BILL NUMBER: SB 14	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  AUGUST 18, 2009
	AMENDED IN ASSEMBLY  JULY 14, 2009
	AMENDED IN ASSEMBLY  JUNE 23, 2009
	AMENDED IN SENATE  MARCH 24, 2009
	AMENDED IN SENATE  MARCH 12, 2009
	AMENDED IN SENATE  FEBRUARY 17, 2009
	AMENDED IN SENATE  JANUARY 29, 2009

INTRODUCED BY   Senators Simitian, Kehoe, Padilla, and Steinberg
   (Coauthors: Senators Alquist, DeSaulnier, Leno, Lowenthal, Romero,
Strickland, and Wiggins)

                        DECEMBER 1, 2008

   An act to add Section 705 to the Fish and Game Code, to amend
Sections 25740, 25740.5, 25741, 25742, 25746, 25747, and 25751 of
 , and to add Section 25500.1 to,  the Public Resources
Code, and to amend Sections 399.2.5, 399.11, 399.12, 399.17, and
454.5 of, to amend and renumber Section 399.16 of, to amend,
renumber, and add Section 399.13 of, to add Sections 399.18, 
399.22,  399.26, 399.30, 399.31,  911, 
and 1005.1 to, to add Article 11 (commencing with Section 910) to
Chapter 4 of Part 1 of Division 1 of, to repeal Section 387 of, and
to repeal and add Sections 399.14 and 399.15 of, the Public Utilities
Code, relating to energy, and making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 14, as amended, Simitian. Utilities: renewable energy
resources.
   (1) Under existing law, the Public Utilities Commission (PUC) has
regulatory authority over public utilities, including electrical
corporations, as defined. Existing law requires the PUC to require
the state's 3 largest electrical corporations, Pacific Gas and
Electric Company, San Diego Gas and Electric, and Southern California
Edison, to identify a separate electrical rate component to fund
programs that enhance system reliability and provide in-state
benefits. This rate component is a nonbypassable element of local
distribution and collected on the basis of usage. Existing PUC
resolutions refer to the nonbypassable rate component as a "public
goods charge." The public goods charge moneys are collected to
support cost-effective energy efficiency and conservation activities,
public interest research and development not adequately provided by
competitive and regulated markets, and renewable energy resources.
   The existing Warren-Alquist State Energy Resources Conservation
and Development Act establishes the State Energy Resources
Conservation and Development Commission (Energy Commission). Existing
law establishes the Renewable Resource Trust Fund as a fund that is
continuously appropriated, with certain exceptions for administrative
expenses, in the State Treasury and requires that certain moneys
collected to support renewable energy resources through the public
goods charge are deposited into the fund and authorizes the Energy
Commission to expend the moneys pursuant to the Renewable Energy
Resources Program. The program states the intent of the Legislature
to increase the amount of electricity generated from eligible
renewable energy resources per year so that amount equals at least
20% of total retail sales of electricity in California per year by
December 31, 2010.
   This bill would revise the Renewable Energy Resources Program to
state the intent of the Legislature to increase the amount of
electricity generated from eligible renewable energy resources per
year, so that amount equals at least 33% of total retail sales of
electricity in California per year by December 31, 2020. The bill
would revise certain eligibility criteria for an instate renewable
electricity generation facility pursuant to the program.
   (2) Existing law expresses the intent of the Legislature, in
establishing the California Renewables Portfolio Standard Program
(RPS program), to increase the amount of electricity generated per
year from eligible renewable energy resources, as defined, to an
amount that equals at least 20% of the total electricity sold to
retail customers in California per year by December 31, 2010.
   This bill would express the intent that the amount of electricity
generated per year from eligible renewable energy resources is
increased to an amount that equals at least 20% of the total
electricity sold to retail customers in California per year by
December 31, 2012, and 33% by December 31, 2020.
   (3) The Public Utilities Act imposes various duties and
responsibilities on the PUC with respect to the purchase of
electricity and requires the PUC to review and adopt a procurement
plan and a renewable energy procurement plan for each electrical
corporation, as defined, pursuant to the RPS program. The RPS program
requires that a retail seller of electricity, including electrical
corporations, community choice aggregators, and electric service
providers, but not including local publicly owned electric utilities,
purchase a specified minimum percentage of electricity generated by
eligible renewable energy resources in any given year as a specified
percentage of total kilowatthours sold to retail end-use customers
each calendar year. The RPS program requires the PUC to implement
annual procurement targets for each retail seller to increase its
total procurement of electricity generated by eligible renewable
energy resources by at least an additional 1% of retail sales per
year so that 20% of its retail sales of electricity are procured from
eligible renewable energy resources no later than December 31, 2010.
Existing law requires the PUC to make a determination of the
existing market cost for electricity, which PUC decisions call the
market price referent, and to limit an electrical corporation's
obligation to procure electricity from eligible renewable energy
resources, that exceeds the market price referent, to an amount
collected through the renewable energy public goods charge.
   This bill would instead require the PUC to require that a retail
seller procure the following percentages of electricity from eligible
renewable energy resources by the following dates: (A) 20% by
December 31, 2012; (B) 23% by December 31, 2014; (C) 26% by December
31, 2016; (D) 30% by December 31, 2018; and (E) 33% by December 31,
2020. The bill would authorize the PUC to permit a retail seller to
delay compliance with (A), (B), (C), and (D) procurement levels when
specified circumstances are present, but would not authorize the PUC
to permit a retail seller to delay compliance with the (E)
procurement level. The bill would delete the existing market price
referent provisions and instead require the PUC to establish a
methodology to determine the market price of electricity for terms
corresponding to the length of contracts with eligible renewable
energy resources, in consideration of, and reflecting, certain
matters. The bill would require the PUC to establish a limitation on
the annual expenditures made above the market price, by an electrical
corporation, in order to achieve the procurement levels established
by the PUC. The bill would require the PUC to permit an electrical
corporation to limit its procurement of electricity from eligible
renewable energy resources to that quantity that can be procured at
or below the market prices established by the PUC, up to the
limitation. The bill would delete an existing requirement that the
PUC adopt flexible rules for compliance for retail sellers and would
instead require the PUC to adopt rules permitting  retail
sellers   electrical corporations  to apply excess
procurement in one year to subsequent years.
   Under existing law, a violation of the Public Utilities Act or any
order, decision, rule, direction, demand, or requirement of the PUC
is a crime.
   Because the provisions of this bill are within the act and require
action by the PUC to implement its requirements, a violation of
these provisions would impose a state-mandated local program by
expanding the definition of a crime.
   (4) Under existing law, the governing board of a local publicly
owned electric utility is responsible for implementing and enforcing
a renewables portfolio standard for the utility that recognizes the
intent of the Legislature to encourage renewable resources, while
taking into consideration the effect of the standard on rates,
reliability, and financial resources and the goal of environmental
improvement.
   This bill would repeal this provision and instead make certain of
the requirements of the RPS program, as discussed below, applicable
to local publicly owned electric utilities. By placing additional
requirements upon local publicly owned electric utilities, the bill
would impose a state-mandated local program.
   (5) Existing law requires the Energy Commission to certify
eligible renewable energy resources, to design and implement an
accounting system to verify compliance with the RPS requirements by
retail sellers, and to develop tracking, accounting, verification,
and enforcement mechanisms for renewable energy credits, as defined.
   This bill would require the Energy Commission to design and
implement an accounting system to verify compliance with the RPS
requirements by retail sellers and local publicly owned electric
utilities. The bill would require the Energy Commission, among other
things, to adopt regulations specifying procedures for enforcement of
the RPS requirements that include a public process under which the
Energy Commission is authorized to issue a notice of violation and
correction with respect to a local publicly owned electric utility
and for referral to the State Air Resources Board for penalties
imposed pursuant to the California Global Warming Solutions Act of
2006. The bill would require that the RPS established for a local
publicly owned electric utility require it to procure the following
percentages of electricity from eligible renewable energy resources
by the following dates: (A) 20% by December 31, 2012; (B) 23% by
December 31, 2014; (C) 26% by December 31, 2016; (D) 30% by December
31, 2018; and (E) 33% by December 31, 2020. The bill would provide
that the local publicly owned electric utility retains discretion
with respect to certain matters in complying with the RPS, would
require that certain notices be given by the utility when adopting
and periodically revising its procurement plan, and would require the
utility to report certain information relative to RPS compliance to
the Energy Commission and its customers.  The bill would
require the Energy Commission, in order to meet the requirements of
the RPS program, undertake certain measures in order to substantially
increase the amounts of electricity generated by eligible renewable
energy resources integrated with and interconnected to specified
transmission grids. 
   (6) Existing law requires that an electrical corporation's
proposed procurement plan include certain elements, including a
showing that the electrical corporation will, in order to fulfill its
unmet resource needs, until a 20% renewable resources portfolio is
achieved, procure renewable energy resources with the goal of
ensuring that at least an additional 1% per year of the electricity
sold by the electrical corporation is generated from eligible
renewable energy resources, provided sufficient funds are made
available to cover the above-market costs for new renewable energy
resources pursuant to certain provisions of the Renewable Energy
Resources Program.
   This bill would require that an electrical corporation's proposed
procurement plan include a showing that the electrical corporation
will, in order to fulfill its unmet resource needs, procure resources
from eligible renewable energy resources in an amount sufficient to
meet its procurement requirements pursuant to the RPS program.
   (7) Existing law requires the PUC to prepare and submit to the
Governor and the Legislature a written report annually before
February 1 of each year on the costs of programs and activities
conducted by an electrical corporation or gas corporation that have
more than a specified number of customers in California.
   The bill would require the PUC to prepare and submit to the policy
and fiscal committees of the Legislature, annually before February 1
of each year, a report on  (a)   (A)  all
electrical corporation revenue requirement increases associated with
meeting the renewables portfolio standard,  (b) 
 (B)  all cost savings experienced, or costs avoided, by
electrical corporations as a result of meeting the renewables
portfolio standard,  (c)   (C)  all costs
incurred by electrical corporations for incentives for distributed
and renewable generation,  (d)   (D)  all
cost savings experienced, or costs avoided, by electrical
corporations as a result of incentives for distributed generation and
renewable generation,  (e)   (E) 
specified costs for which an electrical corporation is seeking
recovery in rates that are pending determination or approval by the
PUC,  (f)   (F)  the decision number of
each PUC decision in the prior year authorizing an electrical
corporation to recover costs incurred in rates, and  (g)
  (G)  any changes in the prior year in load
serviced by an electrical corporation.
   (8) 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 PUC a certificate that the present or future public
convenience and necessity require or will require that construction,
termed a certificate of public convenience and necessity. Existing
law requires the PUC, 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 PUC finds that new transmission facilities
are necessary to facilitate achievement of the renewable power goals
established under the RPS program. Existing law requires the PUC,
upon finding that new transmission facilities are necessary to
facilitate achievement of the renewable power goals established under
the RPS, to take all feasible actions to ensure that the
transmission rates established by the Federal Energy Regulatory
Commission (FERC) are fully reflected in any retail rates established
by the PUC.
   This bill would require the PUC to issue a decision on an
application for a certificate of public convenience and necessity
within 18 months of the filing of a completed application under
specified circumstances.
   (9) The existing restructuring of the electrical industry within
the Public Utilities Act provides for the establishment of an
Independent System Operator (ISO). Existing law requires the ISO to
ensure efficient use and reliable operation of the transmission grid
consistent with achieving planning and operating reserve criteria no
less stringent than those established by the Western Electricity
Coordinating Council and the American Electric Reliability Council.
Pursuant to existing law, the ISO's tariffs are required to be
approved by the FERC. 
   This bill would require the ISO to undertake all feasible efforts
to do certain things and seek the approval of the FERC, if necessary,
including adjusting its market structure to achieve, in the most
cost-effective manner possible, the increased amount of electricity
to be generated by eligible renewable energy resources. The bill
would require the PUC to approve reasonable and cost-effective
transmission and power line investments that are not under the
ratemaking authority of the FERC that are necessary to enable
electricity generated by eligible renewable energy resources to be
delivered to retail sellers and local publicly owned electric
utilities.  
   This bill would require the ISO and other California balancing
authorities to work cooperatively to integrate and interconnect
eligible renewable energy resources to the transmission grid by the
most efficient means possible with the goal of minimizing the impact
and cost of new transmission facilities needed to meet both
reliability needs and the renewables portfolio standard procurement
requirements, and to accomplish this in a manner that respects the
ownership, business, and dispatch models for transmission facilities
owned by electrical corporations, local publicly owned electric
utilities, joint power agencies, and merchant transmission companies.

