BILL ANALYSIS                                                                                                                                                                                                    


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                                 THIRD READING

          Bill No:  AB 2037
          Author:   V. Manuel Perez (D) and Salas (D)
          Amended:  7/15/10 in Senate
          Vote:     21

           SENATE ENERGY, U.&C. COMMITTEE  :  7-2, 6/15/10
          AYES:  Padilla, Corbett, Florez, Kehoe, Lowenthal,  
            Simitian, Wright
          NOES:  Dutton, Strickland
          NO VOTE RECORDED:  Cox, Oropeza

           SENATE ENV. QUALITY COMMITTEE  :  5-2, 6/28/10
          AYES:  Simitian, Corbett, Hancock, Lowenthal, Pavley
          NOES:  Runner, Strickland

           SENATE APPROPRIATIONS COMMITTEE :  Senate Rule 28.8
          ASSEMBLY FLOOR  :  44-26, 5/10/10 - See last page for vote

           SUBJECT  :    Electricity:  air pollution

           SOURCE  :     County of Imperial 

           DIGEST  :    This bill prohibits a load-serving entity or  
          local publicly-owned electric utility from entering into,  
          and prohibits the Public Utilities Commission from  
          approving for an electrical corporation, a long-term  
          financial commitment with or for a new electrical  
          generation facility constructed in California, or in a  
          shared pollution area, as defined, that does not meet  


                                                               AB 2037

          specified air pollution criteria.

           ANALYSIS  :    

          Existing law: 

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

          2. Prohibits the Public Utilities Commission (PUC) from  
             approving a long-term financial commitment by an  
             electrical corporation, unless any baseload generation  
             supplied under the long-term commitment complies with  
             the California Energy Commission's greenhouse gas  
             emission performance standards. 

          This bill prohibits a load-serving entity or local publicly  
          owned electric utility from entering into, and prohibits  
          the PUC from approving, a long-term financial commitment  
          with or for a new electrical generating facility  
          constructed in California or in a shared pollution area if  
          that facility does not meet the following criteria: 

          1. If the new electrical generating facility is in  
             California, the facility meets best available control  
             technology (BACT) standards, to control air pollution  
             emissions from the operation of the facility, and  
             complies with air pollution control district or air  
             quality management district rules and regulations, and  
             state and federal law.

          2. If the new electrical generating facility is outside of  
             California in a shared pollution area, the facility  
             meets BACT standards, to control air pollution emissions  
             from the operation of the facility, that apply in the  
             air basin in California adjacent to the facility. 
          This bill also defines "new electrical generating facility"  
          as an electrical generating unit for which all legally  
          required permits have been received after January 1, 2011.   
          If an electrical generating unit is added to an existing  
          powerplant after January 1, 2011, only the incremental  
          capacity from that unit added after January 1, 2011,  is a  



                                                               AB 2037

          new electrical generating facility.  Lastly, this bill  
          defines "shared pollution area" as an airshed encompassing  
          a portion of California and a portion of an adjacent state  
          or country, ad determined by the United States  
          Environmental Protection Agency.


          According to the author's office, 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  

          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. 

          Three electricity generation facilities are located near  
          Mexicali, about three 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 United States.   
          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 United States.  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,  



                                                               AB 2037

          clean air requirements. 

          InterGen's Complex emits approximately 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 percent  
          of the plants currently operating in the United States 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. 


          According to the Imperial County board of supervisors, in  
          supporting AB 2037, "The [USEPA] holds this region  
          responsible for the quality of our air, yet they have not  
          given us any tools to deal with American companies who  
          build facilities just south of the border in an effort to  
          escape our more stringent standards.  With this proposed  
          law in place, it would be difficult for new power plants to  
          be built with the intent to export power into California  
          unless they are constructed to meet all California  
          standards, including the procurement of offsets."

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT :   (Verified  8/4/10)

          County of Imperial (source)
          American Lung Association
          Breathe California
          California Air Pollution Control Officers Association 
          California Rural Legal Assistance Foundation 



                                                               AB 2037

          Imperial Irrigation District 
          Sierra Club
          South Coast Air Quality Management District
          Southern California Public Power Authority  
          Union of Concerned Scientists 
           ASSEMBLY FLOOR  : 
          AYES:  Ammiano, Arambula, Bass, Beall, Block, Blumenfield,  
            Bradford, Brownley, Buchanan, Charles Calderon, Carter,  
            Chesbro, Coto, Davis, De Leon, Eng, Evans, Feuer, Fong,  
            Fuentes, Furutani, Galgiani, Hall, Hayashi, Hernandez,  
            Hill, Huber, Huffman, Jones, Lieu, Bonnie Lowenthal, Ma,  
            Monning, Nava, V. Manuel Perez, Portantino, Ruskin,  
            Salas, Skinner, Swanson, Torres, Torrico, Yamada, John A.  
          NOES:  Adams, Anderson, Bill Berryhill, Tom Berryhill,  
            Blakeslee, Conway, Cook, Emmerson, Fletcher, Fuller,  
            Gaines, Garrick, Gilmore, Hagman, Jeffries, Knight,  
            Logue, Miller, Nestande, Niello, Nielsen, Silva, Smyth,  
            Audra Strickland, Tran, Villines
          NO VOTE RECORDED:  Caballero, De La Torre, DeVore, Harkey,  
            Mendoza, Norby, Saldana, Solorio, Torlakson, Vacancy

          DLW:mw  8/4/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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