BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2037
                                                                  Page  1

          Date of Hearing:  April 19, 2010

                                Wesley Chesbro, Chair
               AB 2037 (V. Manuel Perez) - As Amended:  April 13, 2010
          SUBJECT  :  Electricity:  air pollution.

           SUMMARY  :  Prohibits an electrical utility from entering into a  
          long-term financial commitment with a new (constructed after  
          January 1, 2011) power plant if it does not meet specified air  
          pollution standards.  

           EXISTING LAW  :

          1)Prohibits the approval of utility long-term financial  
            commitments (contracts or ownership) unless the power plant  
            meets a greenhouse gases (GHG) emission performance standard

          2)Requires the California Energy Commission (CEC), in  
            consultation with PUC and the Air Resources Board (ARB), to  
            establish a GHG emission performance standard for all baseload  
            power plants.

          3)Requires 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.

          4)Requires air districts to adopt and implement local and  
            regional programs to reduce air pollution and to achieve state  
            and federal ambient air standards.  These responsibilities  
            include the adoption and enforcement of requirements for new  
            and modified power plants to ensure that emissions from such  
            facilities are mitigated and are in compliance with federal  
            and state law and regulations.  Air district standards may  
            include requiring power plants to install "best available  
            control technology" (BACT) to control emissions and to obtain  
            emission reduction credits, or "offsets," to mitigate  

           THIS BILL  :

          1)Requires that newly constructed operating electrical  
            generation facilities, within or outside of California, that  
            enter into a long-term financial commitment with a California  


                                                                  AB 2037
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            utility, must be constructed to meet BACT requirements.

          2)Requires that offsets to mitigate air pollution from an  
            operating electrical generation facility, within or outside of  
            California, that has entered into a long-term financial  
            commitment with a California utility, must be obtained for air  
            pollutants within a shared pollution area in California.   
            Offsets for air pollution that is above the federal ambient  
            limit do not have to be acquired if the emissions are fully  
            mitigated by other measures.

          3)Requires the PUC, CEC, ARB and air districts, in conjunction  
            with federal agencies and other governments, to encourage  
            recognition of all achievable offsets within a "shared air  
            pollution area" as defined.

           FISCAL EFFECT  :  Unknown

           COMMENTS  :  

          The addition of new power plants within the interconnected  
          electrical grid, but outside California, can contribute to air  
          pollution in California air basins.  This phenomenon is more  
          significant when power plants do not comply with California's  
          air pollution standards.  The electric grid is interconnected  
          between California and Baja California to facilitate the  
          availability of electricity between the two areas.  There is  
          concern that if California's electrical demand grows, more power  
          plants may be built in Mexico in response.  Power plants built  
          in Mexico are not required to meet BACT requirements, and are  
          not required to offset new their emissions.  At least two new  
          power plants have been built near Mexicali in recent years and  
          deliver some of their electricity across the border to  
          California utilities.  Imperial County, immediately north of  
          these plants, is classified as a moderate non-attainment area  
          and is the recipient of transported pollution from these plants.

          If California electric utilities are limited to incorporating  
          electric generating facilities that are subject to BACT  
          requirements, air pollution within shared pollution areas may be  
          alleviated.  According to the author, unless emissions within a  
          "shared pollution area" are fully mitigated by other measures,  
          offsets to mitigate air pollution from an operating electrical  
          generation facility, within or outside of California that has  
          entered into a long-term financial commitment with a California  


                                                                  AB 2037
                                                                  Page  3

          utility, must be obtained for air pollutants within a shared  
          pollution area in California.  Offsets for a shared pollution  
          area are finite, and will be depleted according to emissions  
          that are generated in a shared pollution area regardless of  
          their location.

          Air pollution is harmful to human health which may have  
          significant impacts on California's economy.  A recent RAND  
          study estimated that the failure of some California local air  
          management districts to meet federal and state air quality  
          standards resulted in over $193 million in hospital-based  
          medical care from 2005 to 2007 due to air-quality related  
          problems such as asthma and pneumonia.  The majority of the  
          medical cases included in the study were paid for by either  
          Medicaid or Medicare.  The study indicates that these cost  
          estimates to the state may be conservative, since they only  
          included medical cases in which a patient suffering from air  
          quality related symptoms was treated in an emergency room and  
          then admitted within an area not in compliance with state and  
          federal air quality standards at that point in time, and did not  
          include medical cases in which a patient was released after  
          treatment in an ER, went to see a doctor for a single doctor's  
          appointment, or stayed at home from work as a result of  
          respiratory symptoms.  This bill attempts to identify any and  
          all sources of potential causes of non-compliance of GHG  
          emission and air quality standards which may reduce the number  
          of air pollution related medical cases.

          The North America Free Trade Agreement (NAFTA) allows free trade  
          area between the U.S., Canada, and Mexico to facilitate trade  
          and the cross-border movement of resources and services and to  
          increase investment opportunities in the territories of the  
          parties.  NAFTA provisions address energy regulatory measures by  
          stating that each party shall seek to ensure that in the  
          application of any energy regulatory measure, energy regulatory  
          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."  While this passage suggests that California, and  
          U.S., policy should not "disrupt" energy exchange within the  
          NAFTA members, it does provide a "practicable" clause.  In this  
          case, the failure of California to meet federal and state  
          ambient air quality standards and the ARB's jurisdiction in this  
          regard may allow California to implement restrictions in order  
          to meet its state and federal requirements.  


                                                                  AB 2037
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          American Lung Association
          Breathe California
          California Air Pollution Control Officers Association (CAPCOA)
          California Rural Legal Assistance Foundation 
          County of Imperial (Co-Sponsors)
          Comite Civico (Co-Sponsors)
          Economic Research Institute - Imperial Valley / CEESEM
          Imperial Irrigation District 
          Imperial Valley Clean Air Initiative
          The Institute for Socio-Economic Justice and Progressive  
          Community Development, Inc.
          San Joaquin Valley Latino Environmental Advancement Project 
          Seeley Citizens United
          The Sierra Club
          South Coast Air Quality Management District 
          Union of Concerned Scientists

          None on file

          Analysis Prepared by  :  Jessica Westbrook / NAT. RES. / (916)