BILL NUMBER: SB 805 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Wright
FEBRUARY 27, 2009
An act to amend Sections 380, 399.12, 399.14, 454.6, 2842, and
8341 of, and to amend and renumber Sections 454.5, 454.55, 454.56,
and 635 of, the Public Utilities Code, relating to energy.
LEGISLATIVE COUNSEL'S DIGEST
SB 805, as introduced, Wright. Energy: procurement.
(1) Under existing law, the Public Utilities Commission has
regulatory authority over public utilities, including electrical
corporations and gas corporations, as defined. The existing Public
Utilities Act requires the commission to review and adopt a
procurement plan for each electrical corporation in accordance with
specified elements, incentive mechanisms, and objectives. The
elements, among other things, require that the plan include a showing
that the electrical corporation will, in order to fulfill its unmet
resource needs, until a 20% renewable resources portfolio is
achieved, procure renewable energy resources with the goal of
ensuring that at least an additional 1% per year of the electricity
sold by the electrical corporation is generated from eligible
renewable energy resources, provided sufficient funds are made
available to cover certain above-market costs.
This bill would move the requirements for the commission to review
and adopt a procurement plan for each electrical corporation from an
article concerning rates to an article concerning long-term plans
and procurement plans, and make conforming changes that reference
existing law. The bill would require that an electrical corporation's
proposed procurement plan include a showing that the electrical
corporation will, in order to fulfill its unmet resource needs,
procure resources from eligible renewable energy resources in an
amount sufficient to meet its procurement requirements pursuant to
the renewables portfolio standard established pursuant to the
California Renewables Portfolio Standard Program.
Existing law requires the commission, in consultation with the
State Energy Resources Conservation and Development Commission
(Energy Commission), to identify all potentially achievable
cost-effective electricity efficiency savings and to establish
efficiency targets for electrical corporations to achieve pursuant to
their procurement plan. Existing law requires the commission, in
consultation with the Energy Commission to identify all potentially
achievable cost-effective natural gas efficiency savings and to
establish efficiency targets for a gas corporation to achieve and
requires a gas corporation to first meet its unmet resource needs
through all available natural gas efficiency and demand reduction
resources that are cost effective, reliable, and feasible.
This bill would move these requirements from an article concerning
rates to an article concerning long-term plans and procurement
plans.
(2) The California Renewables Portfolio Standard Program requires
that a retail seller of electricity, including electrical
corporations, community choice aggregators, and electric service
providers, but not including local publicly owned electric utilities,
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 kilowatthours sold to retail end-use
customers each calendar year (renewables portfolio standard). The
renewables portfolio standard requires each retail seller to increase
its total procurement of eligible renewable energy resources by at
least an additional 1% of retail sales per year so that 20% of its
retail sales are procured from eligible renewable energy resources no
later than December 31, 2010. The program requires the commission to
review and adopt a renewable energy procurement plan for each
electrical corporation. The program requires the commission, by
rulemaking, to adopt a process that provides criteria for the rank
ordering and selection of least-cost and best-fit eligible renewable
energy resources to comply with the renewables portfolio standard on
a total cost basis.
This bill would additionally require that the process consider the
cost impacts of procuring the eligible renewable energy resources on
the electrical corporation's procurement plan, the effects upon
electrical system reliability, and the environmental and economic
benefits of procuring renewable energy.
The program requires the commission, by rulemaking to adopt
flexible rules for compliance that apply to all years, including
years before and after the retail supplier procures at least 20% of
total retail sales of electricity from eligible renewable energy
resources.
This bill would require the commission, by rulemaking to adopt
flexible rules for compliance that apply to all years before and
after a retail seller procures at least 20% by December 31, 2010, and
33% by December 31, 2020, of total retail sales of electricity from
eligible renewable energy resources. The bill would authorize a
retail seller to meet up to 25% of its renewables portfolio standard
procurement requirements with unbundled renewable energy credits, as
defined, from eligible renewable energy resources within the region
of the WECC, as defined. The bill would require a retail seller to
annually report certain information to the commission relative to
compliance with the renewables portfolio standard.
Existing law requires the commission to review the results of an
eligible renewable energy resources solicitation submitted for
approval by an electrical corporation and to accept or reject
proposed contracts based on consistency with the approved plan.
This bill would require the commission to additionally establish
project development milestones to evaluate the potential for
compliance with the adopted plan and a set of actions that will occur
as a result of not meeting those milestones. The bill would require
the commission, in consultation with the Energy Commission, to adopt
rules for the enforcement of the program with respect to retail
sellers. The bill would provide that if the commission determines
that despite good faith best efforts by a retail seller to procure
eligible renewable energy resources, that there are insufficient
eligible renewable energy resources at competitive prices to enable
the retail seller to meet its renewables portfolio standard
procurement requirements, the retail seller is not out of compliance
with the renewables portfolio standard.
Under existing law, a violation of the Public Utilities Act or any
order, decision, rule, direction, demand, or requirement of the
commission is a crime.
Because certain of the provisions of this bill would be a part of
the act and because a violation of an order or decision of the
commission implementing its requirements would be a crime, the bill
would impose a state-mandated local program by creating a new crime.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 380 of the Public Utilities Code is amended to
read:
380. (a) The commission, in consultation with the Independent
System Operator, shall establish resource adequacy requirements for
all load-serving entities.
(b) In establishing resource adequacy requirements, the commission
shall achieve all of the following objectives:
(1) Facilitate development of new generating capacity and
retention of existing generating capacity that is economic and
needed.
(2) Equitably allocate the cost of generating capacity and prevent
shifting of costs between customer classes.
