BILL ANALYSIS
SB 411
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Date of Hearing: July 9, 2007
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Loni Hancock, Chair
SB 411 (Simitian and Perata) - As Amended: July 9, 2007
SENATE VOTE : 21-15
SUBJECT : Renewable energy resources.
SUMMARY : Requires investor-owned utilities and certain other
retail sellers to meet a Renewables Portfolio Standard (RPS) of
at least 33 percent by 2020, to the extent supplemental energy
payments (SEPs) are available to cover above-market costs.
EXISTING LAW :
1)The RPS requires investor-owned utilities and certain other
retail sellers to achieve a 20 percent renewable portfolio by
2010 and establishes a detailed process and standards for
renewable procurement. Local publicly-owned utilities are not
subject to the same detailed process and standards as IOUs,
but are required to implement and enforce their own RPS
programs. Eligible renewable technologies are biomass, solar
thermal, photovoltaic, wind, geothermal, renewable fuel cells,
small hydroelectric (30 megawatts or less), digester gas,
municipal solid waste conversion, landfill gas, ocean wave,
ocean thermal, and tidal current.
2)Provides over $135 million per year of ratepayer funds to the
California Energy Commission (CEC) to administer the Renewable
Energy Program (REP). Fifty-one and one-half percent of these
funds are available for award to new renewable energy
facilities in the form of SEPs pursuant to the RPS.
Collection of ratepayer funds for these and other purposes is
authorized until 2012.
3)Requires the CEC to assess the feasibility of achieving a 33
percent by 2020 RPS and report to the Legislature by November
2007.
4)The California Global Warming Solutions Act (AB 32) requires
the Air Resources Board (ARB) to adopt a statewide greenhouse
gas (GHG) emissions limit equivalent to 1990 levels by 2020
and adopt regulations to achieve maximum technologically
feasible and cost-effective GHG emission reductions. As one
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of the most significant GHG emitters, the electric utility
sector is expected to be required to further reduce use of
fossil fuels via increased energy efficiency and development
of non-fossil energy supplies.
THIS BILL :
1)Repeals "20 percent cap" provisions of existing law which
prohibit requiring a retail seller to procure renewable energy
beyond 20 percent.
2)Requires each retail seller currently subject to the RPS to
increase its total procurement of renewable energy so that at
least 33 percent RPS is achieved by the end of 2020.
3)Permits retail sellers to limit renewable procurement if SEPs
are unavailable to pay above-market costs (collection of SEP
funds expires at the end of 2011 under current law and is
proposed to be eliminated in 2008 by SB 1036 (Perata), pending
in this committee).
4)Prohibits the PUC from requiring a retail seller to enter a
long-term contract that exceeds the market price set by the
PUC.
5)Permits the PUC to relax the current requirement that retail
sellers increase renewable procurement by an additional one
percent per year, for purposes of increasing from 20 percent
to 33 percent, under specified circumstances.
FISCAL EFFECT : Unknown
COMMENTS :
1)Amendments recommended by Utilities and Commerce Committee.
When this bill was approved by the Utilities and Commerce
Committee July 2, the author and committee agreed to
amendments, with adoption deferred to this committee. Those
amendments are reflected in the description of this bill and
attached to this analysis.
2)Background. The RPS requires investor-owned utilities and
certain other retail energy providers, collectively referred
to as "retail sellers," to buy renewable electricity to the
extent SEPs are available to pay for any costs exceeding a
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market price set by the PUC.
Each IOU is required to increase its renewable procurement
each year by at least one percent of total sales, so that 20
percent of its sales are renewable energy sources by December
31, 2010. Once a 20 percent portfolio is achieved, no further
increase is required. The PUC is required to adopt comparable
requirements for direct access energy service providers and
community choice aggregators.
The RPS requires the PUC to adopt processes for determining
market prices, ranking renewable bids according to cost and
fit, flexible compliance rules and standard contract terms.
The RPS requires investor-owned utilities to offer contracts
of at least 10 years, unless the PUC approves shorter
contracts. This is intended to support the development of new
renewable resources.
The original RPS bill, SB 1078 (Sher), Chapter 516, Statute of
2002, set a goal of 20 percent by 2017. The "Energy Action
Plan" subsequently adopted by the PUC and the CEC pledges that
the agencies will accelerate RPS implementation to meet the 20
percent goal by 2010, instead of 2017. This standard was
adopted last year in SB 107 (Simitian), Chapter 464, Statutes
of 2006. In his statements on energy, the Governor has
endorsed an additional goal of 33 percent by 2020. The
Legislature has ordered the CEC to assess the feasibility of
achieving the 33 percent target in AB 1585 (Blakeslee),
Chapter 579, Statutes of 2005. The CEC's report is due
November 2007.
On February 6, 2007, the Senate Energy, Utilities and
Communications Committee held an oversight hearing to review
implementation of the current 20 percent by 2010 RPS goals.
