BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
14 (Simitian)
Hearing Date: 3/23/2009 Amended: 3/12/2009
As proposed to be amended
Consultant: Bob Franzoia Policy Vote: Energy 6-3
_________________________________________________________________
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BILL SUMMARY: SB 14 would revise the California Renewables
Portfolio Standard (RPS) Program, as follows:
- Require investor owned utilities (IOUs) to increase total
procurement of electricity generated by eligible renewable
energy resources by at least an additional one percent of retail
sales annually so that 33 percent of its retail sales are
procured from eligible renewable energy resources no later than
December 31, 2020, if the PUC determines that achieving these
targets will result in just and reasonable rates.
- Make certain requirements of the RPS program applicable to
publicly owned utilities (POUs), thereby imposing a state
mandated local program.
- Require the California Energy Commission (CEC) to implement an
accounting system to verify compliance with the RPS program
requirements by POUs, adopt regulations, and to undertake
measures in order to substantially increase the amounts of
eligible renewable energy resources connected to transmission
grids.
- Require the PUC to enforce existing requirements until an IOU
procures 20 percent of its retail sales from eligible renewable
energy resources and then requires that an IOUs procurement plan
contain a showing that eligible renewable energy resources will
be procured in an amount sufficient to meet RPS program
requirements.
- Require the PUC to approve an application for a certificate of
public convenience within one year of the filing of a completed
application, allow recovery of transmission costs incurred by an
IOU, approve reasonable and cost effective transmission
investments that are necessary to deliver electricity generated
by eligible renewable energy resources, and to approve
transmission investments necessary to transmit electricity
generated by eligible renewable energy resources to IOUs and
POUs.
- Require the California Independent System Operator (Cal ISO)
to adjust its market structure to achieve, in the most cost
effective manner, the 33 percent RPS threshold by 2020, develop
annual statewide transmission plans, seek proposals from and
propose transmission projects to POUs that can be jointly owned,
and eliminate barriers over transmission lines in its control
area.
- Require the PUC, the CEC, and the Cal ISO to consider
recommendations of the Renewable Energy Transmission Initiative
(RETI) relative to the siting of transmission and eligible
renewable energy resources.
- Require the Department of Fish and Game (DFG) to establish an
internal division for the purpose of performing planning and
streamlined environmental compliance services with a priority
given to the building of eligible renewable energy resources.
- Require the CEC to develop a review process with the DFG with
the goal of reducing the time required to comply with the
California Environmental Quality Act (CEQA) for eligible
renewable energy resources.
- State the intent to appropriate $3,700,000 from the Public
Interest Research, Development, and Demonstration Fund to the
CEC for the purposes of facilitating the development of solar
energy in the Mojave Desert.
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SB 14 (Simitian)
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
PUC administration
RPS program $110 $220 $220
Special*
Transmission $170
$340 $340
CEC administration $520 $1,040
$1,040 Special**
Contracts $350 $700
$700
DFG planning $3,057 $3,777$3,057
Bond***/
General****
Cal ISO planning and Unknown costs ongoing
Special*****
oversight
State energy costs Unknown cumulative
increase potentially General/
$279,000
annually statewide beginning Special******
2010 to 2013 to meet new RPS
threshold.
See Staff Comments
* PUC Utilities Reimbursement Account
** Energy Resources Programs Account (revenue in this fund is
available for General Fund purposes)
*** Proposition 84 general obligation bond funds in 2009-10 and
2010-11 (approximately $1,500 in each year)
**** Various. Reimbursements, intent to appropriate $3,700 from
the Public Interest Research, Development, and Demonstration
Fund (PIER) to the CEC for contracts and interagency agreements
to prepare natural communities conversation plans (revenue in
this fund is available for General Fund purposes), and,
potentially, future permit fees.