(3) Minimize enforcement requirements and costs.
(c) Each load-serving entity shall maintain physical generating
capacity adequate to meet its load requirements, including, but not
limited to, peak demand and planning and operating reserves. The
generating capacity shall be deliverable to locations and at times as
may be necessary to provide reliable electric service.
(d) Each load-serving entity shall, at a minimum, meet the most
recent minimum planning reserve and reliability criteria approved by
the Board of Trustees of the Western Systems Coordinating Council or
the Western Electricity Coordinating Council.
(e) The commission shall implement and enforce the resource
adequacy requirements established in accordance with this section in
a nondiscriminatory manner. Each load-serving entity shall be subject
to the same requirements for resource adequacy and the renewables
portfolio standard program that are applicable to electrical
corporations pursuant to this section, or otherwise required by law,
or by order or decision of the commission. The commission shall
exercise its enforcement powers to ensure compliance by all
load-serving entities.
(f) The commission shall require sufficient information,
including, but not limited to, anticipated load, actual load, and
measures undertaken by a load-serving entity to ensure resource
adequacy, to be reported to enable the commission to determine
compliance with the resource adequacy requirements established by the
commission.
(g) An electrical corporation's costs of meeting resource adequacy
requirements, including, but not limited to, the costs associated
with system reliability and local area reliability, that are
determined to be reasonable by the commission, or are otherwise
recoverable under a procurement plan approved by the commission
pursuant to Section 454.5 Article 9
(commencing with Section 635) of Chapter 3 , shall be fully
recoverable from those customers on whose behalf the costs are
incurred, as determined by the commission, at the time the commitment
to incur the cost is made or thereafter, on a fully nonbypassable
basis, as determined by the commission. The commission shall exclude
any amounts authorized to be recovered pursuant to Section 366.2 when
authorizing the amount of costs to be recovered from customers of a
community choice aggregator or from customers that purchase
electricity through a direct transaction pursuant to this
subdivision.
(h) The commission shall determine and authorize the most
efficient and equitable means for achieving all of the following:
(1) Meeting the objectives of this section.
(2) Ensuring that investment is made in new generating capacity.
(3) Ensuring that existing generating capacity that is economic is
retained.
(4) Ensuring that the cost of generating capacity is allocated
equitably.
(i) In making the determination pursuant to subdivision (h), the
commission may consider a centralized resource adequacy mechanism
among other options.
(j) For purposes of this section, "load-serving entity" means an
electrical corporation, electric service provider, or community
choice aggregator. "Load-serving entity" does not include any of the
following:
(1) A local publicly owned electric utility.
(2) The State Water Resources Development System commonly known as
the State Water Project.
(3) Customer generation located on the customer's site or
providing electric service through arrangements authorized by Section
218, if the customer generation, or the load it serves, meets one of
the following criteria:
(A) It takes standby service from the electrical corporation on a
commission-approved rate schedule that provides for adequate backup
planning and operating reserves for the standby customer class.
(B) It is not physically interconnected to the electric
transmission or distribution grid, so that, if the customer
generation fails, backup electricity is not supplied from the
electricity grid.
(C) There is physical assurance that the load served by the
customer generation will be curtailed concurrently and commensurately
with an outage of the customer generation.
SEC. 2. Section 399.12 of the Public Utilities Code is amended to
read:
399.12. For purposes of this article, the following terms have
the following meanings:
(a) "Conduit hydroelectric facility" means a facility for the
generation of electricity that uses only the hydroelectric potential
of an existing pipe, ditch, flume, siphon, tunnel, canal, or other
manmade conduit that is operated to distribute water for a beneficial
use.
(b) "Delivered" and "delivery" have the same meaning as provided
in subdivision (a) of Section 25741 of the Public Resources Code.
(c) "Eligible renewable energy resource" means an electric
generating facility that meets the definition of "in-state renewable
electricity generation facility" in Section 25741 of the Public
Resources Code, subject to the following limitations
:
(1) (A) An existing small hydroelectric generation facility of 30
megawatts or less shall be eligible only if a retail seller or local
publicly owned electric utility owned or procured the electricity
from the facility as of December 31, 2005. A new hydroelectric
facility is not an eligible renewable energy resource if it will
cause an adverse impact on instream beneficial uses or cause a change
in the volume or timing of streamflow.
(B) Notwithstanding subparagraph (A), a conduit hydroelectric
facility of 30 megawatts or less that commenced operation before
January 1, 2006, is an eligible renewable energy resource. A conduit
hydroelectric facility of 30 megawatts or less that commences
operation after December 31, 2005, is an eligible renewable energy
resource so long as it does not cause an adverse impact on instream
beneficial uses or cause a change in the volume or timing of
streamflow.
(2) A facility engaged in the combustion of municipal solid waste
shall not be considered an eligible renewable resource unless it is
located in Stanislaus County and was operational prior to September
26, 1996.
(d) "Procure" means that a retail seller or local publicly owned
electric utility receives delivered electricity generated by an
eligible renewable energy resource that it owns or for which it has
entered into an electricity purchase agreement. Nothing in this
article is intended to imply that the purchase of electricity from
third parties in a wholesale transaction is the preferred method of
fulfilling a retail seller's obligation to comply with this article
or the obligation of a local publicly owned electric utility to meet
its renewables portfolio standard implemented pursuant to Section
387.
(e) "Renewables portfolio standard" means the specified percentage
of electricity generated by eligible renewable energy resources that
a retail seller is required to procure pursuant to this article or
the obligation of a local publicly owned electric utility to meet its
renewables portfolio standard implemented pursuant to Section 387.
