BILL NUMBER: AB 64	AMENDED
	BILL TEXT

	AMENDED IN SENATE  SEPTEMBER 10, 2009
	AMENDED IN SENATE  JUNE 23, 2009
	AMENDED IN ASSEMBLY  MAY 6, 2009
	AMENDED IN ASSEMBLY  APRIL 15, 2009
	AMENDED IN ASSEMBLY  MARCH 24, 2009
	AMENDED IN ASSEMBLY  MARCH 18, 2009

INTRODUCED BY   Assembly Members Krekorian  and Bass
  , Bass,   and Fuentes 
    (   Principal coauthor:   Senator 
 Simitian   ) 
    (   Coauthors:   Senators   Leno
  and Padilla   ) 

                        DECEMBER 9, 2008

   An act to add  Article 7.3 (commencing with Section 12078)
to Chapter 1 of Part 2 of Division 3 of Title 2 of the Government
Code, to amend Sections 25107, 25123, 25324, 25333, 25500, 25501,
25502, 25503, 25516, 25517, 25531, 25540.6, 25740, 25740.5, 25741,
and 25742 of, and to add Section 25108.5 to, the Public Resources
Code, and to amend Sections 454.5 and 1002 of, to amend and repeal
Section 387 of, to add Sections 399.23 and 1004.5 to, to add Chapter
4.5 (commencing with Section 950) to Part 1 of Division 1 of, and to
repeal Article 16 (commencing with Section 399.11) of Chapter 2.3 of
Part 1 of Division 1   Section 705 to the Fish and Game
Code, to amend Sections 25740.5, 25742, 25746, 25747, and 25751 of,
and to add Section 25500.1 to, the Public Resources Code,  
and to amend Sections 399.2.5 and 454.5 of, to add Sections 399.13,
399.26, and 1005.1 to, and to repeal and add Section 399.14  of,
the Public Utilities Code, relating to energy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 64, as amended, Krekorian. Energy: renewable energy resources:
generation and transmission. 
   (1) Under existing law, the Public Utilities Commission (PUC) has
regulatory authority over public utilities, including electrical
corporations, as defined. Existing law requires the PUC to require
the state's 3 largest electrical corporations, Pacific Gas and
Electric Company, San Diego Gas and Electric, and Southern California
Edison, to identify a separate electrical rate component to fund
programs that enhance system reliability and provide in-state
benefits. This rate component is a nonbypassable element of local
distribution and collected on the basis of usage. Existing PUC
resolutions refer to the nonbypassable rate component as a "public
goods charge." The public goods charge moneys are collected to
support cost-effective energy efficiency and conservation activities,
public interest research and development not adequately provided by
competitive and regulated markets, and renewable energy resources.
 
   The existing Warren-Alquist State Energy Resources Conservation
and Development Act establishes the State Energy Resources
Conservation and Development Commission (Energy Commission). Existing
law establishes the Renewable Resource Trust Fund as a fund that is
continuously appropriated, with certain exceptions for administrative
expenses, in the State Treasury and requires that certain moneys
collected to support renewable energy resources through the public
goods charge are deposited into the fund and authorizes the Energy
Commission to expend the moneys pursuant to the Renewable Energy
Resources Program.  
   This bill would make conforming changes to terms used in the
Renewable Energy Resources Program statutes that would be made by SB
14 of the 2009-10 Regular Session.  
   (2) The Public Utilities Act imposes various duties and
responsibilities on the PUC with respect to the purchase of
electricity and requires the PUC to review and adopt a procurement
plan and a renewable energy procurement plan for each electrical
corporation pursuant to the California Renewables Portfolio Standard
Program (RPS program). The RPS program requires that a retail seller
of electricity, including electrical corporations, community choice
aggregators, and electric service providers, but not including local
publicly owned electric utilities, purchase a specified minimum
percentage of electricity generated by eligible renewable energy
resources in any given year as a specified percentage of total
kilowatthours sold to retail end-use customers each calendar year.
The RPS program requires the PUC to implement annual procurement
targets for each retail seller to increase its total procurement of
electricity generated by eligible renewable energy resources by at
least an additional 1% of retail sales per year so that 20% of its
retail sales of electricity are procured from eligible renewable
energy resources no later than December 31, 2010. Existing law
requires the PUC to make a determination of the existing market cost
for electricity, which PUC decisions call the market price referent,
and to limit an electrical corporation's obligation to procure
electricity from eligible renewable energy resources, that exceeds
the market price referent, to an amount collected through the
renewable energy public goods charge.  
   This bill would delete an existing requirement that the PUC adopt
flexible rules for compliance for retail sellers. The bill would
require the PUC to direct each electrical corporation to prepare a
renewable energy procurement plan that includes certain matter and to
review and update the plan. The bill would, to the extent feasible,
require that the renewable energy procurement plan be proposed,
reviewed, and adopted by the PUC pursuant to the general procurement
plan process. The bill would require that an electrical corporation's
proposed procurement plan include a showing that the electrical
corporation will, in order to fulfill its unmet resource needs,
procure resources from eligible renewable energy resources in an
amount sufficient to meet its procurement targets pursuant to the RPS
program. The bill would authorize an electrical corporation to apply
to the PUC for approval to construct, own, and operate an eligible
renewable energy resource and require the PUC to approve the
application if certain conditions are met, until corporation owned
and operated resources provide 8.5% of the corporation's anticipated
retail sales.  
   Under existing law, a violation of the Public Utilities Act or any
order, decision, rule, direction, demand, or requirement of the PUC
is a crime.  
   Because certain provisions of this bill are within the act and
require action by the PUC to implement its requirements, a violation
of these provisions would impose a state-mandated local program by
expanding the definition of a crime.  
   (3) The Public Utilities Act prohibits any electrical corporation
from beginning the construction of, among other things, a line,
plant, or system, or of any extension thereof, without having first
obtained from the PUC a certificate that the present or future public
convenience and necessity require or will require that construction,
termed a certificate of public convenience and necessity. Existing
law requires the PUC, in acting upon an application by an electrical
corporation for a certificate of public convenience and necessity, to
deem new transmission facilities necessary to the provision of
electric service if the PUC finds that new transmission facilities
are necessary to facilitate achievement of the renewable power goals
established under the RPS program. Existing law requires the PUC,
upon finding that new transmission facilities are necessary to
facilitate achievement of the renewable power goals established under
the RPS, to take all feasible actions to ensure that the
transmission rates established by the Federal Energy Regulatory
Commission (FERC) are fully reflected in any retail rates established
by the PUC.  
   This bill would require the PUC to issue a decision on an
application for a certificate of public convenience and necessity
within 18 months of the filing of a completed application under
specified circumstances. The bill would require the PUC, in acting
upon an application by an electrical corporation for a certificate of
public convenience and necessity, to deem new transmission
facilities necessary to the provision of electric service if the PUC
finds that new transmission facilities are reasonably necessary or
appropriate to facilitate achievement of the renewables portfolio
standard. The bill would require the PUC to provide assurance of the
eligibility for recovery in retail rates of any increase in
transmission costs incurred by an electrical corporation resulting
from the construction of transmission facilities in certain
circumstances and to allow recovery in retail rates of any increase
in transmission costs if not approved by the Federal Energy
Regulatory Commission if the PUC determines the costs were prudently
incurred pursuant to a specified law.  
   (4) Existing law establishes the Department of Fish and Game in
the Natural Resources Agency, and generally charges the department
with the administration and enforcement of the Fish and Game Code.
 
   This bill would require the department to establish an internal
division with the primary purpose of performing comprehensive
planning and environmental compliance services with priority given to
projects involving the building of eligible renewable energy
resources.  
   (5) The existing restructuring of the electrical industry within
the Public Utilities Act provides for the establishment of an
Independent System Operator (ISO). Existing law requires the ISO to
ensure efficient use and reliable operation of the transmission grid
consistent with achieving planning and operating reserve criteria no
less stringent than those established by the Western Electricity
Coordinating Council and the American Electric Reliability Council.
