BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2037
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          Date of Hearing:   April 5, 2010

                               Steven Bradford, Chair
            AB 2037 (V. Manuel Perez) - As Introduced:  February 17, 2010
          SUBJECT  :   Electricity: air pollution.

           SUMMARY  :   Prohibits utilities from entering into a long-term  
          financial commitment with a new electric generating facility  
          that is not sited by the California Energy Commission (CEC),  
          does not meet best available technology standards, and will  
          cause air pollution in an in-state air basin.  Specifically,  
           this bill  :

          1)Prohibits a load-serving entity or local publicly owned  
            electric utility from entering into, and prohibits the  
            California Public Utilities Commission (CPUC) from approving,  
            a long-term financial commitment with or for a new electrical  
            generating facility that meets all of the following criteria:

             a)   The new electrical generating facility is to be or was  
               constructed without receiving certification from the CEC.

             b)   The facility is to be or was constructed without meeting  
               California air pollution regulations including best  
               available control technology (BACT) and any offsets  
               required to mitigate additional pollution.

             c)   The facility will cause or contribute to nonattainment  
               with state or federal ambient air quality standards due to  
               emissions of air pollution within, or transported to, an  
               air basin within this state.

          2)Requires the local air pollution control district or air  
            quality management district with jurisdiction over the air  
            basin to make the determination on whether the facility meets  
            the criteria.

           EXISTING LAW  

          1)Requires the state Air Resources Board (ARB) to adopt and  
            enforce state ambient air standards for the control and  
            reduction of air pollution, and to enforce federal ambient air  
            standards for reduction of air pollution.


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          2)Requires air districts to adopt and implement local and  
            regional programs to reduce air pollution and to achieve state  
            and federal ambient air standards.

          3)Prohibits the CPUC from approving a long-term financial  
            commitment by an electrical corporation, unless any baseload  
            generation supplied under the long-term commitment complies  
            with the CEC's greenhouse gas emission performance standards. 

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :  According to the author, the purpose of this bill is  
          to deter the building of powerplants that do not comply with  
          California's air pollution standards, when the powerplant shares  
          an air basin with Californians.  Mexico has more lenient  
          building and air-emission standards than California.  There is  
          concern that California's growing demand for electricity will  
          encourage more powerplants to be built in Mexico, where the  
          regulations are less stringent. 

          Some power plants located in Mexico reside in the same air basin  
          as California's border region. As a result, the adverse air  
          emissions generated from the Mexico-based power plants affect  
          California residents.  By disallowing a California utility from  
          engaging in a long-term contract with dirty-burning power  
          plants, it might provide an incentive for any new powerplants on  
          the Mexico side of the border to comply with California's BACT  
          and air pollution control standards.  

          1)   Background  :  Three electricity generation facilities are  
          located near Mexicali, about 3 miles south of the international  
          border and about 12 miles southwest of Calexico, California.   
          The Termoelectrica de Mexicali plant, owned by Sempra Energy, is  
          a 500-megawatt (MW) facility that produces electricity for  
          export into the U.S.   InterGen owns and operates the La Rosita  
          750 MW plant and Energia de Baja California, which are located  
          on a common site and referred to as the InterGen Complex.  Half  
          of the electricity from the InterGen Complex is generated for  
          use within Mexico and the remaining half is produced for export  
          into the U.S.  InterGen contracted with the Mexican utility to  
          produce electricity for Mexico for a guaranteed fixed price for  
          25 years.  The InterGen Complex producing this power meets  
          Mexican, but not California, clean air requirements. 


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          InterGen's Complex emits about 1,900 tons of nitrous oxide  
          annually, but the Sempra plant in Mexicali produces only 190  
          tons annually.  InterGen counters that its bid on a contract to  
          supply power to Mexico was based on the requirement that bidders  
          must comply with Mexican air regulations, and now that the  
          contract has been awarded, no changes are allowed to the  
          contract except as specifically provided in the contract.  Thus,  
          the company claims that it would be difficult to shut down its  
          operation to install BACT, and it would be cost prohibitive  
          given the circumstances under which the contract was bid.   
          InterGen further contends that its Mexicali plant is one of the  
          cleanest in Mexico and is cleaner than more than 50% of the  
          plants currently operating in the U.S. and California.  As such,  
          this bill does not apply to existing power plants and only to  
          new plants constructed after January 1, 2011, or plants that add  
          incremental capacity after January 1, 2011.  

          2)   The CEC siting process:   Current law requires the CEC to  
          certify sufficient sites and related facilities for the  
          construction and operation of thermal powerplants of 50 MW and  
          larger.  Most renewable power plants, such as solar  
          photovoltaic, wind, and biomass, are certified by the local  
          agency, not the CEC.  This bill might inadvertently disallow a  
          utility to engage in a long-term contract with a renewable  
          energy facility.  

          The author has worked with the utilities and interested parties  
          and has agreed to clarify that these provisions will not apply  
          to contracts with certain renewable energy generation  
          facilities; however, they have not ironed out final language  
          3)    The North American Free Trade Agreement (NAFTA)  :  NAFTA is  
          a regional agreement to implement a free trade area between the  
          U.S., Canada, and Mexico to: eliminate barriers to trade and  
          facilitate the cross-border movement of goods and services,  
          promote conditions of fair competition in the free trade area,  
          and substantially increase investment opportunities in the  
          territories of the parties.  

          The NAFTA provisions that address energy regulatory measures may  
          pre-empt the state's ability to impose trade restrictions.   
          NAFTA requires that "Each party shall seek to ensure that in the  
          application of any energy regulatory measure, energy regulatory  


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          bodies within its territory avoid disruption of contractual  
          relationships to the maximum extent practicable, and provide for  
          orderly and equitable implementation appropriate to such  
          measures."  It is unclear whether this bill will challenge NAFTA  

          AB 1305 (V. Manuel Perez) requires any person importing  
          electricity from a power plant generation unit located in  
          Mexico, within 100 kilometers of the U.S. border, that is  
          constructed after January 1, 2010, and that does not meet  
          California air pollution standards, to pay to the ARB a  
          mitigation fee of $0.001 per kilowatt hour of imported  
          electricity, not to exceed the amount ARB determines necessary  
          to mitigate the environmental or health impacts of the power  
          plant and any associated administrative costs.  AB 1305 was not  
          heard and died in this committee.  


          American Lung Association in California
          Breathe California
          California Air Pollution Control Officers Association (CAPCOA)
          San Diego Gas & Electric (SDG&E) (if amended)
          Sempra Energy (if amended)
          Union of Concerned Scientist

          California Municipal Utilities Association (CMUA) (unless  
          Southern California Edison (SCE)
          Analysis Prepared by  :    Gina Adams / U. & C. / (916) 319-2083