(f)
(e) (1) "Renewable energy credit" means a certificate
of proof associated with the generation of electricity
from an eligible renewable energy resource , issued
through the accounting system established by the Energy Commission
pursuant to Section 399.13, that one unit of electricity was
generated and delivered by an eligible renewable energy resource.
(2) "Renewable energy credit" includes all renewable and
environmental attributes associated with the production of
electricity from the eligible renewable energy resource, except for
an emissions reduction credit issued pursuant to Section 40709 of the
Health and Safety Code and any credits or payments associated with
the reduction of solid waste and treatment benefits created by the
utilization of biomass or biogas fuels.
(3) No electricity generated by an eligible renewable energy
resource attributable to the use of nonrenewable fuels, beyond a de
minimis quantity, as determined by the Energy Commission, shall
result in the creation of a renewable energy credit.
(f) "Renewable energy public goods charge" means that portion of
the nonbypassable system benefits charge required to be collected to
fund renewable energy pursuant to the Reliable Electric Service
Investments Act (Article 15 (commencing with Section 399) of Division
1 for an electrical corporation and pursuant to Section 385 for a
local publicly owned electric utility.
(g) "Renewables portfolio standard" means the specified percentage
of electricity generated by eligible renewable energy resources that
a retail seller or a local publicly owned electric utility is
required to procure pursuant to this article.
(g)
(h) "Retail seller" means an entity engaged in the
retail sale of electricity to end-use customers located within the
state, including any of the following:
(1) An electrical corporation, as defined in Section 218.
(2) A community choice aggregator. The commission shall institute
a rulemaking to determine the manner in which a community choice
aggregator will participate in the renewables portfolio standard
program subject to the same terms and conditions applicable to an
electrical corporation.
(3) An electric service provider , as defined in Section
218.3, for all sales of electricity to customers beginning
January 1, 2006. The commission shall institute a rulemaking to
determine the manner in which electric service providers will
participate in the renewables portfolio standard program. The
electric service provider shall be subject to the same terms and
conditions applicable to an electrical corporation pursuant to this
article. Nothing in this paragraph shall impair a contract entered
into between an electric service provider and a retail customer prior
to the suspension of direct access by the commission pursuant to
Section 80110 of the Water Code.
(4) "Retail seller" does not include any of the following:
(A) A corporation or person employing cogeneration technology or
producing electricity consistent with subdivision (b) of Section 218.
(B) The Department of Water Resources acting in its capacity
pursuant to Division 27 (commencing with Section 80000) of the Water
Code.
(C) A local publicly owned electric utility.
(i) "WECC" means the Western Electricity Coordinating Council of
the North American Electric Reliability Council, or a successor
entity to either council.
SEC. 3. Section 399.14 of the Public Utilities Code is amended to
read:
399.14. (a) (1) The commission shall direct each electrical
corporation to prepare a renewable energy procurement plan that
includes the matter in paragraph (3), to satisfy its obligations
under the renewables portfolio standard. To the extent feasible, this
procurement plan shall be proposed, reviewed, and adopted by the
commission as part of, and pursuant to, a general procurement plan
process. The commission shall require each electrical corporation to
review and update its renewable energy procurement plan as it
determines to be necessary.
(2) The commission shall adopt, by rulemaking, all of the
following:
(A) A process for determining market prices pursuant to
subdivision (c) of Section 399.15. The commission shall make specific
determinations of market prices after the closing date of a
competitive solicitation conducted by an electrical corporation for
eligible renewable energy resources.
(B) A process that provides criteria for the rank ordering and
selection of least-cost and best-fit eligible renewable energy
resources to comply with the annual California Renewables Portfolio
Standard Program obligations on a total cost basis. This process
shall consider estimates of indirect costs associated with needed
transmission investments and ongoing utility expenses resulting from
integrating and operating eligible renewable energy resources.
This process shall also consider the cost impacts of procuring the
eligible renewable energy resources on the electrical corporation's
electricity procurement plan adopted pursuant to Article 9
(commencing with Section 635) of Chapter 3, the effects upon
electrical system reliability, and the environmental and economic
benefits of procuring renewable energy.
(C) (i) Flexible rules for compliance, including rules permitting
retail sellers to apply excess procurement in one year to subsequent
years or inadequate procurement in one year to no more than the
following three years. The flexible rules for compliance shall apply
to all years, including years before and after a retail seller
procures at least 20 percent by December 31, 2010, and 33
percent by December 31, 2020, of total retail sales of
electricity from eligible renewable energy resources. If the
commission determines that despite good faith best efforts
by a retail seller to procure eligible renewable energy resources,
that there are insufficient eligible renewable energy resources at
competitive prices to enable the retail seller to meet its renewables
portfolio standard procurement requirements, the retail seller shall
not be out of compliance with the requirements of this article.
(ii) The flexible rules for compliance shall address situations
where, as a result of insufficient transmission, a retail seller is
unable to procure eligible renewable energy resources sufficient to
satisfy the requirements of this article. Any rules addressing
insufficient transmission shall require a finding by the commission
that the retail seller has undertaken all reasonable efforts to do
all of the following:
(I) Utilize flexible delivery points.
(II) Ensure the availability of any needed transmission capacity.
(III) If the retail seller is an electric corporation, to
construct needed transmission facilities.
(IV) Nothing in this subparagraph shall be construed to revise any
portion of Section 454.5 Article 9
(commencing with Section 635) of Chapter 3 .