Pursuant to existing law, the ISO's tariffs are required to be
approved by the FERC.  
   This bill would require the ISO and other California balancing
authorities to work cooperatively to integrate and interconnect
eligible renewable energy resources to the transmission grid by the
most efficient means possible with the goal of minimizing the impact
and cost of new transmission facilities needed to meet both
reliability needs and the renewables portfolio standard procurement
requirements, and to accomplish this in a manner that respects the
ownership, business, and dispatch models for transmission facilities
owned by electrical corporations, local publicly owned electric
utilities, joint power agencies, and merchant transmission companies.
 
   (6) The bill would require the Energy Commission, by July 1, 2010,
to update previously conducted studies relating to determining the
effective load carrying capacity of wind and solar energy resources
on the electrical grid. The bill would require the PUC to use those
values in establishing the contribution of those resources toward
meeting specified resource adequacy requirements.  
   (7) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.  
   This bill would provide that no reimbursement is required by this
act for a specified reason.  
   (8) The provisions of the bill would only become operative if the
bill and SB 14 of the 2009-10 Regular Session are both enacted and
become effective on or before January 1, 2010.  
   (1) The Public Utilities Act imposes various duties and
responsibilities on the Public Utilities Commission (PUC) with
respect to the purchase of electricity and requires the PUC to review
and adopt a procurement plan and a renewable energy procurement plan
for each electrical corporation pursuant to the California
Renewables Portfolio Standard Program (RPS program). The RPS program
requires that a retail seller of electricity, including electrical
corporations, community choice aggregators, and electric service
providers, but not including local publicly owned electric utilities,
purchase a specified minimum percentage of electricity generated by
eligible renewable energy resources, as defined, in any given year as
a specified percentage of total kilowatthours sold to retail end-use
customers each calendar year (renewables portfolio standard). The
renewables portfolio standard requires the PUC to implement annual
procurement targets for each retail seller to increase its total
procurement of eligible renewable energy resources by at least an
additional 1% of retail sales per year so that 20% of its retail
sales are procured from eligible renewable energy resources no later
than December 31, 2010. Existing law requires the State Energy
Resources Conservation and Development Commission (Energy Commission)
to certify eligible renewable energy resources and to design and
implement an accounting system to verify compliance with the
renewables portfolio standard by retail sellers. Under existing law
the governing board of a local publicly owned electric utility is
responsible for implementing and enforcing a renewables portfolio
standard for the utility that recognizes the intent of the
Legislature to encourage renewable resources, while taking into
consideration the effect of the standard on rates, reliability, and
financial resources and the goal of environmental improvement.
 
   This bill would recast the RPS program, to be operative on January
1, 2011, and which the commission would enforce with respect to a
retail seller once that retail seller procures 20% of its retail
sales from eligible renewable energy resources. Upon the recast RPS
program becoming operative, the bill would require that a retail
seller and a local publicly owned electric utility: (1) procure at
least 23% of the electricity delivered to its retail customers from
eligible renewable energy resources by December 31, 2014, (2) procure
at least 27% of the electricity delivered to its retail customers
from eligible renewable energy resources by December 31, 2017, and
(3) procure at least 33% of the electricity delivered to its retail
customers from eligible renewable energy resources by December 31,
2020. The PUC would be responsible for implementing these
requirements for retail sellers, while the governing board would be
responsible for implementing these requirements for a local publicly
owned electric utility. The bill would require the PUC to establish
procurement targets for retail sellers that are sufficient to reach
the above-stated requirements. The bill would require that an
electrical corporation's renewable energy procurement plan include a
process that provides criteria for the rank ordering and selection of
eligible renewable energy resources to comply with the above-stated
procurement requirements so that the corporation's total renewables
portfolio benefits ratepayers. The bill would require the PUC to
annually establish and adopt a benchmark price for electricity
generated by an eligible renewable energy resource, for terms
corresponding to the length of contracts, in consideration of
specified matter, and would prohibit the PUC from requiring a retail
seller to procure additional electricity from eligible renewable
energy resources if the net annualized costs, as specified, expended
above the benchmark price exceeds 5% of the retail seller's total
system annual revenue requirements, as defined. The bill would
require the governing board of a local publicly owned electric
utility to implement a similar limitation for the utility. The bill
would revise existing law with respect to the use of renewable energy
credits to meet the renewables portfolio standard procurement
requirements. The bill would authorize the PUC to modify certain
requirements for an electrical corporation with 60,000 or fewer
customer accounts in the state that serves retail end-use customers
outside the state and provides that a public utility district that
receives all of its electricity from hydroelectric generation
pursuant to a preference right created by a specified federal law is
in compliance with the renewables portfolio standard. 

   (2) Existing law requires the PUC to require the state's 3 largest
electrical corporations, Pacific Gas and Electric Company, San Diego
Gas and Electric, and Southern California Edison, to identify a
separate electrical rate component to fund programs that enhance
system reliability and provide in-state benefits. This rate component
is a nonbypassable element of local distribution and collected on
the basis of usage. Existing PUC resolutions refer to the
nonbypassable rate component as a "public goods charge." The public
goods charge moneys are collected to support cost-effective energy
efficiency and conservation activities, public interest research and
development not adequately provided by competitive and regulated
markets, and renewable energy resources. Existing law establishes the
Renewable Resource Trust Fund in the State Treasury and requires
that certain moneys collected to support renewable energy resources
through the public goods charge are deposited into the fund and
authorizes the Energy Commission to expend the moneys pursuant to the
Renewable Energy Resources Program. The program states the intent of
the Legislature to increase the amount of electricity generated from
eligible renewable energy resources per year so that amount equals
at least 20% of total retail sales of electricity in California per
year by December 31, 2010.  
   This bill would revise the Renewable Energy Resources Program to
state the intent of the Legislature to increase the amount of
electricity generated from eligible renewable energy resources per
year, so that it equals at least 20% of total retail sales of
electricity in California per year by December 31, 2010, 23% of total
retail sales of electricity in California per year by December 31,
2014, 27% of total retail sales of electricity in California per year
by December 31, 2017, and 33% of total retail sales of electricity
in California per year by December 31, 2020. The bill would revise
the definitions applicable to the Renewable Energy Resources Program
to incorporate the definition of an eligible renewable energy
resource from the RPS program, would define what is a "new" and
"existing" eligible renewable energy resource, would delete certain
unneeded defined terms, and would make other conforming changes.
 
   (3) This bill would establish the Energy Planning and
Infrastructure Coordinating Committee (EPIC committee), composed of
specified members, that would be required to use existing resources
and the authority of the state entities represented by the voting
members to coordinate the actions of the state, make policy
recommendations, and develop a strategic plan to achieve a 23%
renewables portfolio standard by December 31, 2014, a 27% renewables
portfolio standard by December 31, 2017, and a 33% renewables
portfolio standard by December 31, 2020. The bill would require that
the strategic plan, among other things, designate and rank renewable
energy development (RED) zones with high concentrations of
high-quality renewable energy resources, to designate and rank
transmission corridors needed to deliver electricity generated in RED
zones to load and any additional electrical transmission and
distribution upgrades that are prudent and desirable in order to
ensure system reliability, and include a timeline of stages required
to meet the 25% and 33% renewables portfolio standard requirements.
The bill would authorize the EPIC committee to incorporate in the
strategic plan the results reached as a result of the Renewable
Energy Transmission Initiative (RETI) collaborative stakeholder
planning process initiated as a joint effort among the PUC, Energy
Commission, and the Independent System Operator. The bill would
require the EPIC committee to facilitate coordinated permit and
certification review agreements between the PUC, Energy Commission,
Department of Fish and Game, State Air Resources Board, State Water
Resources Control Board, and other agencies responsible for
environmental reviews, including, to the extent feasible, local and
federal governmental entities. The bill would require the EPIC
committee to direct the Energy Commission to prepare a program
environment impact report (PEIR) pursuant to the California
Environmental Quality Act (CEQA) for each RED zone and require that
the EPIC committee approve the PEIR before the Energy Commission may
certify completion of the PEIR.  
