BILL NUMBER: SBX1 2	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senators Simitian, Kehoe, and Steinberg
   (Principal coauthor: Assembly Member Skinner)
   (Coauthors: Assembly Members Bradford and Chesbro)

                        FEBRUARY 1, 2011

   An act to add Section 705 to the Fish and Game Code, to amend
Sections 25740, 25740.5, 25741, 25742, 25746, 25747, and 25751 of, to
add Section 25519.5 to, and to add and repeal Section 25741.5 of,
the Public Resources Code, and to amend Sections 399.11, 399.12,
399.20, and 454.5 of, to amend, renumber, and add Sections 399.13 and
399.16 of, to add Sections 399.18, 399.19, 399.26, 399.30, 399.31,
and 1005.1 to, to add Article 11 (commencing with Section 910) to
Chapter 4 of Part 1 of Division 1 of, to repeal Section 387 of, and
to repeal and add Sections 399.14, 399.15, and 399.17 of, the Public
Utilities Code, relating to energy, and making an appropriation
therefor.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 2, as introduced, Simitian. Energy: renewable energy resources.

   (1) Under existing law, the Public Utilities Commission (PUC) has
regulatory authority over public utilities, including electrical
corporations, as defined. Existing law requires the PUC to require
the state's 3 largest electrical corporations, Pacific Gas and
Electric Company, San Diego Gas and Electric, and Southern California
Edison, to identify a separate electrical rate component to fund
programs that enhance system reliability and provide in-state
benefits. This rate component is a nonbypassable element of local
distribution and collected on the basis of usage. Existing PUC
resolutions refer to the nonbypassable rate component as a "public
goods charge." The public goods charge moneys are collected to
support cost-effective energy efficiency and conservation activities,
public interest research and development not adequately provided by
competitive and regulated markets, and renewable energy resources.
   The existing Warren-Alquist State Energy Resources Conservation
and Development Act establishes the State Energy Resources
Conservation and Development Commission (Energy Commission). The act
requires the commission to certify sufficient sites and related
facilities that are required to provide a supply of electric power
sufficient to accommodate projected demand for power statewide. The
act requires the commission to transmit a copy of an application for
certification of a site and related facility to, among other
entities, each federal and state agency having jurisdiction or
special interest in matters pertinent to the proposed site and
related facilities and to the Attorney General.
   This bill would require an applicant to inform the United States
Department of Defense of a proposed project and that an application
will be filed with the commission if the site and related facility
specified in the application are proposed to be located within 1,000
feet of a military installation, or lie within special use airspace
or beneath a low-level flight path, as defined.
   Existing law establishes the Renewable Resource Trust Fund as a
fund that is continuously appropriated, with certain exceptions for
administrative expenses, in the State Treasury, and requires that
certain moneys collected to support renewable energy resources
through the public goods charge are deposited into the fund and
authorizes the Energy Commission to expend the moneys pursuant to the
Renewable Energy Resources Program. The program states the intent of
the Legislature to increase the amount of electricity generated from
eligible renewable energy resources per year so that amount equals
at least 20% of total retail sales of electricity in California per
year by December 31, 2010.
   This bill would revise the Renewable Energy Resources Program to
state the intent of the Legislature to increase the amount of
electricity generated from eligible renewable energy resources per
year, so that amount equals at least 33% of total retail sales of
electricity in California per year by December 31, 2020. The bill
would revise certain terms used in the program, and revise certain
eligibility criteria for a renewable electrical generation facility,
as defined, pursuant to the program.
   (2) Existing law expresses the intent of the Legislature, in
establishing the California Renewables Portfolio Standard Program
(RPS program), to increase the amount of electricity generated per
year from eligible renewable energy resources, as defined, to an
amount that equals at least 20% of the total electricity sold to
retail customers in California per year by December 31, 2010. The RPS
program requires that a retail seller of electricity, including
electrical corporations, community choice aggregators, and electric
service providers, purchase a specified minimum percentage of
electricity generated by eligible renewable energy resources, as
defined, in any given year as a specified percentage of total
kilowatthours sold to retail end-use customers each calendar year.
The RPS program requires the PUC to implement annual procurement
targets for each retail seller to increase its total procurement of
electricity generated by eligible renewable energy resources by at
least an additional 1% of retail sales per year so that 20% of its
retail sales of electricity are procured from eligible renewable
energy resources no later than December 31, 2010. Existing law
requires the PUC to make a determination of the existing market cost
for electricity, which PUC decisions call the market price referent,
and to limit an electrical corporation's obligation to procure
electricity from eligible renewable energy resources, that exceeds
the market price referent, by a specified amount.
   This bill would express the intent that the amount of electricity
generated per year from eligible renewable energy resources be
increased to an amount that equals at least 20% of the total
electricity sold to retail customers in California per year by
December 31, 2013, and 33% by December 31, 2020. The bill would
require the PUC, by January 1, 2012, to establish the quantity of
electricity products from eligible renewable energy resources to be
procured by each retail seller for specified compliance periods,
sufficient to ensure that the procurement of electricity products
from eligible renewable energy resources achieves 25% of retail sales
by December 31, 2016, and 33% of retail sales by December 31, 2020,
and that retail sellers procure not less than 33% of retail sales in
all subsequent years. The bill, consistent with the goals of
procuring the least-cost and best-fit eligible renewable energy
resources that meet project viability principles, would require that
all retail sellers procure a balanced portfolio of electricity
products from eligible renewable energy resources, as specified. The
bill would require the PUC to waive enforcement of the renewables
portfolio standard procurement requirement if the PUC finds that the
retail seller has demonstrated certain conditions exist that are
beyond the control of the retail seller and will prevent compliance,
and has taken all reasonable actions under its control to achieve
compliance. The bill would require the PUC to direct each electrical
corporation to annually prepare a renewable energy procurement plan
containing specified matters and require, to the extent feasible,
that the plan be proposed, reviewed, and adopted by the PUC as part
of, and pursuant to, a general procurement plan process. The bill
would require the PUC to direct all retail sellers to prepare and
submit an annual compliance report. The bill would delete the
existing market price referent provisions, and instead require the
PUC to establish a limitation for each electrical corporation on the
procurement expenditures for all eligible renewable energy resources
used to comply with the renewables portfolio standard. The bill would