   (10) Existing law establishes the Department of Fish and Game in
the Natural Resources Agency, and generally charges the department
with the administration and enforcement of the Fish and Game Code.
   This bill would require the department to establish an internal
division with the primary purpose of performing comprehensive
planning and environmental compliance services with priority given to
projects involving the building of eligible renewable energy
resources.
   (11) Existing law grants the Energy Commission the exclusive
authority to certify any stationary or floating electrical generating
facility using any source of thermal energy, with a generating
capacity of 50 megawatts or more, and any facilities appurtenant
thereto. Existing law prohibits the construction of any thermal
powerplant or facilities appurtenant thereto or modification of any
existing thermal powerplant and appurtenant facility without first
obtaining certification from the Energy Commission. Each person
proposing to construct a thermal powerplant or electric transmission
line on a site is required to submit an application to the Energy
Commission. The Energy Commission is required to prescribe the form
and content of applications for facilities and to formally act to
approve or disapprove applications, including specifying conditions
under which approval and continuing operation of any facility is
permitted.
   This bill would require the Energy Commission to develop a
concurrent application review process with the Department of Fish and
Game for eligible renewable energy resources with the goal of
reducing the time required to complete certification and compliance
with the California Environmental Quality Act for eligible renewable
energy resources that are within a competitive renewable energy zone.

   (12) This bill would appropriate $322,000 from the Public
Utilities Commission Utilities Reimbursement Account to the PUC for
additional staffing to identify, review, and approve transmission
lines reasonably necessary or appropriate to facilitate achievement
of the renewables portfolio standard  and would state the
intent of the Legislature to appropriate additional moneys to the
Energy Commission and Department of Fish and Game for other specified
purposes  .
   (13) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for specified reasons.
   Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 705 is added to the Fish and Game Code, to
read:
   705.  (a) For purposes of this section, "eligible renewable energy
resources" has the same meaning as in the California Renewables
Portfolio Standard Program (Article 16 (commencing with Section
399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public
Utilities Code).
   (b) The department shall establish an internal division with the
primary purpose of performing comprehensive planning and
environmental compliance services with priority given to projects
involving the building of eligible renewable energy resources.
   (c) The internal division shall ensure the timely completion of
plans pursuant to the Natural Community Conservation Planning Act
(Chapter 10 (commencing with Section 2800) of Division 3).
   SEC. 2.    Section 25500.1 is added to the  
Public Resources Code  , to read:  
   25500.1.  Nothing in this chapter affects the applicability of the
Fish and Game Code, including Division 3 (commencing with Section
2000) of the Fish and Game Code, to an eligible renewable energy
resource, as defined in Article 16 (commencing with Section 399.11)
of the Public Utilities Code. 
   SEC. 2.   SEC. 3.   Section 25740 of the
Public Resources Code is amended to read:
   25740.  The Legislature finds and declares that the State Air
Resources Board has identified a statewide 33 percent renewables
portfolio standard as a key measure to comply with the requirements
of the California Global Warming Solutions Act of 2006. It is the
intent of the Legislature in establishing this program, to increase
the amount of electricity generated from eligible renewable energy
resources per year, so that it equals at least 33 percent of total
retail sales of electricity in California per year by December 31,
2020.
   SEC. 3.   SEC. 4.   Section 25740.5 of
the Public Resources Code is amended to read:
   25740.5.  (a) The commission shall optimize public investment and
ensure that the most cost-effective and efficient investments in
renewable energy resources are vigorously pursued.
   (b) The commission's long-term goal shall be a fully competitive
and self-sustaining supply of electricity generated from renewable
sources.
   (c) The program objective shall be to increase, in the near term,
the quantity of California's electricity generated by renewable
electrical generation facilities located in this state, while
protecting system reliability, fostering resource diversity, and
obtaining the greatest environmental benefits for California
residents.
   (d) An additional objective of the program shall be to identify
and support emerging renewable technologies in distributed generation
applications that have the greatest near-term commercial promise and
that merit targeted assistance.
   (e) The Legislature recommends allocations among all of the
following:
   (1) Rebates, buydowns, or equivalent incentives for emerging
renewable technologies.
   (2) Customer education.
   (3) Production incentives for reducing fuel costs, that are
confirmed to the satisfaction of the commission, at solid fuel
biomass energy facilities in order to provide demonstrable
environmental and public benefits, including improved air quality.
   (4) Solar thermal generating resources that enhance the
environmental value or reliability of the electrical system and that
require financial assistance to remain economically viable, as
determined by the commission. The commission may require financial
disclosure from applicants for purposes of this paragraph.
   (5) Specified fuel cell technologies, if the commission makes all
of the following findings:
   (A) The specified technologies have similar or better air
pollutant characteristics than renewable technologies in the report
made pursuant to Section 25748.
   (B) The specified technologies require financial assistance to
become commercially viable by reference to wholesale generation
prices.
   (C) The specified technologies could contribute significantly to
the infrastructure development or other innovation required to meet
the long-term objective of a self-sustaining, competitive supply of
electricity generated from renewable sources.
   (6) Existing wind-generating resources, if the commission finds
that the existing wind-generating resources are a cost-effective
source of reliable energy and environmental benefits compared with
other renewable electrical generation facilities located in this
state, and that the existing wind-generating resources require
financial assistance to remain economically viable. The commission
may require financial disclosure from applicants for the purposes of
this paragraph.
   (f) Notwithstanding any other provision of law, moneys collected
for renewable energy pursuant to Article 15 (commencing with Section
399) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities
Code shall be transferred to the Renewable Resource Trust Fund.
Moneys collected between January 1, 2007, and January 1, 2012, shall
be used for the purposes specified in this chapter.
   SEC. 4.   SEC. 5.   Section 25741 of the
Public Resources Code is amended to read:
   25741.  As used in this chapter, the following terms have the
following meaning:
   (a) "Delivered" and "delivery," have the same meaning as defined
in Section 399.12 of the Public Utilities Code.
   (b) "Procurement entity" means any person or corporation that
enters into an agreement with a retail seller to procure eligible
renewable energy resources pursuant to subdivision (f) of Section
399.14 of the Public Utilities Code.
   (c) "Renewable electrical generation facility" means a facility
that meets all of the following criteria:
   (1) The facility uses biomass, solar thermal, photovoltaic, wind,
geothermal, fuel cells using renewable fuels, small hydroelectric
generation of 30 megawatts or less, digester gas, municipal solid
waste conversion, landfill gas, ocean wave, ocean thermal, or tidal
current, and any additions or enhancements to the facility using that
technology.
   (2) The facility satisfies one of the following requirements:
   (A) The facility is located in the state or near the border of the
state with the first point of connection to the transmission network
within this state and electricity produced by the facility is
delivered to an in-state location.
   (B) The facility has its first point of interconnection to the
transmission network outside the state and satisfies all of the
following requirements:
   (i) It is connected to the transmission network within the Western
Electricity Coordinating Council (WECC) service territory.
   (ii) It commences initial commercial operation after January 1,
2010.
   (iii) It will not cause or contribute to any violation of a
California environmental quality standard or requirement.
   (iv) If the facility is outside of the United States, it is
developed and operated in a manner that is as protective of the
environment as a similar facility located in the state.
   (v) It participates in the accounting system to verify compliance
with the renewables portfolio standard once established by the
commission pursuant to subdivision (b) of Section 399.25 of the
Public Utilities Code.
   (C) The facility meets the requirements of clauses (i), (iii),
(iv), and (v) of subparagraph (B), but does not meet the requirements
of clause (ii) of subparagraph (B) because it commenced initial
operation prior to January 1, 2010, if the facility satisfies either
of the following requirements:
   (i) The electricity is from incremental generation resulting from
expansion or repowering of the facility.
   (ii) Electricity generated by the facility was procured by a
retail seller or local publicly owned electric utility as of May 31,
2009.
   (3) For the purposes of this subdivision, "solid waste conversion"
means a technology that uses a noncombustion thermal process to
convert solid waste to a clean-burning fuel for the purpose of
generating electricity, and that meets all of the following criteria:

