BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 2187 - Bradford Hearing Date:
June 19, 2012 A
As Amended: May 1, 2012 FISCAL B
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DESCRIPTION
Current law authorizes the non-residential, retail end-use
customers of an electric corporation (IOU) to purchase electric
service directly from non-utility providers (electric service
providers or ESPs), a program commonly referred to as direct
access. Participation is capped as a percentage of total
electric load based on a specified formula.
Current law requires IOUs, publicly owned utilities (POUs),
community choice aggregators (CCAs), and ESPs to increase
purchases of renewable energy such that at least 33% of total
retail sales are procured from renewable energy resources by
December 31, 2020. In the interim each entity would be required
to procure an average of 20% of renewable energy for the period
of January 1, 2011 through December 31, 2013 and 25% by December
31, 2016. This is known as the Renewables Portfolio Standard
(RPS).
Current law requires all renewable electricity products to meet
the requirements of a "loading order" that mandates minimum and
maximum quantities of three product categories (or "buckets")
which includes renewable resources directly connected to a
California balancing authority or provided in real time without
substitution from another energy source, energy not connected or
delivered in real time yet still delivering electricity, and
unbundled renewable energy credits.
Current law permits procurement from contracts for renewable
generation executed prior to June 1, 2010 to "count in full"
toward a retail seller's or POU's RPS requirements and further
exempts those contracts from the three product categories or
"bucket" requirements.
This bill allows an ESP to count the generation from any and all
contracts entered into through January 13, 2011 as eligible
procurement for any of the three compliance periods and for any
of the three product categories or bucket requirements.
BACKGROUND
RPS Purpose & Program - In 2002 the California State Legislature
adopted groundbreaking legislation (SB 1078, Sher) to require
the state's investor-owned utilities (e.g. Pacific Gas &
Electric, Southern California Edison, San Diego Gas and Electric
Company, collectively referred to as IOUs) and the private
companies that compete with the ESPs to increase their annual
purchases of electricity from renewable resources by at least 1%
per year so that 20% of their sales would come from renewable
sources by 2017. In 2006 legislation accelerated the deadline
for utilities to reach 20% to the end of 2010 (SB 107,
Simitian). Flexible compliance provisions of the program could
have extended the deadline to 2013. The POUs were called upon
in those bills to implement and enforce an RPS program 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." In 2011 the Legislature
expanded the RPS program to 33% by 2020 and more clearly
delineated the RPS requirements for the POUs.
Renewable Loading Order - Critical new features required for
compliance in the RPS program are that the retail sellers and
POUs have interim obligations procurement obligations leading up
to 33% by 2020. The program defines three product categories,
the "buckets", and sets limitations on the quantity of
electricity products for each of the three buckets in each
compliance period, as follows:
Bucket #1 - Energy from generators either (1) directly
connected to a California balancing authority (CBA), or,
(2) connected to another balancing authority and providing
power to a CBA via dynamic transfers or by scheduling power
from the facility into a CBA on an hourly basis. The most
important fact about this product category is that CBAs,
like the CAISO and LADWP, have many interconnection points
outside of California. Compliance targets require at least
50% of the generation to meet this category through 2013;
65% through 2016, and 75% thereafter.
Bucket #2 - Unbundled renewable energy credits (RECs) from
generators not directly connected to a CBA. Retail sellers
and POUs can secure no more than 25% through 2013; 15%
through 2016, and 10% thereafter.
Bucket #3 - Energy not directly connected to a California
Balancing Authority or delivered in real time yet still
providing electricity to the state. If unbundled RECs from
Bucket #2 are not used then as much as 50% of generation
can fill this bucket through 2013; 35% through 2016 and 25%
thereafter. If Bucket #2 is full then the remaining
generation needed to comply with the RPS could be applied
to the criteria in this bucket.
COMMENTS
1. Author's Purpose . The rules put in place by both the
California Public Utilities Commission (CPUC) and the
Legislature governing what counted as RPS compliant energy
allowed "bundled" RPS products to count fully toward
meeting the RPS. The California Energy Commission (CEC)
rules, the RPS mandate and a stayed CPUC decision from
March 2010 (tradable RECs decision) that creates new RPS
standards but grandfathers all contracts through January
13, 2011. Since it is more challenging for an ESP to make
renewable purchases in the amounts required by law, Noble
Energy made large procurements in order to comply with the
statutory mandate. If not, Noble Energy would not have
complied with the 2011 mandate.
After negotiating renewable energy purchases in early
January 2011 Noble Energy believed they were 20% RPS
compliant through 2011 and 2012, and into to part of 2013.
This belief was based on the rules and commission policies
in place at the time of the purchases. Subsequently SB 2
(1X) of the First Extraordinary Session of 2011
grandfathered renewable energy contracts that were signed
by June 1, 2010 only. The bill was eventually chaptered
into law in April 2011.
2. Transition from 20% to 33% . Applying the new bucket and
compliance period obligations to contracts entered into to
meet the 20% by 2010 RPS program was awkward at best. To
address those issues all contracts entered into by all
retail sellers and POUs prior to June 1, 2010 were
"grandfathered" and allowed to count toward compliance for
any bucket. This provision was included in RPS bills
dating back to 2010. However, some entities, namely ESPs,
continued to secure contracts that did not comply with the
pending legislation. Additionally, the CPUC ignored
pending legislation and adopted program requirements that
would likely be moot or trumped by the passage of a 33% RPS
bill.
The result was that any retail seller or POU that entered
into contracts after June 1, 2010 were at risk that those
contacts might not comply with the new rules. The ESPs
took that risk and have an unknown number of contracts for
an unknown volume of electricity products that were entered
into between June 1, 2010 and January 13, 2011. The
contracts appear to be only for renewable energy credits.
The circumstances presented in support of this bill were
fully known at the time of passage of SB 2 (1X) and
intentionally not accommodated. Opponents note that the
new program went into effect just one year ago and the
elements of the package represented a "delicate balance"
and "unique consensus" across a broad group of stakeholders
and needs.
3. Impacts Unknown . The CPUC reports that "it is difficult
to quantify the actual impact this bill would have on ESP's
RPS compliance positions both because contract execution
date was not a data point commonly tracked for the RPS
program prior to the enactment of SB 2 (1X) and because the
CPUC does not approve contracts for ESPs. In any event,
this bill would permit more generation to count for
compliance without regard to the portfolio content
categories than set forth in SB 2 (1X).
ASSEMBLY VOTES
Assembly Floor (77-0)
Assembly Appropriations Committee (17-0)
Assembly Natural Resources Committee
(8-0)
Assembly Utilities and Commerce Committee
(13-0)
POSITIONS
Sponsor:
Noble Americas Energy Solutions LLC
Support:
California Manufacturers & Technology Association
Oppose:
Independent Energy Producers Association
Kellie Smith
AB 2187 Analysis
Hearing Date: June 19, 2012