BILL ANALYSIS SB 581 Page 1 SENATE THIRD READING SB 581 (Leno) As Amended August 27, 2009 Majority vote UTILITIES & COMMERCE 13-0 NATURAL RESOURCES 9-0 ----------------------------------------------------------------- |Ayes:|Fuentes, Tom Berryhill, |Ayes:|Skinner, Gilmore, | | |Carter, Fong, Fuller, | |Brownley, Chesbro, De | | |Furutani, Huffman, | |Leon, Hill, Huffman, | | |Krekorian, Skinner, | |Knight, Logue | | |Fletcher, Swanson, | | | | |Torrico, Villines | | | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- SUMMARY : Allows the San Francisco Public Utilities Commission (SFPUC) to designate all renewable electric generation facilities to be eligible for a unique arrangement where Pacific Gas and Electric Company (PG&E) is required to take electricity from the generator and offset the City of San Francisco's (City) municipal load. Specifically, this bill : 1)Expands the type of generation SFPUC can use to offset the City's municipal load from only solar to all forms of renewable energy. 2)Deletes the restriction that the designated generation facility be Hetch Hetchy Water and Power (HHWP) generated and owned by the City; and, allows the facility to be owned or under lease or contract to the City for at least a five-year term and for the full output of electricity from the facility. 3)Provides that the City shall own the environmental attributes associated with the electricity delivered to the electric grid by City-owned renewable generation facilities. FISCAL EFFECT : Unknown COMMENTS : The City owns HHWP, which provides water from the Tuolumne River to the City and its residents. The federal Raker Act (1913) permitted the City to dam the Tuolumne River and construct powerhouses and transmission lines below Hetch Hetchy SB 581 Page 2 Reservoir for the generation, sale, and distribution of electric energy. The Act established priorities for the use of Hetch Hetchy hydropower: first to drive the system's waterworks, next to supply the City's municipal government agencies, and then to farmers and municipal governments within the Modesto and Turlock irrigation districts. Any remaining hydropower could be sold to the City's residential and business users but never to a corporation, such as PG&E. The City has a unique arrangement. PG&E continues to procure generation and provide transmission and distribution services to all bundled-service ratepayers such as residential, commercial, and industrial customers within the City's boundaries. However, the City owns the Hetch Hetchy power which requires the City to use it for its municipal load first. Five years ago, the Legislature passed AB 594 (Leno), Chapter 790, Statutes of 2004, which enabled the City to install on-site photovoltaic solar generation at its municipal sites and get credit for excess electricity. Two years later, AB 2573 (Leno), Chapter 786, Statutes of 2006, allowed the City to offset its power generated by HHWP at one location, with power consumed by the City municipal meters at a different location. This bill expands the AB 2573 arrangement by applying to all renewable generation. In addition, this bill allows the City to engage in contractual relationships with energy providers through power purchase agreements (PPAs). PPAs can be used by public and private entities to finance the construction of onsite renewable power generation. Under a typical PPA, a private third party finances the up-front costs of building the renewable energy generation facility through a loan provided by a bank. The bank provides a loan to cover the up-front financing for the project, and the energy company will build, own, and operate the renewable facility that provides electricity to the building owner. The building owner, in turn, promises to make specified payments for that power for a certain number of years which pays off the loan, as well as creates a profit stream for the energy company. This bill ensures that the PPA is under lease or contract to the City for at least a five-year term and for the full output of electricity from the facility. Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083 SB 581 Page 3 FN: 0002483