   (A) The technology does not use air or oxygen in the conversion
process, except ambient air to maintain temperature control.
   (B) The technology produces no discharges of air contaminants or
emissions, including greenhouse gases as defined in Section 38505 of
the Health and Safety Code.
   (C) The technology produces no discharges to surface or
groundwaters of the state.
   (D) The technology produces no hazardous wastes.
   (E) To the maximum extent feasible, the technology removes all
recyclable materials and marketable green waste compostable materials
from the solid waste stream prior to the conversion process and the
owner or operator of the facility certifies that those materials will
be recycled or composted.
   (F) The facility at which the technology is used is in compliance
with all applicable laws, regulations, and ordinances.
   (G) The technology meets any other conditions established by the
commission.
   (H) The facility certifies that any local agency sending solid
waste to the facility diverted at least 30 percent of all solid waste
it collects through solid waste reduction, recycling, and
composting. For purposes of this paragraph, "local agency" means any
city, county, or special district, or subdivision thereof, which is
authorized to provide solid waste handling services.
   (d) "Renewable energy public goods charge" means that portion of
the nonbypassable system benefits charge required to be collected to
fund renewable energy pursuant to the Reliable Electric Service
Investments Act (Article 15 (commencing with Section 399) of Chapter
2.3 of Part 1 of Division 1 of the Public Utilities Code).
   (e) "Report" means the report entitled "Investing in Renewable
Electricity Generation in California" (June 2001, Publication Number
P500-00-022) submitted to the Governor and the Legislature by the
commission.
   (f) "Retail seller" means a "retail seller" as defined in Section
399.12 of the Public Utilities Code.
   SEC. 5.   SEC. 6.   Section 25742 of the
Public Resources Code is amended to read:
   25742.  (a) Twenty percent of the funds collected pursuant to the
renewable energy public goods charge shall be used for programs that
are designed to achieve fully competitive and self-sustaining
existing renewable electrical generation facilities located in this
state, and to secure for the state the environmental, economic, and
reliability benefits that continued operation of those facilities
will provide during the 2007-2011 investment cycle. Eligibility for
production incentives under this section shall be limited to those
technologies found eligible for funds by the commission pursuant to
paragraphs (3), (4), and (6) of subdivision (e) of Section 25740.5.
   (b) Any funds used to support renewable electrical generation
facilities located in this state pursuant to this section shall be
expended in accordance with the provisions of this chapter.
   (c) Facilities that are eligible to receive funding pursuant to
this section shall be registered in accordance with criteria
developed by the commission and those facilities shall not receive
payments for any electricity produced that has any of the following
characteristics:
   (1) Is sold at monthly average rates equal to, or greater than,
the applicable target price, as determined by the commission.
   (2) Is used onsite.
   (d) (1) Existing facilities located in this state generating
electricity from biomass energy shall be eligible for funding and
otherwise considered a renewable electrical generation facility only
if they report to the commission the types and quantities of biomass
fuels used.
   (2) The commission shall report the types and quantities of
biomass fuels used by each facility to the Legislature in the reports
prepared pursuant to Section 25748.
   (e) Each existing facility seeking an award pursuant to this
section shall be evaluated by the commission to determine the amount
of the funds being sought, the cumulative amount of funds the
facility has received previously from the commission and other state
sources, the value of any past and current federal or state tax
credits, the facility's contract price for energy and capacity, the
prices received by similar facilities, the market value of the
facility, and the likelihood that the award will make the facility
competitive and self-sustaining within the 2007-2011 investment
cycle. The commission shall use this evaluation to determine the
value of an award to the public relative to other renewable energy
investment alternatives. The commission shall compile its findings
and report them to the Legislature in the reports prepared pursuant
to Section 25748.
   SEC. 6.   SEC. 7.   Section 25746 of the
Public Resources Code is amended to read:
   25746.  (a) One percent of the money collected pursuant to the
renewable energy public goods charge shall be used in accordance with
this chapter to promote renewable energy and disseminate information
on renewable energy technologies, including emerging renewable
technologies, and to help develop a consumer market for renewable
energy and for small-scale emerging renewable energy technologies.
   (b) If the commission provides funding for a regional accounting
system to verify compliance with the renewable portfolio standard by
retail sellers, pursuant to subdivision (b) of Section 399.25 of the
Public Utilities Code, the commission shall recover all costs from
user fees.
   SEC. 7.   SEC. 8.   Section 25747 of the
Public Resources Code is amended to read:
   25747.  (a) The commission shall adopt guidelines governing the
funding programs authorized under this chapter, at a publicly noticed
meeting offering all interested parties an opportunity to comment.
Substantive changes to the guidelines may not be adopted without at
least 10 days' written notice to the public. The public notice of
meetings required by this subdivision may not be less than 30 days.
Notwithstanding any other provision of law, any guidelines adopted
pursuant to this chapter or Section 399.25 of the Public Utilities
Code, shall be exempt from the requirements of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code. The Legislature declares that the changes made
to this subdivision by the act amending this section during the 2002
portion of the 2001-02 Regular Session are declaratory of, and not a
change in existing law.
   (b) Funds to further the purposes of this chapter may be committed
for multiple years.
   (c) Awards made pursuant to this chapter are grants, subject to
appeal to the commission upon a showing that factors other than those
described in the guidelines adopted by the commission were applied
in making the awards and payments. Any actions taken by an applicant
to apply for, or become or remain eligible and registered to receive,
payments or awards, including satisfying conditions specified by the
commission, shall not constitute the rendering of goods, services,
or a direct benefit to the commission.
   (d) An award made pursuant to this chapter, the amount of the
award, and the terms and conditions of the grant are public
information.
   SEC. 8.   SEC. 9.   Section 25751 of the
Public Resources Code is amended to read:
   25751.  (a) The Renewable Resource Trust Fund is hereby created in
the State Treasury.
   (b) The following accounts are hereby established within the
Renewable Resource Trust Fund:
   (1) Existing Renewable Resources Account.
   (2) Emerging Renewable Resources Account.
   (3) Renewable Resources Consumer Education Account.
   (c) The money in the fund may be expended, only upon appropriation
by the Legislature in the annual Budget Act, for the following
purposes:
   (1) The administration of this article by the state.
   (2) The state's expenditures associated with the accounting system
established by the commission pursuant to subdivision (b) of Section
399.25 of the Public Utilities Code.
   (d) That portion of revenues collected by electrical corporations
for the benefit of in-state operation and development of existing and
new and emerging renewable resource technologies, pursuant to
Section 399.8 of the Public Utilities Code, shall be transmitted to
the commission at least quarterly for deposit in the Renewable
Resource Trust Fund pursuant to Section 25740.5. After setting aside
in the fund money that may be needed for expenditures authorized by
the annual Budget Act in accordance with subdivision (c), the
Treasurer shall immediately deposit money received pursuant to this
section into the accounts created pursuant to subdivision (b) in
proportions designated by the commission for the current calendar
year. Notwithstanding Section 13340 of the Government Code, the money
in the fund and the accounts within the fund are hereby continuously
appropriated to the commission without regard to fiscal year for the
purposes enumerated in this chapter.
   (e) Upon notification by the commission, the Controller shall pay
all awards of the money in the accounts created pursuant to
subdivision (b) for purposes enumerated in this chapter. The
eligibility of each award shall be determined solely by the
commission based on the procedures it adopts under this chapter.
Based on the eligibility of each award, the commission shall also
establish the need for a multiyear commitment to any particular award
and so advise the Department of Finance. Eligible awards submitted
by the commission to the Controller shall be accompanied by
information specifying the account from which payment should be made
and the amount of each payment; a summary description of how payment
of the award furthers the purposes enumerated in this chapter; and an
accounting of future costs associated with any award or group of
awards known to the commission to represent a portion of a multiyear
funding commitment.
   (f) The commission may transfer funds between accounts for
cashflow purposes, provided that the balance due each account is
restored and the transfer does not adversely affect any of the
accounts.
   (g) The Department of Finance shall conduct an independent audit
of the Renewable Resource Trust Fund and its related accounts
annually, and provide an audit report to the Legislature not later
than March 1 of each year for which this article is operative. The
Department of Finance's report shall include information regarding
revenues, payment of awards, reserves held for future commitments,
unencumbered cash balances, and other matters that the Director of
Finance determines may be of importance to the Legislature.
   SEC. 9.   SEC. 10.   Section 387 of the
Public Utilities Code is repealed.
   SEC. 10.   SEC. 11.   Section 399.2.5 of
the Public Utilities Code is amended to read:
   399.2.5.  (a) Notwithstanding Sections 1001 to 1013, inclusive, an
application of an electrical corporation for a certificate
authorizing the construction of new transmission facilities is
necessary to the provision of electric service for purposes of
Section 1003 if the commission finds that the new facility is
reasonably necessary or appropriate to facilitate achievement of the
renewables portfolio standard established in Article 16 (commencing
with Section 399.11).
   (b) With respect to a transmission facility described in
subdivision (a), the commission shall 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. These actions shall include all of the
following:
   (1) Making findings, where supported by an evidentiary record,
that those transmission facilities provide benefit to the
transmission network and are reasonably necessary or appropriate to
facilitate the achievement of the renewables portfolio standard
established in Article 16 (commencing with Section 399.11).
   (2) Directing the utility to which the generator will be
interconnected, where the direction is not preempted by federal law,
to seek the recovery through general transmission rates of the costs
associated with the transmission facilities.
   (3) Asserting the positions described in paragraphs (1) and (2) to
the Federal Energy Regulatory Commission in appropriate proceedings.

   (4) Providing assurance, prior to a determination of rate recovery
by the Federal Energy Regulatory Commission (FERC) of those costs
that are subject to FERC jurisdiction, of recovery in retail rates of
any increase in transmission costs incurred by an electrical
corporation resulting from the construction of the transmission
facilities to the extent these costs are not subsequently approved
for recovery in transmission rates by the FERC, after the commission
determines that the costs were prudently incurred in accordance with
subdivision (a) of Section 454.
   (5) Allowing recovery in retail rates of any increase in
transmission costs if the FERC does not approve recovery of those
costs in the rates that are subject to FERC jurisdiction after the
commission determines that the costs were prudently incurred in
accordance with subdivision (a) of Section 454.
   (c) (1) The commission shall approve an advice letter seeking
assurance of cost recovery pursuant to paragraph (4) of subdivision
(b), if either of the following are true:
   (A) The new transmission line or facility will primarily deliver
electricity generated within a competitive renewable energy zone
identified in the public collaborative stakeholder planning process
known as the Renewable Energy Transmission Initiative (RETI) and is
consistent with a transmission project that the RETI process has
determined can be approved, financed, and built to provide
electricity generated by eligible renewable energy resources to
retail customers in the most cost-competitive and least
environmentally harmful ways.
   (B) The new transmission line or facility is needed to deliver
electricity to load that is to be generated by generation facilities
for which the electrical corporation has received interconnection
requests if not less than 50 percent of the capacity is for delivery
of electricity generated by eligible renewable energy resources and
all of the interconnection requests are for generation facilities
that are designed to comply with the greenhouse gases emission
performance standard established by the commission pursuant to
Chapter 3 (commencing with Section 8340) of Division 4.1.
   (2) Approval of an advice letter pursuant to paragraph (1) is not
binding upon the commission in making its determination whether or
not to approve an application for a certificate of public convenience
and necessity pursuant to Chapter 5 (commencing with Section 1001).
   SEC. 11.   SEC. 12.   Section 399.11 of
the Public Utilities Code is amended to read:
   399.11.  The Legislature finds and declares all of the following:
   (a) In order to attain a target of generating 20 percent of total
retail sales of electricity in California from eligible renewable
energy resources by December 31, 2012, and 33 percent by December 31,
2020, and for the purposes of increasing the diversity, reliability,
public health, and environmental benefits of the energy mix,
reducing emissions of greenhouse gases, and promoting economic
development it is the intent of the Legislature that the commission
and the Energy Commission implement the California Renewables
Portfolio Standard Program described in this article.
   (b) Increasing California's reliance on eligible renewable energy
resources may promote stable electricity prices, protect public
health, improve environmental quality, stimulate sustainable economic
development, create new employment opportunities, and reduce
reliance on imported fuels.
   (c) The development of eligible renewable energy resources and the
delivery of the electricity generated by those resources to
customers in California may ameliorate air quality problems
throughout the state and improve public health by reducing the
burning of fossil fuels and the associated environmental impacts and
by reducing in-state fossil fuel consumption.
   (d) The California Renewables Portfolio Standard Program is
intended to complement the Renewable Energy Resources Program
administered by the Energy Commission and established pursuant to
Chapter 8.6 (commencing with Section 25740) of Division 15 of the
Public Resources Code.
   (e) New and modified electric transmission facilities will be
necessary to facilitate the state achieving its renewables portfolio
standard targets.
  SEC. 12.   SEC. 13   .   Section
399.12 of the Public Utilities Code is amended to read:
   399.12.  For purposes of this article, the following terms have
the following meanings:
   (a) "Conduit hydroelectric facility" means a facility for the
generation of electricity that uses only the hydroelectric potential
of an existing pipe, ditch, flume, siphon, tunnel, canal, or other
manmade conduit that is operated to distribute water for a beneficial
use. 
   (b) "Delivered" and "delivery," with respect to electricity
generated by a renewable electrical generation facility, means that
the electricity is used to serve retail end-use customers located
within the state. Subject to verification by the accounting system
established by the Energy Commission pursuant to subdivision (b) of
Section 399.25, electricity shall be deemed delivered if it is either
generated at a location within the state, or generated at a location
outside the state and scheduled for simultaneous consumption by
California end-use retail customers. For these purposes, simultaneous
consumption results from the physical delivery of electricity
generated by the renewable electrical generation facility that is
scheduled for transmission to customers served by a balancing
authority primarily located in this state at the same time that the
electricity is generated. Simultaneous consumption occurs if a
renewable electrical generation facility has its first point of
interconnection within a transmission network controlled by a
balancing authority primarily located within this state. Electricity
is not scheduled for simultaneous consumption to the extent that the
physical delivery of electricity to customers is from the purchase or
supply of electricity from a source other than the renewable
electrical generation facility or if the electricity is scheduled for
delivery to customers at a time different from the time of
generation.  
                          (b) (1) "Delivered" and "delivery," with
respect to electricity, means that the electricity is used to serve
end-use retail customers located within the state, and meets either
of the following conditions:  
   (A) The electricity is generated at a location within the state.
 