(iii) The flexible compliance rules shall require each retail
seller to annually report to the commission on the retail seller's
compliance with the renewables portfolio standard, including all of
the following:
(I) The total kilowatthours procured by the retail seller from
eligible renewable energy resources located in the state, identified
by source.
(II) The total kilowatthours procured by the retail seller from
eligible renewable energy resources located outside the state, but
within the region of the WECC, identified by source.
(III) The total kilowatthours represented by unbundled renewable
energy credits procured by the retail seller from eligible renewable
energy resources located in the state, identified by source.
(IV) The total kilowatthours represented by unbundled renewable
energy credits procured by the retail seller from eligible renewable
energy resources located outside the state, but within the region of
the WECC, identified by source.
(D) Standard terms and conditions to be used by all electrical
corporations in contracting for eligible renewable energy resources,
including performance requirements for renewable generators. A
contract for the purchase of electricity generated by an eligible
renewable energy resource shall, at a minimum, include the renewable
energy credits associated with all electricity generation specified
under the contract. The standard terms and conditions shall include
the requirement that, no later than six months after the commission's
approval of an electricity purchase agreement entered into pursuant
to this article, the following information about the agreement shall
be disclosed by the commission: party names, resource type, project
location, and project capacity.
(3) Consistent with the goal of procuring the least-cost
and best-fit increasing California's reliance on
eligible renewable energy resources, the renewable energy
procurement plan submitted by an electrical corporation shall include
all of the following:
(A) An assessment of annual or multiyear portfolio supplies and
demand to determine the optimal mix of eligible renewable energy
resources with deliverability characteristics that may include
peaking, dispatchable, baseload, firm, and as-available capacity.
This assessment shall be consistent with the electrical
corporation's long-term portfolio planning conducted pursuant to
Article 9 (commencing with Section 635) of Chapter 3, and shall
consider the electrical corporation's optimal portfolio to reach the
state's goals for reducing emissions of greenhouse gases. The
assessment shall include an estimate of the net reduction in
emissions of greenhouse gases on a per kilowatthour basis and the
costs associated with that reduction, separately computed for each
renewable technology. Consistent with an electrical corporation's
long-term portfolio planning, the commission may require analyses,
including, but not limited to, the rate impact, effects on system
relia bility, and the environmental and
economic benefits of the proposed procurement.
(B) Provisions Strategies for
employing available compliance flexibility mechanisms established by
the commission.
(C) A bid solicitation setting forth the need for eligible
renewable energy resources of each deliverability characteristic,
required online dates, and locational preferences, if any.
(D) A status update on the development schedule of all eligible
renewable resources currently under contract.
(4) In soliciting and procuring eligible renewable energy
resources, each electrical corporation shall offer contracts of no
less than 10 years in duration, unless the commission approves of a
contract of shorter duration. A retail seller may meet up to 25
percent of its renewables portfolio standard procurement requirements
with unbundled renewable energy credits from eligible renewable
energy resources within the region of the WECC.
(5) In soliciting and procuring eligible renewable energy
resources, each electrical corporation may give preference to
projects that provide tangible demonstrable benefits to communities
with a plurality of minority or low-income populations.
(5) (A) In soliciting and procuring eligible renewable energy
resources for California-based projects, each electrical corporation
shall give preference to renewable energy projects that provide
environmental and economic benefits to communities afflicted with
poverty or high unemployment, or that suffer from high emission
levels of toxic air contaminants, criteria air pollutants, and
greenhouse gases.
(B) The commission shall report to the Legislature by January 1,
2012, and every two years thereafter, on the progress and status of
procurement activities, the identification of barriers, and policy
recommendations for achieving the goals set forth in this paragraph.
(b) A retail seller may enter into a combination of long- and
short-term contracts for delivery of electricity and associated
renewable energy credits. The commission may authorize a retail
seller to enter into a contract of less than 10 years' duration with
an eligible renewable energy resource, if the commission has
established, for each retail seller, minimum quantities of eligible
renewable energy resources to be procured either through contracts of
at least 10 years' duration or from new facilities commencing
commercial operations on or after January 1, 2005. A retail
seller may meet up to 25 percent of its renewables portfolio standard
procurement requirements with unbundled renewable energy credits
from eligible rene wable energy resources
within the region of the WECC.
(c) The commission shall review and accept, modify, or reject each
electrical corporation's renewable energy procurement plan prior to
the commencement of renewable procurement pursuant to this article by
an electrical corporation.
(d) (1) The commission shall review the
results of an eligible renewable energy resources solicitation
submitted for approval by an electrical corporation and accept or
reject proposed contracts with eligible renewable energy resources
based on consistency with the approved renewable energy procurement
plan. If the commission determines that the bid prices are elevated
due to a lack of effective competition among the bidders, the
commission shall direct the electrical corporation to renegotiate the
contracts or conduct a new solicitation.
(e) If an electrical corporation fails to comply with a commission
order adopting a renewable energy procurement plan, the commission
shall exercise its authority pursuant to Section 2113 to require
compliance. The commission shall enforce comparable penalties on any
other retail seller that fails to meet annual procurement targets
established pursuant to Section 399.15.
(2) The commission shall establish project development milestones
to evaluate the potential for compliance with the adopted renewable
procurement plan and a set of actions that will occur as a result of
not meeting those milestones. These actions may include, but shall
not be limited to, determining a cure period for failure to meet
milestones, a suspense period on the contract online date for events
beyond the developer's control that cause a failure to meet
milestones, allow other developers that are prepared to go forward to
move ahead of suspended contracts, and forfeiture of deposits.