require that by January 1, 2016, the PUC report to the Legislature
assessing whether each electrical corporation can achieve a 33%
renewables portfolio standard by December 31, 2020, and maintain that
level thereafter, within the cost limitations. The bill would
provide that, if the cost limitation for an electrical corporation is
insufficient to support the projected costs of meeting the
renewables portfolio standard procurement requirements, the
electrical corporation is authorized to refrain from entering into
new contracts or constructing facilities beyond the quantity that can
be procured within the limitation, unless eligible renewable energy
resources can be procured without exceeding a de minimis increase in
rates, consistent with the electrical corporation's general
procurement plan. The bill would delete an existing requirement that
the PUC adopt flexible rules for compliance for retail sellers. The
bill would revise the definitions of certain terms for purposes of
the RPS program, would recast certain provisions applicable only to
an electrical corporation with 60,000 or fewer customer accounts in
California that serves retail end-use customers outside of
California, and would add provisions applicable to certain smaller
electrical corporations. The bill would authorize an electrical
corporation to apply to the PUC for approval to construct, own, and
operate an eligible renewable energy resource, and would require the
PUC to approve the application if certain conditions are met, until
electrical corporation owned and operated resources provide 8.25% of
the corporation's anticipated retail sales.
   Under existing law, a violation of the Public Utilities Act or any
order, decision, rule, direction, demand, or requirement of the PUC
is a crime.
   Because the provisions of this bill are within the act and require
action by the PUC to implement its requirements, a violation of
these provisions would impose a state-mandated local program by
expanding the definition of a crime.
   (3) Under existing law, the governing board of a local publicly
owned electric utility is responsible for implementing and enforcing
a renewables portfolio standard for the utility that recognizes the
intent of the Legislature to encourage renewable resources, while
taking into consideration the effect of the standard on rates,
reliability, and financial resources and the goal of environmental
improvement.
   This bill would repeal this provision, and instead generally make
the requirements of the RPS program applicable to local publicly
owned electric utilities, except that the utility's governing board
would be responsible for implementation of those requirements,
instead of the PUC, and certain enforcement authority with respect to
local publicly owned electric utilities would be given to the Energy
Commission and State Air Resources Board, instead of the PUC. By
placing additional requirements upon local publicly owned electric
utilities, the bill would impose a state-mandated local program.
   (4) Existing law requires the Energy Commission to certify
eligible renewable energy resources, to design and implement an
accounting system to verify compliance with the RPS requirements by
retail sellers, and to develop tracking, accounting, verification,
and enforcement mechanisms for renewable energy credits, as defined.
   This bill would require the Energy Commission to design and
implement an accounting system to verify compliance with the RPS
requirements by retail sellers and local publicly owned electric
utilities. The bill would require the Energy Commission, among other
things, to adopt regulations by July 1, 2011, specifying procedures
for enforcement of the RPS requirements that include a public process
under which the Energy Commission is authorized to issue a notice of
violation and correction with respect to a local publicly owned
electric utility and for referral to the State Air Resources Board
for penalties imposed pursuant to the California Global Warming
Solutions Act of 2006 or other laws if that act is suspended or
repealed. This bill would revise the definition of renewable energy
credit. The bill would require the Energy Commission, by June 30,
2011, to study and provide a report to the Legislature that analyzes
run-of-river hydroelectric generating facilities, as defined, in
British Columbia, including whether these facilities are, or should
be, included as renewable electrical generation facilities for
purposes of the Renewable Energy Resources Program administered by
the Energy Commission or eligible renewable energy resources for
purposes of the RPS program.
   (5) Existing law requires the PUC, by February 1 of each year, to
prepare and submit to the Governor and the Legislature a written
report on the costs of programs and activities conducted by an
electrical corporation or gas corporation that have more than a
specified number of customers in California.
   This bill would require the PUC, by February 1 of each year, to
prepare and submit to the policy and fiscal committees of the
Legislature a report on (A) all electrical corporation revenue
requirement increases associated with meeting the renewables
portfolio standard, (B) all cost savings experienced, or costs
avoided, by electrical corporations as a result of meeting the
renewables portfolio standard, (C) all costs incurred by electrical
corporations for incentives for distributed and renewable generation,
(D) all cost savings experienced, or costs avoided, by electrical
corporations as a result of incentives for distributed generation and
renewable generation, (E) specified costs for which an electrical
corporation is seeking recovery in rates that are pending
determination or approval by the PUC, (F) the decision number of each
PUC decision in the prior year authorizing an electrical corporation
to recover costs incurred in rates, (G) any changes in the prior
year in load serviced by an electrical corporation, and (H) the
efforts each electrical corporation is taking to recruit and train
employees to ensure an adequately trained and available workforce.
   (6) The bill would require the PUC, by July 1, 2011, to determine
the effective load carrying capacity of wind and solar energy
resources on the electrical grid. The bill would require the PUC to
use those values in establishing the contribution of those resources
toward meeting specified resource adequacy requirements.
   (7) The Public Utilities Act prohibits any electrical corporation
from beginning the construction of, among other things, a line,
plant, or system, or of any extension thereof, without having first
obtained from the PUC a certificate that the present or future public
convenience and necessity require or will require that construction,
termed a certificate of public convenience and necessity.
   This bill would require the PUC to issue a decision on an
application for a certificate of public convenience and necessity
within 18 months of the filing of a completed application under
specified circumstances.
   (8) Existing law establishes the Department of Fish and Game in
the Natural Resources Agency, and generally charges the department
with the administration and enforcement of the Fish and Game Code.
   This bill would require the department to establish an internal
division with the primary purpose of performing comprehensive
planning and environmental compliance services with priority given to
projects involving the building of eligible renewable energy
resources.
   (9) The existing restructuring of the electrical industry within
the Public Utilities Act provides for the establishment of an
Independent System Operator (ISO). Existing law requires the ISO to
ensure efficient use and reliable operation of the transmission grid
consistent with achieving planning and operating reserve criteria no
less stringent than those established by the Western Electricity