   (B) The electricity is generated at a location outside the state
and scheduled for consumption by California end-use retail customers.
 
   (2) Electricity is not delivered by an eligible renewable energy
resource to the extent that either of the following occurs: 

   (A) The physical delivery of electricity is provided from a source
other than an eligible renewable energy resource.  
   (B) The electricity is scheduled for delivery to customers at a
time different from the time of generation by the eligible renewable
energy resource. 
   (c) "Eligible renewable energy resource" means an electrical
generating facility that meets the definition of a "renewable
electrical generation facility" in Section 25741 of the Public
Resources Code, and the electricity generated by the facility is
delivered to a retail seller or local publicly owned electric
utility, or the facility produces renewable energy credits or
undelivered renewable energy credits, subject to the following:
   (1) (A) An existing small hydroelectric generation facility of 30
megawatts or less shall be eligible only if a retail seller or local
publicly owned electric utility owned or procured the electricity
from the facility as of December 31, 2005. A new hydroelectric
facility is not an eligible renewable energy resource if it will
cause an adverse impact on instream beneficial uses or cause a change
in the volume or timing of streamflow.
   (B) Notwithstanding subparagraph (A), a conduit hydroelectric
facility of 30 megawatts or less that commenced operation before
January 1, 2006, is an eligible renewable energy resource. A conduit
hydroelectric facility of 30 megawatts or less that commences
operation after December 31, 2005, is an eligible renewable energy
resource so long as it does not cause an adverse impact on instream
beneficial uses or cause a change in the volume or timing of
streamflow.
   (2) A facility engaged in the combustion of municipal solid waste
shall not be considered an eligible renewable resource unless it is
located in Stanislaus County and was operational prior to September
26, 1996.
   (d) "Procure" means to purchase or own the eligible renewable
energy resource. Nothing in this article is intended to imply that
the purchase of electricity from third parties in a wholesale
transaction is the preferred method of fulfilling a retail seller's
obligation to comply with this article or the obligation of a local
publicly owned electric utility to meet its renewables portfolio
standard implemented pursuant to Section 399.30.
   (e) (1) "Renewable energy credit" means a certificate of proof
associated with the generation of electricity from an eligible
renewable energy resource, issued through the accounting system
established by the Energy Commission pursuant to Section 399.25, that
one unit of electricity was generated and delivered by an eligible
renewable energy resource.
   (2) "Renewable energy credit" includes all renewable and
environmental attributes associated with the production of
electricity from the eligible renewable energy resource, except for
an emissions reduction credit issued pursuant to Section 40709 of the
Health and Safety Code and any credits or payments associated with
the reduction of solid waste and treatment benefits created by the
utilization of biomass or biogas fuels.
   (3) (A) No electricity generated by an eligible renewable energy
resource attributable to the use of nonrenewable fuels, beyond a de
minimis quantity, as determined by the Energy Commission for each
renewable energy technology, shall result in the creation of a
renewable energy credit.
   (B) No electricity generated by a small hydroelectric generation
facility shall result in the creation of a renewable energy credit
unless the facility meets the requirements of subparagraph (A) of
paragraph (1) of subdivision (c).
   (C) No electricity generated by a conduit hydroelectric generation
facility shall result in the creation of a renewable energy credit
unless the facility meets the requirements of subparagraph (B) of
paragraph (1) of subdivision (c).
   (D) No electricity generated by a facility engaged in the
combustion of municipal solid waste shall result in the creation of a
renewable energy credit unless the facility meets the requirements
of paragraph (2) of subdivision (c).
   (f) "Renewable energy public goods charge" means that portion of
the nonbypassable system benefits charge required to be collected to
fund renewable energy pursuant to the Reliable Electric Service
Investments Act (Article 15 (commencing with Section 399) of Chapter
2.3 of Part 1 of Division 1, for an electrical corporation, and
pursuant to Section 385 for a local publicly owned electric utility.
   (g) "Renewables portfolio standard" means the specified percentage
of electricity generated by eligible renewable energy resources that
a retail seller or a local publicly owned electric utility is
required to procure pursuant to this article.
   (h) "Retail seller" means an entity engaged in the retail sale of
electricity to end-use customers located within the state, including
any of the following:
   (1) An electrical corporation, as defined in Section 218.
   (2) A community choice aggregator. The commission shall institute
a rulemaking to determine the manner in which a community choice
aggregator will participate in the renewables portfolio standard
program subject to the same terms and conditions applicable to an
electrical corporation.
   (3) An electric service provider, as defined in Section 218.3, for
all sales of electricity to customers beginning January 1, 2006. The
commission shall institute a rulemaking to determine the manner in
which electric service providers will participate in the renewables
portfolio standard program. The electric service provider shall be
subject to the same terms and conditions applicable to an electrical
corporation pursuant to this article. Nothing in this paragraph shall
impair a contract entered into between an electric service provider
and a retail customer prior to the suspension of direct access by the
commission pursuant to Section 80110 of the Water Code.
   (4) "Retail seller" does not include any of the following:
   (A) A corporation or person employing cogeneration technology or
producing electricity consistent with subdivision (b) of Section 218.