(e) The commission, in consultation with the State Air Resources
Board, shall adopt rules for the enforcement of this article with
respect to retail sellers. The rules shall be adopted at a publicly
noticed meeting offering all interested parties an opportunity to
comment. Not less than 30 days' notice shall be given to the public
of any meeting held for purposes of adopting the rules. Not less than
10 days' notice shall be given to the public before any meeting is
held to make a substantive change to the rules.
(f) (1) The commission may authorize a procurement entity to enter
into contracts on behalf of customers of a retail seller for
deliveries of eligible renewable energy resources to satisfy annual
renewables portfolio standard obligations. The commission may not
require any person or corporation to act as a procurement entity or
require any party to purchase eligible renewable energy resources
from a procurement entity.
(2) Subject to review and approval by the commission, the
procurement entity shall be permitted to recover reasonable
administrative and procurement costs through the retail rates of
end-use customers that are served by the procurement entity and are
directly benefiting from the procurement of eligible renewable energy
resources.
(g) Procurement and administrative costs associated with long-term
contracts entered into by an electrical corporation for eligible
renewable energy resources pursuant to this article and approved by
the commission shall be deemed reasonable per se, and shall be
recoverable in rates.
(h) Construction, alteration, demolition, installation, and repair
work on an eligible renewable energy resource that receives
production incentives pursuant to Section 25742 of the Public
Resources Code, including work performed to qualify, receive, or
maintain production incentives is "public works" for the purposes of
Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of
the Labor Code.
SEC. 4. Section 454.5 of the Public Utilities Code is amended and
renumbered to read:
454.5. 635. (a) The commission
shall specify the allocation of electricity, including quantity,
characteristics, and duration of electricity delivery, that the
Department of Water Resources shall provide under its power purchase
agreements to the customers of each electrical corporation, which
shall be reflected in the electrical corporation's proposed
procurement plan. Each electrical corporation shall file a proposed
procurement plan with the commission not later than 60 days after the
commission specifies the allocation of electricity. The proposed
procurement plan shall specify the date that the electrical
corporation intends to resume procurement of electricity for its
retail customers, consistent with its obligation to serve. After the
commission's adoption of a procurement plan, the commission shall
allow not less than 60 days before the electrical corporation resumes
procurement pursuant to this section.
(b) An electrical corporation's proposed procurement plan shall
include, but not be limited to, all of the following:
(1) An assessment of the price risk associated with the electrical
corporation's portfolio, including any utility-retained generation,
existing power purchase and exchange contracts, and proposed
contracts or purchases under which an electrical corporation will
procure electricity, electricity demand reductions, and
electricity-related products and the remaining open position to be
served by spot market transactions.
(2) A definition of each electricity product, electricity-related
product, and procurement related financial product, including support
and justification for the product type and amount to be procured
under the plan.
(3) The duration of the plan.
(4) The duration, timing, and range of quantities of each product
to be procured.
(5) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services,
including the format and criteria of that procurement process.
(6) An incentive mechanism, if any incentive mechanism is
proposed, including the type of transactions to be covered by that
mechanism, their respective procurement benchmarks, and other
parameters needed to determine the sharing of risks and benefits.
(7) The upfront standards and criteria by which the acceptability
and eligibility for rate recovery of a proposed procurement
transaction will be known by the electrical corporation prior to
execution of the transaction. This shall include an expedited
approval process for the commission's review of proposed contracts
and subsequent approval or rejection thereof. The electrical
corporation shall propose alternative procurement choices in the
event a contract is rejected.
(8) Procedures for updating the procurement plan.
(9) A showing that the procurement plan will achieve the
following:
(A) The electrical corporation will, in order to fulfill its unmet
resource needs and in furtherance of Section 701.3, until a
20 percent renewable resources portfolio is achieved, procure
renewable energy resources with the goal of ensuring that at least an
additional 1 percent per year of the electricity sold by the
electrical corporation is generated from renewable energy resources,
provided sufficient funds are made available pursuant to Sections
399.6 and 399.15, to cover the above-market costs for new renewable
energy resources needs, procure resources from
eligible renewable energy resou rces in an amount
sufficient to meet its procurement requirements pursuant to the
renewables portfolio standard .
(B) The electrical corporation will create or maintain a
diversified procurement portfolio consisting of both short-term and
long-term electricity and electricity-related and demand reduction
products.
(C) The electrical corporation will first meet its unmet resource
needs through all available energy efficiency and demand reduction
resources that are cost effective, reliable, and feasible.
(10) The electrical corporation's risk management policy,
strategy, and practices, including specific measures of price
stability.
(11) A plan to achieve appropriate increases in diversity of
ownership and diversity of fuel supply of nonutility electrical
generation.
(12) A mechanism for recovery of reasonable administrative costs
related to procurement in the generation component of rates.
(c) The commission shall review and accept, modify, or reject each
electrical corporation's procurement plan. The commission's review
shall consider each electrical corporation's individual procurement
situation, and shall give strong consideration to that situation in
determining which one or more of the features set forth in this
subdivision shall apply to that electrical corporation. A procurement
plan approved by the commission shall contain one or more of the
following features, provided that the commission may not approve a
feature or mechanism for an electrical corporation if it finds that
the feature or mechanism would impair the restoration of an
electrical corporation's creditworthiness or would lead to a
deterioration of an electrical corporation's creditworthiness:
(1) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services. The
commission shall specify the format of that procurement process, as
well as criteria to ensure that the auction process is open and
adequately subscribed. Any purchases made in compliance with the
commission-authorized process shall be recovered in the generation
component of rates.
