BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1247
                                                                  Page  1

          Date of Hearing:   August 9, 2010

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                               Steven Bradford, Chair
                    SB 1247 (Dutton) - As Amended:  August 5, 2010

           SENATE VOTE  :   (vote not relevant)
           
          SUBJECT  :   Renewable energy resources: hydroelectric generation  
          facilities.

           SUMMARY  :   Allows additional capacity of the Rock Creek  
          Powerhouse to be an eligible renewable resource if efficiency  
          improvements undertaken cause the generating capacity to exceed  
          30 megawatts (MW).   In addition, allows a project to affect  
          changes in streamflow pursuant to a specific Federal Energy  
          Regulatory Commission (FERC) license.  This bill contains an  
          urgency clause.

           EXISTING LAW  : 

          1)States legislative intent of a Renewable Portfolio Standard  
            (RPS) to increase the amount of electricity generated from  
            eligible renewable energy resources per year, so that it  
            equals at least 20 percent of total retail sales of  
            electricity by December 31, 2010.

          2)Includes a small hydroelectric generation of 30 megawatts or  
            less, as an eligible "in-state renewable electricity  
            generation facility" for purposes of the RPS.

          3)Provides that a hydroelectric generation facility is an  
            eligible renewable facility if it has, within the immediately  
            preceding 15 years, received certification from the Water  
            Board or a regional board. 

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   According to the author, the purpose of this bill is  
          intended to address two hydroelectric facilities.  This bill  
          will allow incremental improvements on the Rock Creek Powerhouse  
          to be eligible for RPS compliance.  Current law allows  
          incremental increases to be eligible for RPS compliance if the  
          facility received certification from the Water Board or regional  
          board.  The Rock Creek Powerhouse received certification from  








                                                                  SB 1247
                                                                  Page  2

          the Federal Energy Regulatory Commission (FERC) through a  
          settlement agreement.

          This bill will also allow a Sacramento Municipal Utility  
          District (SMUD) project, that was licensed by a settlement  
          agreement from FERC, to qualify as an eligible resource for RPS  
          compliance pursuant to its FERC license.  The author states that  
          the SMUD relicense will change streamflow in a positive manner.   
          However, current law precludes RPS eligibility if the project  
          changes streamflow in any way.  This bill is proposing to modify  
          current law to clarify that any adverse impact or streamflow  
          change is to be measured against the environmental conditions  
          mandated by the FERC license currently in effect.  This change  
          to the law will ensure that any FERC license requirements  
          stemming from a relicensing process, such as those at SMUD's  
          smaller facilities, will not be interpreted by the California  
          Energy Commission as an adverse impact or streamflow change that  
          alters their eligibility to count toward the SMUD's renewable  
          portfolio standard.  

          In addition, the author states that this bill is intended to  
          address rising electricity rates by increasing the supply of  
          eligible renewable resources.  The author cites the Southern  
          California Public Power Authority, which forecasts that  
          California's electricity rates, which are already among the  
          highest in the nation, could climb as much as 60% higher as a  
          result of the state's efforts to fight global warming.  

           Background :  California's RPS program requires electric  
          corporations to increase procurement from eligible renewable  
          energy resources by at least 1% of their retail sales annually,  
          until they reach 20% by December 31, 2010.  Last year, SB 14  
          (Simitian) attempted to increase the RPS to 33% by 2020.  The  
          Governor vetoed the bill and instead directed the Air Resources  
          Board to adopt regulations for a 33% RPS under its  
          greenhouse-gas emission reduction authority.  SB 722 (Simitian)  
          increases the RPS to 33% by 2020.  SB 722 passed out of this  
          committee on June 24, 2010, and out of Assembly Natural  
          Resources committee on June 30, 2010.  SB 722 is currently held  
          in Assembly Appropriations committee. 

           Rock Creek  :  The Rock Creek facility is located on the North  
          Fork of the Feather River.  PG&E notes that efficiency  
          improvements will use the same amount of water that is currently  
          used thus there will be no changes in the timing or volume of  








                                                                  SB 1247
                                                                  Page  3

          streamflow.  The $37 million upgrade will add about 11 MW of  
          capacity.  PG&E estimates the rate for the power generated  
          through this efficiency gain to be about $0.08 per kWh.

