and the amount of each payment; a summary description of how payment of the award furthers the purposes enumerated in this chapter; and an accounting of future costs associated with any award or group of awards known to the commission to represent a portion of a multiyear funding commitment. (f) The commission may transfer funds between accounts for cashflow purposes, provided that the balance due each account is restored and the transfer does not adversely affect any of the accounts. (g) The Department of Finance shall conduct an independent audit of the Renewable Resource Trust Fund and its related accounts annually, and provide an audit report to the Legislature not later than March 1 of each year for which this article is operative. The Department of Finance's report shall include information regarding revenues, payment of awards, reserves held for future commitments, unencumbered cash balances, and other matters that the Director of Finance determines may be of importance to the Legislature. SEC. 19. Section 381 of the Public Utilities Code is amended to read: 381. (a) To ensure that the funding for the programs described in subdivision (b) and Section 382 are not commingled with other revenues, the commission shall require each electrical corporation to identify a separate rate component to collect the revenues used to fund these programs. The rate component shall be a nonbypassable element of the local distribution service and collected on the basis of usage. (b) The commission shall allocate funds collected pursuant to subdivision (a), and any interest earned on collected funds, to programs that enhance system reliability and provide in-state benefits as follows: (1) Cost-effective energy efficiency and conservation activities. (2) Public interest research and development not adequately provided by competitive and regulated markets. (3) In-state operation and development of existing and new and emerging eligible renewable energy resources, as defined in Section 399.12. (c) The Public Utilities Commission shall order the respective electrical corporations to collect and spend these funds at the levels and for the purposes required in Section 399.8. (d) Each electrical corporation shall allow customers to make voluntary contributions through their utility bill payments as either a fixed amount or a variable amount to support programs established pursuant to paragraph (3) of subdivision (b). Funds collected by electrical corporations for these purposes shall be forwarded in a timely manner to the appropriate fund as specified by the commission. SEC. 20. Section 383 of the Public Utilities Code is repealed. SEC. 21. Section 383.6 of the Public Utilities Code is repealed. SEC. 22. Section 384.1 of the Public Utilities Code is repealed. SEC. 23. Section 399 of the Public Utilities Code, as added by Section 4 of Chapter 1050 of the Statutes of 2000, is amended to read: 399. (a) This article shall be known, and may be cited, as the Reliable Electric Service Investments Act. (b) The Legislature finds and declares that safe, reliable electric service is of utmost importance to the citizens of this state, and its economy. (c) The Legislature further finds and declares that in order to ensure that the citizens of this state continue to receive safe, reliable, affordable, and environmentally sustainable electric service, it is essential that prudent investments continue to be made in all of the following areas: (1) To protect the integrity of the electric distribution grid. (2) To ensure an adequately sized and trained utility workforce. (3) To ensure cost-effective energy efficiency improvements. (4) To achieve a sustainable supply of renewable energy. (5) To advance public interest research, development and demonstration programs not adequately provided by competitive and regulated markets. (d) It is the intent of the Legislature to reaffirm, without requiring revision, California's doctrine, as reflected in regulatory and judicial decisions, regarding electrical corporations' reasonable opportunity to recover costs and investments associated with their electric distribution grid and the reasonable opportunity to attract capital for investment on reasonable terms. (e) The Legislature further finds and declares all of the following: (1) Acting under applicable constitutional and statutory authorities, the Public Utilities Commission and the boards of local publicly owned electric utilities have included in regulated electricity prices, investments that are essential to maintaining system reliability, reducing California electricity users' bills, and mitigating environmental costs of California users' electricity consumption. (2) Among the most important of these "system benefits" investments categories are energy efficiency, renewable energy, and public interest research, development and demonstration (RD&D). (3) Energy efficiency investments funded from California's usage-based charges on electricity distribution help improve systemwide reliability by reducing