Coordinating Council and the American Electric Reliability Council.
Pursuant to existing law, the ISO's tariffs are required to be
approved by the Federal Energy Regulatory Commission.
   This bill would require the ISO and other California balancing
authorities to work cooperatively to integrate and interconnect
eligible renewable energy resources to the transmission grid by the
most efficient means possible with the goal of minimizing the impact
and cost of new transmission facilities needed to meet both
reliability needs and the renewables portfolio standard procurement
requirements, and to accomplish this in a manner that respects the
ownership, business, and dispatch models for transmission facilities
owned by electrical corporations, local publicly owned electric
utilities, joint power agencies, and independent transmission
companies.
   (10) This bill would appropriate $322,000 from the Public
Utilities Commission Utilities Reimbursement Account to the PUC for
additional staffing to identify, review, and approve transmission
lines reasonably necessary or appropriate to facilitate achievement
of the renewables portfolio standard.
   (11) 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 specified reasons.
   Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  This act shall be known, and may be cited, as the
California Renewable Energy Resources Act.
  SEC. 2.  Section 705 is added to the Fish and Game Code, to read:
   705.  (a) For purposes of this section, "eligible renewable energy
resources" has the same meaning as in the California Renewables
Portfolio Standard Program (Article 16 (commencing with Section
399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public
Utilities Code).
   (b) The department shall establish an internal division with the
primary purpose of performing comprehensive planning and
environmental compliance services with priority given to projects
involving the building of eligible renewable energy resources.
   (c) The internal division shall ensure the timely completion of
plans pursuant to the Natural Community Conservation Planning Act
(Chapter 10 (commencing with Section 2800) of Division 3).
  SEC. 3.  Section 25519.5 is added to the Public Resources Code, to
read:
   25519.5.  (a) If the site and related facilities specified in the
application are proposed to be located within 1,000 feet of a
military installation, or lie within special use airspace or beneath
a low-level flight path, as defined in Section 21098, the applicant
shall inform the United States Department of Defense of the proposed
project and that an application will be filed with the commission.
   (b) If provided by the United States Department of Defense, the
applicant shall include within the application a description of its
consultation with the department, with regard to potential impacts
upon national security, including potential impacts on the land, sea,
and airspace identified by the United States Department of Defense
and its impacted service components, for conducting operations and
training, or for the research, development, testing, and evaluation
of weapons, sensors, and tactics. If the information is provided
after the application is filed, the applicant shall forward the
information upon receipt.
  SEC. 4.  Section 25740 of the Public Resources Code is amended to
read:
   25740.  It is the intent of the Legislature in establishing this
program, to increase the amount of electricity generated from
eligible renewable energy resources per year, so that it equals at
least  20   33  percent of total retail
sales of electricity in California per year by December 31, 
2010   2020  .
  SEC. 5.  Section 25740.5 of the Public Resources Code is amended to
read:
   25740.5.  (a) The commission shall optimize public investment and
ensure that the most cost-effective and efficient investments in
renewable energy resources are vigorously pursued.
   (b) The commission's long-term goal shall be a fully competitive
and self-sustaining supply of electricity generated from renewable
sources.
   (c) The program objective shall be to increase, in the near term,
the quantity of California's electricity generated by 
in-state renewable electricity generation facilities  
renewable   electrical generation facilities located in this
state  , while protecting system reliability, fostering
resource diversity, and obtaining the greatest environmental benefits
for California residents.
   (d) An additional objective of the program shall be to identify
and support emerging renewable technologies in distributed generation
applications that have the greatest near-term commercial promise and
that merit targeted assistance.
   (e) The Legislature recommends allocations among all of the
following:
   (1) Rebates, buydowns, or equivalent incentives for emerging
renewable technologies.
   (2) Customer education.
   (3) Production incentives for reducing fuel costs, that are
confirmed to the satisfaction of the commission, at solid fuel
biomass energy facilities in order to provide demonstrable
environmental and public benefits, including improved air quality.
   (4) Solar thermal generating resources that enhance the
environmental value or reliability of the electrical system and that
require financial assistance to remain economically viable, as
determined by the commission. The commission may require financial
disclosure from applicants for purposes of this paragraph.
   (5) Specified fuel cell technologies, if the commission makes all
of the following findings:
   (A) The specified technologies have similar or better air
pollutant characteristics than renewable technologies in the report
made pursuant to Section 25748.
   (B) The specified technologies require financial assistance to
become commercially viable by reference to wholesale generation
prices.
   (C) The specified technologies could contribute significantly to
the infrastructure development or other innovation required to meet
the long-term objective of a self-sustaining, competitive supply of
electricity generated from renewable sources.
   (6) Existing wind-generating resources, if the commission finds
that the existing wind-generating resources are a cost-effective
source of reliable energy and environmental benefits compared with
other  in-state renewable electricity generation facilities
  renewable electrical generation facilities located in
this state  , and that the existing wind-generating resources
require financial assistance to remain economically viable. The
commission may require financial disclosure from applicants for the
purposes of this paragraph.
   (f) Notwithstanding any other  provision of  law,
moneys collected for renewable energy pursuant to Article 15
(commencing with Section 399) of Chapter 2.3 of Part 1 of Division 1
of the Public Utilities Code shall be transferred to the Renewable
Resource Trust Fund. Moneys collected between January 1, 2007, and
January 1, 2012, shall be used for the purposes specified in this
chapter.
  SEC. 6.  Section 25741 of the Public Resources Code is amended to
read:
   25741.  As used in this chapter, the following terms have the
following meaning: 
   (a) "Delivered" and "delivery" mean the electricity output of an
in-state renewable electricity generation facility that is used to
serve end-use retail customers located within the state. Subject to
verification by the accounting system established by the commission
pursuant to subdivision (b) of Section 399.13 of the Public Utilities
Code, electricity shall be deemed delivered if it is either
generated at a location within the state, or is scheduled for
consumption by California end-use retail customers. Subject to
criteria adopted by the commission, electricity generated by an
eligible renewable energy resource may be considered "delivered"
regardless of whether the electricity is generated at a different
time from consumption by a California end-use customer. 

