BILL ANALYSIS
SB 1036
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Date of Hearing: August 30, 2007
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mark Leno, Chair
SB 1036 (Perata) - As Amended: July 12, 2007
Policy Committee: Utilities
Vote: 7-3
Natural Resources 6-3
Urgency: No State Mandated Local Program:
Yes Reimbursable:
SUMMARY
This bill deletes the California Energy Commission's (CEC's)
authority to award Supplemental Energy Payments (SEPs) for the
above-market cost of renewable power, and instead authorizes the
Public Utilities Commission (PUC) to allow the investor-owned
utilities (IOUs) to pay renewable developers for above-market
costs as approved by the PUC. Specifically, this bill:
1)Deletes provisions allowing the CEC to award Public Goods
Charge (PGC) monies that are annually deposited into the New
Renewable Resources Account (currently $69.5 million) to fund
SEPs, and eliminates the PUC's authority to annually collect
these funds from IOU ratepayers.
2)Requires the CEC, by March 1, 2008, to transfer all
unencumbered funds in the New Renewable Resources Account back
to the IOUs for the benefit of their ratepayers.
3)Requires the PUC to establish a cap on the total amount of
money each IOU ratepayer could be required to pay for above
market-costs of renewable electricity. The cap will equal the
amount of funds each IOU would have otherwise transferred to
the CEC to fund SEPs out of the New Renewable Resources
Account. (Roughly $600 million through 2012.)
4)Provides that if the above-market costs of an IOU's renewable
solicitations to meet its Renewable Portfolio Standard (RPS)
obligations exceed the cost cap per (3), the IOU may limit its
renewable procurement to the amount of renewable electricity
that can be purchased within the cap.
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FISCAL EFFECT
The PUC would incur minor ongoing special fund costs (about
$50,000) for one-half position to implement the above market
cost recovery. [Public Utilities Reimbursement Account] The CEC
would incur one-time minor absorbable administrative costs.
The CEC indicates that about $400 million estimated to be in the
New Renewable Resources Account as of March 2008 will
transferred to the IOUs for the benefit of ratepayers.
COMMENTS
1)Background . Under California's RPS, the IOUs are required to
increase their renewable procurement each year by at least 1%
of total sales, so that 20% of their sales are from renewable
energy sources by December 31, 2010. To ensure that IOU
ratepayers are not saddled with unlimited above-market costs,
the RPS requires the PUC to determine the market price for
electricity and requires IOUs to pay the renewable energy
providers only for those contract costs that do not exceed the
market price. The RPS also allows new renewable energy
providers to apply to the CEC for SEPs to cover any costs
above the market price. The RPS requires IOUs to buy renewable
electricity only to the extent PGC funds are available to pay
for SEPs if needed.
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, thus there
were no requests for SEP awards. 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.
2)Purpose . The current SEP system requires reasonableness
reviews of all contracts by two separate agencies. The
contracts must first be approved as reasonable by the PUC. If
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the developer wants to subsequently apply for SEPs, the CEC
can review the reasonableness of the contact a second time,
and may deny SEPs even if the PUC determined the contract was
reasonable. In addition, a renewable energy developer relying
on the full contract price to secure financing may be unable
to finance that portion of the price paid by SEPs, which are
subject to CEC review and would be paid out over several years
with state funds.
This bill attempts to resolve these problems by eliminating
the SEP provisions entirely and instead providing that the IOU
will pay the entire costs of renewable contracts that are
deemed reasonable, including above-market costs. The bill also
maintains a cost cap for total IOU payments of above-market
costs.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081