demand in times and areas of system congestion, and at the same time reduce all California electricity users' costs. These investments also significantly reduce environmental costs associated with California's electricity consumption, including, but not limited to, degradation of the state' s air, water, and land resources. (4) California's in-state renewable energy resources help alleviate supply deficits that could threaten electric system reliability, reduce environmental costs associated with California's electricity consumption, and increase the diversity of the electricity system's fuel mix, reducing electricity users' exposure to fossil-fuel price volatility. (5) California's public interest RD&D investments enhance private and regulated sector investment in electricity system technologies, and are designed specifically to help ensure sustained improvement in the economic and environmental performance of the distribution, transmission, and generation and end-use systems that serve California electricity users. (6) California has established a long tradition of recovering system benefits investments through usage-based electricity charges, which is reflected in at least two decades of electricity price regulation by the commission, the boards of local publicly owned electric utilities, and the mandate of the Legislature in Chapter 854 of the Statutes of 1996 (Assembly Bill 1890 of the 1995-96 Regular Session of the Legislature) and Chapter 905 of the Statutes of 1997 (Senate Bill 90 of the 1997-98 Regular Session of the Legislature). (7) Unless the Legislature acts to extend the mandate of this article for minimum levels of usage based system benefits charges, California electricity users are at substantial risk of higher economic and environmental costs and degraded reliability. SEC. 24. Section 399 of the Public Utilities Code, as added by Section 4 of Chapter 1051 of the Statutes of 2000, is repealed. SEC. 25. Section 399.1 of the Public Utilities Code, as added by Section 4 of Chapter 1051 of the Statutes of 2000, is repealed. SEC. 26. Section 399.2 of the Public Utilities Code, as added by Section 4 of Chapter 1051 of the Statutes of 2000, is repealed. SEC. 27. Section 399.3 of the Public Utilities Code, as added by Section 4 of Chapter 1051 of the Statutes of 2000, is repealed. SEC. 28. Section 399.4 of the Public Utilities Code, as added by Section 4 of Chapter 1050 of the Statutes of 2000, is amended to read: 399.4. (a) (1) In order to ensure that prudent investments in energy efficiency continue to be made that produce cost-effective energy savings, reduce customer demand, and contribute to the safe and reliable operation of the electric distribution grid, it is the policy of this state and the intent of the Legislature that the commission shall continue to administer cost-effective energy efficiency programs authorized pursuant to existing statutory authority. (2) As used in this section, the term "energy efficiency" includes, but is not limited to, cost-effective activities to achieve peak load reduction that improve end-use efficiency, lower customers' bills, and reduce system needs. (b) The commission, in evaluating energy efficiency investments under its existing statutory authority, shall also ensure that local and regional interests, multifamily dwellings, and energy service industry capabilities are incorporated into program portfolio design and that local governments, community-based organizations, and energy efficiency service providers are encouraged to participate in program implementation where appropriate. SEC. 29. Section 399.4 of the Public Utilities Code, as added by Section 4 of Chapter 1051 of the Statutes of 2000, is repealed. SEC. 30. Section 399.6 of the Public Utilities Code is repealed. SEC. 31. Section 399.7 of the Public Utilities Code is repealed. SEC. 32. Section 399.8 of the Public Utilities Code is amended to read: 399.8. (a) In order to ensure that the citizens of this state continue to receive safe, reliable, affordable, and environmentally sustainable electric service, it is the policy of this state and the intent of the Legislature that prudent investments in energy efficiency, renewable energy, and research, development and demonstration shall continue to be made. (b) (1) Every customer of an electrical corporation shall pay a nonbypassable system benefits charge authorized pursuant to this article. The system benefits charge shall fund energy efficiency, renewable energy, and research, development and demonstration. (2) Local publicly owned electric utilities shall continue to collect and administer system benefits charges pursuant to Section 385. (c) (1) The commission shall require each electrical corporation to identify a separate rate component to collect revenues to fund energy efficiency, renewable energy, and research, development and demonstration programs authorized pursuant to this section beginning January 1, 2002, through January 1, 2012. The rate component shall be a nonbypassable element of