***** The ISO is a private, non profit public benefit
corporation regulated by the Federal Energy Regulatory
Commission
****** Service Revolving Fund, other special funds (total
estimated on IOU usage)
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Chapter 516/2002 (SB 1078, Sher) and Chapter 464/2006 (SB 107,
Simitian) established and revised the RPS program which requires
IOUs to increase procurement from eligible renewable energy
resources by at least one percent of retail sales annually,
until they reach 20 percent by 2010. The 20 percent threshold
in Chapter 516 was accelerated from 2017 to 2010 by Chapter 464.
Executive Order S-14-08 ordered that all retail sellers of
electricity shall serve 33 percent of their load with renewable
energy by 2020. The order directed state agencies
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SB 14 (Simitian)
to take all appropriate actions to implement this target in all
regulatory proceedings, inlcuding siting, permitting, and
procurement for renewable energy power plants and transmission
lines.
PUC
The PUC's RPS program responsibilities include:
- Determining annual procurement targets and enforcing
compliance.
- Reviewing and approving IOU renewable energy procurement
plans.
- Reviewing IOU contracts for RPS-eligible energy.
- Establishing the standard terms and conditions used by IOUs in
their contracts for eligible renewable energy.
- Calculating market price referents for non-renewable energy
that serve as benchmarks for the price of renewable energy.
Under this bill, PUC responsibilities would be increased in
order to:
- Facilitate the identification, review, and approval of
transmission projects needed to deliver 33 percent RPS energy by
2020.
- Identify additional renewable transmission interconnection
projects needed to deliver 33 percent RPS energy by 2020.
- Decrease the time needed to perform environmental review and
project need analysis in order to meet permit streamlining
requirements, improve implementation of the PUC's streamlining
practices, and improve coordination with federal agencies.
RPS Program
The PUC has identified the need for two regulatory analyst
positions ongoing to meet the above requirements. Since current
RPS staff is still implementing the 20 percent 2010 threshold,
the new staff will concurrently address expanded design and
implementation issues.
Transmission
The PUC's average time for permitting transmission lines is 18
months and was 16 months before the Sunrise Powerlink case. A
12 month timeframe may be difficult as CEQA review typically
takes 12 months in order to account for the four seasons. After
the EIR/EIS is released, the PUC generally needs two to four
months to complete the permitting process - a 30 day period for
public review and comment, including public hearings in select
communities impacted by the transmission line, drafting of the
proposed decision on whether to approve the line, a 30 day
period for public review and comment on the proposed decision,
and adoption of the decision by a PUC vote.
The PUC has identified the need for one regulatory analyst to
assist with permitting and rate recovery, one engineer to
process applications more quickly, and one administrative law
judge to handle the increased proceeding workload on an
expedited basis.
CEC
Under this bill, the CEC will have oversight of POU efforts to
meet the same 33 percent 2020 RPS threshold required of IOUs.
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SB 14 (Simitian)
Preliminary information indicates the CEC will require five
staff and $300,000 in contract services annually to provide the
required oversight of POUs, two staff and $400,000 in contract
services annually for transmission siting, permitting, and
review activities and one staff attorney to assist with POU
oversight and transmission activities. The CEC will utilize the
Energy Resources Programs Account to fund the oversight
functions. It is unknown at this time whether this will
necessitate an increase in the surcharge.
DFG
DFG has identified costs of $3,057,000 in 2009-10, $3,777,000 in
2010-11, and $3,057,000 in 2011-12 and ongoing. Of these
amounts, personal services are consistent at $2,045,000 (22 two
year limited term positions of which 17 are a scientist
classification) with one time equipment costs in 2009-10 and
consultant contracts in 2010-11 accounting for the biggest
changes in operating expenses and equipment.
2009-10 and 2010-11 costs would be paid from a combination of
CEC funds and a Wildlife Conservation Board (WCB) Prop 84
Natural Community Conservation Plan (NCCP) planning grant of
$1,558,103 in 2009-10 and $1,498,897 in 2010-11. For 2011-12
and ongoing reimbursements would come from energy generators.