(2) An incentive mechanism that establishes a procurement
benchmark or benchmarks and authorizes the electrical corporation to
procure from the market, subject to comparing the electrical
corporation's performance to the commission-authorized benchmark or
benchmarks. The incentive mechanism shall be clear, achievable, and
contain quantifiable objectives and standards. The incentive
mechanism shall contain balanced risk and reward incentives that
limit the risk and reward of an electrical corporation.
(3) Upfront achievable standards and criteria by which the
acceptability and eligibility for rate recovery of a proposed
procurement transaction will be known by the electrical corporation
prior to the execution of the bilateral contract for the transaction.
The commission shall provide for expedited review and either approve
or reject the individual contracts submitted by the electrical
corporation to ensure compliance with its procurement plan. To the
extent the commission rejects a proposed contract pursuant to this
criteria, the commission shall designate alternative procurement
choices obtained in the procurement plan that will be recoverable for
ratemaking purposes.
(d) A procurement plan approved by the commission shall accomplish
each of the following objectives:
(1) Enable the electrical corporation to fulfill its obligation to
serve its customers at just and reasonable rates.
(2) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation's actions in compliance with an approved
procurement plan, including resulting electricity procurement
contracts, practices, and related expenses. However, the commission
may establish a regulatory process to verify and assure that each
contract was administered in accordance with the terms of the
contract, and contract disputes which may arise are reasonably
resolved.
(3) Ensure timely recovery of prospective procurement costs
incurred pursuant to an approved procurement plan. The commission
shall establish rates based on forecasts of procurement costs adopted
by the commission, actual procurement costs incurred, or combination
thereof, as determined by the commission. The commission shall
establish power procurement balancing accounts to track the
differences between recorded revenues and costs incurred pursuant to
an approved procurement plan. The commission shall review the power
procurement balancing accounts, not less than semiannually, and shall
adjust rates or order refunds, as necessary, to promptly amortize a
balancing account, according to a schedule determined by the
commission. Until January 1, 2006, the commission shall ensure that
any overcollection or undercollection in the power procurement
balancing account does not exceed 5 percent of the electrical
corporation's actual recorded generation revenues for the prior
calendar year excluding revenues collected for the Department of
Water Resources. The commission shall determine the schedule for
amortizing the overcollection or undercollection in the balancing
account to ensure that the 5 percent threshold is not exceeded. After
January 1, 2006, this adjustment shall occur when deemed appropriate
by the commission consistent with the objectives of this section.
(4) Moderate the price risk associated with serving its retail
customers, including the price risk embedded in its long-term supply
contracts, by authorizing an electrical corporation to enter into
financial and other electricity-related product contracts.
(5) Provide for just and reasonable rates, with an appropriate
balancing of price stability and price level in the electrical
corporation's procurement plan.
(e) The commission shall provide for the periodic review and
prospective modification of an electrical corporation's procurement
plan.
(f) The commission may engage an independent consultant or
advisory service to evaluate risk management and strategy. The
reasonable costs of any consultant or advisory service is a
reimbursable expense and eligible for funding pursuant to Section
631.
(g) The commission shall adopt appropriate procedures to ensure
the confidentiality of any market sensitive information submitted in
an electrical corporation's proposed procurement plan or resulting
from or related to its approved procurement plan, including, but not
limited to, proposed or executed power purchase agreements, data
request responses, or consultant reports, or any combination,
provided that the Office of Ratepayer Advocates and other consumer
groups that are nonmarket participants shall be provided access to
this information under confidentiality procedures authorized by the
commission.
(h) Nothing in this section alters, modifies, or amends the
commission's oversight of affiliate transactions under its rules and
decisions or the commission's existing authority to investigate and
penalize an electrical corporation's alleged fraudulent activities,
or to disallow costs incurred as a result of gross incompetence,
fraud, abuse, or similar grounds. Nothing in this section expands,
modifies, or limits the State Energy Resources Conservation and
Development Commission's existing authority and responsibilities as
set forth in Sections 25216, 25216.5, and 25323 of the Public
Resources Code.
(i) An electrical corporation that serves less than 500,000
electric retail customers within the state may file with the
commission a request for exemption from this section, which the
commission shall grant upon a showing of good cause.
(j) (1) Prior to its approval pursuant to Section 851 of any
divestiture of generation assets owned by an electrical corporation
on or after the date of enactment of the act adding this section, the
commission shall determine the impact of the proposed divestiture on
the electrical corporation's procurement rates and shall approve a
divestiture only to the extent it finds, taking into account the
effect of the divestiture on procurement rates, that the divestiture
is in the public interest and will result in net ratepayer benefits.
(2) Any electrical corporation's procurement necessitated as a
result of the divestiture of generation assets on or after the
effective date of the act adding this subdivision shall be subject to
the mechanisms and procedures set forth in this section only if its
actual cost is less than the recent historical cost of the divested
generation assets.
(3) Notwithstanding paragraph (2), the commission may deem
proposed procurement eligible to use the procedures in this section
upon its approval of asset divestiture pursuant to Section 851.
SEC. 5. Section 454.55 of the Public Utilities Code is amended and
renumbered to read:
454.55. 636. The commission, in
consultation with the State Energy Resources Conservation and
Development Commission, shall identify all potentially achievable
cost-effective electricity efficiency savings and establish
efficiency targets for an electrical corporation to achieve pursuant
to Section 454.5 635 .
SEC. 6. Section 454.56 of the Public Utilities Code is amended and
renumbered to read:
454.56. 637. (a) The commission, in
consultation with the State Energy Resources Conservation and
Development Commission, shall identify all potentially achievable
cost-effective natural gas efficiency savings and establish
efficiency targets for the gas corporation to achieve.
