BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 722|
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UNFINISHED BUSINESS
Bill No: SB 722
Author: Simitian (D), Kehoe (D), Steinberg (D)
Amended: 8/31/10
Vote: 21
PRIOR SENATE VOTES NOT RELEVANT
ASSEMBLY FLOOR : Not available
SUBJECT : Utilities: renewable energy resources
SOURCE : Author
DIGEST : Assembly Amendments delete the Senate version of
the bill concerning greenhouse gas credits.
This bill now increases 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, as specified. This bill requires the
California Public Utilities Commission (CPUC) to monitor
and enforce the investor owned utility (IOU) and energy
service producers (ESP) compliance with the RPS targets,
including directing each IOU to prepare and annually update
a renewable energy procurement plan, to be reviewed and
approved by the CPUC, and an annual RPS compliance report.
This bill authorizes CPUC to approve an IOU's application
to construct, own and operate an eligible renewable energy
resources in order to meet the RPS targets, so that such
facilities represent no more than 8.25 percent of the IOU's
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retail sales by December 1, 2020. Requires the Energy
Commission to adopt regulations specifying procedures to
ensure publically owned utilities (POUs) meet RPS targets
and to monitor their compliance, and assigns the ARB-not
the Energy Commission-responsibility to enforce POU
compliance with the RPS.
Other Significant Provisions . (1)Requires a "balanced
portfolio" of renewable energy, meaning, among other
things, that 75% of the portfolio must be interconnected to
the grid within, scheduled not less than hourly for direct
delivery into, or dynamically transferred by a California
balancing authority; (2) requires PUC to issue a decision
on an application for a certificate authorizing
construction of new transmission facilities within 18
months of the date of filing of the completed application;
(3) permits the CPUC to delay compliance with a RPS
requirement if it finds insufficient transmission exists to
meet the RPS, or there were unforeseen delays in permitting
or interconnecting projects; (4) permits the PUC to
establish a cost limitation for each IOU on its
expenditures to procure eligible renewable energy resources
used to comply with the RPS; (5) relaxes the criteria by
which the CPUC determines the necessity of a retail
electricity provider's application to build new
transmission facilities to achieve the RPS.
This bill (1)authorizes use of renewable energy credits
(RECs) for RPS compliance, good for 18 months following the
generation of electricity represented by the REC; (2)
Directs the Energy Commission to update its previous
studies on the capacity of the electricity grid to carry
wind and solar energy resources; (3) requires the
Department of Fish and Game (DFG) to establish an internal
division to conduct planning and environmental compliance
services, giving priority to eligible renewable energy
projects; and (4) appropriates $322,000 from the CPUC
Utilities Reimbursement Account to the CPUC for additional
staff to transmission line applications that facilitate RPS
compliance.
ANALYSIS : The author notes that the Air Resources Board
(ARB) has identified a 33 percent RPS goal as key among its
measures to achieve the state's greenhouse gas (GHG)
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emission reduction goals. The author proposes to codify
the 33 percent RPS goal to increase the amount of
electricity procured from renewable generation sources to
reduce GHG emissions, improve public health and air
quality, and stimulate economic development by encouraging
innovation in energy technologies and creating new
employment opportunities in California.
Under existing law, the California Public Utilities
Commission (CPUC) has regulatory authority over public
utilities, including electrical corporations, as defined.
Existing law requires the CPUC to require the state's three
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 CPUC 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 (Act) establishes the
State Energy Resources Conservation and Development
Commission (Energy Commission). The Act requires the
Commission to certify sufficient sites and related
facilities that are required to provide a supply of
electric power sufficient to accommodate projected demand
for power statewide. The Act requires the Commission to
transmit a copy of an application for certification of a
site and related facility to, among other entities, each
federal and state agency having jurisdiction or special
interest in matters pertinent to the proposed site and
related facilities and to the Attorney General.
This bill requires an applicant to inform the United States
Department of Defense of a proposed project and that an
application will be filed with the commission if the site
and related facility specified in the application is
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proposed to be located within 1000 feet of a military
installation, or lies within special use airspace or
beneath a low-level flight path, as defined.