According to a DFG Budget Change Proposal, a fund source is
under development with the Resources Agency and a funding
commitment will be in place prior to July 10, 2019. Staff notes
a fee on permits for transmission projects, as well as energy
generators, would more equitably spread these costs. Absent
adoption of the funding source under development, these costs
may be a General Fund obligation.
DFG would establish a Renewable Energy Action Team and a
Renewable Energy Conservation Planning Program. The action team
would:
- Develop multi-species regional conservation strategies while
facilitating the development of renewable energy to meet RPS
goals.
- Provide permit and technical assistance to expedite siting and
construction of renewable energy projects.
- Develop multiple coordinated processes with state and federal
agencies to ensure renewable energy development is timely and
achieves environmental policy goals.
Chapter 6 of Prop 84 authorized $450 million for the protection
and conservation of forests and wildlife habitat. Of that
amount, $90 million is available to the WCB for grants to
implement NCCP plans. As of 3/15/2009, this chapter has a
balance of $28,542,000. As noted above, DFG is proposing the
use of these funds.
Staff notes that the use of bond funds, which are retired over
30 years, for a non capital outlay expenditure is not cost
effective. As part of the budget process, an appropriation of
PIER funds, or a loan from another funding source, would result
in a General Fund savings of $6,365,000 over 30 years by
eliminating the principal and interest cost on the repayment of
$3,057,000.
PIER revenues are approximately $70,000,000 annually. The fund
balance is estimated at $48,100,000 on 6/30/2009.
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SB 14 (Simitian)
Cal ISO
The ISO is a not-for-profit public-benefit corporation charged
with operating the majority of the state's high-voltage
wholesale power grid and serves as an impartial link between
generators and utilities, providing equal access to the grid for
all qualified users and planning for transmission infrastructure
needs.
Utilities and other generators use their own power plants or
negotiate short- and long-term contracts for power deliveries.
Most of the state's electricity is traded through these
contracts prior to being scheduled on the ISO grid. Generators
schedule their
electricity deliveries through the ISO. While some POU's
operate their own transmission lines, the ISO routes electricity
from generators to substations using the wholesale grid.
The ISO is funded through a grid management charge which is
essentially a toll for wholesale users of the grid. Since 2005,
the charge has dropped from a high of $0.83 per MWh to $0.77 per
MWh which amounts to about $1 on a monthly utility bill of about
$80. The charge is designed to recover operating costs and debt
service, fund approved capital requirements, and provide for an
operating reserve. The charge is earned from six transaction
categories: core reliability services; energy transmission
services; forward scheduling; congestion management; market
usage and settlements, metering and client relations.
Managing six to seven new transmission lines and many widely
disbursed generation facilities is likely to increase ISO
operating costs though no estimate of those costs is available
at this time.
RETI is a statewide initiative to help identify the transmission
projects needed to accommodate renewable energy goals, support
future energy policy, and facilitate transmission corridor
designation, transmission and generation siting and permitting.
RETI is a collaborative process in which all interested parties
are encouraged to participate. RETI will assess all competitive
renewable energy zones in California and possibly also in
neighboring states that can provide significant electricity to
California consumers by the year 2020. RETI also will identify
those zones that can be developed in the most cost effective and
environmentally benign manner and will prepare detailed
transmission plans for those zones identified for development.
The PUC estimates that Tehachapi, Sunrise, and Devers-Palo Verde
account for half of the estimated need transmission, and will
get the state to the 20 percent RPS threshold and beyond. To
meet the 33 percent RPS threshold, the PUC will need to permit
at least three more major transmission lines in the next few
years.
Preliminary generation and transmission cost information
A joint PUC/CEC greenhouse gas proceeding estimated statewide
RPS revenue requirements in 2020 depending on one of three
scenarios. These scenarios also provide an estimate of energy
costs on an average rate per kiloWatt hour (kWh). The
proceeding identified an average rate in 2008 of $0.13 per kWh.