   (b) "In-state renewable electricity 
    (a)     "Renewable electrical 
generation facility" means a facility that meets all of the following
criteria:
   (1) The facility uses biomass, solar thermal, photovoltaic, wind,
geothermal, fuel cells using renewable fuels, small hydroelectric
generation of 30 megawatts or less, digester gas, municipal solid
waste conversion, landfill gas, ocean wave, ocean thermal, or tidal
current, and any additions or enhancements to the facility using that
technology.
   (2) The facility satisfies one of the following requirements:
   (A) The facility is located in the state or near the border of the
state with the first point of connection to the transmission network
 within this state and electricity produced by the facility
is delivered to an in-state location   of a balancing
authority area primarily located within the state. For purposes of
this subparagraph, "balancing authority area" has the same meaning as
defined in Section 399.12 of the Public Utilities Code  .
   (B) The facility has its first point of interconnection to the
transmission network outside the state  , within the Western
Electricity Coordinating Council (WECC) service area,  and
satisfies all of the following requirements: 
   (i) It is connected to the transmission network within the Western
Electricity Coordinating Council (WECC) service territory. 

   (ii) 
    (i)  It commences initial commercial operation after
January 1, 2005. 
   (iii) Electricity produced by the facility is delivered to an
in-state location.  
   (iv) 
    (ii)  It will not cause or contribute to any violation
of a California environmental quality standard or requirement.

   (v) If the facility is outside of the United States, it is
developed and operated in a manner that is as protective of the
environment as a similar facility located in the state. 

