BILL ANALYSIS
SB 14
Page 1
Date of Hearing: July 8, 2009
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Nancy Skinner, Chair
SB 14 (Simitian) - As Amended: June 23, 2009
SENATE VOTE : 21-16
SUBJECT : Utilities: Renewable energy resources
SUMMARY : Raises California's Renewables Portfolio Standard
(RPS) goal from 20 percent by 2010 to 33 percent by 2020 and
revises specified provisions of the existing RPS statutes.
EXISTING LAW :
1)The RPS requires investor-owned utilities (IOUs) and certain
other retail sellers of electricity to achieve a 20 percent
renewable energy portfolio by 2010 and establishes a detailed
process and standards for renewable energy procurement.
a) Requires local publicly-owned utilities (POUs) to
implement and enforce their own RPS programs. POUs are not
subject to the same detailed process and standards as IOUs
and other retail sellers subject to the jurisdiction of the
Public Utilities Commission (PUC).
b) Provides that eligible renewable technologies are
biomass, solar thermal, photovoltaic, wind, geothermal,
renewable fuel cells, small hydroelectric (30 megawatts or
less), digester gas, limited non-combustion municipal solid
waste conversion, landfill gas, ocean wave, ocean thermal,
and tidal current.
c) Provides that renewable resources located outside the
state are eligible if the project commences operation after
January 1, 2005 and is connected to California's
transmission grid or delivers energy to California.
d) Defines and permits the use of unbundled/tradable
renewable energy credits (RECs) for RPS compliance, subject
to PUC approval, and authorizes the PUC to limit the amount
of RECs a retail seller may use for RPS compliance.
e) Requires IOUs to submit annual RPS procurements plans
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and meet a one percent per year annual procurement target.
f) Requires the PUC to adopt a market price referent (MPR)
as a benchmark for reasonable prices for RPS procurement by
IOUs.
g) Designates funds (approximately $165 million per year)
available to cover IOUs' RPS procurement costs which exceed
the MPR. Once these funds are exhausted, IOUs are relieved
of their obligation to buy additional renewable energy
through the RPS procurement process, but may build or
continue to buy renewable energy through bilateral
contracts, notwithstanding this RPS "cost cap."
h) Permits specified small, multi-jurisdictional IOUs to
count renewable energy delivered in other states under
specified conditions.
2)Requires the PUC to certify the public convenience and
necessity require a transmission line before an IOU may begin
construction (Certificate of Public Convenience and Necessity,
or CPCN). The CPCN process includes environmental review of
the proposed project under the California Environmental
Quality Act (CEQA).
3)The California Global Warming Solutions Act (AB 32) requires
the Air Resources Board (ARB) to adopt a statewide greenhouse
gas (GHG) emissions limit equivalent to 1990 levels by 2020
and adopt regulations to achieve maximum technologically
feasible and cost-effective GHG emission reductions. Pursuant
to AB 32, ARB has adopted a Scoping Plan which includes
achieving a 33 percent RPS by 2020 as a key measure to achieve
the 2020 GHG emissions limit.
THIS BILL :
1)Replaces the 20 percent by 2010 RPS target and one percent
annual procurement targets with biennial targets of 20 percent
by 2012, 23 percent by 2014, 26 percent by 2016, 30 percent by
2018 and 33 percent by 2020. These targets are applicable to
"retail sellers", which include IOUs, energy service providers
and community choice aggregators.
2)Revises the definition of "delivery" to eliminate eligibility
of energy from an out-of-state resource that is not scheduled
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for "simultaneous consumption," as defined, by customers in
California.
3)Revises out-of-state eligibility, which generally prohibits
existing projects, to permit existing projects selling
electricity to a retail seller or POU as of May 31, 2009.
4)Provides additional assurance of recovery by IOUs of costs
incurred for transmission facilities the PUC finds are
reasonably necessary or appropriate to facilitate achievement
of the RPS.
5)Revises existing provisions requiring POUs to implement and
enforce their own RPS programs and adds new provisions
requiring the CEC to establish and enforce an RPS applicable
to POUs, consistent with the 33 percent by 2020 target and
related purposes.
6)Requires the CEC, in consultation with ARB, to adopt
regulations for enforcement of the RPS on POUs, including
providing for the imposition of penalties by ARB pursuant to
AB 32, upon referral by the CEC, for failure to comply with
the RPS.
7)Requires the PUC to adopt a minimum margin of procurement
above the level necessary to comply with the RPS to mitigate
the risk that renewable projects will be delayed or cancelled.
8)Sets aside 25 percent of the 33 percent renewable market for
IOU-owned generation by requiring the PUC to approve an
application by an IOU to construct, own and operate a
renewable energy facility until IOU-owned renewable facilities
equal 8.25 percent of the IOU's anticipated 2020 retail sales.