   (B) The Department of Water Resources acting in its capacity
pursuant to Division 27 (commencing with Section 80000) of the Water
Code.
   (C) A local publicly owned electric utility.
   (i) (1) "Undelivered renewable energy credit" means a certificate
of proof, issued through the accounting system established by the
Energy Commission pursuant to Section 399.25, associated with one
unit of electricity generated, but not delivered, by a renewable
electrical generation facility.
   (2) (A) No electricity generated by a renewable electrical
generation facility attributable to the use of nonrenewable fuels,
beyond a de minimis quantity, as determined by the Energy Commission
for each renewable energy technology, shall result in the creation of
an undelivered renewable energy credit.
   (B) No electricity generated by a small hydroelectric generation
facility shall result in the creation of an undelivered renewable
energy credit unless the facility meets the requirements of
subparagraph (A) of paragraph (1) of subdivision (c).
   (C) No electricity generated by a conduit hydroelectric generation
facility shall result in the creation of an undelivered renewable
energy credit unless the facility meets the requirements of
subparagraph (B) of paragraph (1) of subdivision (c).
   (D) No electricity generated by a facility engaged in the
combustion of municipal solid waste shall result in the creation of
an undelivered renewable energy credit unless the facility meets the
requirements of paragraph (2) of subdivision (c).
   SEC. 13.   SEC. 14.   Section 399.13 of
the Public Utilities Code is amended and renumbered to read:
   399.25.  The Energy Commission shall do all of the following:
   (a) Certify eligible renewable energy resources that it determines
meet the criteria described in subdivision (c) of Section 399.12.
   (b) Design and implement an accounting system to verify compliance
with the renewables portfolio standard by retail sellers and local
publicly owned electric utilities, to ensure that electricity
generated by an eligible renewable energy resource is counted only
once for the purpose of meeting the renewables portfolio standard of
this state or any other state, to certify renewable energy credits
produced by eligible renewable energy resources, and to verify retail
product claims in this state or any other state. In establishing the
guidelines governing this accounting system, the Energy Commission
shall collect data from electricity market participants that it deems
necessary to verify compliance of retail sellers and local publicly
owned electric utilities, in accordance with the requirements of this
article and the California Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code). In seeking data from electrical corporations, the
Energy Commission shall request data from the commission. The
commission shall collect data from electrical corporations and remit
the data to the Energy Commission within 90 days of the request.
   (c) Establish a system for tracking and verifying renewable energy
credits that, through the use of independently audited data,
verifies the generation and delivery of electricity associated with
each renewable energy credit and protects against multiple counting
of the same renewable energy credit. The Energy Commission shall
consult with other western states and with the Western Electricity
Coordinating Council in the development of this system.
   (d) Certify, for purposes of compliance with the renewables
portfolio standard requirements by a retail seller, the eligibility
of renewable energy credits associated with deliveries of electricity
by an eligible renewable energy resource to a local publicly owned
electric utility, if the Energy Commission determines that all of the
conditions of Section 399.31 have been met.
   SEC. 14.   SEC. 15.   Section 399.13 is
added to the Public Utilities Code, to read:
   399.13.  (a) (1) The commission shall direct each electrical
corporation to prepare a renewable energy procurement plan that
includes the matter in paragraph (3), to satisfy its obligations
under the renewables portfolio standard. To the extent feasible, this
procurement plan shall be proposed, reviewed, and adopted by the
commission as part of, and pursuant to, a general procurement plan
process. The commission shall require each electrical corporation to
review and update its renewable energy procurement plan as it
determines to be necessary.
   (2) The commission shall adopt, by rulemaking, all of the
following:
   (A) A process that provides criteria for the rank ordering and
selection of least-cost and best-fit eligible renewable energy
resources to comply with the annual California Renewables Portfolio
Standard Program obligations on a total cost basis. This process
shall  also consider the   take into account all
of the following:  
   (i) Estimates of indirect costs associated with needed
transmission investments and ongoing electrical corporation expenses
resulting from integrating and operating eligible renewable energy
resources.  
   (ii) The cost impact of procuring the eligible renewable energy
resources on the electrical corporation's electricity portfolio,
system reliability, and the environmental and economic benefits of
procuring renewable energy. 
    (iii)     The  viability of the
project to construct and reliably operate the eligible renewable
energy resource, including the developer's experience, the
feasibility of the technology used to generate electricity, and the
risk that the facility will not be built, or that construction will
be delayed, with the result that electricity will not be delivered as
required by the contract.
   (B) Rules permitting  retail sellers  
electrical corporations  to apply excess procurement in one year
to subsequent years.
   (C) Standard terms and conditions to be used by all electrical
corporations in contracting for eligible renewable energy resources,
including performance requirements for renewable generators. A
contract for the purchase of electricity generated by an eligible
renewable energy resource shall, at a minimum, include the renewable
energy credits associated with all electricity generation specified
under the contract. The standard terms and conditions shall include
the requirement that, no later than six months after the commission's
approval of an electricity purchase agreement entered into pursuant
to this article, the following information about the agreement shall
be disclosed by the commission: party names, resource type, project
location, and project capacity.
   (D) An appropriate minimum margin of procurement above the minimum
procurement level necessary to comply with the renewables portfolio
standard, applied equally to all  retail sellers 
 electrical corporations  , to mitigate the risk that
renewable projects planned or under contract are delayed or canceled.
Nothing in this paragraph shall preclude an electrical corporation
from voluntarily proposing a margin of procurement above the
appropriate minimum margin established by the commission.
   (3) Consistent with the goal of increasing California's reliance
on eligible renewable energy resources, the renewable energy
procurement plan submitted by an electrical corporation shall include
all of the following:
   (A) An assessment of annual or multiyear portfolio supplies and
demand to determine the optimal mix of eligible renewable energy
resources with deliverability characteristics that may include
peaking, dispatchable, baseload, firm, and as-available capacity.
   (B) Potential compliance delays related to the conditions
described in paragraph (4) of subdivision (b) of Section 399.15.
   (C) A bid solicitation setting forth the need for eligible
renewable energy resources of each deliverability characteristic,
required online dates, and locational preferences, if any.
   (D) A status update on the development schedule of all eligible
renewable resources currently under contract.
   (E) Consideration of mechanisms for price adjustments associated
with the costs of key components for eligible renewable energy
resource projects with online dates more than 24 months after the
date of contract execution.
   (F) An assessment of the risk that an eligible renewable energy
resource will not be built, or that construction will be delayed,
with the result that electricity will not be delivered as required by
the contract.
   (4) In soliciting and procuring eligible renewable energy
resources, each electrical corporation shall offer contracts of no
less than 10 years in duration, unless the commission approves of a
contract of shorter duration.
   (5) In soliciting and procuring eligible renewable energy
resources for California-based projects, each electrical corporation
shall give preference to renewable energy projects that provide
environmental and economic benefits to communities afflicted with
poverty or high unemployment, or that suffer from high emission
levels of toxic air contaminants, criteria air pollutants, and
greenhouse gases.
   (b)  A retail seller  An electrical
corporation  may enter into a combination of long- and
short-term contracts for delivery of electricity and associated
renewable energy credits. The commission may authorize  a
retail seller   an electrical corporation to enter
into a contract of less than 10 years' duration with an eligible
renewable energy resource, if the commission has established, for
each  retail seller   electrical corporation
 , minimum quantities of eligible renewable energy resources to
be procured through contracts of at least 10 years' duration.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's renewable energy procurement plan prior to
the commencement of renewable procurement pursuant to this article by
an electrical corporation.
   (d) Unless previously preapproved by the commission, an electrical
corporation shall submit a contract for the generation of an
eligible renewable energy resource to the commission for review and
approval consistent with an approved renewable energy procurement
plan. If the commission determines that the bid prices are elevated
due to a lack of effective competition among the bidders, the
commission shall direct the electrical corporation to renegotiate the
contracts or conduct a new solicitation. 
   (e) The commission shall establish milestones in the development
of the project to evaluate the potential for compliance with the
adopted renewable energy procurement plan and a set of actions that
will occur as a result of not meeting those milestones. These actions
may include, but shall not be limited to, determining a cure period
for failure to meet milestones, a suspense period on the contract
online date for events beyond the developer's control that cause a
failure to meet milestones, allowing other developers that are
prepared to go forward to move ahead of suspended contracts, and the
forfeiture of deposits.  
   (e) 
    (f)  If an electrical corporation fails to comply with a
commission order adopting a renewable energy procurement plan, the
commission shall exercise its authority pursuant to Section 2113 to
require compliance. The commission shall enforce comparable penalties
on any retail seller that is not an electrical corporation that
fails to meet the procurement targets established pursuant to Section
399.15. 
   (f) 
    (g)  (1) The commission may authorize a procurement
entity to enter into contracts on behalf of customers of a retail
seller for deliveries of eligible renewable energy resources to
satisfy the retail seller's renewables portfolio standard procurement
requirements. The commission may not require any person or
corporation to act as a procurement entity or require any party to
purchase eligible renewable energy resources from a procurement
entity.
   (2) Subject to review and approval by the commission, the
procurement entity shall be permitted to recover reasonable
administrative and procurement costs through the retail rates of
end-use customers that are served by the procurement entity and are
directly benefiting from the procurement of eligible renewable energy
resources. 
   (g) 
    (h)  Procurement and administrative costs associated
with contracts entered into by an electrical corporation for eligible
renewable energy resources pursuant to this article and approved by
the commission shall be deemed reasonable and shall be recoverable in
rates. 
   (h) 
    (i)  Construction, alteration, demolition, installation,
and repair work on an eligible renewable energy resource that
receives production incentives pursuant to Section 25742 of the
Public Resources Code, including work performed to qualify, receive,
or maintain production incentives are "public works" for the purposes
of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2
of the Labor Code.
   SEC. 15.   SEC. 16.   Section 399.14 of
the Public Utilities Code is repealed.
   SEC. 16.   SEC. 17.   Section 399.14 is
added to the Public Utilities Code, to read:
   399.14.  (a) (1) An electrical corporation may, pursuant to
Chapter 5 (commencing with Section 1001), and in order to meet its
renewables portfolio standard procurement requirements, apply to the
commission for approval to construct, own, and operate an eligible
renewable energy resource.
   (2) If the proposed eligible renewable energy resource complies
with the requirements of subdivision (b), the commission shall
approve an application filed pursuant to paragraph (1), until the
commission has approved applications for eligible renewable energy
resources for the electrical corporation that, when constructed and
operating, will provide 8.25 percent of the electrical corporation's
anticipated retail sales by December 31, 2020.
   (3) The commission may approve additional applications for
eligible renewable energy resources once the commission has approved
sufficient applications for eligible renewable energy resources for
the electrical corporation that, when constructed and operating, will
provide 8.25 percent of the electrical corporation's anticipated
retail sales by December 31,  2020, provided that the
proposed eligible renewable energy resource complies with the
requirements of subdivision (b).   2020. 
   (b) The commission shall not approve any application by an
electrical corporation pursuant to subdivision (a) unless 
both   all  of the following conditions are met:
   (1) The eligible renewable energy resource will be constructed and
operated in compliance with other applicable laws, including
environmental and safety laws.
   (2) The eligible renewable energy resource utilizes a viable
technology at a reasonable cost and provides comparable or superior
value to ratepayers when compared to then recent or contemporaneous
solicitations for generation provided by eligible renewable energy
resources. 
   (3) The eligible renewable energy resource provides comparable or
superior value to ratepayers when compared to recent or
contemporaneous solicitations for generation provided by other
eligible renewable energy resources. 
   (c) In approving any application by an electrical corporation for
approval to construct, own, and operate an eligible renewable energy
resource, the commission shall apply traditional cost-of-service
ratemaking, including reasonableness review after construction is
completed.
   SEC. 17.  SEC. 18.   Section 399.15 of
the Public Utilities Code is repealed.
   SEC. 18.   SEC. 19.   Section 399.15 is
added to the Public Utilities Code, to read:
   399.15.  (a) In order to fulfill unmet long-term resource needs,
the commission shall establish a renewables portfolio standard
requiring all retail sellers to procure a minimum quantity of
electricity generated by eligible renewable energy resources as a
specified percentage of total kilowatthours sold to their retail
end-use customers each compliance period to achieve the targets
established under this article.
   (b) The commission shall implement renewables portfolio standard
procurement requirements as follows:
   (1) Each retail seller shall procure the following minimum
percentages of eligible renewable energy resources delivered in the
following years:
   (A) Twenty percent by December 31, 2012.
   (B) Twenty-three percent by December 31, 2014.
   (C) Twenty-six percent by December 31, 2016.
   (D) Thirty percent by December 31, 2018.
   (E) Thirty-three percent by December 31, 2020.
   (2) A retail seller with 33 percent of its retail sales of
electricity procured from eligible renewable energy resources in any
year shall not be required to increase its procurement of renewable
energy resources, except to the extent required to maintain a 33
percent renewables portfolio standard. A retail seller may
voluntarily increase its procurement of eligible renewable energy
resources beyond the renewables portfolio standard procurement
requirements.
   (3) Only for purposes of establishing the renewables portfolio
standard procurement requirements of paragraph (1), the commission
shall include all electricity sold to retail customers by the
Department of Water Resources pursuant to Section 80100 of the Water
Code in the calculation of retail sales by an electrical corporation.