   (vi) 
    (iii)  It participates in the accounting system to
verify compliance with the renewables portfolio standard  by
retail sellers,  once established by the  Energy
Commission   commission  pursuant to subdivision
(b) of Section  399.13   399.25  of the
Public Utilities Code.
   (C) The facility meets the requirements of clauses  (i),
(iii), (iv), (v), and (vi)   (ii) and (iii)  in
subparagraph (B), but does not meet the requirements of clause
 (ii)   (i) of subparagraph (B)  because it
 commences   commenced  initial operation
prior to January 1, 2005, if the facility satisfies either of the
following requirements:
   (i) The electricity is from incremental generation resulting from
expansion or repowering of the facility. 
   (ii) The facility has been part of the existing baseline of
eligible renewable energy resources of a retail seller established
pursuant to paragraph (2) of subdivision (b) of Section 399.15 of the
Public Utilities Code or has been part of the existing baseline of
eligible renewable energy resources of a local publicly owned
electric utility established pursuant to Section 387 of the Public
Utilities Code.  
   (ii) Electricity generated by the facility was procured by a
retail seller or local publicly owned electric utility as of January
1, 2010.  
   (3) If the facility is outside the United States, it is developed
and operated in a manner that is as protective of the environment as
a similar facility located in the state.  
   (3) For the purposes of this subdivision, "solid waste conversion"

    (b)     "Municipal solid waste conversion,"
as used in subdivision (a),  means a technology that uses a
noncombustion thermal process to convert solid waste to a
clean-burning fuel for the purpose of generating electricity, and
that meets all of the following criteria: 
   (A) 
    (1)  The technology does not use air or oxygen in the
conversion process, except ambient air to maintain temperature
control. 
   (B) 
    (2)  The technology produces no discharges of air
contaminants or emissions, including greenhouse gases as defined in
Section 38505 of the Health and Safety Code. 
   (C) 
    (3)  The technology produces no discharges to surface or
groundwaters of the state. 
   (D) 
    (4)  The technology produces no hazardous wastes.

   (E) 
    (5)  To the maximum extent feasible, the technology
removes all recyclable materials and marketable green waste
compostable materials from the solid waste stream prior to the
conversion process and the owner or operator of the facility
certifies that those materials will be recycled or composted.

   (F) 
    (6)  The facility at which the technology is used is in
compliance with all applicable laws, regulations, and ordinances.

   (G) 
    (7)  The technology meets any other conditions
established by the commission. 
   (H)
    (8)  The facility certifies that any local agency
sending solid waste to the facility diverted at least 30 percent of
all solid waste it collects through solid waste reduction, recycling,
and composting. For purposes of this paragraph, "local agency" means
any city, county, or special district, or subdivision thereof, which
is authorized to provide solid waste handling services. 
   (c) "Procurement entity" means any person or corporation that
enters into an agreement with a retail seller to procure eligible
renewable energy resources pursuant to subdivision (f) of Section
399.14 of the Public Utilities Code.  
   (d) 
    (c)  "Renewable energy public goods charge" means that
portion of the nonbypassable system benefits charge 
authorized   required  to be collected  and
to be transferred to the Renewable Resource Trust Fund 
 to fund renewable energy  pursuant to the Reliable Electric
Service Investments Act (Article 15 (commencing with Section 399) of
Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code).