   (4) Existing law requires the Energy Commission to adopt a
strategic plan for the state's electrical transmission grid using
existing resources, to be included in the integrated energy policy
report adopted on November 1, 2005, which identifies and recommends
actions required to implement investments needed to ensure
reliability, relieve congestion, and to meet future growth in
electrical load and generation, including renewable resources, energy
efficiency, and other demand reduction measures. Existing law
authorizes the Energy Commission to designate a transmission corridor
zone on its own motion or by application of a person who plans to
construct a high-voltage electric transmission line within the state.
Existing law provides that the designation of a transmission
corridor shall serve to identify a feasible corridor where a future
transmission line can be built that is consistent with the state's
needs and objectives as set forth in the strategic plan adopted by
the Energy Commission. Existing law provides that the designation of
a transmission corridor zone is subject to the requirements of the
CEQA and prescribes procedures for the designation of a transmission
corridor zone, including publication of the request for designation
and request for comments, coordination with federal agencies and
California Native American tribes, informational hearings, and
requirements for a proposed decision.  
   This bill would require the Energy Commission to adopt, and, as
needed, update a strategic plan for the state's electrical
transmission grid using existing resources, to be included in the
next integrated energy policy report, which identifies and recommends
actions required to implement investments needed to ensure
reliability, relieve congestion, and to meet future growth in
electrical load and generation, including achieving the renewables
portfolio standard procurement requirements, energy efficiency, and
other demand reduction measures. The bill would authorize the Energy
Commission to separately adopt a strategic plan to facilitate
achieving the renewables portfolio standard requirements. The bill
would require that any strategic plan adopted by the Energy
Commission be consistent with the strategic plan adopted by the EPIC
committee. The bill would make conforming changes to the transmission
corridor designations statutes.  
   (5) The existing federal Energy Policy Act of 2005 requires the
federal Secretaries of Agriculture, Commerce, Defense, Energy, and
the Interior, in consultation with the Federal Energy Regulatory
Commission (FERC), states, and tribal or local units of interested
persons, to designate corridors for oil, gas, and hydrogen pipelines
and electricity transmission and distribution facilities on federal
land in the 11 contiguous western states, including California, to
perform any environmental reviews that may be required to complete
the designation of corridors, and to incorporate the designated
corridors into the relevant agency land use and resource management
plans or equivalent plans. The Energy Policy Act of 2005 additionally
requires the federal secretaries, in consultation with the FERC,
affected utility industries, and other interest parties, to establish
procedures that ensure that additional corridors for oil, gas, and
hydrogen pipelines and electricity transmission and distribution
facilities on federal land are promptly identified and designated as
necessary and to expedite applications to construct or modify oil,
gas, and hydrogen pipelines and electricity transmission and
distribution facilities within corridors, taking into account prior
analysis and environmental reviews.  
   This bill would require the Energy Commission to confer with the
federal secretaries and the FERC to ensure that the transmission
corridors designated by the Energy Commission are identified and
designated as necessary pursuant to the federal Energy Policy Act of
2005.  
   (6) The existing Warren-Alquist State Energy Resources
Conservation and Development Act grants the Energy Commission the
exclusive authority to certify any stationary or floating electrical
generating facility using any source of thermal energy, with a
generating capacity of 50 megawatts or more, and any facilities
appurtenant thereto. This authority extends to any alteration,
replacement, or improvement of equipment that results in a
50-megawatt or more increase in the electric generating capacity of
an existing thermal powerplant or an increase of 25% in the peak
operating voltage or peak kilowatt capacity of an existing electric
transmission line. Existing law prohibits the construction of any
thermal powerplant or facilities
        appurtenant thereto or modification of any existing thermal
powerplant and appurtenant facility without first obtaining
certification from the Energy Commission.  
   This bill would grant the Energy Commission the exclusive
authority to certify an eligible renewable energy resource, as
defined, with a generating capacity of 5 megawatts or more, except
for a facility for which a building permit application or other
request for governmental approval was filed on or before December 31,
2009. The bill would make other conforming changes to the act.
 
   (7) The existing Public Utilities Act prohibits any electrical
corporation from beginning the construction of, among other things, a
line, plant, or system, or of any extension thereof, without having
first obtained from the PUC a certificate that the present or future
public convenience and necessity require or will require that
construction (certificate of public convenience and necessity). The
act requires that the PUC consider certain factors in determining
whether to issue a certificate of convenience and necessity,
including community values, recreational and park areas, historical
and aesthetic values, and influence on the environment, but requires
that the issuance of a certificate by the Energy Commission for a
thermal powerplant and facilities appurtenant thereto, pursuant to
the above-described provisions, is conclusive as to all matters
determined thereby when the PUC is determining whether to issue a
certificate of public convenience and necessity.  
   The bill would make the issuance of a certificate by the Energy
Commission for an eligible renewable energy resource, pursuant to the
above-described provisions, conclusive as to all matters determined
thereby when the PUC is determining whether to issue a certificate of
public convenience and necessity. The bill would authorize the PUC,
with the concurrence of the Division of Ratepayer Advocates, to
accept as a rebuttable presumption, a determination of the ISO, made
as part of its transmission planning process, that a transmission
project is needed to connect to renewable generation. For any
application for a certificate of public convenience and necessity to
construct or modify an electrical transmission line, a substantial
purpose of which is to access electricity generated by eligible
renewable energy resources, the bill would require the PUC to
establish a schedule for review of the application and to employ
staffing and other resources sufficient to produce a decision on
whether to issue the certificate, or refuse to issue it, within 12
months of receiving the completed application.  
   (8) Under existing law, a violation of the Public Utilities Act or
an order or direction of the PUC is a crime. Because some of the
provisions of this bill would require an order or other action of the
PUC to implement its provisions, and a violation of that order or
action would be a crime, the bill would impose a state-mandated local
program by creating a new crime. By placing additional requirements
upon local publicly owned electric utilities, which are entities of
local government, and new requirements upon city and county
governments, the bill would impose a state-mandated local program.
 
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.  
   This bill would provide that no reimbursement is required by this
act for a specified reason. 
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 705 is added to the  
Fish and Game Code  , to read:  
   705.  (a) For purposes of this section, "eligible renewable energy
resources" has the same meaning as in the California Renewables
Portfolio Standard Program (Article 16 (commencing with Section
399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public
Utilities Code).
   (b) The department shall establish an internal division with the
primary purpose of performing comprehensive planning and
environmental compliance services with priority given to projects
involving the building of eligible renewable energy resources.
   (c) The internal division shall ensure the timely completion of
plans pursuant to the Natural Community Conservation Planning Act
(Chapter 10 (commencing with Section 2800) of Division 3). 
   SEC. 2.    Section 25500.1 is added to the  
Public Resources Code   , to read:  
   25500.1.  Nothing in this chapter exempts an eligible renewable
energy resource, as defined in Article 16 (commencing with Section
399.11) of the Public Utilities Code, from the Fish and Game Code,
including Division 3 (commencing with Section 2000) of the Fish and
Game Code. 
   SEC. 3.    Section 25740.5 of the   Public
Resources Code   is amended to read: 
   25740.5.  (a) The commission shall optimize public investment and
ensure that the most cost-effective and efficient investments in
renewable energy resources are vigorously pursued.
   (b) The commission's long-term goal shall be a fully competitive
and self-sustaining supply of electricity generated from renewable
sources.
   (c) The program objective shall be to increase, in the near term,
the quantity of California's electricity generated by 
in-state  renewable  electricity generation
facilities   electrical generation facilities located in
this state  , while protecting system reliability, fostering
resource diversity, and obtaining the greatest environmental benefits
for California residents.