   (4) The commission may only allow a retail seller for a maximum of
two years per request to delay compliance with a renewables
portfolio standard procurement requirement established pursuant to
subparagraph (A), (B), (C), or (D) of paragraph (1), if it finds,
after an evidentiary hearing, that the retail seller has demonstrated
that either of the following conditions will prevent timely
compliance:
   (A) There is inadequate transmission capacity to allow for
sufficient electricity to be delivered from proposed eligible
renewable energy resource projects using the current operational
protocols of the Independent System Operator (ISO). The commission
shall consult with the ISO in making its findings relative to the
existence of this condition. In making its findings relative to the
existence of this condition with respect to a retail seller that owns
transmission lines, the commission shall consider both of the
following:
   (i) Whether the retail seller has undertaken all reasonable
measures to develop and construct new transmission lines or upgrades
to existing lines in a timely fashion.
   (ii) Whether the retail seller has taken all reasonable
operational measures, as verified by the ISO, to maximize deliveries
of electricity from eligible renewable energy resources in advance of
transmission availability.
   (B) Unanticipated permitting and interconnection delays for
procured eligible renewable energy resource projects. In making this
finding, the commission shall consider whether the retail seller has
prudently managed portfolio risks, relied on sufficient viable
projects, and procured an appropriate minimum margin of procurement
above the minimum procurement level necessary to comply with the
renewables portfolio standard to compensate for foreseeable delays.
   (5) The commission shall require a retail seller to demonstrate,
as part of an evidentiary showing made pursuant to paragraph (4),
that it has taken all reasonable measures consistent with this
article to procure cost-effective distributed generation and to
procure undelivered renewable energy credits consistent with the
restrictions in paragraph (6) of subdivision (a) of Section 399.21.
   (6) The commission may not approve any request to delay a
compliance obligation for which it has already granted a delay unless
a retail seller presents evidence that it has identified and taken
all reasonable actions under its control to pursue additional options
to comply                                              with the
delayed interim procurement obligation and remove impediments that
are related to its delay.
   (7) The commission may not authorize any delay in achieving the 33
percent by December 31, 2020, renewables portfolio standard
procurement requirement of subparagraph (E) of paragraph (1).
   (8) If a retail seller fails to procure sufficient eligible
renewable energy resources to comply with a renewables portfolio
standard procurement requirement and fails to obtain an order from
the commission authorizing a compliance delay pursuant to paragraph
(4), the commission shall exercise its authority pursuant to Section
2113.
   (c) The commission shall establish a methodology to determine the
market price of electricity for terms corresponding to the length of
contracts with eligible renewable energy resources, in consideration
of the long-term ownership, operating, and fixed-price fuel costs
associated with fixed-price electricity from new generating
facilities. The methodology shall reflect all of the following:
   (1) The value of different products including baseload, peaking,
and as-available electricity.
   (2) All current and anticipated environmental compliance costs,
including mitigation of emissions of greenhouse gases and air
pollution offsets associated with the operation of new generating
facilities.
   (d) The commission shall establish a limitation for each
electrical corporation on the annual expenditures above the market
prices determined in subdivision (c) for the procurement of all
eligible renewable energy resources that are used to comply with the
electrical corporation's renewables portfolio standard. The
commission shall update the limitation on a biennial basis. The
annual cost limitation shall equal 6 percent of the total bundled
electric revenues recorded by the electrical corporation for the
prior calendar year, or for an updated limitation, for the calendar
year prior to the year in which the commission is preparing the
update. Total bundled electric revenues shall include revenues
collected by the electrical corporation on behalf of the Department
of Water Resources for procurement activities conducted pursuant to
Division 27 (commencing with Section 80000) of the Water Code. The
commission shall not reduce the limitation as a result of changes in
bundled electric revenues since the previous biennial update. The
annual limitation, as modified by subsequent updates, shall apply to
the net annual above-market costs projected to be incurred during
each future year.
   (e) The net annual above-market costs of all procurement of
eligible renewable energy resources shall be counted toward the
annual cost limitation if all of the following conditions are
satisfied:
   (1) The procurement has been approved by the commission.
   (2) The procurement is used to meet the renewables portfolio
standard procurement requirements established pursuant to paragraph
(1) of subdivision (b).
   (3) The procurement is submitted for approval to the commission
after January 1, 2011.
   (4) The above-market costs of procurement do not include any
indirect expenses, including imbalance energy charges, sale of excess
energy, decreased generation from existing resources, or
transmission upgrades.
   (5) Calculations of net annual above-market costs shall include,
as a reduction to the total above-market costs, procurement that
satisfies paragraphs (1), (2), and (3) and is below the market prices
determined in subdivision (c) for each year.
   (6) The commission has accounted for the potential that some
procured resources may be delayed or canceled.
   (f) If the annual cost limitation for an electrical corporation is
insufficient to support the projected net above-market costs
identified in subdivision (e) for a future year, the commission shall
allow the electrical corporation to refrain from entering into new
contracts or to construct facilities for that future year beyond the
quantity of eligible renewable energy resources that can be procured
at or below the market prices established in subdivision (c). If the
cost limitation is not reached for an individual year, any amount
below the cost limitation may not be applied to a future year.
   (g) Notwithstanding subdivision (f), if an electrical corporation'
s net annual above-market costs for a future year  exceeds
  exceed  the electrical corporation's annual cost
limitation, the electrical corporation may voluntarily propose to
procure eligible renewable energy resources at above-market prices.
Any voluntary procurement under this paragraph shall be subject to
commission approval prior to the expense being recovered in rates.
   (h) (1) The commission shall monitor the status of the annual cost
limitation for each electrical corporation in order to ensure
compliance with this article.
   (2) If the commission determines that an electrical corporation
may exceed its annual cost limitation prior to achieving the
renewables portfolio standard procurement requirements, the
commission shall do all of the following within 60 days of making
that determination:
   (A) Investigate and identify the reasons why the electrical
corporation may exceed its annual cost limitation.
   (B) Identify those actions that can be taken to ensure that the
electrical corporation continues to comply with its renewables
portfolio standard procurement requirements.
   (C) Notify the appropriate policy and fiscal committees of the
Legislature that the electrical corporation may exceed its annual
cost limitation, the reasons why the electrical corporation may
exceed its annual cost limitation, and those actions that may be
taken by the electrical corporation to comply with the renewables
portfolio standard procurement requirements.
   (3) The commission shall examine mechanisms for mitigating the
potential impact of low fossil fuel prices on the annual cost
limitation of each electrical corporation and make recommendations to
the Legislature on any changes in law it identifies to mitigate
those impacts.
   (i) The commission shall examine and adopt mechanisms to limit the
potential influence of the market prices established in subdivision
(c) on seller pricing and buyer contract selection.
   (j) The establishment of a renewables portfolio standard shall not
constitute implementation by the commission of the federal Public
Utility Regulatory Policies Act of 1978 (Public Law 95-617).
   (k) The commission shall consult with the Energy Commission in
establishing renewables portfolio standard policies.
   SEC. 19.   SEC. 20.   Section 399.16 of
the Public Utilities Code is amended and renumbered to read:
   399.21.  (a) The commission, by rule, may authorize the use of
renewable energy credits and undelivered renewable energy credits to
satisfy the renewables portfolio standard procurement requirements
established pursuant to this article, subject to the following
conditions:
   (1) Prior to authorizing any renewable energy credit to be used
toward satisfying the renewables portfolio standard procurement
requirements, the commission and the Energy Commission shall conclude
that the tracking system established pursuant to subdivision (c) of
Section 399.25, is operational, is capable of independently verifying
that the electricity is generated by an eligible renewable energy
resource and is delivered to the retail seller, and can ensure that
renewable energy credits shall not be double counted by any seller of
electricity within the service territory of the Western Electricity
Coordinating Council (WECC).
   (2) Each renewable energy credit and undelivered renewable energy
credit shall be counted only once for compliance with the renewables
portfolio standard of this state or any other state, or for verifying
retail product claims in this state or any other state.
   (3) All revenues received by an electrical corporation for the
sale of a renewable energy credit or undelivered renewable energy
credit shall be credited to the benefit of ratepayers.
   (4) No renewable energy credits shall be created for electricity
generated pursuant to any electricity purchase contract with a retail
seller or a local publicly owned electric utility executed before
January 1, 2005, unless the contract contains explicit terms and
conditions specifying the ownership or disposition of those credits.
Deliveries under those contracts shall be tracked through the
accounting system described in subdivision (b) of Section 399.25 and
included in the quantity of eligible renewable energy resources of
the purchasing retail seller pursuant to Section 399.15.
   (5) No renewable energy credits shall be created for electricity
generated under any electricity purchase contract executed after
January 1, 2005, pursuant to the federal Public Utility Regulatory
Policies Act of 1978 (16 U.S.C. Sec. 2601 et seq.). Deliveries under
the electricity purchase contracts shall be tracked through the
accounting system described in subdivision (b) of Section 399.12 and
count toward the renewables portfolio standard obligations of the
purchasing retail seller.
   (6) The quantity of undelivered renewable energy credits used by a
retail seller to meet the renewables portfolio standard procurement
requirements of this article shall not exceed 20 percent of its
procurement requirements. Notwithstanding this limitation, the
commission shall authorize a retail seller to use undelivered
renewable energy credits procured through contracts executed by the
retail seller prior to May 31, 2009, and approved by the commission,
to be counted towards the renewables portfolio standard procurement
requirements of that retail seller.
   (7) No renewable energy credit or undelivered renewable energy
credit shall be eligible for compliance with a renewables portfolio
standard procurement requirement after 18 months from the initial
date of generation of the associated electricity. A renewable energy
credit or undelivered renewable energy credit is used for compliance
when the retail seller or local publicly owned electric utility
irrevocably retires the credit within the tracking system established
pursuant to subdivision (c) of Section 399.25.
   (8) Any additional condition that the commission determines is
reasonable.
   (b) The commission shall allow an electrical corporation to
recover the reasonable costs of purchasing renewable energy credits
and undelivered renewable energy credits in rates.
   SEC. 20.   SEC. 21.   Section 399.17 of
the Public Utilities Code is amended to read:
   399.17.  (a) Subject to the provisions of this section, the
requirements of this article apply to an electrical corporation with
60,000 or fewer customer accounts in California that serves retail
end-use customers outside California.
   (b) For an electrical corporation with 60,000 or fewer customer
accounts in California that serves retail end-use customers outside
California, an eligible renewable energy resource includes a facility
that is located outside California, if the facility is connected to
the Western Electricity Coordinating Council (WECC) transmission
system, provided all of the following conditions are met:
   (1) The electricity generated by the facility is procured by the
electrical corporation on behalf of its California customers, and is
not used to fulfill renewable energy procurement requirements in
other states.
   (2) The electrical corporation participates in, and complies with,
the accounting system administered by the Energy Commission pursuant
to subdivision (b) of Section 399.25.
   (3) The Energy Commission verifies that the electricity generated
by the facility is eligible to meet the biennial procurement targets
of this article.
   (c) The commission shall determine the biennial procurement
targets for an electrical corporation with 60,000 or fewer customer
accounts in California that serves retail end-use customers outside
California, as a specified percentage of total kilowatthours sold by
the electrical corporation to its retail end-use customers in
California in a calendar year.
   (d) An electrical corporation with 60,000 or fewer customer
accounts in California that serves retail end-use customers outside
California, may use an integrated resource plan prepared in
compliance with the requirements of another state utility regulatory
commission, to fulfill the requirement to prepare a renewable energy
procurement plan pursuant to this article, provided the plan meets
the requirements of Sections 399.11, 399.12, 399.13, or 399.14, and
399.25, as modified by this section.
   (e) Procurement and administrative costs associated with long-term
contracts entered into by an electrical corporation with 60,000 or
fewer customer accounts in California that serves retail end-use
customers outside California, for eligible renewable energy resources
pursuant to this article, at or below the market price determined by
the commission pursuant to subdivision (c) of Section 399.15, shall
be deemed reasonable per se, and shall be recoverable in rates of the
electrical corporation's California customers, provided the costs
are not recoverable in rates in other states served by the electrical
corporation.
   SEC. 21.   SEC. 22.   Section 399.18 is
added to the Public Utilities Code, to read:
   399.18.  The commission, in consultation with the Energy
Commission, shall report to the Legislature by January 1 of every
even-numbered year on all of the following:
   (a) The progress and status of procurement activities by each
retail seller.
   (b) The status of permitting and siting eligible renewable energy
resources and transmission facilities necessary to deliver the
electricity generated to load, including the time taken to permit
each eligible renewable energy resource and transmission line or
upgrade, explanations of failures to meet permitting milestones, and
recommendations for improvements to expedite permitting and siting
processes.
   (c) The projected ability of each electrical corporation to meet
the renewables portfolio standard procurement requirements under the
cost limitations in subdivision (d) of Section 399.15 and any
recommendations for revisions of those cost limitations.
   (d) Any barriers to, and policy recommendations for, achieving the
renewables portfolio standard pursuant to this article. 
  SEC. 22.    Section 399.22 is added to the Public
Utilities Code, to read:
   399.22.  (a) In order for the state to meet the requirements of
the California Renewables Portfolio Standard Program, substantially
increased amounts of electricity generated by eligible renewable
energy resources must be integrated with, and interconnected to, the
transmission grid that is under the operational control of the
Independent System Operator.
   (b) The Independent System Operator shall undertake all feasible
efforts to do all of the following, and shall seek the approval of
the Federal Energy Regulatory Commission, if necessary:
   (1) Adjust its market structure to achieve, in the most
cost-effective manner possible, a minimum of 33 percent of
electricity generated from eligible renewable energy resources by
December 31, 2020.
   (2) In consultation and cooperation with local publicly owned
electric utilities develop annual statewide transmission plans that
incorporate local publicly owned electric utility transmission plans
and any potential joint privately owned and local publicly owned
electric utility infrastructure projects, with the goal of minimizing
the aggregate amount and cost of new transmission needed statewide
to meet both reliability needs and renewable energy targets.
   (3) Seek proposals from, and propose transmission projects to,
local publicly owned electric utilities that can be jointly owned by
electrical corporations, merchant transmission companies, and local
publicly owned electric utilities.
   (4) Eliminate barriers established by the Independent System
Operator over transmission lines in its control area.
   (c) The commission shall approve reasonable and cost-effective
transmission and power line investments that are not under the
ratemaking authority of the Federal Energy Regulatory Commission and
that are necessary to enable electricity generated by eligible
renewable energy resources to be delivered to retail sellers and
local publicly owned electric utilities. 
  SEC. 23.  Section 399.26 is added to the Public Utilities Code, to
read:
   399.26.  (a) In order for the state to meet the requirements of
the California Renewables Portfolio Standard Program, substantially
increased amounts of electricity generated by eligible renewable
energy resources must be integrated with, and interconnected to, the
transmission grid that is either owned by, or under the operational
control of, the local publicly owned electric utilities and the
transmission grid that is under the operational control of the
Independent System Operator. 
   (b) The Energy Commission shall facilitate both of the following:
 
   (1) The development of annual statewide transmission plans that
incorporate local publicly owned electric utility transmission plans
and any potential joint privately owned and local publicly owned
electric utility infrastructure projects, with the goal of minimizing
the aggregate amount and cost of new transmission needed statewide
to meet both reliability needs and renewables portfolio standard
targets.  
   (2) The siting and approval of new transmission lines that can be
jointly owned or utilized by electrical corporations, merchant
transmission companies, and local publicly owned electric utilities,
and can be jointly operated by the Independent System Operator and
local publicly owned electric utility balancing authorities.
 