9)Replaces existing flexible compliance provisions with PUC
authority to allow retail sellers to delay compliance with the
2012, 2014, 2016 and 2018 renewable targets for a maximum of
two years if the retail seller demonstrates inadequate
transmission capacity or unanticipated permitting and
interconnection delays, subject to specified evidentiary
requirements.
10)Revises the criteria for the market price used to gauge the
reasonableness of renewable energy contracts by requiring the
price methodology to reflect all current and anticipated
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environmental compliance costs.
11)Repeals existing above-market funds and cost cap provisions
and establishes a new and significantly higher annual cap on
above-market costs - six percent of an IOU's revenue
requirement.
12)Limits the use of undelivered RECs by a retail seller or a
POU to 20 percent of its procurement requirements.
13)Requires the PUC to approve an application to construct a
transmission line within one year under specified conditions.
14)Requires the Department of Fish and Game to establish an
internal division to perform comprehensive planning,
streamlined environmental compliance services, and ensure
timely completion of Natural Community Conservation Plans
related to development of renewable energy projects.
15)Appropriates $322,000 from the PUC Utilities Reimbursement
Account to the PUC for additional staffing related to
transmission lines.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. The RPS requires IOUs and certain other retail
energy providers, collectively referred to as "retail
sellers," to buy renewable electricity to the extent funds are
available to pay for any costs exceeding a market price set by
the PUC. Each IOU is required to increase its renewable
procurement each year by at least one percent of total sales,
so that 20 percent of its sales are renewable energy sources
by December 31, 2010. Once a 20 percent portfolio is
achieved, no further increase is required. The PUC is
required to adopt comparable requirements for direct access
energy service providers and community choice aggregators.
The RPS requires the PUC to adopt processes for determining
market prices, ranking renewable bids according to cost and
fit, flexible compliance rules and standard contract terms.
The RPS requires IOUs to offer contracts of at least 10 years,
unless the PUC approves shorter contracts. This is intended
to support the development of new renewable resources.
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The original RPS bill, SB 1078 (Sher), Chapter 516, Statute of
2002, set a goal of 20 percent by 2017. SB 107 (Simitian),
Chapter 464, Statutes of 2006, accelerated the deadline for 20
percent to 2010. Nearly seven years after the RPS was
enacted, IOUs have not advanced very far beyond their 2002
average starting point of 12 percent RPS, are not on pace to
achieve 20 percent by 2010, and are already planning to use
flexible compliance rules to delay attainment of 20 percent
until 2013.
According to the PUC, as of 2007, the IOUs have achieved
varying levels of progress toward the 20 percent target: PG&E
- 11.4%; SCE -15.7%; SDG&E - 5.2%. While each IOU added
renewable resources in 2007, the percentage of renewable
energy compared to the rest of the portfolio declined from
2006 due to total load growth. Recent renewable solicitations
by IOUs indicate increasing prices for renewable energy may
exhaust the funds set aside to pay above-market costs before
the 20 percent target is achieved.
2)Amendments recommended by Utilities and Commerce Committee.
When this bill was approved by the Utilities and Commerce
Committee July 6, the author and committee agreed to
amendments, with adoption deferred to this committee. The U&C
amendments ensure that the cap on above-market cost includes
all procurement activities that are used to comply with the
RPS, but allow electric corporations to voluntarily exceed the
cap if the PUC approves those specific contracts.
REGISTERED SUPPORT / OPPOSITION :
Support
California Hydropower Reform Coalition
California Public Utilities Commission
California Sportfishing Protection Alliance
California State Association of Electrical Workers
California State Pipe Trades Council
City of Los Angeles Department of Water and Power
Coalition of California Utility Employees
Environment California
First Solar
Green California
Large-scale Solar Association
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League of Women Voter of California
Natural Resources Defense Council
Sierra Club California
Solar Alliance
TURN
Union of Concerned Scientists
Western State Council of Sheet Metal Workers
Opposition
Alameda Municipal Power
American Whitewater
Burbank Water and Power
CalChamber
California Biomass Energy Alliance
California Large Energy Users Association
California Manufacturers & Technology Association
California Municipal Utilities Association
Clean Power Campaign
City of Alameda
City of Palo Alto
City of Roseville
City of Santa Clara
Covanta Energy
Direct Energy
Evolution Markets, Inc.
Independent Energy Producers Association
Modesto Irrigation District
M-S-R Public Power Agency
Northern California Power Agency
Pacific Gas and Electric Company
PacifiCorp
Redding Electric Utility
Sacramento Municipal Utility District
Shell Energy North America
Southern California Public Power Authority
Terra-Gen Power
Turlock Irrigation District
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092