   (e) 
    (d)  "Report" means the report entitled "Investing in
Renewable Electricity Generation in California" (June 2001,
Publication Number P500-00-022) submitted to the Governor and the
Legislature by the commission. 
   (f) 
    (e)  "Retail seller" means a "retail seller" as defined
in Section 399.12 of the Public Utilities Code.
  SEC. 7.  Section 25741.5 is added to the Public Resources Code, to
read:
   25741.5.  (a) By June 30, 2011, after providing public notice and
an opportunity for public comment, including holding at least one
public workshop, and following consultation with interested
governmental entities, the commission shall study and provide a
report to the Legislature that analyzes run-of-river hydroelectric
generating facilities in British Columbia, including whether these
facilities are, or should be, included as renewable electrical
generation facilities pursuant to Section 25741 or eligible renewable
energy resources pursuant to Article 16 (commencing with Section
399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public
Utilities Code.
   (b) By completing the study and making recommendations, the
commission shall consider the effect that inclusion would have upon
all of the following:
   (1) Emissions of carbon dioxide and other greenhouse gases.
   (2) Emissions of air pollutants.
   (3) Water quality, recreation, and fisheries.
   (4) Any other environmental impact caused by run-of-river
hydroelectric generating facilities.
   (c) The report submitted pursuant to this section shall be
submitted in compliance with Section 9795 of the Government Code.
   (d) Pursuant to Section 10231.5 of the Government Code, this
section is repealed on January 1, 2015.
  SEC. 8.  Section 25742 of the Public Resources Code is amended to
read:
   25742.  (a) Twenty percent of the funds collected pursuant to the
renewable energy public goods charge shall be used for programs that
are designed to achieve fully competitive and self-sustaining
existing  in-state renewable electricity generation
facilities   renewable electrical generation facilities
located in this state  , and to secure for the state the
environmental, economic, and reliability benefits that continued
operation of those facilities will provide during the 2007-2011
investment cycle. Eligibility for production incentives under this
section shall be limited to those technologies found eligible for
funds by the commission pursuant to paragraphs (3), (4), and (6) of
subdivision (e) of Section 25740.5.
   (b) Any funds used to support in-state renewable
electricity generation facilities   renewable electrical
generation facilities located in this state  pursuant to this
section shall be expended in accordance with the provisions of this
chapter.
   (c) Facilities that are eligible to receive funding pursuant to
this section shall be registered in accordance with criteria
developed by the commission and those facilities shall not receive
payments for any electricity produced that has any of the following
characteristics:
   (1) Is sold at monthly average rates equal to, or greater than,
the applicable target price, as determined by the commission.
   (2) Is used onsite.
   (d) (1) Existing facilities  located in this state 
generating electricity from biomass energy shall be eligible for
funding and otherwise considered  an in-state renewable
electricity   a renewable electrical  generation
facility only if they report to the commission the types and
quantities of biomass fuels used.
   (2) The commission shall report the types and quantities of
biomass fuels used by each facility to the Legislature in the reports
prepared pursuant to Section 25748.
   (e) Each existing facility seeking an award pursuant to this
section shall be evaluated by the commission to determine the amount
of the funds being sought, the cumulative amount of funds the
facility has received previously from the commission and other state
sources, the value of any past and current federal or state tax
credits, the facility's contract price for energy and capacity, the
prices received by similar facilities, the market value of the
facility, and the likelihood that the award will make the facility
competitive and self-sustaining within the 2007-2011 investment
cycle. The commission shall use this evaluation to determine the
value of an award to the public relative to other renewable energy
investment alternatives. The commission shall compile its findings
and report them to the Legislature in the reports prepared pursuant
to Section 25748.
  SEC. 9.  Section 25746 of the Public Resources Code is amended to
read:
   25746.  (a) One percent of the money collected pursuant to the
renewable energy public goods charge shall be used in accordance with
this chapter to promote renewable energy and disseminate information
on renewable energy technologies, including emerging renewable
technologies, and to help develop a consumer market for renewable
energy and for small-scale emerging renewable energy technologies.
   (b) If the commission provides funding for a regional accounting
system to verify compliance with the renewable portfolio standard by
retail sellers, pursuant to subdivision (b) of Section 
399.13   399.25  of the Public Utilities Code, the
commission shall recover all costs from user fees.
  SEC. 10.  Section 25747 of the Public Resources Code is amended to
read:
   25747.  (a) The commission shall adopt guidelines governing the
funding programs authorized under this chapter, at a publicly noticed
meeting offering all interested parties an opportunity to comment.
Substantive changes to the guidelines  may  
shall  not be adopted without at least 10 days' written notice
to the public. The public notice of meetings required by this
subdivision  may   shall  not be less than
30 days. Notwithstanding any other  provision of 
law, any guidelines adopted pursuant to this chapter or Section
 399.13   399.25  of the Public Utilities
Code, shall be exempt from the requirements of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code. The Legislature declares that the changes made
to this subdivision by the act amending this section during the 2002
portion of the 2001-02 Regular Session are declaratory of, and not a
change in existing law.
   (b) Funds to further the purposes of this chapter may be committed
for multiple years.
   (c) Awards made pursuant to this chapter are grants, subject to
appeal to the commission upon a showing that factors other than those
described in the guidelines adopted by the commission were applied
in making the awards and payments. Any actions taken by an applicant
to apply for, or become or remain eligible and registered to receive,
payments or awards, including satisfying conditions specified by the
commission, shall not constitute the rendering of goods, services,
or a direct benefit to the commission.
   (d) An award made pursuant to this chapter, the amount of the
award, and the terms and conditions of the grant are public
information.
  SEC. 11.  Section 25751 of the Public Resources Code is amended to
read:
   25751.  (a) The Renewable Resource Trust Fund is hereby created in
the State Treasury.
   (b) The following accounts are hereby established within the
Renewable Resource Trust Fund:
   (1) Existing Renewable Resources Account.
   (2) Emerging Renewable Resources Account.
   (3) Renewable Resources Consumer Education Account.
   (c) The money in the fund may be expended, only upon appropriation
by the Legislature in the annual Budget Act, for the following
purposes:
   (1) The administration of this article by the state.
   (2) The state's expenditures associated with the accounting system
established by the commission pursuant to subdivision (b) of Section
 399.13   399.25  of the Public Utilities
Code.
   (d) That portion of revenues collected by electrical corporations
for the benefit of in-state operation and development of existing
 and new  and emerging renewable resource
technologies, pursuant to Section 399.8 of the Public Utilities Code,
shall be transmitted to the commission at least quarterly for
deposit in the Renewable Resource Trust Fund pursuant to Section
25740.5. After setting aside in the fund money that may be needed for
expenditures authorized by the annual Budget Act in accordance with
subdivision (c), the Treasurer shall immediately deposit money
received pursuant to this section into the accounts created pursuant
to subdivision (b) in proportions designated by the commission for
the current calendar year. Notwithstanding Section 13340 of the
Government Code, the money in the fund and the accounts within the
fund are hereby continuously appropriated to the commission without
regard to fiscal  year   years  for the
purposes enumerated in this chapter.
   (e) Upon notification by the commission, the Controller shall pay
all awards of the money in the accounts created pursuant to
subdivision (b) for purposes enumerated in this chapter. The
eligibility of each award shall be determined solely by the
commission based on the procedures it adopts under this chapter.
Based on the eligibility of each award, the commission shall also
establish the need for a multiyear commitment to any particular award
and so advise the Department of Finance. Eligible awards submitted
by the commission to the Controller shall be accompanied by
information specifying the account from which payment should be made
and the amount of each payment; a summary description of how payment
of the award furthers the purposes enumerated in this chapter; and an
accounting of future costs associated with any award or group of
awards known to the commission to represent a portion of a multiyear
funding commitment.
   (f) The commission may transfer funds between accounts for
cashflow purposes, provided that the balance due each account is
restored and the transfer does not adversely affect any of the
accounts.
   (g) The Department of Finance shall conduct an independent audit
of the Renewable Resource Trust Fund and its related accounts
annually, and provide an audit report to the Legislature not later
than March 1 of each year for which this article is operative. The
Department of Finance's report shall include information regarding
revenues, payment of awards, reserves held for future commitments,
unencumbered cash balances, and other matters that the Director of
Finance determines may be of importance to the Legislature.
  SEC. 12.  Section 387 of the Public Utilities Code is repealed.