The scenarios are:
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SB 14 (Simitian)
- Natural Gas Only Case. This is essentially the Air Resources
Board's (ARB) business as usual case and envisions no further
investments in either energy efficiency or RPS energy.
- Reference Case. This case projects continuation of current
levels of energy efficiency programs and the 20 percent RPS
through 2020, or current law.
- Accelerated Policy Case. This case implements the policies
recommended in the joint decision and adopted in the ARB's
Proposed Scoping Plan-33 percent RPS threshold and significantly
expanded energy efficiency programs.
The average rate per kWh increase to reach the Reference Case
(reflects current law) is estimated at $0.15. The average rate
per KWh to reach the Accelerated Policy Case (changes to current
law proposed by this bill plus high goals energy efficiency
inputs) is estimated at $0.17.
(The energy efficiency inputs are:
- Energy efficiency: High goals energy efficiency scenario based
on PUC Goals Update Study and POU AB 2021 (Chapter 734/2006)
filings: 36,559 gigawatt hour (GWh).
- Rooftop solar photo voltaic (PV): 3,000 MW nameplate (100
percent efficiency) of rooftop PV installed.
- Demand response: five percent of demand response.
- Combined heat and power (CHP): 1,574 MegaWatt (MW) small CHP <
5 MW and 2,804 MW larger CHP > 5 MW.)
The PUC analysis estimates achieving a 33 percent RPS threshold
in 2020 will cost $8.9 billion in generation and transmission
costs but will save $6.3 billion in avoided costs (the cost of
building and operating conventional fossil fueled generation)
resulting in a net cost to ratepayers of $2.6 billion annually.
The key drivers in the analysis include natural gas prices, the
level of energy efficiency achieved, and renewable technology
development.
On a net cost basis, the difference between current rates to the
Accelerated Policy Case and the Reference Case is $2.6 billion
and $1.8 billion. Those annual costs to ratepayers (minus the
high goals efficiency program, which is not a provision of this
bill) are noted in the following chart in 2008 dollars.
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| |Existing to 20 |Existing to 33 |Difference |
| |percent RPS |percent RPS |between 20 |
| | | |percent and 33 |
| | | |percent RPS |
|----------------+----------------+----------------+----------------|
|Annual Cost in |$3,400,000,000 |$8,900,000,000 |$5,500,000,000 |
|2020 | | | |
|----------------+----------------+----------------+----------------|
|Annual Benefits |$2,600,000,000 |$6,300,000,000 |$3,700,000,000 |
|in 2020 | | | |
|----------------+----------------+----------------+----------------|
|Net Cost in | $800,000,000 |$2,600,000,000 |$1,800,000,000 |
|2020 | | | |
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Dividing $1.8 billion (the net cost difference between the
current 20 percent RPS threshold and the proposed 33 percent RPS
threshold) by estimated 2020 total system power of 330,000 GWh
results in a $0.00545 per kWh increase. That is, the cost to
the
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SB 14 (Simitian)
ratepayer when the RPS threshold is increased from 20 percent to
33 percent is slightly more than one half cent per kWh.
Staff notes the PUC is finalizing a more thorough estimate of
total costs and net costs.
According to the PUC analysis, the 33 percent RPS threshold
combined with energy efficiency will increase costs by four
percent annually compared to the Natural Gas Only Case scenario.
The PUC's Division of Ratepayer Advocates (DRA) estimates a
$0.04 or 25 percent increase per kWh to achieve a 33 percent RPS
threshold. The DRA uses current rates ($0.13/kWh in 2008) as
the base to compare the 2020 Accelerated Policy Case rate. (The
current kWh rate increases to the 2020 Natural Gas Only Case
even if all other RPS costs are held constant as a result of
increased investment and fuel costs.)
State Energy Costs
The state is a retail energy customer appropriating General
Funds for entities like the University of California, the
California State University, and the California Department of
Corrections and Rehabilitation, and K-14 education in a less
direct manner. The Department of General Services allocates
Service Revolving Funds, a fund used for the purchase and sale
of materials, supplies and equipment and the rendering of
services, including energy used by special fund entities.