   (b) The Independent System Operator and the balancing authority of
each area in California shall do both of the following:  
   (1) Work cooperatively to integrate and interconnect eligible
renewable energy resources to the transmission grid by the most
efficient means possible with the goal of minimizing the impact and
cost of new transmission needed to meet both reliability needs and
the renewables portfolio standard procurement requirements. 

   (2) Accomplish the requirements of paragraph (1) in a manner that
respects the ownership, business, and dispatch models for
transmission facilities owned by electrical corporations, local
publicly owned electric utilities, joint power agencies, and merchant
transmission companies.  
   (c) The Independent System Operator shall seek any approvals from
the Federal Energy Regulatory Commission that are necessary to
accomplish the goals and requirements of this article. 
  SEC. 24.  Section 399.30 is added to the Public Utilities Code, to
read:
   399.30.  (a) In order to fulfill unmet long-term generation
resource needs, each local publicly owned electric utility shall
adopt and implement a renewable energy resources procurement plan
that requires the utility to procure a minimum quantity of
electricity generated by eligible renewable energy resources,
including renewable energy credits, as a specified percentage of
total kilowatthours sold to the utility's retail end-use customers,
each calendar year, to achieve the targets of subdivision (b).
   (b) The governing board shall implement procurement targets for a
local publicly owned electric utility that require the utility to
procure the following minimum percentages of eligible renewable
energy resources delivered in the following years:
   (1) Twenty percent by December 31, 2012.
   (2) Twenty-three percent by December 31, 2014.
   (3) Twenty-six percent by December 31, 2016.
   (4) Thirty percent by December 31, 2018.
   (5) Thirty-three percent by December 31, 2020.
   (c) A local publicly owned electric utility may use renewable
energy credits or undelivered renewable energy credits to meet its
renewables portfolio standard procurement requirements to the same
extent as permitted for a retail seller pursuant to subdivision (a)
of Section 399.21.
   (d) The governing board of the local publicly owned electric
utility shall adopt a program for the enforcement of this article on
or before January 1, 2011. The program shall be adopted at a publicly
noticed meeting offering all interested parties an opportunity to
comment. Not less than 30 days' notice shall be given to the public
of any meeting held for purposes of adopting the program. Not less
than 10 days' notice shall be given to the public before any meeting
is held to make a substantive change to the program.
   (e) (1) Each local publicly owned electric utility shall annually
post notice, in accordance with Chapter 9 (commencing with Section
54950) of Part 1 of Division 2 of Title 5 of the Government Code,
whenever its governing body will deliberate in public on its
renewable energy resources procurement plan.
   (2) Contemporaneous with the posting of the notice of a public
meeting to consider the renewable energy resources procurement plan,
the local publicly owned electric utility shall notify the Energy
Commission of the date, time, and location of the meeting in order to
enable the Energy Commission to post the information on its Internet
Web site. This requirement is satisfied if the local publicly owned
electric utility provides the uniform resource locator (URL) that
links to this information.
   (3) Upon distribution to its governing body of information related
to its renewable energy resources procurement status and future
plans, for its consideration at a noticed public meeting, the local
publicly owned electric utility shall make that information available
to the public and shall provide the Energy Commission with an
electronic copy of the documents for posting on the Energy Commission'
s Internet Web site. This requirement is satisfied if the local
publicly owned electric utility provides the uniform resource locator
(URL) that links to the documents or information regarding other
manners of access to the documents.
   (f) Within 30 business days after a local publicly owned electric
utility executes a renewable energy resources procurement contract,
the local publicly owned electric utility shall submit, to the Energy
Commission, documentation that includes all of the following:
   (1) A description of the eligible renewable energy resource,
including the duration of the contract or electricity purchase
agreement.
   (2) A description and identification of the electrical generating
facility providing the eligible renewable energy resource under the
contract.
   (3) An estimate of the percentage increase in the utility's total
retail sales of electricity from eligible renewable energy resources
that will result from the contract.
   (g) A public utility district that receives all of its electricity
pursuant to a preference right adopted and authorized by the United
States Congress pursuant to Section 4 of the Trinity River Division
Act of August 12, 1955 (Public Law 84-386) shall be in compliance
with the renewable energy procurement requirements of this article.
   (h) Each local publicly owned electric utility shall report, on an
annual basis, to its customers and to the Energy Commission, all of
the following:
   (1) Expenditures of public goods funds collected pursuant to
Section 385 for eligible renewable energy resource development.
Reports shall contain a description of programs, expenditures, and
expected or actual results.
   (2) The resource mix used to serve its customers by energy source.