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
percent of total retail sales of electricity in California
per year by December 31, 2010.
This bill revises 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
percent of total retail sales of electricity in California
per year by December 31, 2020. This bill revises certain
terms used in the program, and revises certain eligibility
criteria for a renewable electrical generation facility, as
defined, pursuant to the program.
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 percent of the total electricity sold to retail
customers in California per year by December 31, 2010. The
RPS program requires that a retail seller of electricity,
including electrical corporations, community choice
aggregators, and electric service providers, purchase a
specified minimum percentage of electricity generated by
eligible renewable energy resources, as defined, in any
given year as a specified percentage of total kilowatt
hours sold to retail end-use customers each calendar year.
The RPS program requires the CPUC to implement annual
procurement targets for each retail seller to increase its
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total procurement of electricity generated by eligible
renewable energy resources by at least an additional one
percent of retail sales per year so that 20 percent of its
retail sales of electricity are procured from eligible
renewable energy resources no later than December 31, 2010.
Existing law requires the CPUC to make a determination of
the existing market cost for electricity, which CPUC
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, by a specified amount.
This bill expresses the intent that the amount of
electricity generated per year from eligible renewable
energy resources be increased to an amount that equals at
least 20 percent of the total electricity sold to retail
customers in California per year by December 31, 2013, and
33 percent by December 31, 2020. This bill requires the
CPUC, by January 1, 2012, to establish the quantity of
electricity products from eligible renewable energy
resources to be procured by each retail seller for
specified compliance periods, sufficient to ensure that the
procurement of electricity products from eligible renewable
energy resources achieves 25 percent of retail sales by
December 31, 2016, and 33 percent of retail sales by
December 31, 2020, and that retail sellers procure not less
than 33 percent of retail sales in all subsequent years.
This bill, consistent with the goals of procuring the
least-cost and best-fit eligible renewable energy resources
that meet project viability principles, requires that all
retail sellers procure a balanced portfolio of electricity
products from eligible renewable energy resources, as
specified. This bill requires the CPUC to waive
enforcement associated with the RPS procurement requirement
if the CPUC finds that the retail seller has demonstrated
certain conditions exist that are beyond the control of the
retail seller and will prevent compliance, has made
material progress towards meeting the applicable RPS
procurement requirement, and has taken reasonable actions
under its control to procure cost effective distributed
generation and allowable unbundled renewable energy
credits, as specified. This bill requires the CPUC to
direct each electrical corporation to annually prepare a
renewable energy procurement plan containing specified
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matter and require, to the extent feasible, that the plan
be proposed, reviewed, and adopted by the Commission as
part of, and pursuant to, a general procurement plan
process. This bill requires the Commission to direct all
retail sellers to prepare and submit an annual compliance
report. This bill deletes the existing market price
referent provisions, and instead requires the CPUC to
establish a limitation for each electrical corporation on
the procurement expenditures for all eligible renewable
energy resources used to comply with the RPS. This bill
requires that by January 1, 2016, the CPUC report to the
Legislature assessing whether each electrical corporation
can achieve a 33 percent RPS by December 31, 2020, and
maintain that level thereafter, within the cost
limitations. This bill provides that, if the cost
limitation for an electrical corporation is insufficient to
support the projected costs of meeting the RPS procurement
requirements, the electrical corporation is authorized to
refrain from entering into new contracts or constructing
facilities beyond the quantity that can be procured within
the limitation, unless eligible renewable energy resources
can be procured without exceeding a de minims increase in
rates consistant with the long-term procurement plan
established for electrical corporations. This bill deletes
an existing requirement that the CPUC adopt flexible rules
for compliance for retail sellers. This bill revises the
definitions of certain terms for purposes of the RPS
program. This bill authorizes an electrical corporation to
apply to the CPUC for approval to construct, own, and
operate an eligible renewable energy resource, and requires
the CPUC to approve the application if certain conditions
are met, until electrical corporation owned and operated
resources provide 8.25 percent of the corporation's
anticipated retail sales.