   (d) An additional objective of the program shall be to identify
and support emerging renewable technologies in distributed generation
applications that have the greatest near-term commercial promise and
that merit targeted assistance.
   (e) The Legislature recommends allocations among all of the
following:
   (1) Rebates, buydowns, or equivalent incentives for emerging
renewable technologies.
   (2) Customer education.
   (3) Production incentives for reducing fuel costs, that are
confirmed to the satisfaction of the commission, at solid fuel
biomass energy facilities in order to provide demonstrable
environmental and public benefits, including improved air quality.
   (4) Solar thermal generating resources that enhance the
environmental value or reliability of the electrical system and that
require financial assistance to remain economically viable, as
determined by the commission. The commission may require financial
disclosure from applicants for purposes of this paragraph.
   (5) Specified fuel cell technologies, if the commission makes all
of the following findings:
   (A) The specified technologies have similar or better air
pollutant characteristics than renewable technologies in the report
made pursuant to Section 25748.
   (B) The specified technologies require financial assistance to
become commercially viable by reference to wholesale generation
prices.
   (C) The specified technologies could contribute significantly to
the infrastructure development or other innovation required to meet
the long-term objective of a self-sustaining, competitive supply of
electricity generated from renewable sources.
   (6) Existing wind-generating resources, if the commission finds
that the existing wind-generating resources are a cost-effective
source of reliable energy and environmental benefits compared with
other  in-state  renewable  electricity
generation facilities   electrical generation facilities
located in this state  , and that the existing wind-generating
resources require financial assistance to remain economically viable.
The commission may require financial disclosure from applicants for
the purposes of this paragraph.
   (f) Notwithstanding any other provision of law, moneys collected
for renewable energy pursuant to Article 15 (commencing with Section
399) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities
Code shall be transferred to the Renewable Resource Trust Fund.
Moneys collected between January 1, 2007, and January 1, 2012, shall
be used for the purposes specified in this chapter.
   SEC. 4.    Section 25742 of the   Public
Resources Code   is amended to read: 
   25742.  (a) Twenty percent of the funds collected pursuant to the
renewable energy public goods charge shall be used for programs that
are designed to achieve fully competitive and self-sustaining
existing  in-state  renewable  electricity
generation facilities   electrical generation facilities
located in this state  , and to secure for the state the
environmental, economic, and reliability benefits that continued
operation of those facilities will provide during the 2007-2011
investment cycle. Eligibility for production incentives under this
section shall be limited to those technologies found eligible for
funds by the commission pursuant to paragraphs (3), (4), and (6) of
subdivision (e) of Section 25740.5.
   (b) Any funds used to support  in-state 
renewable  electricity   electrical 
generation facilities  located in this state  pursuant to
this section shall be expended in accordance with the provisions of
this chapter.
   (c) Facilities that are eligible to receive funding pursuant to
this section shall be registered in accordance with criteria
developed by the commission and those facilities shall not receive
payments for any electricity produced that has any of the following
characteristics:
   (1) Is sold at monthly average rates equal to, or greater than,
the applicable target price, as determined by the commission.
   (2) Is used onsite.
   (d) (1) Existing facilities  located in this state 
generating electricity from biomass energy shall be eligible for
funding and otherwise considered  an in-state renewable
electricity   a renewable electrical  generation
facility only if they report to the commission the types and
quantities of biomass fuels used.
   (2) The commission shall report the types and quantities of
biomass fuels used by each facility to the Legislature in the reports
prepared pursuant to Section 25748.
   (e) Each existing facility seeking an award pursuant to this
section shall be evaluated by the commission to determine the amount
of the funds being sought, the cumulative amount of funds the
facility has received previously from the commission and other state
sources, the value of any past and current federal or state tax
credits, the facility's contract price for energy and capacity, the
prices received by similar facilities, the market value of the
facility, and the likelihood that the award will make the facility
competitive and self-sustaining within the 2007-2011 investment
cycle. The commission shall use this evaluation to determine the
value of an award to the public relative to other renewable energy
investment alternatives. The commission shall compile its findings
and report them to the Legislature in the reports prepared pursuant
to Section 25748.
   SEC. 5.    Section 25746 of the   Public
Resources Code   is amended to read: 
   25746.  (a) One percent of the money collected pursuant to the
renewable energy public goods charge shall be used in accordance with
this chapter to promote renewable energy and disseminate information
on renewable energy technologies, including emerging renewable
technologies, and to help develop a consumer market for renewable
energy and for small-scale emerging renewable energy technologies.
   (b) If the commission provides funding for a regional accounting
system to verify compliance with the renewable portfolio standard by
retail sellers, pursuant to subdivision (b) of Section 
399.13  399.25  of the Public Utilities Code, the
commission shall recover all costs from user fees.
   SEC. 6.    Section 25747 of the   Public
Resources Code   is amended to read: 
   25747.  (a) The commission shall adopt guidelines governing the
funding programs authorized under this chapter, at a publicly noticed
meeting offering all interested parties an opportunity to comment.
Substantive changes to the guidelines may not be adopted without at
least 10 days' written notice to the public. The public notice of
meetings required by this subdivision may not be less than 30 days.
Notwithstanding any other provision of law, any guidelines adopted
pursuant to this chapter or Section  399.13  
399.25 of the Public Utilities Code, shall be exempt from the
requirements of Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code. The Legislature
declares that the changes made to this subdivision by the act
amending this section during the 2002 portion of the 2001-02 Regular
Session are declaratory of, and not a change in existing law.
   (b) Funds to further the purposes of this chapter may be committed
for multiple years.
   (c) Awards made pursuant to this chapter are grants, subject to
appeal to the commission upon a showing that factors other than those
described in the guidelines adopted by the commission were applied
in making the awards and payments. Any actions taken by an applicant
to apply for, or become or remain eligible and registered to receive,
payments or awards, including satisfying conditions specified by the
commission, shall not constitute the rendering of goods, services,
or a direct benefit to the commission.
   (d) An award made pursuant to this chapter, the amount of the
award, and the terms and conditions of the grant are public
information.
   SEC. 7.    Section 25751 of the   Public
Resources Code  is amended to read: 
   25751.  (a) The Renewable Resource Trust Fund is hereby created in
the State Treasury.
   (b) The following accounts are hereby established within the
Renewable Resource Trust Fund:
   (1) Existing Renewable Resources Account.
   (2) Emerging Renewable Resources Account.
   (3) Renewable Resources Consumer Education Account.
   (c) The money in the fund may be expended, only upon appropriation
by the Legislature in the annual Budget Act, for the following
purposes:
   (1) The administration of this article by the state.
   (2) The state's expenditures associated with the accounting system
established by the commission pursuant to subdivision (b) of Section
 399.13   399.25  of the Public Utilities
Code.
   (d) That portion of revenues collected by electrical corporations
for the benefit of in-state operation and development of existing and
new and emerging renewable resource technologies, pursuant to
Section 399.8 of the Public Utilities Code, shall be transmitted to
the commission at least quarterly for deposit in the Renewable
Resource Trust Fund pursuant to Section 25740.5. After setting aside
in the fund money that may be needed for expenditures authorized by
the annual Budget Act in accordance with subdivision (c), the
Treasurer shall immediately deposit money received pursuant to this
section into the accounts created pursuant to subdivision (b) in
proportions designated by the commission for the current calendar
year. Notwithstanding Section 13340 of the Government Code, the money
in the fund and the accounts within the fund are hereby continuously
appropriated to the commission without regard to fiscal year for the
purposes enumerated in this chapter.
   (e) Upon notification by the commission, the Controller shall pay
all awards of the money in the accounts created pursuant to
subdivision (b) for purposes enumerated in this chapter. The
eligibility of each award shall be determined solely by the
commission based on the procedures it adopts under this chapter.
