BILL NUMBER: AB 1954 AMENDED BILL TEXT AMENDED IN SENATE JUNE 17, 2010 AMENDED IN ASSEMBLY APRIL 12, 2010 INTRODUCED BY Assembly Members Skinner and V. Manuel Perez FEBRUARY 17, 2010 An act to amend Sections 399.2.5 and 399.12 of the Public Utilities Code, relating to electricity. LEGISLATIVE COUNSEL'S DIGEST AB 1954, as amended, Skinner. Electrical transmission: renewable energy resources. Under existing law, the Public Utilities Commission (CPUC) has regulatory authority over public utilities, including electrical corporations, as defined. Existing law, 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 CPUC a certificate that the present or future public convenience and necessity require or will require that construction (certificate of public convenience and necessity). Existing law requires the CPUC, 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 CPUC finds that new transmission facilities are necessary to facilitate achievement of the renewable power goals established under the renewables portfolio standard. That law additionally requires the CPUC, upon finding that new transmission facilities are necessary to facilitate achievement of the renewable power goals established under the renewables portfolio standard, to 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. This bill would provide that an application by an electrical corporation for a certificate of public convenience and necessity for new transmission facilities is necessary to the provision of electric service if the CPUC finds that new transmission facilities facilitate achievement of the renewables portfolio standard. The bill would authorize the CPUC to approve the recovery in retail rates by an electrical corporation of certain costs for transmission facilities that are incurred in certain circumstances if not approved for recovery in transmission rates by the Federal Energy Regulatory Commission. This bill would revise and recast certain of the definitions applicable to the California Renewables Portfolio Standard Program and would revise certain requirements applicable to the State Energy Resources Conservation and Development Commission for certifying when an eligible renewable energy resource may earn a renewable energy credit . Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. 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 if the commission finds that the new facility facilitates 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 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 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 wereprudently incurred in accordance with subdivision (a) of Section 454.reasonably and prudently incurred, subject to any rule adopted by the commission pursuant to subdivision (b) of Section 454, concerning the showing to be made in support of proposed rate changes. (c) (1) The commission, prior to making a finding pursuant to subdivision (a), may approve an advice letter from an electrical corporation seeking, for a specific transmission project, a finding of eligibility for cost recovery pursuant to paragraph (4) of subdivision (b). Ultimate recovery of construction costs shall be contingent upon the commission finding, pursuant to subdivision (a), that the facility facilitates achievement of the renewables portfolio standard established pursuant to Article 16 (commencing with Section 399.11), and upon a determination by the commission that the costs wereprudently incurred pursuant to subdivision (a) of Section 454.reasonably and prudently incurred, subject to any rule adopted by the commission pursuant to subdivision (b) of Section 454, concerning the showing to be made in support of proposed rate changes. (2) (A) The commission may approve cost recovery, in retail rates, for preconstruction costs if requested in an application of an electrical corporation for a certificate authorizing the construction of new transmission facilities if the commission finds that the new facility facilitates achievement of the renewables portfolio standard established in Article 16 (commencing with Section 399.11) and that the costs were reasonably and prudently incurred, subject to any rule adopted by the commission pursuant to subdivision (b) of Section 454, concerning the showing to be made in support of proposed rate changes . (B) The commission may approve cost recovery, in retail rates, for preconstruction costs if requested in an application or advice letter of an electrical corporation that seeks approval for preconstruction costs for a potential transmission facility if the utility certifies, at the time of filing the application, that it expects that the facility will facilitate achievement of the renewables portfolio standard established in Article 16 (commencing with Section 399.11). If the request for recovery of preconstruction costs is made in an application that the commission finds contains an adequate showing that the costs to be incurred are reasonable, the commission may approve recovery in retail rates without a subsequent reasonableness review. If the request for recovery of preconstruction costs is made in an advice letter, retail rate recovery is contingent upon a subsequent reasonableness review, unless otherwise ordered by the commission. (3) The commission's determination that transmission facilities are eligible for cost recovery pursuant to paragraph (1) or (2) is not binding upon the commission when determining the need for the transmission facilities pursuant to Chapter 5 (commencing with Section 1001) or upon the commission's determination whether the facility will facilitate achievement of the renewables portfolio standard established in Article 16 (commencing with Section 399.11). (d) Any cost recovery pursuant to subdivision (b) or (c) shall be limited to costs that are not approved for recovery in transmission rates by the Federal Energy Regulatory Commission. SEC. 2. Section 399.12 of the Public Utilities Code is amended to read: 399.12. For purposes of this article, the following terms have the following meanings: (a) "Conduit hydroelectric facility" means a facility for the generation of electricity that uses only the hydroelectric potential of an existing pipe, ditch, flume, siphon, tunnel, canal, or other manmade conduit that is operated to distribute water for a beneficial use. (b) "Delivered" and "delivery" have the same