BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1180
                                                                  Page  1

          Date of Hearing:   April 26, 2011

                   ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE
                                Jared Huffman, Chair
                AB 1180 (Bradford) - As Introduced:  February 18, 2011
           
          SUBJECT  :   Coastal powerplants:  Once-through cooling

           SUMMARY  :   Requires the State Water Resources Control Board 
          (SWRCB) to do an economic analysis of ratepayer impacts from 
          measures it required to protect the marine environment from the 
          impacts of powerplants utilizing once-through cooling (OTC).

           EXISTING LAW  

          1) Requires, in accordance with the Federal Clean Water Act 
          (CWA), that the location, design, construction, and capacity of 
          new and existing cooling water intake structures on power plants 
          reflect the best technology available (BTA) to minimize the harm 
          or killing of fish, shellfish and other aquatic organisms.

          2) Designates the SWRCB as the statewide water quality planning 
          agency and authorizes the SWRCB to implement provisions of the 
          federal CWA, including provisions related to BTA requirements 
          for existing power plants employing OTC.

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

          The Federal CWA Section 316(b) requires that the location, 
          design, construction, and capacity of new and existing cooling 
          water intake structures on power plants reflect the best 
          technology available to minimize the harm or killing of fish, 
          shellfish and other aquatic organisms.  In California, the SWRCB 
          is the agency authorized to implement provisions of the CWA, 
          including Section 316(b).

          On May 4, 2010 the SWRCB adopted a Policy on the Use of Coastal 
          and Estuarine Waters for Power Plant Cooling (Policy), which 
          became final on October 1, 2010. The SWRCB's environmental 
          document explained the need for the Policy stating, "OTC can 
          cause adverse impacts when aquatic organisms are trapped against 
          a facility's intake screens (impinged) and cannot escape, or 
          when they suffer contact injuries that increase mortality. 








                                                                  AB 1180
                                                                  Page  2

          Likewise, smaller organisms, such as larvae and eggs, can be 
          drawn through a facility's entire cooling system (entrained) and 
          subjected to rapid pressure changes, chemical treatment systems, 
          and violent sheering forces, only to be discharged along with 
          the now heated cooling water and other facility wastewaters. The 
          State's active coastal power plants that use OTC maintain the 
          capacity to withdraw more than 15 billion gallons per day of 
          cooling water. Over the course of a year, billions of eggs and 
          larvae are effectively removed from coastal waters, while 
          millions of adult fish are lost due to impingement. These OTC 
          systems, many of which have been in operation for 30 years or 
          more, present a considerable and chronic stressor to the State's 
          coastal aquatic ecosystems by reducing important fisheries and 
          contributing to the overall degradation of the State's marine 
          and estuarine environments."

          The stated intent of the Policy "is to ensure that the 
          beneficial uses of the State's coastal and estuarine waters are 
          protected while also ensuring that the electrical power needs 
          essential for the welfare of the citizens of the State are met." 
          The Policy acknowledges there are no applicable nationwide 
          standards for implementing CWA Section 316(b) for existing power 
          plants and establishes technology-based measures to reduce the 
          harmful effects associated with cooling water intake structures 
          on marine and estuarine life. The Policy applies to the 19 
          existing power plants (including two nuclear plants) that 
          currently employ a single-pass system, also known as OTC. Under 
          the Policy, "closed-cycle wet cooling" has been selected as BTA. 
          Unlike OTC, which draws cool water and living organisms from the 
          ocean and then discharges warm water back into it, closed-cycle 
          wet cooling recirculates the same water but uses cooling towers 
          or other means to reduce its temperature for reuse.

          The SWRCB's Policy has been in development for at least five 
          years. Phase I of the Policy addresses new power plant units.  
          However, the most contentious issues have centered on Phase II, 
          which applies to existing OTC units. On December 7, 2005 the 
          SWRCB held a Phase II 316(b) Workshop in Oakland, California. 
          Various presentations were made concerning the degree of OTC 
          impacts, technologies for compliance, and issues of cost. For 
          example, one group, the California Council for Environmental and 
          Economic Balance (CCEEB), questioned the biological significance 
          of OTC effects and warned that there were very high retrofit 
          costs and increased operating and maintenance costs associated 
          with converting existing OTC units to wet/dry cooling tower 








                                                                  AB 1180
                                                                  Page  3

          systems. CCEEB gave retrofit cost estimates for the Los Angeles 
          Department of Water and Power (LADWP) San Onofre Nuclear 
          Generating Station of $465-$500 million to change to dry cooling 
          and $205-$400 million to change to wet cooling.  

