BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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                                 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  
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          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  







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          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







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           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."








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           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

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