Based on the eligibility of each award, the commission shall also
establish the need for a multiyear commitment to any particular award
and so advise the Department of Finance. Eligible awards submitted
by the commission to the Controller shall be accompanied by
information specifying the account from which payment should be made
and the amount of each payment; a summary description of how payment
of the award furthers the purposes enumerated in this chapter; and an
accounting of future costs associated with any award or group of
awards known to the commission to represent a portion of a multiyear
funding commitment.
   (f) The commission may transfer funds between accounts for
cashflow purposes, provided that the balance due each account is
restored and the transfer does not adversely affect any of the
accounts.
   (g) The Department of Finance shall conduct an independent audit
of the Renewable Resource Trust Fund and its related accounts
annually, and provide an audit report to the Legislature not later
than March 1 of each year for which this article is operative. The
Department of Finance's report shall include information regarding
revenues, payment of awards, reserves held for future commitments,
unencumbered cash balances, and other matters that the Director of
Finance determines may be of importance to the Legislature.
   SEC. 8.    Section 399.2.5 of the   Public
Utilities Code   is amended to read: 
   399.2.5.  (a) Notwithstanding  any other provision in
 Sections 1001 to 1013, inclusive, an application of an
electrical corporation for a certificate authorizing the construction
of new transmission facilities  shall be deemed to be
  is  necessary to the provision of electric
service for purposes of  any determination made under
 Section 1003 if the commission finds that the new facility
is  reasonably necessary  or appropriate  to
facilitate achievement of the  renewable power goals
  renewables portfolio standard  established in
Article 16 (commencing with Section 399.11).
   (b) With respect to a transmission facility described in
subdivision (a), the commission shall take all feasible actions to
ensure that the transmission rates established by the Federal Energy
Regulatory Commission are fully reflected in any retail rates
established by the commission. These actions shall include  ,
but are not limited to   all of the following :
   (1) Making findings, where supported by an evidentiary record,
that those transmission facilities provide benefit to the
transmission network and are  reasonably  necessary  or
appropriate  to facilitate the achievement of the renewables
portfolio standard established in Article 16 (commencing with Section
399.11).
   (2) Directing the utility to which the generator will be
interconnected, where the direction is not preempted by federal law,
to seek the recovery through general transmission rates of the costs
associated with the transmission facilities.
   (3) Asserting the positions described in paragraphs (1) and (2) to
the Federal Energy Regulatory Commission in appropriate proceedings.

   (4) Allowing   Providing assurance, prior to
a determination of rate recovery by the Federal Energy Regulatory
Commission (FERC) of those costs that are subject to FERC
jurisdiction, of the eligibility for  recovery in retail rates
of any increase in transmission costs incurred by an electrical
corporation resulting from the construction of the transmission
facilities  that are not approved for recovery in
transmission rates by the Federal Energy Regulatory Commission after
the commission determines that the costs were prudently incurred in
accordance with subdivision (a) of Section 454  . 
   (5) Allowing recovery in retail rates of any increase in
transmission costs if the FERC does not approve recovery of those
costs in the rates that are subject to FERC jurisdiction after the
commission determines that the costs were prudently incurred in
accordance with subdivision (a) of Section 454.  
   (c) (1) The commission shall approve an advice letter seeking
assurance of cost recovery pursuant to paragraph (4) of subdivision
(b), if either of the following is true:  
   (A) The new transmission line or facility is an upgrade of an
existing transmission line or facility, or is a new facility within
either an existing transmission right-of-way or a transmission
corridor zone that has been designated by the Energy Commission
pursuant to Section 25331 of the Public Resources Code, and is
consistent with the priority transmission projects in the conceptual
transmission plan in the final Phase 3 report produced by the public
collaborative stakeholder planning process known as the Renewable
Energy Transmission Initiative (RETI).  
   (B) Not less than 50 percent of the planned use for the capacity
of the new transmission line or facility is for interconnecting
eligible renewable energy resources, as determined by the Independent
System Operator or an electrical corporation, and all
interconnection requests for that transmission line or facility are
for generation facilities that comply with the greenhouse gases
emission performance standard established pursuant to Chapter 3
(commencing with Section 8340) of Division 4.1.  
   (2) Approval of an advice letter pursuant to paragraph (1) is not
binding upon the commission in making its determination whether or
not to approve an application for a certificate of public convenience
and necessity pursuant to Chapter 5 (commencing with Section 1001).

   SEC. 9.    Section 399.13 is added to the  
Public Utilities Code   , to read:  
   399.13.  (a) (1) The commission shall direct each electrical
corporation to prepare a renewable energy procurement plan that
includes the matter in paragraph (3), to satisfy its obligations
under the renewables portfolio standard. To the extent feasible, this
procurement plan shall be proposed, reviewed, and adopted by the
commission as part of, and pursuant to, a general procurement plan
process. The commission shall require each electrical corporation to
review and update its renewable energy procurement plan as it
determines to be necessary.
   (2) The commission shall adopt, by rulemaking, all of the
following:
   (A) A process that provides criteria for the rank ordering and
selection of least-cost and best-fit eligible renewable energy
resources to comply with the California Renewables Portfolio Standard
Program obligations on a total cost basis. This process shall take
into account all of the following:
   (i) Estimates of indirect costs associated with needed
transmission investments and ongoing electrical corporation expenses
resulting from integrating and operating eligible renewable energy
resources.
   (ii) The cost impact of procuring the eligible renewable energy
resources on the electrical corporation's electricity portfolio.
   (iii) The viability of the project to construct and reliably
operate the eligible renewable energy resource, including the
developer's experience, the feasibility of the technology used to
generate electricity, and the risk that the facility will not be
built, or that construction will be delayed, with the result that
electricity will not be delivered as required by the contract.
   (B) Rules permitting retail sellers to apply excess procurement in
one year to subsequent years.
   (C) Standard terms and conditions to be used by all electrical
corporations in contracting for eligible renewable energy resources,
including performance requirements for renewable generators. A
contract for the purchase of electricity generated by an eligible
renewable energy resource shall, at a minimum, include the renewable
energy credits associated with all electricity generation specified
under the contract. The standard terms and conditions shall include
the requirement that, no later than six months after the commission's
approval of an electricity purchase agreement entered into pursuant
to this article, the following information about the agreement shall
be disclosed by the commission: party names, resource type, project
location, and project capacity.
   (D) An appropriate minimum margin of procurement above the minimum
procurement level necessary to comply with the renewables portfolio
standard to mitigate the risk that renewable projects planned or
under contract are delayed or canceled. Nothing in this paragraph
shall preclude an electrical corporation from voluntarily proposing a
margin of procurement above the appropriate minimum margin
established by the commission.
   (3) Consistent with the goal of increasing California's reliance
on eligible renewable energy resources, the renewable energy
procurement plan submitted by an electrical corporation shall include
all of the following:
   (A) An assessment of annual or multiyear portfolio supplies and
demand to determine the optimal mix of eligible renewable energy
resources with deliverability characteristics that may include
peaking, dispatchable, baseload, firm, and as-available capacity.
   (B) Potential compliance delays related to the conditions
described in paragraph (4) of subdivision (b) of Section 399.15.
   (C) A bid solicitation setting forth the need for eligible
renewable energy resources of each deliverability characteristic,
required online dates, and locational preferences, if any.
   (D) A status update on the development schedule of all eligible
renewable resources currently under contract.
   (E) Consideration of mechanisms for price adjustments associated
with the costs of key components for eligible renewable energy
resource projects with online dates more than 24 months after the
date of contract execution.
   (F) An assessment of the risk that an eligible renewable energy
resource will not be built, or that construction will be delayed,
with the result that electricity will not be delivered as required by
the contract.
   (4) In soliciting and procuring eligible renewable energy
resources, each electrical corporation shall offer contracts of no
less than 10 years in duration, unless the commission approves of a
contract of shorter duration.