(b) A gas corporation shall first meet its unmet resource needs
through all available natural gas efficiency and demand reduction
resources that are cost effective, reliable, and feasible.
SEC. 7. Section 454.6 of the Public Utilities Code is amended to
read:
454.6. (a) A contract entered into pursuant to Section
454.5 635 by an electrical corporation for the
electricity generated by a replacement or repowering project that
meets the criteria specified in subdivision (b) shall be recoverable
in rates, taking into account any collateral requirements and debt
equivalence associated with the contract, in a manner determined by
the commission to provide the best value to ratepayers.
(b) To be eligible for rate treatment in accordance with
subdivision (a), a contract shall be for a project which meets all of
the following criteria:
(1) The project is a replacement or repowering of an existing
generation unit of a thermal powerplant.
(2) The project complies with all applicable requirements of
federal, state, and local laws.
(3) The project will not require significant additional
rights-of-way for electrical or fuel-related transmission facilities.
(4) The project will result in significant and substantial
increases in the efficiency of the production of electricity.
(5) The Independent System Operator or local system operator
certifies that the project is needed for local area reliability.
(6) The project provides electricity to consumers of this state at
the cost of generating that electricity, including a reasonable
return on the investment and the costs of financing the project.
SEC. 8. Section 635 of the Public Utilities Code is amended and
renumbered to read:
635. 638. In a long-term plan
adopted by an electrical corporation or in a procurement plan
implemented by a local publicly owned electric utility, the
electrical corporation or local publicly owned electric utility shall
adopt a strategy applicable both to newly constructed or repowered
generation owned and procured by the electrical corporation or local
publicly owned electric utility to achieve efficiency in the use of
fossil fuels and to address carbon emissions.
SEC. 9. Section 2842 of the Public Utilities Code is amended to
read:
2842. The commission, in approving a procurement plan for an
electrical corporation pursuant to Section 454.5
Article 9 (commencing with Section 635) of Chapter 3 of Part 1
, shall require that the electrical corporation's procurement
plan incorporate combined heat and power solutions to the extent that
it is cost effective compared to other competing forms of wholesale
generation, technologically feasible, and environmentally beneficial,
particularly as it pertains to reducing emissions of carbon dioxide
and other greenhouse gases.
SEC. 10. Section 8341 of the Public Utilities Code is amended to
read:
8341. (a) No load-serving entity or local publicly owned electric
utility may enter into a long-term financial commitment unless any
baseload generation supplied under the long-term financial commitment
complies with the greenhouse gases emission performance standard
established by the commission, pursuant to subdivision (d), for a
load-serving entity, or by the Energy Commission, pursuant to
subdivision (e), for a local publicly owned electric utility.
(b) (1) The commission shall not approve a long-term financial
commitment by an electrical corporation unless any baseload
generation supplied under the long-term financial commitment complies
with the greenhouse gases emission performance standard established
by the commission pursuant to subdivision (d).
(2) The commission may, in order to enforce this section, review
any long-term financial commitment proposed to be entered into by an
electric service provider or a community choice aggregator.
(3) The commission shall adopt rules to enforce the requirements
of this section, for load-serving entities. The commission shall
adopt procedures, for all load-serving entities, to verify the
emissions of greenhouse gases from any baseload generation supplied
under a contract subject to the greenhouse gases emission performance
standard to ensure compliance with the standard.
(4) In determining whether a long-term financial commitment is for
baseload generation, the commission shall consider the design of the
powerplant and the intended use of the powerplant, as determined by
the commission based upon the electricity purchase contract, any
certification received from the Energy Commission, any other permit
or certificate necessary for the operation of the powerplant,
including a certificate of public convenience and necessity, any
procurement approval decision for the load-serving entity, and any
other matter the commission determines is relevant under the
circumstances.
(5) Costs incurred by an electrical corporation to comply with
this section, including those costs incurred for electricity purchase
agreements that are approved by the commission that comply with the
greenhouse gases emission performance standard, are to be treated as
procurement costs incurred pursuant to an approved procurement plan
and the commission shall ensure timely cost recovery of those costs
pursuant to paragraph (3) of subdivision (d) of Section
454.5 635 .
(6) A long-term financial commitment entered into through a
contract approved by the commission, for electricity generated by a
zero- or low-carbon generating resource that is contracted for, on
behalf of consumers of this state on a cost-of-service basis, shall
be recoverable in rates, in a manner determined by the commission
consistent with Section 380. The commission may, after a hearing,
approve an increase from one-half to 1 percent in the return on
investment by the third party entering into the contract with an
electrical corporation with respect to investment in zero- or
low-carbon generation resources authorized pursuant to this
subdivision.
(c) (1) The Energy Commission shall adopt regulations for the
enforcement of this chapter with respect to a local publicly owned
electric utility.
(2) The Energy Commission may, in order to ensure compliance with
the greenhouse gases emission performance standard by local publicly
owned electric utilities, apply the procedures adopted by the
commission to verify the emissions of greenhouse gases from baseload
generation pursuant to subdivision (b).
(3) In determining whether a long-term financial commitment is for
baseload generation, the Energy Commission shall consider the design
of the powerplant and the intended use of the powerplant, as
determined by the Energy Commission based upon the electricity
purchase contract, any certification received from the Energy
Commission, any other permit for the operation of the powerplant, any
procurement approval decision for the load-serving entity, and any
other matter the Energy Commission determines is relevant under the
circumstances.