   387.  (a) Each governing body of a local publicly owned electric
utility shall be responsible for implementing and enforcing a
renewables portfolio standard 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.
   (b) Each local publicly owned electric utility shall report, on an
annual basis, to its customers and to the State Energy Resources
Conservation and Development Commission, the following:
   (1) Expenditures of public goods funds collected pursuant to
Section 385 for eligible renewable energy resource development.
Reports shall contain a description of programs, expenditures, and
expected or actual results.
   (2) The resource mix used to serve its customers by fuel type.
Reports shall contain the contribution of each type of renewable
energy resource with separate categories for those fuels that are
eligible renewable energy resources as defined in Section 399.12,
except that the electricity is delivered to the local publicly owned
electric utility and not a retail seller. Electricity shall be
reported as having been delivered to the local publicly owned
electric utility from an eligible renewable energy resource when the
electricity would qualify for compliance with the renewables
portfolio standard if it were delivered to a retail seller.
   (3) The utility's status in implementing a renewables portfolio
standard pursuant to subdivision (a) and the utility's progress
toward attaining the standard following implementation. 
  SEC. 13.  Section 399.11 of the Public Utilities Code is amended to
read:
   399.11.  The Legislature finds and declares all of the following:
   (a) In order to attain a target of generating 20 percent of total
retail sales of electricity in California from eligible renewable
energy resources by December 31,  2010, and for the purposes
of increasing the diversity, reliability, public health and
environmental benefits of the energy mix   2013, and 33
percent by December 31, 2020  , it is the intent of the
Legislature that the commission and the  State Energy
Resources Conservation and Development   Energy 
Commission implement the California Renewables Portfolio Standard
Program described in this article. 
   (b) Increasing California's reliance on eligible renewable energy
resources may promote stable electricity prices, protect public
health, improve environmental quality, stimulate sustainable economic
development, create new employment opportunities, and reduce
reliance on imported fuels.  
   (c) The development of eligible renewable energy resources and the
delivery of the electricity generated by those resources to
customers in California may ameliorate air quality problems
throughout the state and improve public health by reducing the
burning of fossil fuels                                          and
the associated environmental impacts and by reducing in-state fossil
fuel consumption.  
   (b) Achieving the renewables portfolio standard through the
procurement of various electricity products from eligible renewable
energy resources is intended to provide unique benefits to
California, including all of the following, each of which
independently justifies the program:  
   (1) Displacing fossil fuel consumption within the state. 

   (2) Adding new electrical generating facilities in the
transmission network within the Western Electricity Coordinating
Council service area.  
   (3) Reducing air pollution in the state.  
   (4) Meeting the state's climate change goals by reducing emissions
of greenhouse gases associated with electrical generation. 

   (5) Promoting stable retail rates for electric service.  

   (6) Meeting the state's need for a diversified and balanced energy
generation portfolio.  
   (7) Assistance with meeting the state's resource adequacy
requirements.  
   (8) Contributing to the safe and reliable operation of the
electrical grid, including providing predictable electrical supply,
voltage support, lower line losses, and congestion relief.  

   (9) Implementing the state's transmission and land use planning
activities related to development of eligible renewable energy
resources.  
   (d) 
    (c)  The California Renewables Portfolio Standard
Program is intended to complement the Renewable Energy Resources
Program administered by the  State Energy Resources
Conservation and Development   Energy  Commission
and established pursuant to Chapter 8.6 (commencing with Section
25740) of Division 15 of the Public Resources Code. 
   (e) 
    (d)  New and modified electric transmission facilities
may be necessary to facilitate the state achieving its renewables
portfolio standard targets. 
   (e) (1) Supplying electricity to California end-use customers that
is generated by eligible renewable energy resources is necessary to
improve California's air quality and public health, and the
commission shall ensure rates are just and reasonable, and are not
significantly affected by the procurement requirements of this
article. This electricity may be generated anywhere in the
interconnected grid that includes many states, and areas of both
Canada and Mexico.  
   (2) This article requires generating resources located outside of
California, but are able to supply that electricity to California
end-use customers, to be treated identically to generating resources
located within the state, without discrimination.  
   (3) California electrical corporations have already executed, and
the commission has approved, power purchase agreements with eligible
renewable energy resources located outside of California that will
supply electricity to California end-use customers. These resources
will fully count toward meeting the renewables portfolio standard
procurement requirements. In addition, there are nearly 7,000
megawatts of additional proposed renewable energy resources located
outside of California that are awaiting interconnection approval from
the Independent System Operator. All of these resources, if
procured, will count as eligible renewable energy resources that
satisfy the portfolio content requirements of paragraph (1) of
subdivision (c) of Section 399.16. 
  SEC. 14.  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.
 