   (5) In soliciting and procuring eligible renewable energy
resources for California-based projects, each electrical corporation
shall give preference to renewable energy projects that provide
environmental and economic benefits to communities afflicted with
poverty or high unemployment, or that suffer from high emission
levels of toxic air contaminants, criteria air pollutants, and
greenhouse gases.
   (b) A retail seller may enter into a combination of long- and
short-term contracts for delivery of electricity and associated
renewable energy credits. The commission may authorize a retail
seller to enter into a contract of less than 10 years' duration with
an eligible renewable energy resource, if the commission has
established, for each retail seller, minimum quantities of eligible
renewable energy resources to be procured through contracts of at
least 10 years' duration.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's renewable energy procurement plan prior to
the commencement of renewable procurement pursuant to this article by
an electrical corporation.
   (d) Unless previously preapproved by the commission, an electrical
corporation shall submit a contract for the generation of an
eligible renewable energy resource to the commission for review and
approval consistent with an approved renewable energy procurement
plan. If the commission determines that the bid prices are elevated
due to a lack of effective competition among the bidders, the
commission shall direct the electrical corporation to renegotiate the
contracts or conduct a new solicitation.
   (e) The commission shall establish milestones in the development
of the project to evaluate the potential for compliance with the
adopted renewable energy procurement plan and a set of actions that
will occur as a result of not meeting those milestones. These actions
may include, but shall not be limited to, determining a cure period
for failure to meet milestones, a suspense period on the contract
online date for events beyond the developer's control that cause a
failure to meet milestones, allowing other developers that are
prepared to go forward to move ahead of suspended contracts, and the
forfeiture of deposits.
   (f) If an electrical corporation fails to comply with a commission
order adopting a renewable energy procurement plan, the commission
shall exercise its authority pursuant to Section 2113 to require
compliance. The commission shall enforce comparable penalties on any
retail seller that is not an electrical corporation that fails to
meet the procurement targets established pursuant to Section 399.15.
   (g) (1) The commission may authorize a procurement entity to enter
into contracts on behalf of customers of a retail seller for
deliveries of eligible renewable energy resources to satisfy the
retail seller's renewables portfolio standard procurement
requirements. The commission may not require any person or
corporation to act as a procurement entity or require any party
                                             to purchase eligible
renewable energy resources from a procurement entity.
   (2) Subject to review and approval by the commission, the
procurement entity shall be permitted to recover reasonable
administrative and procurement costs through the retail rates of
end-use customers that are served by the procurement entity and are
directly benefiting from the procurement of eligible renewable energy
resources.
   (h) Procurement and administrative costs associated with contracts
entered into by an electrical corporation for eligible renewable
energy resources pursuant to this article and approved by the
commission shall be deemed reasonable and shall be recoverable in
rates.
   (i) Construction, alteration, demolition, installation, and repair
work on an eligible renewable energy resource that receives
production incentives pursuant to Section 25742 of the Public
Resources Code, including work performed to qualify, receive, or
maintain production incentives are "public works" for the purposes of
Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of
the Labor Code. 
   SEC. 10.    Section 399.14 of the   Public
Utilities Code   is repealed.  
   399.14.  (a) (1) The commission shall direct each electrical
corporation to prepare a renewable energy procurement plan that
includes the matter in paragraph (3), to satisfy its obligations
under the renewables portfolio standard. To the extent feasible, this
procurement plan shall be proposed, reviewed, and adopted by the
commission as part of, and pursuant to, a general procurement plan
process. The commission shall require each electrical corporation to
review and update its renewable energy procurement plan as it
determines to be necessary.
   (2) The commission shall adopt, by rulemaking, all of the
following:
   (A) A process for determining market prices pursuant to
subdivision (c) of Section 399.15. The commission shall make specific
determinations of market prices after the closing date of a
competitive solicitation conducted by an electrical corporation for
eligible renewable energy resources.
   (B) A process that provides criteria for the rank ordering and
selection of least-cost and best-fit eligible renewable energy
resources to comply with the annual California Renewables Portfolio
Standard Program obligations on a total cost basis. This process
shall consider estimates of indirect costs associated with needed
transmission investments and ongoing utility expenses resulting from
integrating and operating eligible renewable energy resources.
   (C) (i) Flexible rules for compliance, including rules permitting
retail sellers to apply excess procurement in one year to subsequent
years or inadequate procurement in one year to no more than the
following three years. The flexible rules for compliance shall apply
to all years, including years before and after a retail seller
procures at least 20 percent of total retail sales of electricity
from eligible renewable energy resources.
   (ii) The flexible rules for compliance shall address situations
where, as a result of insufficient transmission, a retail seller is
unable to procure eligible renewable energy resources sufficient to
satisfy the requirements of this article. Any rules addressing
insufficient transmission shall require a finding by the commission
that the retail seller has undertaken all reasonable efforts to do
all of the following:
   (I) Utilize flexible delivery points.
   (II) Ensure the availability of any needed transmission capacity.
   (III) If the retail seller is an electric corporation, to
construct needed transmission facilities.
   (IV) Nothing in this subparagraph shall be construed to revise any
portion of Section 454.5.
   (D) Standard terms and conditions to be used by all electrical
corporations in contracting for eligible renewable energy resources,
including performance requirements for renewable generators. A
contract for the purchase of electricity generated by an eligible
renewable energy resource shall, at a minimum, include the renewable
energy credits associated with all electricity generation specified
under the contract. The standard terms and conditions shall include
the requirement that, no later than six months after the commission's
approval of an electricity purchase agreement entered into pursuant
to this article, the following information about the agreement shall
be disclosed by the commission: party names, resource type, project
location, and project capacity.
   (3) Consistent with the goal of procuring the least-cost and
best-fit eligible renewable energy resources, the renewable energy
procurement plan submitted by an electrical corporation shall include
all of the following:
   (A) An assessment of annual or multiyear portfolio supplies and
demand to determine the optimal mix of eligible renewable energy
resources with deliverability characteristics that may include
peaking, dispatchable, baseload, firm, and as-available capacity.
   (B) Provisions for employing available compliance flexibility
mechanisms established by the commission.
   (C) A bid solicitation setting forth the need for eligible
renewable energy resources of each deliverability characteristic,
required online dates, and locational preferences, if any.
   (4) In soliciting and procuring eligible renewable energy
resources, each electrical corporation shall offer contracts of no
less than 10 years in duration, unless the commission approves of a
contract of shorter duration.
   (5) In soliciting and procuring eligible renewable energy
resources, each electrical corporation may give preference to
projects that provide tangible demonstrable benefits to communities
with a plurality of minority or low-income populations.
   (b) The commission may authorize a retail seller to enter into a
contract of less than 10 years' duration with an eligible renewable
energy resource, if the commission has established, for each retail
seller, minimum quantities of eligible renewable energy resources to
be procured either through contracts of at least 10 years' duration
or from new facilities commencing commercial operations on or after
January 1, 2005.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's renewable energy procurement plan prior to
the commencement of renewable procurement pursuant to this article by
an electrical corporation.
   (d) The commission shall review the results of an eligible
renewable energy resources solicitation submitted for approval by an
electrical corporation and accept or reject proposed contracts with
eligible renewable energy resources based on consistency with the
approved renewable energy procurement plan. If the commission
determines that the bid prices are elevated due to a lack of
effective competition among the bidders, the commission shall direct
the electrical corporation to renegotiate the contracts or conduct a
new solicitation.
   (e) If an electrical corporation fails to comply with a commission
order adopting a renewable energy procurement plan, the commission
shall exercise its authority pursuant to Section 2113 to require
compliance. The commission shall enforce comparable penalties on any
other retail seller that fails to meet annual procurement targets
established pursuant to Section 399.15.
   (f) (1) The commission may authorize a procurement entity to enter
into contracts on behalf of customers of a retail seller for
deliveries of eligible renewable energy resources to satisfy annual
renewables portfolio standard obligations. The commission may not
require any person or corporation to act as a procurement entity or
require any party to purchase eligible renewable energy resources
from a procurement entity.