(d) (1) On or before February 1, 2007, the commission, through a
rulemaking proceeding, and in consultation with the Energy Commission
and the State Air Resources Board, shall establish a greenhouse
gases emission performance standard for all baseload generation of
load-serving entities, at a rate of emissions of greenhouse gases
that is no higher than the rate of emissions of greenhouse gases for
combined-cycle natural gas baseload generation. Enforcement of the
greenhouse gases emission performance standard shall begin
immediately upon the establishment of the standard. All
combined-cycle natural gas powerplants that are in operation, or that
have an Energy Commission final permit decision to operate as of
June 30, 2007, shall be deemed to be in compliance with the
greenhouse gases emission performance standard.
(2) In determining the rate of emissions of greenhouse gases for
baseload generation, the commission shall include the net emissions
resulting from the production of electricity by the baseload
generation.
(3) The commission shall establish an output-based methodology to
ensure that the calculation of emissions of greenhouse gases for
cogeneration recognizes the total usable energy output of the
process, and includes all greenhouse gases emitted by the facility in
the production of both electrical and thermal energy.
(4) In calculating the emissions of greenhouse gases by facilities
generating electricity from biomass, biogas, or landfill gas energy,
the commission shall consider net emissions from the process of
growing, processing, and generating the electricity from the fuel
source.
(5) Carbon dioxide that is injected in geological formations, so
as to prevent releases into the atmosphere, in compliance with
applicable laws and regulations shall not be counted as emissions of
the powerplant in determining compliance with the greenhouse gases
emissions performance standard.
(6) In adopting and implementing the greenhouse gases emission
performance standard, the commission, in consultation with the
Independent System Operator shall consider the effects of the
standard on system reliability and overall costs to electricity
customers.
(7) In developing and implementing the greenhouse gases emission
performance standard, the commission shall address long-term
purchases of electricity from unspecified sources in a manner
consistent with this chapter.
(8) In developing and implementing the greenhouse gases emission
performance standard, the commission shall consider and act in a
manner consistent with any rules adopted pursuant to Section 824a-3
of Title 16 of the United States Code.
(9) An electrical corporation that provides electric service to
75,000 or fewer retail end-use customers in California may file with
the commission a proposal for alternative compliance with this
section, which the commission may accept upon a showing by the
electrical corporation of both of the following:
(A) A majority of the electrical corporation's retail end-use
customers for electric service are located outside of California.
(B) The emissions of greenhouse gases to generate electricity for
the retail end-use customers of the electrical corporation are
subject to a review by the utility regulatory commission of at least
one other state in which the electrical corporation provides
regulated retail electric service.
(e) (1) On or before June 30, 2007, the Energy Commission, at a
duly noticed public hearing and in consultation with the commission
and the State Air Resources Board, shall establish a greenhouse gases
emission performance standard for all baseload generation of local
publicly owned electric utilities at a rate of emissions of
greenhouse gases that is no higher than the rate of emissions of
greenhouse gases for combined-cycle natural gas baseload generation.
The greenhouse gases emission performance standard established by the
Energy Commission for local publicly owned electric utilities shall
be consistent with the standard adopted by the commission for
load-serving entities. Enforcement of the greenhouse gases emission
performance standard shall begin immediately upon the establishment
of the standard. All combined-cycle natural gas powerplants that are
in operation, or that have an Energy Commission final permit decision
to operate as of June 30, 2007, shall be deemed to be in compliance
with the greenhouse gases emission performance standard.
(2) The greenhouse gases emission performance standard shall be
adopted by regulation pursuant to the Administrative Procedure Act
(Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code).
(3) In determining the rate of emissions of greenhouse gases for
baseload generation, the Energy Commission shall include the net
emissions resulting from the production of electricity by the
baseload generation.
(4) The Energy Commission shall establish an output-based
methodology to ensure that the calculation of emissions of greenhouse
gases for cogeneration recognizes the total usable energy output of
the process, and includes all greenhouse gases emitted by the
facility in the production of both electrical and thermal energy.
(5) In calculating the emissions of greenhouse gases by facilities
generating electricity from biomass, biogas, or landfill gas energy,
the Energy Commission shall consider net emissions from the process
of growing, processing, and generating the electricity from the fuel
source.
(6) Carbon dioxide that is captured from the emissions of a
powerplant and that is permanently disposed of in geological
formations in compliance with applicable laws and regulations, shall
not be counted as emissions from the powerplant.
(7) In adopting and implementing the greenhouse gases emission
performance standard, the Energy Commission, in consultation with the
Independent System Operator, shall consider the effects of the
standard on system reliability and overall costs to electricity
customers.
(8) In developing and implementing the greenhouse gases emission
performance standard, the Energy Commission shall address long-term
purchases of electricity from unspecified sources in a manner
consistent with this chapter.
(9) In developing and implementing the greenhouse gases emission
performance standard, the Energy Commission shall consider and act in
a manner consistent with any rules adopted pursuant to Section
824a-3 of Title 16 of the United States Code.
(f) The Energy Commission, in a duly noticed public hearing and in
consultation with the commission and the State Air Resources Board,
shall reevaluate and continue, modify, or replace the greenhouse
gases emission performance standard when an enforceable greenhouse
gases emissions limit is established and in operation, that is
applicable to local publicly owned electric utilities.
(g) The commission, through a rulemaking proceeding and in
consultation with the Energy Commission and the State Air Resources
Board, shall reevaluate and continue, modify, or replace the
greenhouse gases emission performance standard when an enforceable
greenhouse gases emissions limit is established and in operation,
that is applicable to load-serving entities.
SEC. 11. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.