the local distribution service and collected on the basis of usage. (2) This rate component may not exceed, for any tariff schedule, the level of the rate component that was used to recover funds authorized pursuant to Section 381 on January 1, 2000. If the amounts specified in paragraph (1) of subdivision (d) are not recovered fully in any year, the commission shall reset the rate component to restore the unrecovered balance, provided that the rate component may not exceed, for any tariff schedule, the level of the rate component that was used to recover funds authorized pursuant to Section 381 on January 1, 2000. Pending restoration, any annual shortfalls shall be allocated pro rata among the three funding categories in the proportions established in paragraph (1) of subdivision (d). (d) The commission shall order San Diego Gas and Electric Company, Southern California Edison Company, and Pacific Gas and Electric Company to collect these funds commencing on January 1, 2002, as follows: (1) Two hundred twenty-eight million dollars ($228,000,000) per year in total for energy efficiency and conservation activities, one hundred thirty-five million dollars ($135,000,000) in total per year for renewable energy, and sixty-two million five hundred thousand dollars ($62,500,000) in total per year for research, development and demonstration. The funds for energy efficiency and conservation activities shall continue to be allocated in proportions established for the year 2000 as set forth in paragraph (1) of subdivision (c) of Section 381. (2) The amounts shall be adjusted annually at a rate equal to the lesser of the annual growth in electric commodity sales or inflation, as defined by the gross domestic product deflator. (e) The commission and the Energy Commission shall retain and continue their oversight responsibilities as set forth in Sections 381 and 383, and Chapter 7.1 (commencing with Section 25620) and Chapter 8.6 (commencing with Section 25740) of Division 15 of the Public Resources Code. (f) An applicant for the Large Nonresidential Standard Performance Contract Program funded pursuant to paragraph (1) of subdivision (b) and an electrical corporation shall promptly attempt to resolve disputes that arise related to the program's guidelines and parameters prior to entering into a program agreement. The applicant shall provide the electrical corporation with written notice of any dispute. Within 10 business days after receipt of the notice, the parties shall meet to resolve the dispute. If the dispute is not resolved within 10 business days after the date of the meeting, the electrical corporation shall notify the applicant of his or her right to file a complaint with the commission, which complaint shall describe the grounds for the complaint, injury, and relief sought. The commission shall issue its findings in response to a filed complaint within 30 business days of the date of receipt of the complaint. Prior to issuance of its findings, the commission shall provide a copy of the complaint to the electrical corporation, which shall provide a response to the complaint to the commission within five business days of the date of receipt. During the dispute period, the amount of estimated financial incentives shall be held in reserve until the dispute is resolved. SEC. 33. Section 399.9 of the Public Utilities Code, as added by Section 4 of Chapter 1051 of the Statutes of 2000, is repealed. SEC. 34. Section 895 of the Public Utilities Code is amended to read: 895. Notwithstanding Section 13340 of the Government Code, moneys in the Gas Consumption Surcharge Fund are continuously appropriated, without regard to fiscal years, as follows: (a) To the commission or an entity designated by the commission to fund programs described in subdivision (a) of Section 890. If the commission designates the State Energy Resources Conservation and Development Commission to receive funds for public interest research and development, both of the following shall apply: (1) The Controller shall transfer funds to a separate subaccount within the Public Interest Research, Development, and Demonstration Fund to pay the State Energy Resources Conservation and Development Commission for its costs in carrying out its duties and responsibilities under this article. (2) The State Energy Resources Conservation and Development Commission may administer the program pursuant to Chapter 7.1 (commencing with Section 25620) of Division 15 of the Public Resources Code. (b) To pay the commission for its costs in carrying out its duties and responsibilities under this article. (c) To pay the State Board of Equalization for its costs in administering this article. SEC. 35. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to avoid disruption in renewable energy and public interest research, development and demonstration programs, and to maximize the effectiveness of energy efficiency programs, thereby promoting the public health and welfare, it is necessary that this act take effect immediately.