   (2) Subject to review and approval by the commission, the
procurement entity shall be permitted to recover reasonable
administrative and procurement costs through the retail rates of
end-use customers that are served by the procurement entity and are
directly benefiting from the procurement of eligible renewable energy
resources.
   (g) Procurement and administrative costs associated with long-term
contracts entered into by an electrical corporation for eligible
renewable energy resources pursuant to this article and approved by
the commission shall be deemed reasonable per se, and shall be
recoverable in rates.
   (h) Construction, alteration, demolition, installation, and repair
work on an eligible renewable energy resource that receives
production incentives pursuant to Section 25742 of the Public
Resources Code, including work performed to qualify, receive, or
maintain production incentives is "public works" for the purposes of
Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of
the Labor Code. 
   SEC. 11.    Section 399.14 is added to the  
Public Utilities Code   , to read:  
   399.14.  (a) (1) An electrical corporation may, pursuant to
Chapter 5 (commencing with Section 1001), and in order to meet its
renewables portfolio standard procurement requirements, apply to the
commission for approval to construct, own, and operate an eligible
renewable energy resource.
   (2) If the proposed eligible renewable energy resource complies
with the requirements of subdivision (b), the commission shall
approve an application filed pursuant to paragraph (1), until the
commission has approved applications for eligible renewable energy
resources for the electrical corporation that, when constructed and
operating, will provide 8.25 percent of the electrical corporation's
anticipated retail sales by December 31, 2020.
   (3) The commission may approve additional applications for
eligible renewable energy resources once the commission has approved
sufficient applications for eligible renewable energy resources for
the electrical corporation that, when constructed and operating, will
provide 8.25 percent of the electrical corporation's anticipated
retail sales by December 31, 2020.
   (b) The commission shall not approve any application by an
electrical corporation pursuant to subdivision (a) unless both of the
following conditions are met:
   (1) The eligible renewable energy resource utilizes a viable
technology at a reasonable cost.
   (2) The eligible renewable energy resource provides comparable or
superior value to ratepayers when compared to then recent or
contemporaneous solicitations for generation provided by eligible
renewable energy resources.
   (c) In approving any application by an electrical corporation for
approval to construct, own, and operate an eligible renewable energy
resource, the commission shall apply traditional cost-of-service
ratemaking, including reasonableness review after construction is
completed. 
   SEC. 12.    Section 399.26 is added to the  
Public Utilities Code   , to read:  
   399.26.  (a) In order for the state to meet the requirements of
the California Renewables Portfolio Standard Program, substantially
increased amounts of electricity generated by eligible renewable
energy resources must be integrated with, and interconnected to, the
transmission grid that is either owned by, or under the operational
control of, the local publicly owned electric utilities and the
transmission grid that is under the operational control of the
Independent System Operator.
   (b) The Independent System Operator and the balancing authority of
each area in California shall do both of the following:
   (1) Work cooperatively to integrate and interconnect eligible
renewable energy resources to the transmission grid by the most
efficient means possible with the goal of minimizing the impact and
cost of new transmission needed to meet both reliability needs and
the renewables portfolio standard procurement requirements.
   (2) Accomplish the requirements of paragraph (1) in a manner that
respects the ownership, business, and dispatch models for
transmission facilities owned by electrical corporations, local
publicly owned electric utilities, joint power agencies, and merchant
transmission companies.
   (c) The Independent System Operator shall seek any approvals from
the Federal Energy Regulatory Commission that are necessary to
accomplish the goals and requirements of this article.
   (d) In order to maintain electric service reliability and to
minimize the construction of fossil fuel electrical generation
capacity to support the integration of intermittent renewable
electrical generation into the electrical grid, by July 1, 2010, the
Energy Commission shall update its previously conducted studies to
determine the effective  load carrying capacity of wind and solar
energy resources on the California electrical grid. The commission
shall use those effective load carrying capacity values in
establishing the contribution of wind and solar energy resources
toward meeting the resource adequacy requirements established
pursuant to Section 380.
   (e) It is the intent of the Legislature that the California Public
Utilities Commission and the California Energy Commission shall
implement this article so that it is compatible with, and does not
preclude achievement of, the combined heat and power system
electricity generation objective identified by the State Air
Resources Board in its scoping plan implementing the California
Global Warming Solutions Act of 2006 (Division 25.5 (commencing with
Section 38500) of the Health and Safety Code), including maintaining
existing levels of efficient combined heat and power systems and the
installation of additional megawatts of efficient combined heat and
power systems that meet the goals for reducing emissions of
greenhouse gases provided, however, nothing in this provision shall
change the definition of renewable electrical generation facility.
New combined heat and power systems shall be sized to meet all or a
portion of the eligible customer-generators on-site demand. 
   SEC. 13.    Section 454.5 of the   Public
Utilities Code   is amended to read: 
   454.5.  (a) The commission shall specify the allocation of
electricity, including quantity, characteristics, and duration of
electricity delivery, that the Department of Water Resources shall
provide under its power purchase agreements to the customers of each
electrical corporation, which shall be reflected in the electrical
corporation's proposed procurement plan. Each electrical corporation
shall file a proposed procurement plan with the commission not later
than 60 days after the commission specifies the allocation of
electricity. The proposed procurement plan shall specify the date
that the electrical corporation intends to resume procurement of
electricity for its retail customers, consistent with its obligation
to serve. After the commission's adoption of a procurement plan, the
commission shall allow not less than 60 days before the electrical
corporation resumes procurement pursuant to this section.
   (b) An electrical corporation's proposed procurement plan shall
include, but not be limited to, all of the following:
   (1) An assessment of the price risk associated with the electrical
corporation's portfolio, including any utility-retained generation,
existing power purchase and exchange contracts, and proposed
contracts or purchases under which an electrical corporation will
procure electricity, electricity demand reductions, and
electricity-related products and the remaining open position to be
served by spot market transactions.
   (2) A definition of each electricity product, electricity-related
product, and procurement related financial product, including support
and justification for the product type and amount to be procured
under the plan.
   (3) The duration of the plan.
   (4) The duration, timing, and range of quantities of each product
to be procured.
   (5) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services,
including the format and criteria of that procurement process.
   (6) An incentive mechanism, if any incentive mechanism is
proposed, including the type of transactions to be covered by that
mechanism, their respective procurement benchmarks, and other
parameters needed to determine the sharing of risks and benefits.
   (7) The upfront standards and criteria by which the acceptability
and eligibility for rate recovery of a proposed procurement
transaction will be known by the electrical corporation prior to
execution of the transaction. This shall include an expedited
approval process for the commission's review of proposed contracts
and subsequent approval or rejection thereof. The electrical
corporation shall propose alternative procurement choices in the
event a contract is rejected.
   (8) Procedures for updating the procurement plan.
   (9) A showing that the procurement plan will achieve the
following:
   (A) The electrical corporation  will   shall
 , in order to fulfill its unmet resource needs  and in
furtherance of Section 701.3, until a 20 percent renewable resources
portfolio is achieved  , procure  resources from
eligible  renewable energy resources  with the goal of
ensuring that at least an additional 1 percent per year of the
electricity sold by the electrical corporation is generated from
renewable energy resources, provided sufficient funds are made
available pursuant to Sections 399.6 and 399.15, to cover the
above-market costs for new renewable energy resources  
in an amount sufficient to meet its procurement requirements pursuant
to the California Renewables Portfolio Standard Program (Article 16
(commencing with Section 399.11) of Chapter 2.3)  .
   (B) The electrical corporation will create or maintain a
diversified procurement portfolio consisting of both short-term and
long-term electricity and electricity-related and demand reduction
products.
   (C) The electrical corporation will first meet its unmet resource
needs through all available energy efficiency and demand reduction
resources that are cost effective, reliable, and feasible.