meaning as provided in subdivision (a) of Section 25741 of the Public Resources Code. (c) "Eligible renewable energy resource" means an electrical generating facility that meets the definition of an "in-state renewable electricity generation facility" in Section 25741 of the Public Resources Code, subject to the following limitations: (1) (A) An existing small hydroelectric generation facility of 30 megawatts or less shall be eligible only if a retail seller or local publicly owned electric utility owned or procured the electricity from the facility as of December 31, 2005. A new hydroelectric facility is not an eligible renewable energy resource if it will cause an adverse impact on instream beneficial uses or cause a change in the volume or timing of streamflow. (B) Notwithstanding subparagraph (A), a conduit hydroelectric facility of 30 megawatts or less that commenced operation before January 1, 2006, is an eligible renewable energy resource. A conduit hydroelectric facility of 30 megawatts or less that commences operation after December 31, 2005, is an eligible renewable energy resource so long as it does not cause an adverse impact on instream beneficial uses or cause a change in the volume or timing of streamflow. (2) A facility engaged in the combustion of municipal solid waste shall not be considered an eligible renewable resource unless it is located in Stanislaus County and was operational prior to September 26, 1996. (d) "Procure" means to acquire through ownership or contract. For purposes of meeting the renewables portfolio standard procurement requirements, a retail seller or local publicly owned electric utility may procure either delivered electricity generated by an eligible renewable energy resource that it owns or for which it has entered into an electricity purchase agreement. Nothing in this article is intended to imply that the purchase of electricity from third parties in a wholesale transaction is the preferred method of fulfilling a retail seller's obligation to comply with this article or the obligation of a local publicly owned electric utility to meet its renewables portfolio standard implemented pursuant to Section 387. (e) (1) "Renewable energy credit" means a certificate of proof associated with the generation of electricity from an eligible renewable energy resource, issued through the accounting system established by the Energy Commission pursuant to Section 399.13, that one unit of electricity was generated and delivered by an eligible renewable energy resource. (2) "Renewable energy credit" includes all renewable and environmental attributes associated with the production of electricity from the eligible renewable energy resource, except for an emissions reduction credit issued pursuant to Section 40709 of the Health and Safety Code and any credits or payments associated with the reduction of solid waste and treatment benefits created by the utilization of biomass or biogas fuels. (3) No electricity generated by an eligible renewable energy resource attributable to the use of nonrenewable fuels, beyond a de minimis quantity used to generate electricity in the same process through which the facility converts renewable fuel to electricity, shall result in the creation of a renewable energy credit. The Energy Commission shall set the de minimis quantity of nonrenewable fuels for each renewable energy technology at a level of no more than 2 percent of the total quantity of fuel used by the technology to generate electricity.If, however, a specific facility demonstrates that a higher de minimis quantity will permit it to significantly increase its utilization of renewable fuel and reduce the variability of its electrical output, the Energy Commission may set the de minimis quantity for that facility at a level of no more than 10 percent of the total quantity of energy used by the facility to generate electricity.The Energy Commission may adjust the de minimis quantity for an individual facility, up to a maximum of 5 percent, if it finds that both of the following conditions are met: (A) The facility demonstrates that the higher quantity of nonrenewable fuel will lead to a meaningful increase in generation from the eligible renewable energy facility that is greater than generation from the nonrenewable fuel alone. (B) The facility demonstrates that the higher quantity of nonrenewable fuels will reduce the variability of its electrical output in a manner that results in net environmental benefits to the state. (f) "Renewables portfolio standard" means the specified percentage of electricity generated by eligible renewable energy resources that a retail seller is required to procure pursuant to this article or the obligation of a local publicly owned electric utility to meet its renewables portfolio standard implemented pursuant to Section 387. (g) "Retail seller" means an entity engaged in the retail sale of electricity to end-use customers located within the state, including any of the following: (1) An electrical corporation, as defined in Section 218. (2) A community choice aggregator. The commission shall institute a rulemaking to determine the manner in which a community choice aggregator will participate in the renewables portfolio standard program subject to the same terms and conditions applicable to an electrical corporation. (3) An electric service provider, as defined in Section 218.3, for all sales of electricity to customers beginning January 1, 2006. The commission shall institute a rulemaking to determine the manner in which electric service providers will participate in the renewables portfolio standard program. The electric service provider shall be subject to the same terms and conditions applicable to an electrical corporation pursuant to this article. Nothing in this paragraph shall impair a contract entered into between an electric service provider and a retail customer prior to the suspension of direct access by the commission pursuant to Section 80110 of the Water Code. (4) "Retail seller" does not include any of the following: (A) A corporation or person employing cogeneration technology or producing electricity consistent with subdivision (b) of Section 218. (B) The Department of Water Resources acting in its capacity pursuant to Division 27 (commencing with Section 80000) of the Water Code. (C) A local publicly owned electric utility.