Under existing law, the governing board of a local publicly
owned electric utility is responsible for implementing and
enforcing an RPS 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 repeals this provision, and instead generally
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makes the requirements of the RPS program applicable to
local publicly owned electric utilities, except that the
utility's governing board would be responsible for
implementation of those requirements, instead of the CPUC,
and certain enforcement authority with respect to local
publicly owned electric utilities would be given to the
Energy Commission and ARB, instead of the CPUC.
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 requires 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. This bill requires 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 ARB for
penalties imposed pursuant to the California Global Warming
Solutions Act of 2006 or other laws if that act is
suspended or repealed.
Existing law requires the CPUC 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.
This bill requires the CPUC to prepare and submit to the
policy and fiscal committees of the Legislature, annually
before February 1 of each year, a report on (1) all
electrical corporation revenue requirement increases
associated with meeting the RPS, (2) all cost savings
experienced, or costs avoided, by electrical corporations
as a result of meeting the RPS, (3) all costs incurred by
electrical corporations for incentives for distributed and
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renewable generation, (4) all cost savings experienced, or
costs avoided, by electrical corporations as a result of
incentives for distributed generation and renewable
generation, (5) specified costs for which an electrical
corporation is seeking recovery in rates that are pending
determination or approval by the CPUC, (6) the decision
number of each CPUC decision in the prior year authorizing
an electrical corporation to recover costs incurred in
rates,
(7) any changes in the prior year in load serviced by an
electrical corporation, and (8) the efforts each electrical
corporation is taking to recruit and train employees to
ensure an adequately trained and available workforce.
This bill requires the CPUC, by July 1, 2011, to determine
the effective load carrying capacity of wind and solar
energy resources on the electrical grid. This bill
requires the CPUC to use those values in establishing the
contribution of those resources toward meeting specified
resource adequacy requirements.
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 CPUC 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 CPUC, 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 CPUC finds that new transmission
facilities are necessary to facilitate achievement of the
renewable power goals established under the RPS program.
Existing law requires the CPUC, 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 CPUC.
This bill requires the CPUC to issue a decision on an
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application for a certificate of public convenience and
necessity within 18 months of the filing of a completed
application under specified circumstances. This bill
requires the CPUC, 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 CPUC finds that new transmission facilities are
reasonably necessary or appropriate to facilitate
achievement of the RPS. Allows for an extension of time by
the CPUC if it finds it necessary for completion of CEQA.
This bill requires the CPUC to provide assurance of the
eligibility for recovery in retail rates of any increase in
transmission costs incurred by an electrical corporation
resulting from the construction of transmission facilities
in certain circumstances and to allow recovery in retail
rates of any increase in transmission costs if not approved
by FERC if the CPUC determines the costs were prudently
incurred pursuant to a specified law.
Existing law establishes the Department of Fish and Game
(DFG) in the Natural Resources Agency, and generally
charges DFG with the administration and enforcement of the
Fish and Game Code.
This bill requires DFG 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.
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 FERC.
This bill requires the ISO and other California balancing
authorities to work cooperatively to integrate and
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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 RPS 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 independent
transmission companies. The bill also applies to successor
entities.
Background
The RPS requires investor owned utilities (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 CPUC. 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 CPUC is
required to adopt comparable requirements for direct access
energy service providers and community choice aggregators.
The RPS requires the CPUC 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 CPUC approves shorter
contracts. This is intended to support the development of
new renewable resources.
The original RPS bill, SB 1078 (Sher), Chapter 516,
Statutes 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 eight years after
the RPS was enacted, IOUs have advanced beyond their 2002
average starting point of 12 percent RPS, but are not on
pace to achieve 20 percent by the end of this year, and
intend to rely on flexible compliance rules to delay
attainment of 20 percent until 2013. According to the
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CPUC, in 2009, the IOUs served 15.4 percent of their load
with renewable energy, up from 13 percent in 2008. PG&E
achieved 14.4 percent, SCE 17.4 percent and San Diego Gas &
Electric 10.5 percent.
