BILL ANALYSIS
SB 1036
Page 1
Date of Hearing: July 9, 2007
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Loni Hancock, Chair
SB 1036 (Perata) - As Introduced: February 23, 2007
SENATE VOTE : 39-0
SUBJECT : Renewable energy resources.
SUMMARY : Eliminates California Energy Commission (CEC)
administration of funds available for award to new renewable
energy facilities in the form of supplemental energy payments
(SEPs) pursuant to the Renewables Portfolio Standard (RPS).
Provides for refund of accumulated CEC funds to ratepayers.
Authorizes the Public Utilities Commission (PUC) to allow
recovery of future above-market costs pursuant to its ratemaking
authority.
EXISTING LAW :
1)The RPS requires investor-owned utilities (IOUs) and certain
other retail sellers to achieve a 20 percent renewable
portfolio by 2010 and establishes a detailed process and
standards for renewable procurement. The PUC may only
authorize recovery of procurement costs at or below a
specified market price, but the CEC is authorized to award
SEPs to cover above-market costs if the price for renewable
energy exceeds the PUC-set market price.
2)Provides over $135 million per year of ratepayer funds to the
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. To date,
no SEPs have been awarded and the funds collected for this
purpose since the RPS was enacted in 2003 have accumulated to
the amount of approximately $370 million.
THIS BILL :
1)States legislative intent to streamline the approval of
above-market RPS contracts, ensure that approved contracts can
be relied upon to finance new renewable facilities, and
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continue meaningful ratepayer protections by limiting total
RPS costs.
2)Repeals the new renewable energy element of the CEC's REP,
reduces annual collection for the REP from $135 million to $65
million, and reallocates remaining funds between the other two
elements of the REP - existing and emerging renewable energy.
3)Requires the CEC to terminate any pending new renewable awards
and, by March 1, 2008, transfer to IOUs the remaining
unencumbered funds in the New Renewable Resources Account, to
be allocated on the basis of sales and refunded to customers
within 180 days.
4)Repeals the CEC's authority to award SEPs pursuant to the RPS
and repeals related SEP provisions in the RPS.
5)Requires the PUC to establish comparable above-market cost
limits so that total RPS costs do not exceed what has been
authorized under existing law.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. The SEP program was created as part of the RPS'
detailed process and standards for renewable procurement so
that IOUs' purchase of renewable energy at above-market prices
could occur in a transparent and limited manner. The SEP
program created a budget for the attainment of the 20 percent
RPS goal. Under the RPS, if and when the funds set aside for
SEPs are exhausted, IOUs are no longer required to buy
renewable energy. In the first few years of the RPS, IOUs
succeeded in buying renewable energy at or below market prices
set by the PUC to reflect the prevailing cost of conventional
energy. Only recently have IOUs and renewable developers
signed contracts at above-market prices and applied to the CEC
for SEP awards. While at least two applications are pending,
the CEC has yet to approve any SEP awards. In addition to the
complicated process, where two agencies must approve different
aspects of the same contract, a substantive problem with the
existing structure has been identified. A renewable developer
relying on the full contract price to secure financing may be
unable to finance that portion of the price being paid by SEPs
because SEPs would be paid over the course of many years out
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of state funds which are subject to annual appropriation in
the Budget Act. As a result, lenders may not consider the
source of funds adequately secure. On the other hand, lenders
apparently attribute greater security to the portion of price
being paid through IOU rates set by the PUC, which can be
changed by the PUC, but aren't subject to appropriation. This
bill attempts to address the financing problem and ease the
complication of the RPS process, while refunding to ratepayers
the unused funds collected during the last several years to
support new renewable resources. The bill creates a "one stop
shop" for above-market RPS contracts at the PUC, takes the CEC
out of the equation, and leaves cost containment in the hands
of the PUC.
2)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. The
amendments require the PUC to ensure each IOU allocates its
share of the refund "in a manner that maximizes the economic
benefit to all customer classes that funded the New Renewable
Resource Account" (plus related technical amendments). These
amendments replace provisions that specifically require
refunds to customers within 180 days. Presumably, this would
allow the funds to be used to offset new costs or otherwise
compensate customers, if the PUC determines that issuing
individual customer refunds is too costly.
3)Conflicts. This bill contains technical conflicts with the
following bills, amending the same sections in inconsistent
ways so that if both bills are signed, the later chaptered
bill will negate the changes made by the earlier:
SB 410 (Simitian and Perata), pending in this committee. Both
bills amend Sections 25740.5 and 25742 of the Public Resources
Code.
SB 411 (Simitian), pending in this committee. Both bills
amend Section 399.15 of the Public Utilities Code.
AB 94 (Levine), pending in this committee (two-year bill).
Both bills amend Section 399.15 of the Public Utilities Code.
AB 809 (Blakeslee), pending in the Senate Natural Resources
and Water Committee. Both bills amend Sections 399.13 and
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399.16 of the Public Utilities Code.
The author and the committee may wish to consider some
combination of amendments to this bill and the others to
resolve these conflicts.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092