BILL ANALYSIS
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THIRD READING
Bill No: SB 1036
Author: Perata (D)
Amended: 7/12/07
Vote: 27
SENATE ENERGY, U. & C. COMMITTEE : 8-0, 4/24/07
AYES: Kehoe, Dutton, Battin, Cox, Padilla, Ridley-Thomas,
Simitian, Wiggins
NO VOTE RECORDED: Calderon
SENATE APPROPRIATIONS COMMITTEE : 17-0, 5/7/07
AYES: Torlakson, Cox, Aanestad, Ashburn, Battin, Calderon,
Cedillo, Corbett, Correa, Dutton, Florez, Kuehl, Oropeza,
Ridley-Thomas, Runner, Wyland, Yee
SENATE FLOOR : 39-0, 6/4/07
AYES: Aanestad, Ackerman, Alquist, Ashburn, Calderon,
Cedillo, Cogdill, Corbett, Correa, Cox, Denham, Ducheny,
Dutton, Florez, Harman, Hollingsworth, Kehoe, Kuehl,
Lowenthal, Machado, Maldonado, Margett, McClintock,
Migden, Negrete McLeod, Oropeza, Padilla, Perata,
Ridley-Thomas, Romero, Runner, Scott, Simitian,
Steinberg, Torlakson, Vincent, Wiggins, Wyland, Yee
NO VOTE RECORDED: Battin
ASSEMBLY FLOOR : 57-18, 9/10/07 - See last page for vote
SUBJECT : Energy: renewable energy resources
SOURCE : Author
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DIGEST : This bill, effective July, 2008, recasts the
Renewables Portfolio Standard Program, a program for the
purchase of renewable energy.
Assembly Amendments (1) delete provisions that specifically
require refunds to customers within 180 days and (2)
require the Public Utilities Commission to ensure each
investor-owned utility allocates its share of the refund in
a manner that maximizes the economic benefit to customer
classes that funded the New Renewable Resource Account.
ANALYSIS : Current law requires investor-owned utilities
and other retail sellers of electricity to increase their
purchases of renewable energy by one percent 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
Portfolio Standard (RPS).
Current law authorizes the California Energy Commission
(CEC) to award Supplemental Energy Payments (SEP) to
renewably energy produces if their price for renewable
energy exceeds the market price for electricity, as
determined by the Public Utilities Commission (PUC). Once
SEP funding is exhausted, the investor-owned utilities are
no longer required to purchase additional renewable energy
at above market prices. Funding for the SEP comes from an
existing surcharge on electric bills which are designated
for developing new in-state renewable electricity
generation facilities.
This bill deletes the authority for the CEC to award SEPs
and refunds to customers' unspent SEP funds. This bill,
instead, authorizes the PUC to allow investor-owned
utilities to recover costs for renewable energy that are in
excess of market prices, as determined by the PUC, with a
cap on such costs equal to the maximum SEP that would have
been allowed for each investor-owned utility.
Background
Meeting California's 20 percent RPS standard has been a
challenge for California's investor-owned utilities. The
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utilities have attained differing levels of RPS
achievement: PG&E - 12.4 percent, Southern California
Edison - 16.7 percent, SDG&E - 6.3 percent. But in a
recent hearing of the Senate Energy, Utilities and
Communications Committee, representatives of those
utilities and the PUC expressed considerable optimism that
they would be in compliance with that standard on or about
2010.
In approving a 20 percent RPS standard, there was
considerable concern that the costs could be unreasonably
high because it greatly increased the demand for renewable
energy in a short period of time. Thankfully, those
concerns have not been manifested yet. So far almost all
renewable purchases have been at or below the market price
for non-renewable energy. But renewable energy prices are
expected to rise as region-wide demand grows and the most
attractive renewable energy sources get tapped. The SEP
program was the mechanism for ensuring the California's
desire for renewable energy did not cause large rate
increases. Limiting the SEP to the funds collected by the
existing public goods surcharge for new renewable energy
sources meant that an additional $70 million annually would
be available to subsidize renewable energy purchases.
Comments
While most renewable energy purchases did not require SEP
funding, a few projects did. And it is that experience
which establishes the basis for this bill. Each utility
solicits bids to supply renewable energy which are
predicated on the particular energy needs of the utility.
A selected bid requiring SEP payments is forwarded to the
CEC. The CEC then independently reviews the bid and
authorizes payment if appropriate. This CEC process has
led to two concerns, according to the author. The first is
that the CEC process is seen by some as duplicative of the
work already done by the PUC's bid review process, though
the CEC asserts that it is simply performing its fiduciary
duty to the utility customers, who have provided the funds.
The second, and more problematic, concern is that the SEP
awards are subject to annual appropriation in the budget.
This creates enough uncertainty that bankers and investors
do not consider the SEP awards to be available when they
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consider whether to fund a given renewable energy project.
The SEP mechanism, then, seems not to be achieving its
purpose.
The proposed solution is to take the CEC out of the process
and to build the SEP cost into electric rates. The author
believes that this removes the redundant review process and
makes the SEP funds financeable because electric rates are
not subject to annual appropriation.
The bill keeps the existing cost caps in place, entrusting
the PUC to assure that the SEP payments don't exceed what
would have been collected in the public goods charge for
new renewable energy projects.
The refund provided for in this bill will be substantial.
Current projections for the SEP balance are about $300
million as of July 2007, though this amount could decline
if the CEC makes SEP awards before this bill is enacted.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
Fiscal Impact (in thousands)
Major Provisions 2007-08 2008-09
2009-10 Fund
Revision of renewable $70,000 annually (new surcharge
paid Private
energy funding by customers)
mechanism
Refund Estimated $370,000 (to be
returned to Special*
customers)
PUC/CEC Minor costs ongoing; minor
savings one Special/
time
General
*New Renewable Resources Account
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While the bill strikes the authority of the CEC to award
supplemental energy payments to renewable energy producers,
the bill authorizes the PUC to allow investor owned
utilities to recover costs for renewable energy that are in
excess of market prices. These supplemental energy
payments are capped such that the payments for projects
will not exceed what would have been collected in the
public goods charge for new renewable projects.
SUPPORT : (Verified 5/9/07) (Unable to reverify)
American Federation of State, County and Municipal
Employees
Pacific Gas and Electric Company
Sempra Energy
Southern California Edison
The Utility Reform Network
Union of Concerned Scientists
OPPOSITION : (Verified 5/9/07) (Unable to reverify)
Independent Energy Producers
ASSEMBLY FLOOR :
AYES: Aghazarian, Arambula, Bass, Beall, Berg, Berryhill,
Blakeslee, Brownley, Caballero, Charles Calderon, Carter,
Cook, Coto, Davis, De La Torre, De Leon, DeSaulnier,
Dymally, Emmerson, Eng, Evans, Feuer, Fuentes, Galgiani,
Garcia, Hayashi, Hernandez, Horton, Houston, Huffman,
Jones, Karnette, Krekorian, Laird, Leno, Levine, Lieber,
Lieu, Ma, Mendoza, Mullin, Nava, Parra, Plescia,
Portantino, Price, Ruskin, Salas, Saldana, Smyth,
Solorio, Soto, Swanson, Torrico, Tran, Wolk, Nunez
NOES: Adams, Anderson, Benoit, DeVore, Duvall, Fuller,
Gaines, Huff, Keene, La Malfa, Maze, Nakanishi, Niello,
Sharon Runner, Silva, Spitzer, Villines, Walters
NO VOTE RECORDED: Garrick, Hancock, Jeffries, Strickland,
Vacancy
NC:cm 9/11/07 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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