          On April 17, 2006 the California State Lands Commission adopted 
          a Resolution regarding California OTC power plants. The 
          Resolution states that the Commission shall not approve leases 
          for new power facilities, leases for re-powering existing 
          facilities, or extensions or amendments of existing leases for 
          existing power facilities whose operations include OTC, unless 
          the power plant is in full compliance, or engaged in an 
          agency-directed process to achieve full compliance, with 
          requirements imposed to implement both CWA § 316(b) and 
          California water quality law, and with any additional 
          requirements imposed by state and federal agencies for the 
          purpose of minimizing the impacts of cooling systems on the 
          environment. The Resolution also states that the Commission 
          shall include in any extended lease that includes OTC systems a 
          provision to consider re-opening the lease, if an alternative, 
          environmentally superior technology exists that can be feasibly 
          installed.

          In 2006 and twice in 2008, the SWRCB held public meetings to 
          discuss the scope, content and environmental analysis for the § 
          316(b) Policy. Thereafter, on April 14, 2009, Senator Corbett 
          introduced SB 42, which prohibited state agencies from 
          authorizing, approving, or certifying new powerplants or 
          industrial facilities using OTC and requiring the phase-out of 
          certain OTC facilities by January 1, 2015.  SB 42 was later 
          amended to remove the phase-out of existing OTC facilities and 
          instead require the payment of a per gallon mitigation fee.  In 
          its analysis of SB 42, the Senate Energy, Utilities and 
          Communications Committee stated, "This mandate would jump ahead 
          of the SWRCB's work on developing a statewide policy and 
          undermine its work product."  SB 42 was held in Committee.

          On July 9, 2009 the SWRCB issued notice that it would hold a 
          September 16, 2009, hearing on a proposed Policy and requested 
          comments. In response, over seventy groups and individuals, 
          representing community organizations, environmental protection, 
          industry, state and federal agencies, and the California Senate 
          sent letters. In its letter the LADWP claimed "impingement and 
          entrainment losses Ýfrom OTC] are not a significant factor 
          causing declines to California's coastal fisheries" and that 








                                                                  AB 1180
                                                                  Page  4

          "OTC compliance costs will be several hundreds of millions of 
          dollars for LADWP, and according to a NERA Ýeconomic consulting] 
          report, over $3 billion dollars to the electric utility 
          industry" and suggested the SWRCB adopt a "site-specific 
          cost-benefit analyses" in its Policy. Environmental groups, on 
          the other hand, maintained that there were "40-50 years of 
          marine life impacts due to OTC, where adjacent ecosystems have 
          suffered a long history of entrainment and impingement. 
          Eliminating this significant impact on marine life may allow 
          depleted or 'overfished' species to recover to population 
          abundance well beyond what we see in population assessments 
          today."

          As reference above, the SWRCB adopted its Policy on May 10, 2010 
          and submitted it on August 10, 2010 to the Office of 
          Administrative Law (OAL) for approval. The Policy recognized 
          that because the "Los Angeles region presents a more complex and 
          challenging set of issues, it is anticipated that more time 
          would be needed to study and implement replacement 
          infrastructure solutions." The Policy allowed the Greater Bay 
          Area and San Diego regions until 2017 to comply while providing 
          the Los Angeles region until 2020. On August 20, 2010 while the 
          SWRCB Policy was pending with OAL, the Assembly Committee on 
          Utilities and Commerce gutted and amended a Committee bill, AB 
          1552, in order to allow municipally-owned coastal powerplants 
          until December 31, 2031 to comply with the SWRCB's Policy. AB 
          1552 was later withdrawn.

          On September 30, 2010 the SWRCB issued notice that it would 
          consider a proposed amendment to the Policy and invited public 
          comment. Among other provisions, the proposed amendment would 
          have allowed the LADWP Haynes Generating Station and Harbor 
          Generating Station and the Dynegy Moss Landing Power Plant, 
          under certain circumstances, to continue to use OTC until their 
          units reached the end of their useful life and to, instead, 
          submit mitigation funds in the amount of three dollars per 
          million gallons of water withdrawn, payable annually. In 
          response, over sixty groups and individuals, representing 
          community organizations, environmental protection, industry, 
          federal agencies, and others sent letters. At its December 14, 
          2010 hearing the SWRCB rejected the amendment.