Last year, the Governor vetoed two bills passed by the
Legislature to establish a 33 percent RPS - SB 14
(Simitian) and AB 64 (Krekorian). Following the vetoes, the
Governor issued an executive order directing ARB to
implement a 33 percent RPS as a GHG reduction measure
pursuant to its authority under AB 32. ARB has initiated a
rulemaking to establish a "renewable electricity standard"
(RES), with adoption by the board scheduled for July 2010.
However, questions have been raised regarding the
permanence and legality of an RES regulation based on an
executive order.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
Public Utilities Commission
Ongoing annual costs of approximately $650,000,
equivalent to 5.0 positions, to implement the RPS
provisions for IOUs, including developing new interim
goals, developing cost limitations on renewable
electricity procurement, communicating with IOUs
regarding new requirements, developing requirements for
approval of IOU-owned electricity generating facilities,
and reporting to the Legislature. (CPUC Utilities
Reimbursement Account (PURA))
Ongoing annual costs of approximately $650,000,
equivalent to 5.0 positions, for transmission planning
and expedited review of applications to construct new
transmission lines. (PURA)
Ongoing annual costs of approximately $1 million for
contracts for program evaluation and technical
assistance, such as analysis of program implementation
options. (PURA)
Appropriation of $322,000 from PURA for additional staff
for transmission line applications that facilitate RPS
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compliance.
Potential revenue of an unknown amount from fines levied
against IOUs that fail to meet RPS targets.
California Energy Commission (CEC)
Ongoing annual costs of approximately $600,000,
equivalent to 4.0 positions, to the CEC to adopt
regulations and monitor RPS compliance among publicly
owned utilities. (Energy Resources Program Account
(ERPA))
One-time costs of approximately $300,000, equivalent to
1.0 position and contract expenses, to the Energy
Commission to update its studies on the capacity of the
electricity grid to carry wind and solar energy
resources. (ERPA)
Minor, absorbable costs to CEC to prepare, in
consultation with CPUC, its biennial report to the
Legislature on progress toward meeting RPS. (ERPA)
Department of Fish and Game
Ongoing annual costs of $350,000 to $600,000 to establish
an internal division to conduct planning and
environmental compliance services. (General Fund or Fish
and Game Preservation Fund)
Air Resources Board
Ongoing annual costs of approximately $340,000 for 2.0
positions to enforce publicly owned utility compliance
with RPS requirements. (Air Pollution Control Fund
(APCF))
Potential revenue of an unknown amount from fines levied
against publicly owned utilities that fail to meet RPS
targets. (APCF)
This bill appropriates $322,000 from the CPUC Utilities
Reimbursement Account to the CPUC for additional staffing
to identify, review, and approve transmission lines
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reasonably necessary or appropriate to facilitate
achievement of the RPS.
SUPPORT : (Verified 8/31/10)
Large-scale Solar Association
OPPOSITION : (Verified 6/30/10)
Alliance for Retail Energy Markets (unless amended)
California Manufacturers & Technology Association
ARGUMENTS IN SUPPORT : The Large-scale Solar Association
(LSA), the association of utility-scale solar wholesalers
supports this bill relating to the creation of a 33 percent
renewable portfolio standard goal.
They state that, "The 33% RPS will make California "ground
zero" for renewables development and create the necessary
pressure to build-out the California renewable energy
marketplace, thus creating new jobs.
According to a 2009 report by CEERT, building the
power plants and green infrastructure required to meet
a 33% RPS by 2020 could pump as much as $60 billion I
to the state's stagnating economy.
Between 100,000 and 235,000 new manufacturing,
operations, and maintenance jobs could be created
under current business conditions to meet those goals.
Sales and property taxes paid on 6000 megawatts alone
(about of the megawatts required for a 33% RPS) are
anticipated to be more than $1.3 billion.
"The RPS is one of the most effective ways both to
stimulate the construction sector through large new energy
projects - and create a long-term sustainable green energy
sector for California's ailing economy."
DLW:mw:do 8/31/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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