BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2037
                                                                  Page  1

          Date of Hearing:   April 28, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

               AB 2037 (V. Manuel Perez) - As Amended:  April 13, 2010 

          Policy Committee:                              Utilities and  
          Commerce     Vote:                            10-4

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              Yes

           SUMMARY  

          This bill prohibits an electric utility from entering into a  
          long-term financial commitment with a new electricity generating  
          facility unless the facility meets certain air quality-related  
          standards.  Specifically, this bill:

          1)Prohibits an electric utility from entering into, and  
            prohibits the Public Utilities Commission (PUC) from  
            approving, a long-term financial commitment with a new  
            electricity generating facility, located within or without  
            California, unless:

             a)   In the case of a California-based facility, the facility  
               either (i) meets the best available control technology  
               (BACT) standards for air pollution control that applied at  
               the time construction began in the air basin in which the  
               facility was constructed, or (ii) obtained offsets for any  
               pollutant in nonattainment of federal standards of the air  
               basin.

             b)   In the case of a facility located outside California,  
               the facility either (i) meets BACT standards for air  
               pollution control that applied at the time construction  
               began in the air basin in California adjacent to the  
               facility, or (ii) obtained offsets for any pollutant in  
               nonattainment of federal standards in the air basin in  
               California adjacent to the facility.

          2)Defines a "new electricity generating facility" as a unit,  
            including an addition to an existing facility, constructed  
            after January 1, 2011.








                                                                  AB 2037
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          3)Requires the PUC, the California Energy Commission (CEC), the  
            Air Resources Board (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  

          1)Minor ongoing costs to PUC, in the range tens of thousands of  
            dollars, to review proposed long-term financial commitments  
            between public utilities and generating facilities to ensure  
            compliance with BACT standards or possession of sufficient  
            offsets.  Actual costs will depend upon the number of  
            facilities proposed to be built that fall under PUC  
            jurisdiction and that require additional review, a number  
            likely to be very small. In any case, PUC already reviews  
            proposed contracts between public utilities and generating  
            facilities, so any additional workload should be minor.

          2)Minor, absorbable costs to PUC, CEC and ARB to explore with  
            federal agencies and other governments methods to encourage  
            recognition of offsets in a shared pollution area.

           COMMENTS  

           1)Rationale  .  The author notes that growing demand for  
            electricity in California might lead to increased electricity  
            generation in Mexico, where electricity generating facilities  
            are not required to meet California's stringent air quality  
            standards.  The author is concerned that air pollution  
            emissions from such-out-of-state facilities, which oftentimes  
            sit in air basins that span across political boundaries, will  
            lead to the deterioration of air quality, especially in the  
            Imperial Valley, an area already suffering from poor air  
            quality.  The author contends this bill will protect  
            California's air quality by better ensuring that electricity  
            generating facilities operating in air basins shared by  
            California, including those facilities operating outside of  
            California, meet the state's air pollution control standards.

           2)Background  .  

              a)   The Overlapping Interconnects of Electricity and Air  .    
                The electricity grid interconnects California and Baja  








                                                                  AB 2037
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               California to facilitate the availability of electricity  
               between the two areas.  There are a number of electricity  
               generation facilities located near Mexicali, about 3 miles  
               south of the international border and about 12 miles  
               southwest of Calexico, California, that supply electricity  
               to California.  

               While some power plants operating in Mexico meet California  
               clean air standards, others do not.  Nor are they required  
               to do so.  As California's electrical demand grows, some  
               fear more power plants may be built in Mexico to supply  
               electricity to California.  Because air basins, such as  
               that encompassing Imperial County on the state's  
               southeastern edge, do not coincide with political borders,  
               air pollution produced anywhere within the basin may spread  
               throughout the basin.  Californians, therefore, have an  
               interest in ensuring electricity generating facilities  
               operating near the state's borders, such as plant operating  
               in Mexico, meet California's air quality standards.  

              b)   The California Public Utilities Commission  . The CPUC is  
               responsible for the regulation of privately owned "public  
               utilities"-oftentimes referred to as "investor-owned  
               utilities" or "IOUs"-such as gas or electric corporations.  
               The CPUC's primary objective is to ensure adequate  
               facilities and services for the public at equitable and  
               reasonable rates.  The rates that IOUs can charge their  
               customers are determined by the PUC. In addition, PUC  
               regulates how IOUs provide electricity service to their  
               customers.  As part of this work, PUC review proposed  
               electricity contracts between IOUs and electricity  
               generators.

           3)Support  .  This bill is supported by numerous public health,  
            air quality control and environmental organizations, Sempra  
            Energy and San Diego Gas and Power, and the County of  
            Imperial, which is one of the bill's sponsors.

           4)There is no opposition to this bill on file.  

           Analysis Prepared by  :    Jay Dickenson / APPR. / (916) 319-2081