BILL ANALYSIS
AB 1954
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Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1954 (Skinner) - As Amended: April 12, 2010
Policy Committee:
UtilitiesVote:14-0
Natural Resources 9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill:
1)Authorizes the Public Utilities Commission (PUC) to provide
administrative pre-approval of utility costs for transmission
lines that the commission finds facilitate achieving the
state's Renewable Portfolio Standard.
2)Caps de minimis quantities of non-renewable fuels for purposes
of renewable energy credit (REC) creation at no more than 2%
of the total quantity of fuel used, but authorizes the
California Energy Commission (CEC) to increase the limit up to
10% for a specific facility based on demonstration that higher
non-renewable fuel use will permit the facility to increase
its utilization of renewable fuel and reduce the variability
of its electrical output.
FISCAL EFFECT
1)First-year special fund costs to the CEC of $110,000 for one
position related to the de minimis standard for each renewable
technology, and absorbable costs thereafter.
2)Minor absorbable costs to the PUC.
COMMENTS
1)Purpose . According to the author, this bill is intended to
smooth a couple of small issues that could have big impacts on
the renewable development community and on the achievement of
AB 1954
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our long-term goals. "As we move toward California's current
renewable energy goals and pursue a higher standard, it has
become clear that there are limitations to the statutory
authority to accommodate new and improved technologies, and
the current tight credit market, which, in turn, affects
financing of these projects."
2)Transmission Siting . The investor-owned utilities are
responsible for building and owning transmission lines. Prior
to building any needed transmission, the PUC must issue a
certificate of public convenience and necessity (CPCN), which
can take three or four years, and the transmission owner must
request cost-recovery for the transmission line from the
Federal Energy Regulatory Commission (FERC).
Although current law allows the PUC to allow recovery of
construction costs in retail rates, the transmission owner
must first seek recovery from the FERC, and FERC must have
denied the request for cost recovery. Until either the PUC
issues the CPCN, or FERC determines the costs are recoverable
in federal transmission rates, renewable energy developers are
presumed responsible for financing the substantial cost of new
or upgraded transmission. This uncertainty likely will
increase the developers' cost of capital, resulting in higher
costs for the resulting electricity, which is then passed on
to ratepayers. This bill allows the PUC to assure cost
recovery administratively through an advice letter process
prior to construction of the transmission line.
3)Renewable Energy Credits (RECs) . A REC represents the
renewable attributes of renewable generation. If a REC remains
bundled with the associated energy, the utility buys the
renewable electricity and uses the RECs to meet its RPS
obligation and uses the associated electricity to meet its own
load. RECs can also be traded as a separate asset from the
underlying electricity (tradable RECs or tRECs). In this
case, a retail seller purchases the tREC and applies it toward
its RPS obligation and another retail seller purchases the
associated electricity to meet its own load. The second retail
seller cannot count that electricity toward its own RPS
obligations.
Current law authorizes the CEC to determine a de minimis
quantity of fossil fuel that renewable energy generation can
utilize and still qualify their output as renewable energy.
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Small quantities of fossil fuel are used by different
technologies to improve reliability and operations, as well as
to increase the efficiency of their conversion of renewable
fuels into electrical energy. The CEC has determined the de
minimis quantity needed to stabilize a biomass plant and uses
that quantity as its baseline for all renewable technologies.
This baseline, however, may not be applicable to the quantity
needed to stabilize other renewable technologies such as
solar, wind, or geothermal. AB 1954 requires the CEC to limit
the de minimis quantity for any renewable technology to 2% of
the total quantity of fuel use, but also allows the commission
to set that level up to 10% if such an increase can be
demonstrated to significantly increase the efficiency of a
renewable facility.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081