BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 1954|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 1954
Author: Skinner (D) and V. Manuel Perez (D)
Amended: 8/4/10 in Senate
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 9-0, 6/29/10
AYES: Padilla, Dutton, Corbett, Florez, Kehoe, Lowenthal,
DeSaulnier, Simitian, Strickland
NO VOTE RECORDED: Cox, Wright
SENATE APPROPRIATIONS COMMITTEE : 9-0, 08/02/10
AYES: Kehoe, Alquist, Ashburn, Corbett, Emmerson, Price,
Wolk, Wyland, Yee
ASSEMBLY FLOOR : 76-0, 5/13/10 (Consent) - See last page
for vote
SUBJECT : Electrical transmission: renewable energy
resources
SOURCE : BrightSource Energy
Large Scale Solar Association
DIGEST : This bill authorizes the Public Utilities
Commission to approve in advance the recovery through
electricity rates of the costs of a transmission proposed
to meet the state's Renewable Portfolio Standard goals. The
bill sets the "de minimus" amount of non-renewable energy
that may be used by a renewable energy facility at two
percent, and authorizes the Energy Commission to adjust
CONTINUED
AB 1954
Page
2
that level up to five percent on a case by case basis.
This bill becomes operative if SB 722 (Simitian) is
enacted.
ANALYSIS : 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 authorizes the Public Utilities Commission to
approve an advice letter from an investor owned utility
seeking pre-approval of cost recovery through electricity
rates for a transmission project that will facilitate
achievement of the Renewable Portfolio Standard. The bill
provides that ultimate rate recovery is still subject to
review by the Public Utilities Commission to ensure that
the utility incurred the costs reasonably and prudently.
This bill directs the Energy Commission to set the "de
minimus" amount of non-renewable energy that may be
included with renewable energy at no more than two percent
of total fuel use. The bill also authorizes the Energy
Commission to allow up to five percent to come from
AB 1954
Page
3
non-renewable fuels, on a case-by-case basis, if the Energy
Commission finds that the additional use of non-renewable
fuels will lead to an increase in overall renewable energy
generation and reduce variability in generation. It also
specifies that in order to qualify for more than two
percent non-renewable fuel use, the non-renewable fuel must
come from either natural gas or hydrogen derived by
reformation of a fossil fuel.
This bill will only become operative if SB 722 (Simitian)
is enacted. SB 722 increases the state's Renewable
Portfolio Standard to 33 percent by 2020 and makes several
other changes to the program. SB 722 is in the Assembly
Appropriations Committee.
Background
Renewable Facilities Using Multiple Fuels . The CEC is
responsible for certifying all eligible renewable resources
and tracking the procurement of such resources to ensure
compliance with the RPS. In general, a facility is
eligible if it uses an eligible renewable resource or fuel,
satisfies resource-specific criteria, and is either located
within the state, or satisfies applicable requirements for
out-of-state facilities.
The CEC can allow RPS-eligibility for renewable facilities
that use fossil fuels to generate electricity if the annual
fossil fuel use at the facility does not exceed a de
minimus amount which the CEC has defined as two percent of
all fuels used, and measured on an annual total energy
input basis. For example a solar thermal facility might
use a natural gas turbine to maintain fluids at a higher
temperature when the sun isn't shining to reduce the time
to ramp-up the solar thermal facility when the sun is
shining because less sun time would be required to heat the
fluids that run the turbines. As long as the natural gas
turbine does not comprise more than two percent of the
electricity production at the facility, electricity
produced by the gas turbine and the renewable resource
would both be considered RPS eligible delivered
electricity.
Transmission Cost Recovery . The FERC generally sets and
AB 1954
Page
4
approves rates for transmission and recovery by
transmission developers. Traditionally generation
developers fund the costs of transmission to sell their
energy to the market as part of their development and
construction costs. Once a generation project comes on
line those costs are recouped in the form of rates and the
generation/transmission developer is paid back over time.
This historic process has created problems in financing
transmission lines that are primarily needed for new
renewable generation development. A number of factors make
it difficult for the generation developer to provide the
upfront financing for the transmission lines. Instead the
electric utility in some instances will pay the upfront
costs, but the utility does not want to be responsible for
those costs, which require FERC approval for recovery, if
the generation never comes on line.
The Legislature addressed this issue by allowing backstop
cost recovery to resolve the "chicken and egg" problem
presented by renewable transmission projects by allowing
the CPUC to guarantee that a utility that constructs a
renewable transmission project can obtain recovery in
retail rates where FERC does not permit wholesale rate
recovery.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
The Public Utilities Commission indicates that the costs to
review advice letters under the bill can be absorbed within
existing resources dedicated to transmission planning and
rate design. Staff does not anticipate any significant
costs to rate payers under the bill, as the Public
Utilities Commission is only authorized to pre-approve
costs recovery for projects designed to meet the existing
Renewable Portfolio Standard requirements in law.
The Energy Commission indicates that it will need one
additional position to review existing renewable generation
facilities to ensure that they comply with the new "de
minimus" standard. (Some facilities may have been
authorized a higher level of fossil fuel use.) The
additional position will also be responsibly for
establishing criteria to determine whether additional
AB 1954
Page
5
non-renewable fuel use will lead to additional renewable
energy and reduce variability.
SUPPORT : (Verified 8/4/10)
BrightSource Energy (co-source)
Large Scale Solar Association (co-source)
Union of Concerned Scientists
ARGUMENTS IN SUPPORT : BrightSource Energy believes that
this bill is an important bill, which will eliminate a
major barrier to renewable energy development in
California, reduce unnecessary and expensive burdens on
renewable developers, such as BrightSource Energy, and save
rate payers from unnecessary costs and by correcting the
timing of regulatory decision on financing renewable energy
transmission projects as proposed in the amended 399.2.5
Section of the Public Utilities Code. Additionally, with
respect to natural gas usage, the California Energy
Commission has determined the de minimus gas quantity based
on a single technology, biomass combustion, using the
amount of fossil fuel needed to stabilized flames in those
plants. This quantity has no relationship to the quantity
of fossil fuel that other technologies could use to
increase their reliability and make renewable energy
projects more efficient, thus furthering the aims of
California's renewable portfolio standard. This bill
resolves this problem.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Bradford, Brownley, Buchanan, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,
Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,
Huber, Huffman, Jeffries, Jones, Knight, Lieu, Logue,
Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava,
Nestande, Niello, Nielsen, V. Manuel Perez, Portantino,
Ruskin, Salas, Saldana, Silva, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
AB 1954
Page
6
Villines, Yamada, John A. Perez
NO VOTE RECORDED: Caballero, Norby, Skinner, Vacancy
DLW:do 8/4/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****