          Under the SWRCB Policy, a Statewide Advisory Committee on 
          Cooling Water Intake Structures (SACCWIS) was created to "ensure 
          that implementation plans and schedules established by the 








                                                                  AB 1180
                                                                  Page  5

          Policy are realistic and will not cause disruption to the 
          State's electrical power supply."  The SACCWIS includes 
          representatives from the California Energy Commission, 
          California Public Utilities Commission, California Coastal 
          Commission, California State Lands Commission, California Air 
          Resources Board, California Independent System Operator, and the 
          SWRCB. One task of the SACCWIS is to review the implementation 
          plans and schedules that power plant owners and operators were 
          required to submit by April 1, 2011 to ensure that the deadlines 
          in the Policy account for local area and grid reliability, 
          including permitting constraints. The SACCWIS must report to the 
          SWRCB with recommendations no later than October 1, 2011. The 
          SWRCB may then direct staff to amend the Policy, if needed. The 
          SACCWIS will continue to meet and provide annual reports to the 
          State Water Board until the Policy has been fully implemented.

          On April 1, 2011, LADWP submitted a 54-page Implementation Plan 
          (IP) to the SACCWIS.  In that IP, LADWP requested to be allowed 
          to replace its OTC units on an extended schedule at a sequenced 
          "pace of two repowers per decade" based on a unit-by-unit rather 
          than a facility basis with the final unit coming off-line in 
          approximately 24 years, providing there are no delays in the 
          process.  The LADWP IP also addressed demographics and rates in 
          the Los Angeles area stating that "nearly three quarters of a 
          million individuals (725,196), or about 19.1% of Angelenos, live 
          in poverty." The IP asserts that the average median household in 
          the City of Los Angeles ($48,570) is lower than the statewide 
          median and also other service territories such as San Diego Gas 
          & Electric ($60,354) and Southern California Edison ($57,033).  
          The IP closes by advising that due to the "demographics of the 
          City of Los Angeles, even moderate rate increases will have a 
          severe impact on LADWP's ratepayers. Rate increases that may 
          result from OTC compliance will be in addition to baseline rate 
          increases intended to cover fuel, operation and maintenance 
          costs."
           
          Support Arguments  :  Supporters state this bill is needed in 
          order to require the SWRCB to determine the potential cost to 
          utility rate payers of the Policy, including the timelines for 
          implementing the Policy, and for state regulators and state 
          agencies to better assess the relationship between new 
          regulations placed on utilities and the funding sources, often 
          increased utility rates, used to comply with those regulations.  










                                                                  AB 1180
                                                                  Page  6

           Opposition Arguments:   The opponents of this bill state that it 
          will require the SWRCB to spend extremely scarce funds to 
          conduct analyses that have already been completed in depth as 
          part of the extensive process used to adopt the Policy.  
          Opponents state that economics and ratepayer impacts were 
          specific elements of two separate independent studies 
          incorporated into the Policy's Substitute Environmental 
          Document, which itself provided assessments of cost increases to 
          ratepayers under different industry scenarios.

          SWRCB staff indicate approximately $556,000 was previously spent 
          conducting two economic impact analyses of the draft Policy, not 
          including staff time.  SWRCB Staff indicate an additional 
          $300,000 and one staff person would be needed to implement this 
          bill.

           Suggested Amendments  :  In light of the concerns raised by SWRCB 
          Staff, the author and the Committee may wish to consider an 
          amendment that eliminates the requirement for an economic report 
          but instead provides LADWP with a date certain as to when the 
          SWRCB may, or may not, amend the Policy with respect to 
          municipally-owned power plants.

           REGISTERED SUPPORT / OPPOSITION  :   
           Support 

          Anthony
          California Chamber of Commerce
          E Street Cold Logistics
          Robert Smola, President Konoike-Pacific
          See's Candies
          The Downtown Properties
          The Trident Center
           
           Opposition 

          California Coastkeeper Alliance
          California League of Conservation Voters
          Clean Water Action California
          Heal the Bay
          Natural Resources Defense Council
          Orange County Coastkeeper

         Pacific Coast Federation of Fishermen's Assocs.
         Pacific Environment








                                                                 AB 1180
                                                                  Page  7

         Planning and Conservation League
         Sierra Club of California
         Southern California Watershed Alliance
         Surfrider Foundation
         The Ocean Conservancy
            
          Analysis Prepared by  :    Tina Cannon Leahy / W., P. & W. / (916) 
          319-2096