BILL NUMBER: AB 64	AMENDED
	BILL TEXT

	AMENDED IN SENATE  SEPTEMBER 11, 2009
	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, Bass, and Fuentes
   (Principal coauthor: Senator Simitian)
   (Coauthors: Senators Leno and Padilla)

                        DECEMBER 9, 2008

   An act to add 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.
   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 renewable
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 renewable 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 renewable 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 renewable 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 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 399.25 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 399.25 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
399.25 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 Sections 1001 to 1013, inclusive, an
application of an electrical corporation for a certificate
authorizing the construction of new transmission facilities is
necessary to the provision of electric service for purposes of
Section 1003 if the commission finds that the new facility is
reasonably necessary or appropriate to facilitate achievement of the
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 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) 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.
   (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.
  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
  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 shall, in order to fulfill its
unmet resource needs, procure resources from eligible 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.