The Committee found that, on average, utilities have not
advanced far beyond their 2002 average starting point of 12
percent RPS, are not on pace to achieve 20 percent by 2010,
and are already planning to use flexible compliance rules to
delay attainment of 20 percent until 2013. Recent renewable
solicitations by investor-owned utilities indicate increasing
prices for renewable energy may exhaust the funds set aside to
pay above-market costs before the 20 percent target is
achieved.
3)RPS in name only? This bill's RPS mandate outlives the funds
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to support it. SEPs, state and federal tax exemptions and
credits available to support renewable energy development all
expire in the next several years. Renewable energy projects
are expected to rely on these funds to support development and
sales. In fact, the RPS is explicitly contingent on the
availability of SEPs to support above market purchases. In
practice, this bill's requirements impact the 2013-2020
period. Currently, none of the funds supporting renewable
energy are available during that period.
To execute a 33% by 2020 RPS policy, the statutory structure
underlying the RPS must be addressed. For example, the SEP
funds which this bill, as well as the existing RPS, rely upon
to achieve the RPS targets expire in 2011. SB 1036 proposes
to eliminate SEP funds as of 2008. The conflicts between this
bill and SB 1036 must be reconciled in order to have a
workable program to manage the predicted cost increases as
renewable procurement is pushed past 20 percent.
4)Bill misses carbon target. On average, the portfolios of
publicly-owned utilities are far more carbon-intensive than
investor-owned utilities. This is due in large part to the
reliance of major publicly-owned utilities, such as the Los
Angeles Department of Water and Power (LADWP), on coal.
LADWP, the nation's largest publicly-owned utilities and the
third largest electric utility in the state, also buys
relatively less renewable energy than investor-owned
utilities. By not applying the 33 percent goal to
publicly-owned utilities, this bill misses the utilities with
the highest relative greenhouse gas emissions.
5)Increasing and extending RPS goal invites broader discussion
of RPS structure, relationship to AB 32. The current RPS sets
a relative standard (percent of sales) for renewable
purchases, so as overall electricity sales grow, the renewable
component grows along with it. That approach remains
unchanged in this bill, which only changes the percentage and
deadline.
In contrast, AB 32 (Nunez), Chapter 488, Statutes of 2006,
sets an absolute standard for reductions in greenhouse gases,
80 percent of which result from burning fossil fuels, and much
of that for electricity generation. Under AB 32, statewide
greenhouse gas emissions must be reduced to 1990 levels by
2020.
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The author and the committee may wish to consider whether,
post 2010, it would be more sensible to shift from the
relative standard and specific set-aside for renewable energy
to an approach that is more in sync with achieving the AB 32
goals for greenhouse gas reduction, allowing utilities to
choose from a menu of carbon-reducing strategies, including
renewables, but also including energy efficiency and other
resource options that may be more cost-effective.
For example, in order to achieve the maximum technologically
feasible and cost-effective greenhouse gas emission reductions
pursuant to AB 32, the PUC could require each retail seller to
implement measures which achieve, by 2020, equivalent or
greater greenhouse gas emission reductions than would be
achieved by 33 percent of total annual retail energy sales
from eligible renewable energy resources. This could allow
potentially more cost-effective GHG reduction strategies, such
as energy efficiency, to compete with renewable resources.
In addition, the enactment of an increased RPS requirement
after the enactment of AB 32 raises a question of whether and
how utilities should receive credit for RPS procurement toward
GHG reductions required pursuant to AB 32. The author and the
committee may wish to consider recognizing this issue, without
deciding one way or the other, by adding a provision requiring
ARB to determine GHG reduction credit for renewable energy
procurement exceeding 20 percent in a manner consistent with
AB 32.
6)Related legislation. AB 94 (Levine) also increases the RPS
target to 33 percent by 2020. AB 94 was heard in this
committee April 23, but was pulled by the author and made a
two-year bill prior to a vote.
7)Conflicts. This bill contains policy and technical conflicts
with SB 1036 (Perata), pending in this committee. Notably,
this bill contemplates the use of the SEP program that SB 1036
repeals. In addition, both bills amend Section 399.15 of the
Public Utilities Code in inconsistent ways so that if both
bills are signed, the later chaptered bill will negate the
changes to that section made by the earlier. The author and
the committee may wish to consider some combination of
amendments to this bill and SB 1036 to resolve these
conflicts.
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REGISTERED SUPPORT / OPPOSITION :
Support
California Coastal Protection Network
Californian Communities Against Toxics
California Environmental Rights Alliance
California League of Conservation Voters
California Public Utilities Commission
California Safe Schools
Clean Power Campaign
Comite Pro Uno
Communities for a Better Environment
Del Amo Action Committee
Environment California
Environmental Entrepreneurs
Latino Issues Forum
Natural Resources Defense Council
Planning and Conservation League
Physicians for Social Responsibility, L.A.
Sierra Club California
Union of Concerned Scientists
Vote Solar
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Opposition
Pacific Gas and Electric
Sierra Pacific Power Company
Southern California Edison
Southwest California Legislative Council
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092