   (3) The utility's status in implementing a renewables portfolio
standard pursuant to subdivision (a) and the utility's progress
toward attaining the standard following implementation.
   (i) A local publicly owned electric utility shall retain
discretion over all of the following:
   (1) The mix of eligible renewable energy resources procured or
owned by the utility and those additional generation resources
procured or owned by the utility for purposes of ensuring resource
adequacy and reliability.
   (2) The prices paid by the utility for electricity generated by
eligible renewable energy resources.
   (3) The reasonable costs incurred by the utility for eligible
renewable energy resources owned by the utility.
   (j) On or before July 1, 2010, the Energy Commission shall adopt
regulations specifying procedures for enforcement of this article.
The regulations shall include a public process under which the Energy
Commission may issue a notice of violation and correction against a
local publicly owned electric utility for failure to comply with this
article, and for referral of violations to the State Air Resources
Board for penalties pursuant to subdivision (k).
   (k) Upon a determination by the Energy Commission that a local
publicly owned electric utility has failed to comply with this
article, the Energy Commission shall refer the failure to comply with
this article to the State Air Resources Board which may impose
penalties pursuant to Part 6 (commencing with Section 38580) of
Division 25.5 of the Health and Safety Code. If the State Air
Resources Board has imposed a penalty upon a local publicly owned
electric utility for the utility's failure to meet a renewable energy
resources procurement requirement imposed upon the utility pursuant
to the California Global Warming Solutions Act of 2006 (Division 25.5
(commencing with Section 38500) of the Health and Safety Code), the
board shall not impose an additional penalty pursuant to this section
for the utility's failure to comply with the procurement
requirements of this article. 
   (l) The commission has no authority or jurisdiction to enforce any
of the requirements of this article on a local publicly owned
electric utility. 
  SEC. 25.  Section 399.31 is added to the Public Utilities Code, to
read:
   399.31.  A retail seller may procure renewable energy credits
associated with deliveries of electricity by an eligible renewable
energy resource to a local publicly owned electric utility, for
purposes of compliance with the renewables portfolio standard
requirements, if both of the following conditions are met:
   (a) The local publicly owned electric utility has adopted and
implemented a renewable energy resources procurement plan that
complies with the renewables portfolio standard adopted by the Energy
                                             Commission pursuant to
subdivision (f) of Section 399.25.
   (b) The local publicly owned electric utility is procuring
sufficient eligible renewable energy resources to satisfy the target
standard, and will not fail to satisfy the target standard in the
event that the renewable energy credit is sold to the retail seller.
  SEC. 26.  Section 454.5 of the Public Utilities Code is amended to
read:
   454.5.  (a) The commission shall specify the allocation of
electricity, including quantity, characteristics, and duration of
electricity delivery, that the Department of Water Resources shall
provide under its power purchase agreements to the customers of each
electrical corporation, which shall be reflected in the electrical
corporation's proposed procurement plan. Each electrical corporation
shall file a proposed procurement plan with the commission not later
than 60 days after the commission specifies the allocation of
electricity. The proposed procurement plan shall specify the date
that the electrical corporation intends to resume procurement of
electricity for its retail customers, consistent with its obligation
to serve. After the commission's adoption of a procurement plan, the
commission shall allow not less than 60 days before the electrical
corporation resumes procurement pursuant to this section.
   (b) An electrical corporation's proposed procurement plan shall
include, but not be limited to, all of the following:
   (1) An assessment of the price risk associated with the electrical
corporation's portfolio, including any utility-retained generation,
existing power purchase and exchange contracts, and proposed
contracts or purchases under which an electrical corporation will
procure electricity, electricity demand reductions, and
electricity-related products and the remaining open position to be
served by spot market transactions.
   (2) A definition of each electricity product, electricity-related
product, and procurement related financial product, including support
and justification for the product type and amount to be procured
under the plan.
   (3) The duration of the plan.
   (4) The duration, timing, and range of quantities of each product
to be procured.
   (5) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services,
including the format and criteria of that procurement process.
   (6) An incentive mechanism, if any incentive mechanism is
proposed, including the type of transactions to be covered by that
mechanism, their respective procurement benchmarks, and other
parameters needed to determine the sharing of risks and benefits.
   (7) The upfront standards and criteria by which the acceptability
and eligibility for rate recovery of a proposed procurement
transaction will be known by the electrical corporation prior to
execution of the transaction. This shall include an expedited
approval process for the commission's review of proposed contracts
and subsequent approval or rejection thereof. The electrical
corporation shall propose alternative procurement choices in the
event a contract is rejected.
   (8) Procedures for updating the procurement plan.
   (9) A showing that the procurement plan will achieve the
following:
   (A) The electrical corporation shall, in order to fulfill its
unmet resource needs, procure resources from eligible renewable
energy resources in an amount sufficient to meet its procurement
requirements pursuant to the California Renewables Portfolio Standard
Program (Article 16 (commencing with Section 399.11) of Chapter
2.3).
   (B) The electrical corporation will create or maintain a
diversified procurement portfolio consisting of both short-term and
long-term electricity and electricity-related and demand reduction
products.
   (C) The electrical corporation will first meet its unmet resource
needs through all available energy efficiency and demand reduction
resources that are cost effective, reliable, and feasible.
   (10) The electrical corporation's risk management policy,
strategy, and practices, including specific measures of price
stability.
   (11) A plan to achieve appropriate increases in diversity of
ownership and diversity of fuel supply of nonutility electrical
generation.
   (12) A mechanism for recovery of reasonable administrative costs
related to procurement in the generation component of rates.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's procurement plan. The commission's review
shall consider each electrical corporation's individual procurement
situation, and shall give strong consideration to that situation in
determining which one or more of the features set forth in this
subdivision shall apply to that electrical corporation. A procurement
plan approved by the commission shall contain one or more of the
following features, provided that the commission may not approve a
feature or mechanism for an electrical corporation if it finds that
the feature or mechanism would impair the restoration of an
electrical corporation's creditworthiness or would lead to a
deterioration of an electrical corporation's creditworthiness:
   (1) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services. The
commission shall specify the format of that procurement process, as
well as criteria to ensure that the auction process is open and
adequately subscribed. Any purchases made in compliance with the
commission-authorized process shall be recovered in the generation
component of rates.
   (2) An incentive mechanism that establishes a procurement
benchmark or benchmarks and authorizes the electrical corporation to
procure from the market, subject to comparing the electrical
corporation's performance to the commission-authorized benchmark or
benchmarks. The incentive mechanism shall be clear, achievable, and
contain quantifiable objectives and standards. The incentive
mechanism shall contain balanced risk and reward incentives that
limit the risk and reward of an electrical corporation.
   (3) Upfront achievable standards and criteria by which the
acceptability and eligibility for rate recovery of a proposed
procurement transaction will be known by the electrical corporation
prior to the execution of the bilateral contract for the transaction.
The commission shall provide for expedited review and either approve
or reject the individual contracts submitted by the electrical
corporation to ensure compliance with its procurement plan. To the
extent the commission rejects a proposed contract pursuant to this
criteria, the commission shall designate alternative procurement
choices obtained in the procurement plan that will be recoverable for
ratemaking purposes.
   (d) A procurement plan approved by the commission shall accomplish
each of the following objectives:
   (1) Enable the electrical corporation to fulfill its obligation to
serve its customers at just and reasonable rates.
   (2) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation's actions in compliance with an approved
procurement plan, including resulting electricity procurement
contracts, practices, and related expenses. However, the commission
may establish a regulatory process to verify and assure that each
contract was administered in accordance with the terms of the
contract, and contract disputes which may arise are reasonably
resolved.
   (3) Ensure timely recovery of prospective procurement costs
incurred pursuant to an approved procurement plan. The commission
shall establish rates based on forecasts of procurement costs adopted
by the commission, actual procurement costs incurred, or combination
thereof, as determined by the commission. The commission shall
establish power procurement balancing accounts to track the
differences between recorded revenues and costs incurred pursuant to
an approved procurement plan. The commission shall review the power
procurement balancing accounts, not less than semiannually, and shall
adjust rates or order refunds, as necessary, to promptly amortize a
balancing account, according to a schedule determined by the
commission. Until January 1, 2006, the commission shall ensure that
any overcollection or undercollection in the power procurement
balancing account does not exceed 5 percent of the electrical
corporation's actual recorded generation revenues for the prior
calendar year excluding revenues collected for the Department of
Water Resources. The commission shall determine the schedule for
amortizing the overcollection or undercollection in the balancing
account to ensure that the 5 percent threshold is not exceeded. After
January 1, 2006, this adjustment shall occur when deemed appropriate
by the commission consistent with the objectives of this section.
   (4) Moderate the price risk associated with serving its retail
customers, including the price risk embedded in its long-term supply
contracts, by authorizing an electrical corporation to enter into
financial and other electricity-related product contracts.
   (5) Provide for just and reasonable rates, with an appropriate
balancing of price stability and price level in the electrical
corporation's procurement plan.
   (e) The commission shall provide for the periodic review and
prospective modification of an electrical corporation's procurement
plan.
   (f) The commission may engage an independent consultant or
advisory service to evaluate risk management and strategy. The
reasonable costs of any consultant or advisory service is a
reimbursable expense and eligible for funding pursuant to Section
631.
   (g) The commission shall adopt appropriate procedures to ensure
the confidentiality of any market sensitive information submitted in
an electrical corporation's proposed procurement plan or resulting
from or related to its approved procurement plan, including, but not
limited to, proposed or executed power purchase agreements, data
request responses, or consultant reports, or any combination,
provided that the Division of Ratepayer Advocates and other consumer
groups that are nonmarket participants shall be provided access to
this information under confidentiality procedures authorized by the
commission.
   (h) Nothing in this section alters, modifies, or amends the
commission's oversight of affiliate transactions under its rules and
decisions or the commission's existing authority to investigate and
penalize an electrical corporation's alleged fraudulent activities,
or to disallow costs incurred as a result of gross incompetence,
fraud, abuse, or similar grounds. Nothing in this section expands,
modifies, or limits the State Energy Resources Conservation and
Development Commission's existing authority and responsibilities as
set forth in Sections 25216, 25216.5, and 25323 of the Public
Resources Code.
   (i) An electrical corporation that serves less than 500,000
electric retail customers within the state may file with the
commission a request for exemption from this section, which the
commission shall grant upon a showing of good cause.
   (j) (1) Prior to its approval pursuant to Section 851 of any
divestiture of generation assets owned by an electrical corporation
on or after the date of enactment of the act adding this section, the
commission shall determine the impact of the proposed divestiture on
the electrical corporation's procurement rates and shall approve a
divestiture only to the extent it finds, taking into account the
effect of the divestiture on procurement rates, that the divestiture
is in the public interest and will result in net ratepayer benefits.
   (2) Any electrical corporation's procurement necessitated as a
result of the divestiture of generation assets on or after the
effective date of the act adding this subdivision shall be subject to
the mechanisms and procedures set forth in this section only if its
actual cost is less than the recent historical cost of the divested
generation assets.
   (3) Notwithstanding paragraph (2), the commission may deem
proposed procurement eligible to use the procedures in this section
upon its approval of asset divestiture pursuant to Section 851.
  SEC. 27.  Article 11 (commencing with Section 910) is added to
Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to
read:

      Article 11.  Reports


   910.  (a) The commission shall, on an annual basis by February 1
of each year, prepare and submit to the policy and fiscal committees
of the Legislature a written report summarizing the following
information:
   (1) All electrical corporation revenue requirement increases
associated with meeting the renewables portfolio standard, as defined
in Section 399.12, including direct procurement costs for eligible
renewable energy resources and renewable energy credits,
administrative expenses for procurement, expenses incurred to ensure
a reliable supply of electricity, and expenses for upgrades to the
electrical transmission and distribution grid necessary to 
delivery   the delivery of  electricity from
eligible renewable energy resources to load.
   (2) All cost savings experienced, or costs avoided, by electrical
corporations as a result of meeting the renewables portfolio
standard.
   (3) All costs incurred by electrical corporations for incentives
for distributed and renewable generation, including the
self-generation incentive program, the California Solar Initiative,
and net energy metering.
   (4) All cost savings experienced, or costs avoided, by electrical
corporations as a result of incentives for distributed and renewable
generation.
   (5) All renewable, fossil fuel, and nuclear procurement costs,
research, study, or pilot program costs, or other program costs for
which an electrical corporation is seeking recovery in rates, that is
pending determination or approval by the commission.
   (6) The decision number for each decision of the commission of
recovery in rates of costs incurred by an electrical corporation
since the preceding report.
   (7) Any change in the electrical load serviced by an electrical
corporation since the preceding report.
   (b) The commission may combine the information required by this
section with the reports prepared pursuant to Article 16 (commencing
with Section 399.11) of Chapter 2.3.
  SEC. 28.  Section 1005.1 is added to the Public Utilities Code, to
read:
   1005.1.  (a) The commission shall issue a decision on an
application for a certificate within 18 months of the date of filing
of the completed application, when  both   all
 of the following are true:
   (1) The application is for a certificate for building or upgrading
an electrical transmission line that the commission finds necessary
to provide transmission to load centers for electricity generated in
a high priority renewable energy zone or is reasonably necessary to
facilitate achievement of the renewables portfolio standard
established in Article 16 (commencing with Section 399.11) of Chapter
2.3. 
   (2) The commission has considered all of the following:  

   (A) The utilization of rights-of-way by upgrading existing
transmission facilities instead of building new transmission
facilities, where technically and economically justifiable. 

   (B) The expansion of existing rights-of-way, if technically and
economically feasible, when construction of new transmission lines is
required.  
   (C) The creation of new rights-of-way when justified by
environmental, technical, and economic reasons.  
   (D) The availability of cost-effective alternatives to
transmission, such as energy efficiency measures and distributed
generation.  
   (2) 
    (3)  The commission has not expressly found any of the
following:
   (A) That the investment is not reasonable and necessary to
maintain or enhance reliability of the transmission grid.
   (B) That the building or upgrading of the electrical transmission
line will not maintain or enhance efficient use of the transmission
grid.
   (C) That the transmission line fails to meet other applicable
standards and requirements for approval and construction.
   (b) An extension of time may be granted by the commission if it
finds the extension is necessary for completion of review pursuant to
the California Environmental Quality Act (Division 13 (commencing
with Section 21000) of the Public Resources Code).
  SEC. 29.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
certain costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
   With respect to certain other costs, no reimbursement is required
by this act pursuant to Section 6 of Article XIII B of the California
Constitution because a local agency or school district has the
authority to levy service charges, fees, or assessments sufficient to
pay for the program or level of service mandated by this act, within
the meaning of Section 17556 of the Government Code.
  SEC. 30.   (a)    The sum of
three hundred twenty-two thousand dollars ($322,000) is hereby
appropriated from the Public Utilities Commission Utilities
Reimbursement Account to the Public Utilities Commission for
additional staffing to identify, review, and approve transmission
lines reasonably necessary or appropriate to facilitate achievement
of the renewables portfolio standard established in Article 16
(commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division
1 of the Public Utilities Code. 
   (b) It is the intent of the Legislature, through the Budget Act or
other measure, to appropriate the sum of two million three hundred
thirty-nine thousand dollars ($2,339,000) from the Energy Resources
Programs Account to the State Energy Resources Conservation and
Development Commission for additional staffing to process
applications for certification of powerplants pursuant to Chapter 6
(commencing with Section 25500) of Division 15 of the Public
Resources Code.  
   (c) It is the intent of the Legislature, through the Budget Act or
other measure, to appropriate the sum of two million five hundred
eighty-nine thousand dollars ($2,589,000) from the Energy Resources
Programs Account to the State Energy Resources Conservation and
Development Commission for additional staffing to do the following:
 
   (1) To prepare, in association with the Department of Fish and
Game, one or more natural communities conservation plans for the
Mojave and Colorado Desert regions to facilitate the development of
renewable electrical generation facilities using solar energy in
those regions.  
   (2) To assist the federal Bureau of Land Management in the
development of a program environmental impact report to identify
appropriate areas, on federal lands within the state, for the
development of renewable electrical generation facilities using solar
energy.  
   (3) To develop best management practices to facilitate development
of renewable electrical generation facilities using solar energy,
while minimizing environmental impacts.  
   (d) It is the intent of the Legislature, through the Budget Act or
other measure, to appropriate the sum of three million fifty-seven
thousand dollars ($3,057,000) to the Department of Fish and Game for
staffing for the Renewable Energy Regulatory Action Team to develop
natural communities conservation plans for transmission lines and
powerplant sitings.