BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 411| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 411 Author: Simitian (D) and Perata (D) Amended: 04/18/07 Vote: 21 SENATE ENERGY, U.&C. COMMITTEE : 5-3, 4/24/07 AYES: Kehoe, Padilla, Ridley-Thomas, Simitian, Wiggins NOES: Dutton, Battin, Cox NO VOTE RECORDED: Calderon SENATE ENV. QUALITY COMMITTEE : 5-1, 4/26/07 AYES: Simitian, Florez, Kuehl, Lowenthal, Steinberg NOES: Aanestad NO VOTE RECORDED: Runner SUBJECT : Renewable energy resources SOURCE : Author DIGEST : This bill requires retail sellers of electricity to increase their purchases of renewable energy so that at least 33 percent of the retail sales come from renewable energy resources by 2020. ANALYSIS : Current law requires investor-owned utilities and other retail sellers of electricity to increase their existing purchases of renewable energy by 1% of sales per year such that 20 percent of their retail sales, as measured by usage, are procured from eligible renewable resources by 2010. This is known as the Renewable CONTINUED SB 411 Page 2 Portfolio Standard (RPS). If the cost of renewable electricity exceeds specified thresholds then the purchase mandate is waived. Current law exempts municipal utilities from the state RPS program and instead requires these utilities to implement and enforce their own renewable energy purchase programs that recognize the intent of the Legislature to encourage increasing use of renewable energy sources. This bill requires investor-owned utilities and energy service providers to increase their purchases of renewable energy such that at least 33 percent of retail sales are procured from renewable energy resources by December 31, 2020. The bill states that this shall be in the furtherance of achieving the greenhouse gas emissions reductions required pursuant to the enactment of AB 32 (Nunez), Chapter 488, Statutes of 2006, the California Global Warming Solution Act of 2006. Background In 2002 legislation was enacted to require investor-owned utilities (e.g. PG&E, Southern California Edison, San Diego Gas and Electric Company) and the private companies that compete with the utilities to increase their annual purchases of electricity from renewable resources by at least one percent so that 20 percent of their sales would come from renewable sources by 2017. Last year, SB 107 (Simitian), Chapter 464. Statutes of 2006, was enacted to accelerate the 20 percent requirement to the end of 2010. The legislation did not require renewable energy purchases irrespective of cost. If the cost of renewable energy exceeded the cost of non-renewable energy by more than $70 million in any one year, then the requirement for additional renewable energy purchases was waived. To date virtually all renewable energy purchases have been at prices comparable to non-renewable energy. Earlier this year the Senate Energy, Utilities and Communications Committee heard from experts and industry participants about California's progress at meeting the 20 percent requirement. The investor-owned utilities were at very different percentages: PG&E --12.4 percent, Southern SB 411 Page 3 California Edison - 16.7 percent, SDG&E - 6.3 percent. All expressed confidence that they would achieve the 20 percent on or about 2010 though some concern was expressed by the California Energy Commission. There is widespread dissatisfaction with the mechanisms used to achieve the 20 percent RPS standard. The biggest concern is whether the mechanism for subsidizing the purchase of renewable energy, known as the Supplement Energy Payment (SEP), is working. Legislation to fix the SEP, SB 1036 (Perata) is pending before the Senate Energy, Utilities and Communications Committee. In 2005 the Governor adopted greenhouse gas emissions goals for California. One of those goals was to increase the state's procurement of renewable resources from 20 percent by 2010 to 33 percent by 2020. A study prepared for the Public Utilities Commission in 2005 found that it was economically and technologically feasible to achieve the 33 percent RPS standard, noting that there was a small negative ratepayer impact from 2011-2020 which was more than offset by ratepayer benefits from 2021-2030. However, that analysis was subject to high variability because of uncertain forecasts of volatile natural gas and renewable energy prices. NOTE: Please refer to the senate committee analyses - both the Senate Energy, Utilities and Communications Committee and the Senate Environmental Quality Committee analysis of this bill contain detailed information about statistics regarding climate change, the intended and unintended effects of the 20 percent RPS standards, the types of renewable resources, the use of marketable credits and emissions trading, and California's groundbreaking measures intended to reduce the environmental impact of energy use. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 5/3/07) Southern California Edison Union of Concerned Scientists Clean Power Campaign SB 411 Page 4 OPPOSITION : (Verified 5/3/07) California Chamber of Commerce Pacific Gas and Electric Company Sempra Energy ARGUMENTS IN SUPPORT : The author's office explains the purpose of this bill as follows: "Global warming is a threat to our health, environment, and economy. The passage of AB 32 requires greenhouse gas emissions from all sectors, including the electricity sector, to be reduced to 1990 levels or below to help mitigate these threats. "According to state energy agencies, California's electricity sector produced about 108 million metric tons of carbon dioxide in 2004, an increase of over 35 percent over 1990 levels. The emissions from this sector are increasing twice as fast as emissions from any other sector, including transportation. Electricity generation now accounts for 32 percent of California's gross carbon dioxide emissions. "In light of the state's ambitious carbon emissions targets, it is important that the state make the appropriate statutory changes to give energy agencies the flexibility they need in order to meet those goals. Current law 'caps' the amount of renewable energy that the California Public Utilities Commission (PUC) may order utilities to buy or build at 20 percent. This bill would remove this cap and authorize a requirement of up to 33 percent." It is also important to note that the legislative intent of the Renewables Portfolio Standard [SB 1078 (Sher), Chapter 516, Statutes of 2002] includes not only emissions reductions but also energy diversity, reliability and economic development. This bill facilitates fulfillment of that intent and will be complemented by SB 410 (Simitian and Perata) along with SB 1036 and SB 660 (Perata) which eliminate a number of barriers to meeting the requirement." SB 411 Page 5 ARGUMENTS IN OPPOSITION : Opponents argue the bill adds a new premature target for RPS without a plan for feasibility and consideration of the significant challenges that have yet to be resolved in order to achieve the existing standard. They argue they cannot support a policy that excludes 30 percent of the load serving entities such as municipal utilities from adopting similar requirements. They point out an analysis of the impacts on grid reliability and costs should be conducted. Opponents argue the bill impairs the sellers ability to generate emission reduction credits and eliminates opportunities for utilities to identify potentially less costly means of meeting requirements. They feel the bill should deal with RPS transmission barriers and should encourage investments in supply and demand resources. NC:cm 5/3/07 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****