   (10) The electrical corporation's risk management policy,
strategy, and practices, including specific measures of price
stability.
   (11) A plan to achieve appropriate increases in diversity of
ownership and diversity of fuel supply of nonutility electrical
generation.
   (12) A mechanism for recovery of reasonable administrative costs
related to procurement in the generation component of rates.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's procurement plan. The commission's review
shall consider each electrical corporation's individual procurement
situation, and shall give strong consideration to that situation in
determining which one or more of the features set forth in this
subdivision shall apply to that electrical corporation. A procurement
plan approved by the commission shall contain one or more of the
following features, provided that the commission may not approve a
feature or mechanism for an electrical corporation if it finds that
the feature or mechanism would impair the restoration of an
electrical corporation's creditworthiness or would lead to a
deterioration of an electrical corporation's creditworthiness:
   (1) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services. The
commission shall specify the format of that procurement process, as
well as criteria to ensure that the auction process is open and
adequately subscribed. Any purchases made in compliance with the
commission-authorized process shall be recovered in the generation
component of rates.
   (2) An incentive mechanism that establishes a procurement
benchmark or benchmarks and authorizes the electrical corporation to
procure from the market, subject to comparing the electrical
corporation's performance to the commission-authorized benchmark or
benchmarks. The incentive mechanism shall be clear, achievable, and
contain quantifiable objectives and standards. The incentive
mechanism shall contain balanced risk and reward incentives that
limit the risk and reward of an electrical corporation.
   (3) Upfront achievable standards and criteria by which the
acceptability and eligibility for rate recovery of a proposed
procurement transaction will be known by the electrical corporation
prior to the execution of the bilateral contract for the transaction.
The commission shall provide for expedited review and either approve
or reject the individual contracts submitted by the electrical
corporation to ensure compliance with its procurement plan. To the
extent the commission rejects a proposed contract pursuant to this
criteria, the commission shall designate alternative procurement
choices obtained in the procurement plan that will be recoverable for
ratemaking purposes.
   (d) A procurement plan approved by the commission shall accomplish
each of the following objectives:
   (1) Enable the electrical corporation to fulfill its obligation to
serve its customers at just and reasonable rates.
   (2) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation's actions in compliance with an approved
procurement plan, including resulting electricity procurement
contracts, practices, and related expenses. However, the commission
may establish a regulatory process to verify and assure that each
contract was administered in accordance with the terms of the
contract, and contract disputes which may arise are reasonably
resolved.
   (3) Ensure timely recovery of prospective procurement costs
incurred pursuant to an approved procurement plan. The commission
shall establish rates based on forecasts of procurement costs adopted
by the commission, actual procurement costs incurred, or combination
thereof, as determined by the commission. The commission shall
establish power procurement balancing accounts to track the
differences between recorded revenues and costs incurred pursuant to
an approved procurement plan. The commission shall review the power
procurement balancing accounts, not less than semiannually, and shall
adjust rates or order refunds, as necessary, to promptly amortize a
balancing account, according to a schedule determined by the
commission. Until January 1, 2006, the commission shall ensure that
any overcollection or undercollection in the power procurement
balancing account does not exceed 5 percent of the electrical
corporation's actual recorded generation revenues for the prior
calendar year excluding revenues collected for the Department of
Water Resources. The commission shall determine the schedule for
amortizing the overcollection or undercollection in the balancing
account to ensure that the 5 percent threshold is not exceeded. After
January 1, 2006, this adjustment shall occur when deemed appropriate
by the commission consistent with the objectives of this section.
   (4) Moderate the price risk associated with serving its retail
customers, including the price risk embedded in its long-term supply
contracts, by authorizing an electrical corporation to enter into
financial and other electricity-related product contracts.
   (5) Provide for just and reasonable rates, with an appropriate
balancing of price stability and price level in the electrical
corporation's procurement plan.
   (e) The commission shall provide for the periodic review and
prospective modification of an electrical corporation's procurement
plan.
   (f) The commission may engage an independent consultant or
advisory service to evaluate risk management and strategy. The
reasonable costs of any consultant or advisory service is a
reimbursable expense and eligible for funding pursuant to Section
631.
   (g) The commission shall adopt appropriate procedures to ensure
the confidentiality of any market sensitive information submitted in
an electrical corporation's proposed procurement plan or resulting
from or related to its approved procurement plan, including, but not
limited to, proposed or executed power purchase agreements, data
request responses, or consultant reports, or any combination,
provided that the Office of Ratepayer Advocates and other consumer
groups that are nonmarket participants shall be provided access to
this information under confidentiality procedures authorized by the
commission.
   (h) Nothing in this section alters, modifies, or amends the
commission's oversight of affiliate transactions under its rules and
decisions or the commission's existing authority to investigate and
penalize an electrical corporation's alleged fraudulent activities,
or to disallow costs incurred as a result of gross incompetence,
fraud, abuse, or similar grounds. Nothing in this section expands,
modifies, or limits the State Energy Resources Conservation and
Development Commission's existing authority
                     and responsibilities as set forth in Sections
25216, 25216.5, and 25323 of the Public Resources Code.
   (i) An electrical corporation that serves less than 500,000
electric retail customers within the state may file with the
commission a request for exemption from this section, which the
commission shall grant upon a showing of good cause.
   (j) (1) Prior to its approval pursuant to Section 851 of any
divestiture of generation assets owned by an electrical corporation
on or after the date of enactment of the act adding this section, the
commission shall determine the impact of the proposed divestiture on
the electrical corporation's procurement rates and shall approve a
divestiture only to the extent it finds, taking into account the
effect of the divestiture on procurement rates, that the divestiture
is in the public interest and will result in net ratepayer benefits.
   (2) Any electrical corporation's procurement necessitated as a
result of the divestiture of generation assets on or after the
effective date of the act adding this subdivision shall be subject to
the mechanisms and procedures set forth in this section only if its
actual cost is less than the recent historical cost of the divested
generation assets.
   (3) Notwithstanding paragraph (2), the commission may deem
proposed procurement eligible to use the procedures in this section
upon its approval of asset divestiture pursuant to Section 851.
   SEC. 14.    Section 1005.1 is added to the  
Public Utilities Code   , to read:  
   1005.1.  (a) The commission shall issue a decision on an
application for a certificate within 18 months of the date of filing
of the completed application, when all of the following are true:
   (1) The application is for a certificate for building or upgrading
an electrical transmission line that the commission finds necessary
to provide transmission to load centers for electricity generated in
a high priority renewable energy zone or is reasonably necessary to
facilitate achievement of the renewables portfolio standard
established in Article 16 (commencing with Section 399.11) of Chapter
2.3.
   (2) The commission has considered all of the following:
   (A) The utilization of rights-of-way by upgrading existing
transmission facilities instead of building new transmission
facilities, where technically and economically justifiable.
   (B) The expansion of existing rights-of-way, if technically and
economically feasible, when construction of new transmission lines is
required.
   (C) The creation of new rights-of-way when justified by
environmental, technical, and economic reasons.
   (D) The availability of cost-effective alternatives to
transmission, such as energy efficiency measures and distributed
generation.
   (3) The commission has not expressly found any of the following:
   (A) That the investment is not reasonable and necessary to
maintain or enhance reliability of the transmission grid.
   (B) That the building or upgrading of the electrical transmission
line will not maintain or enhance efficient use of the transmission
grid.
   (C) That the transmission line fails to meet other applicable
standards and requirements for approval and construction.
   (b) An extension of time may be granted by the commission if it
finds the extension is necessary for completion of review pursuant to
the California Environmental Quality Act (Division 13 (commencing
with Section 21000) of the Public Resources Code). 
   SEC. 15.    This bill shall only become operative if
this bill and SB 14 are both enacted and become effective on or
before January 1, 2010. 
   SEC. 16.    No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.  All matter omitted in this version of
the bill appears in the bill as amended in the Senate, June 23, 2009
(JR11)