California is served by about 75 load-serving entities (LSEs).
There are:
IOUs - 6
POU - 48
Rural Electricity Cooperatives - 4
Native American Utilities - 3
Other Electricity Service Providers - 14
The five largest utilities and total electricity consumption
(2007) are:
1. Southern California Edison Company (SCE) - 88,208
million kWh
2. Pacific Gas and Electric Company (PG&E) - 85,057 million
kWh
3. Los Angeles Department of Water and Power - 24,317
million kWh
4. San Diego Gas & Electric (SDG&E) - 20,300 million kWh
5. Sacramento Municipal Utility District - 10,917 million
kWh
In 2008, within the SCE and SDG&E service territories, state
entities consume 739,651,000 (state), 428,876,000 (colleges and
universitites) and 1,930,848,000 (K-12) and 62,650,000 (state),
244,836,000 (colleges and universities) and 375,976,000 (K-12)
kWh, respectively. Per kWH rates range from $0.096 for colleges
and universities to $0.16 for K-12 and from $0.07 for colleges
and universitites to nearly $0.17 for K-12, respectively.
Within the PG&E service terrritory, state entities consume
1,169,420 megaWatt hours (MWh) (16 percent of use by all
governmental activity (federal, state, county, city, district,
city/county, and foreign). (At this time, K-12 consumption
within the PG&E service territory is an estimate of 50 percent
of total "district" govermental activity or 1,362,520 MWh. This
varies total state PG&E consumption between 3 and 4.5 percent.)
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Total state entity consumption within these IOU service
territories is estimated at approximately 6,315,000,000 kWh (10
to 11 percent of all consumption within these service
territoires). IOUs deliver approximately two thirds (64.3
percent in 2007) of state systemwide electricity. Adding POUs,
total state entity consumption is estimated at 15 to 16 percent
of all consumption in the state. If the cost in 2020 to achieve
a 33 percent RPS threshold is $1.8 billion to all ratepayers,
state costs would increase by an estimated $279 million annually
(15.5 percent of $1,800,000,000) based on 2007 and 2008
electricity consumption data.
Other non General Fund entities may be affected. For example,
though the provisions of the bill relate to retail rates, and
the State Water Project (SWP) is a wholesale purchaser, to the
extent that there are new costs associated with new transmission
lines, SWP costs may increase. Currently, SWP
transmission-related costs are several million dollars annually.
The Department of Water Resources, which has oversight of the
SWP, has a Budget Change Proposal requesting 9 PYs and $1.7
million (California Water Fund) to support a new effort to
increase the use of renewables in the SWP power portfolio.
Changes in energy usage, climate changes including changes in
rainfall, regulatory changes, efficiencies in renewable energy
production, and changes in the cost and availability of fossil
fuels will impact these costs.
Staff notes the proposed amendments do the following:
- Clarify that a public utility district receiving 100 percent
of its electricity pursuant to a preference right pursuant to
the federal Trinity River Diversion Act of August 12, 1955 is in
compliance with the renewable energy procurement requirements of
the RPS Program.
- Require the PUC to prepare, on an annual basis, a report
summarizing IOU revenue requirements associated with meeting the
RPS, including procurement costs, expenses incurred to ensure a
reliable supply of electricity, and expenses to upgrade the
transmission grid; all cost savings experienced, or costs
avoided, as a result of meeting the RPS; costs incurred for
incentives for distributed and renewable generation; cost
savings experienced, or costs avoided, as a result of these
incentives; all renewable, fossil fuel, and nuclear procurement
costs, research, study, or pilot program costs for which an IOU
is seeking recovery in rates; and any change in the electrical
load serviced by the IOU since the preceding report. The
information contained in this report is similar to, and may be
combined with, report information required by Public Utilities
Code Section 747 (renumbered by this bill as Section 910).