          Existing law provides that efficiency improvements to an  
          existing hydroelectric generation facility can be considered an  
          eligible renewable resource if the hydroelectric generation  
          facility received water quality certification from the Water  
          Board within the immediately preceding 15 years.  The Rock Creek  
          facility did not receive its certification from the Water Board.  
           According to PG&E, the Rock Creek facility received its  
          certification from the FERC through a settlement agreement.  In  
          1979, PG&E had originally applied to the Water Board for  
          certification of its existing Rock Creek hydroelectric  
          generation facility and the Water Board failed to act on the  
          application within the prescribed time allotted, which was  
          possibly a year.  PG&E states that the Water Board did not pose  
          any objections to the application.  PG&E claims that the Water  
          Board failed to act on the application because it did not have  
          the resources to process it.

          If the Water Board does not act, certification defaults to FERC.  
           In 2001, PG&E entered into a multi-party settlement agreement,  
          and FERC issued a new operating license for the Rock Creek  
          facility.  PG&E states that it performed extensive evaluation of  
          potential project impacts, including impacts to water quality.   
          The multi-party settlement agreement that FERC used to support  
          issuance of a new Rock Creek operating license, addressed  
          project impacts and recommended protection, mitigation and  
          enhancement measures which were incorporated into the license.    
          PG&E claims that the settlement was supported by the Water  
          Board, U.S. Department of Agriculture Forest Service, U.S.  
          Department of Fish and Wildlife Services, the Natural Heritage  
          Institute, American Whitewater, Friends of the River, CA  
          Outdoors, CA Trout, and others.

          PG&E states that it reached agreement with the California  
          Hydropower Reform Coalition (CHRC) in 2009 on the RPS  
          eligibility of the Rock Creek efficiency improvements.   
          According to PG&E, CHRC supports the eligibility of the  
          efficiency improvements, and this bill.  (This committee notes  
          that it has not received a letter from CHRC in support of SB  
          1247.)

           Why single out Rock Creek  :  The author states that this bill  








                                                                  SB 1247
                                                                  Page  4

          narrowly identifies Rock Creek and does not intend to expand it  
          to allow all hydroelectric projects licensed by FERC to be an  
          eligible renewable resource if efficiency improvements  
          undertaken cause the generating capacity to exceed 30 megawatts  
          (MW).  The author is concerned that the expanded scope of the  
          bill might inadvertently capture controversial projects.

           Water Board certification vs. legislation  :  If the Rock Creek  
          facility obtains a Water Board certification, efficiency  
          improvements at Rock Creek would qualify as eligible renewable  
          resources under existing law.  PG&E states that it does not wish  
          to obtain a Water Board certification and would prefer SB 1247.   
          PG&E states that "? obtaining a Water Board certification for  
          the entire Rock Creek hydroelectric generation facility at this  
          time is not practical or feasible, as it would involve years of  
          re-studying impacts that were already addressed in the FERC  
          license and which are not affected in any way by the proposed  
          efficiency improvements."

           Upper American River Project  :  SMUD owns and operates the Upper  
          American River Project, located on the western slope of the  
          Sierra Nevada.  The Upper American River Project recently went  
          through a relicensing process and is currently awaiting final  
          FERC approval. The project is a large hydroelectric development  
          composed of several reservoirs and powerhouses including three  
          small facilities under 30 MW (Slab Creek, Jones Fork, and  
          Robbs). 

          Pursuant to SMUD's relicensing settlement agreement and the  
          expected Water Board water quality certification, SMUD will  
          increase the volume of water released into the natural stream  
          channel from dams that also deliver water to the three  
          aforementioned powerhouses.  The author states that these  
          increased releases to the stream channel will benefit the  
          environment by increasing aquatic resource habitat and  
          recreation.  Nevertheless, SMUD is concerned that because the  
          streamflow is changed (even if it is changed to be more  
          environmentally beneficial), the California Energy Commission  
          may have grounds to disqualify SMUD's small powerhouses from the  
          RPS on the basis that the new federal license requirements will  
          change the volume or timing of streamflow.  

           REGISTERED SUPPORT / OPPOSITION  :

           Support 








                                                                 SB 1247
                                                                  Page  5

           
          None on file.
           
            Opposition 
           
          None on file.

           Analysis Prepared by  :    Gina Adams / U. & C. / (916) 319-2083