BILL ANALYSIS
SB 14
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Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 14 (Simitian) - As Amended: August 18, 2009
Policy Committee:
UtilitiesVote:10-5
Natural Resources 5-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill increases the state's Renewable Portfolio Standards
(RPS) goal in stages up to 33% by 2020 and generally recasts the
existing RPS statute. Specifically, this bill:
1)Replaces the 20% by 2010 RPS target with biennial targets of
20% by 2012, 23% by 2014, 26% by 2016, 30% by 2018 and 33% by
2020. These targets are applicable to "retail sellers," which
include IOUs, energy service providers and community choice
aggregators, and also to publicly-owned utilities (POUs).
2)Revises the definition of "delivery," for purposes of
renewable energy generated to meet the RPS goal, to eliminate
eligibility of energy from an out-of-state resource that is
not scheduled for "simultaneous consumption," as defined, by
customers in California.
3)Allows retail sellers and POUs to count the renewable output
from renewable facilities that do not comply with the
definitions of eligible renewable resources toward the RPS if
the retail seller or POU had executed a contract to procure
resources from a facility prior to May 31, 2009.
4)Revises existing provisions requiring POUs to implement their
own RPS programs by specifically requiring each POU to meet
the targets in (1) and to report annually to the California
Energy Commission (CEC) on its progress toward meeting the
targets.
5)Requires the CEC to adopt regulations for enforcement of (5),
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and upon a determination by the CEC that a POU has failed to
comply with the RPS requirements, requires the CEC to refer
the matter to the Air Resources Board (ARB), which may impose
penalties on the POU.
6)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.
7)Sets aside up to one-quarter of the 33% renewable portfolio
for IOU-owned generation, by requiring the PUC to approve an
IOU's application to construct, own and operate a renewable
energy facility until IOU-owned renewable facilities equal
8.25% of the IOU's anticipated 2020 retail sales.
8)Replaces existing RPS flexible compliance provisions with PUC
authority to allow retail sellers to delay compliance with the
2012, 2014, 2016 and 2018 renewable targets per (1) for a
maximum of two years if the retail seller demonstrates
inadequate transmission capacity or unanticipated permitting
and interconnection delays.
9)Revises the criteria for the Market Price Referent (MPR) used
to gauge the reasonableness of renewable energy contracts, by
requiring the price methodology to reflect all current and
anticipated environmental compliance costs.
10)Establishes a new and significantly higher annual
above-market cap-6% of an IOU's total electric revenues for
the prior year-beyond which the IOUs would not have to procure
additional renewable resources under the RPS at above-market
costs in a particular year.
11)Allows retail sellers and POUs to use renewable energy
credits (RECs) from out-of-state renewable resources that do
not deliver electricity into California (undelivered RECs)
toward their RPS obligations, but caps the total amount of
undelivered RECs at 20% of the retail seller's or POU's
renewable procurement targets.
12)Requires the PUC to approve an application to construct a
transmission line within 18 months if the commission finds the
project necessary to meet the RPS goals.
13)Requires the Department of Fish and Game to establish an
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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.
14)Appropriates $322,000 from Public Utilities Reimbursement
Account to the PUC for additional staffing related to
transmission lines.
FISCAL EFFECT
1)CEC : The commission will require $650,000 annually for two
positions and contract funds to expedite the siting of
renewable energy generation and transmission. [Energy
Resources Programs Account]
The CEC would also incur annual costs of $600,000 for three
positions and contract funds to enforce the RPS requirements
for POUs. [Energy Resources Programs Account]
2)PUC : The commission states that meeting the 33% by 2020 goal
"will require an infrastructure build-out on a scale and
timeline perhaps unparalleled anywhere in the world." In
addition to the seven staff current assigned to the RPS
program, the commission would incur ongoing special fund costs
[Public Utilities Reimbursement Account] of $1.7 million for
14 additional positions as follows:
a) Five additional regulatory analyst positions to design
and implement the new RPS policies, manage the renewable
energy procurement process, coordinate procurement and
transmission planning, and calculate program costs for
purposes of applying the cost cap.
b) An administrative law judge and an attorney to evaluate
utilities' requests for flexible compliance with the
increased targets.
c) Seven additional positions, supplementing five existing
staff, associated with permitting an anticipated four to
six major new transmission projects and within an 18-month
deadline following application.
COMMENTS
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1)Purpose . This bill is intended to increase the amount of
electricity procured from renewable generation sources to
reduce greenhouse gas emissions, improve public health and air
quality, stimulate economic development by encouraging
innovation in energy technologies and creating new employment
opportunities in California, and increase fuel diversity to
promote greater stability and predictability in electricity
process for consumers.
2)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% of its sales are from renewable energy sources by
December 31, 2010. 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 investor-owned utilities 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.
The original RPS bill, SB 1078 (Sher)/Chapter 516 of 2002, set
a goal of 20% by 2017. SB 107 (Simitian)/Chapter 464 of 2006,
accelerated the deadline for 20% to 2010. Nearly seven years
after the RPS was enacted, the IOUs have not advanced very far
beyond their 2002 average starting point of 12% renewable
energy generation, are not on pace to achieve 20% by 2010, and
are planning to use flexible compliance rules to delay
attainment of 20% until 2013.
According to the PUC, as of 2007, the IOUs have achieved the
following levels of progress to the statutory goal: 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 that increasing prices for renewable energy
may exhaust the funds set aside to pay above-market costs
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before the 20% target is achieved.
In a recent report providing preliminary results on the
feasibility and costs of achieving a 33% RPS by 2020, the PUC
concluded that such a goal "is highly ambitious, given the
magnitude of the infrastructure buildout required." Under the
PUC's analysis, the incremental cost of moving from the
current to a 33% RPS would result in a 7.1% increase in
utility costs. This increase included the costs associated
with more expensive generation resources, new transmission,
and other resources that will be needed to provide back up
generation when renewable electricity is not available. The
estimate assumes the utilities will continue the same balance
of renewable technologies, which includes a large reliance on
wind and solar energy, and that the direct costs of building
new renewable facilities remains unchanged over time, and thus
does not account for potential technology-related decreases in
costs over time.
3)Cost cap . This bill establishes a new limitation for
above-market costs for IOU renewable procurement-6% of the
IOU's revenue requirement. Based on PUC data, for the three
largest IOUs, 6% of the 2008 revenue requirement equals
approximately: PG&E - $650 million; SCE - $700 million; SDG&E
- $180 million. Thus, a rough estimate of the total cost cap
for all three IOUs is $1.5 billion at 2008 revenues, roughly
between five and 10 times the amount set aside for
above-market costs under current law, depending on the
accounting method.
4)Related Legislation . AB 64 (Krekorian), a similar measure, is
pending in Senate Appropriations.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081