   (b) "Balancing authority" means the responsible entity that
integrates resource plans ahead of time, maintains load-interchange
generation balance within a balancing authority area, and supports
interconnection frequency in real time.  
   (c) "Balancing authority area" means the collection of generation,
transmission, and loads within the metered boundaries of the area
within which the balancing authority maintains the electrical
load-resource balance.  
   (d) "California balancing authority" is a balancing authority with
control over a balancing authority area primarily located in this
state and operating for retail sellers and local publicly owned
electric utilities subject to the requirements of this article and
includes the Independent System Operator (ISO) and a local publicly
owned electric utility operating a transmission grid that is not
under the operational control of the ISO. A California balancing
authority is responsible for the operation of the transmission grid
within its metered boundaries which may not be limited by the
political boundaries of the State of California.  
   (c) 
    (e)  "Eligible renewable energy resource" means an
electrical generating facility that meets the definition of an
 "in-state renewable electricity   a "renewable
electrical  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
small hydroelectric generation unit with a nameplate capacity not
exceeding 40 megawatts that is operated as part of a water supply or
conveyance system is an eligible renewable energy resource if the
retail seller or local publicly owned electric utility procured
the electricity from the facility as of December 31, 2005. A new
hydroelectric facility  that commences generation of electricity
after December 31, 2005,  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. 
   (C) A facility approved by the governing board of a local publicly
owned electric utility prior to June 1, 2010, for procurement to
satisfy renewable energy procurement obligations adopted pursuant to
former Section 387, shall be certified as an eligible renewable
energy resource by the Energy Commission pursuant to this article, if
the facility is a "renewable electrical generation facility" as
defined in Section 25741 of the Public Resources Code. 
   (2) A facility engaged in the combustion of municipal solid waste
shall not be considered an eligible renewable energy resource unless
it is located in Stanislaus County and was operational prior to
September 26, 1996. 
   (d) "Procure" means to acquire through ownership or contract. For
purposes of meeting the renewables portfolio standard procurement
requirements, a retail seller or local publicly owned electric
utility may procure either 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.  
   (f) "Procure" means to acquire through ownership or contract.
 
   (g) "Procurement entity" means any person or corporation
authorized by the commission to enter into contracts to procure
eligible renewable energy resources on behalf of customers of a
retail seller pursuant to subdivision (f) of Section 399.13. 

   (e) 
    (h) (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   399.25  , 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   (A)     An 
electricity generated by an eligible renewable energy resource
attributable to the use of nonrenewable fuels, beyond a de minimis
quantity used to generate electricity in the same process through
which the facility converts renewable fuel to electricity, shall 
not  result in the creation of a renewable energy credit. The
Energy Commission shall set the de minimis quantity of nonrenewable
fuels for each renewable energy technology at a level of no more than
2 percent of the total quantity of fuel used by the technology to
generate electricity. The Energy Commission may adjust the de minimis
quantity for an individual facility, up to a maximum of 5 percent,
if it finds that all of the following conditions are met: 
   (A) 
    (i)  The facility demonstrates that the higher quantity
of nonrenewable fuel will lead to an increase in generation from the
eligible renewable energy facility that is significantly greater than
generation from the nonrenewable fuel alone. 
   (B) 
    (ii)  The facility demonstrates that the higher quantity
of nonrenewable fuels will reduce the variability of its electrical
output in a manner that results in net environmental benefits to the
state. 
   (C) 
    (iii)  The higher quantity of nonrenewable fuel is
limited to either natural gas or hydrogen derived by reformation of a
fossil fuel. 
   (B) Electricity generated by a small hydroelectric generation
facility shall not result in the creation of a renewable energy
credit unless the facility meets the requirements of subparagraph (A)
of paragraph (1) of subdivision (e).  
   (C) Electricity generated by a conduit hydroelectric generation
facility shall not result in the creation of a renewable energy
credit unless the facility meets the requirements of subparagraph (B)
of paragraph (1) of subdivision (e).  
   (D) Electricity generated by a facility engaged in the combustion
of municipal solid waste shall not result in the creation of a
renewable energy credit unless the facility meets the requirements of
paragraph (2) of subdivision (e).  
   (f) 
    (i)  "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  or the obligation of a local publicly owned electric
utility to meet its renewables portfolio standard implemented
pursuant to Section 387  . 
   (g) 
    (j)  "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
  This  paragraph  shall  
does not  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. 
   (k) "WECC" means the Western Electricity Coordinating Council of
the North American Electric Reliability Corporation, or a successor
to either corporation. 
  SEC. 15.  Section 399.13 of the Public Utilities Code is amended
and renumbered to read:
    399.13.   399.25.   The Energy
Commission shall do all of the following:
   (a) Certify eligible renewable energy resources that it determines
meet the criteria described in subdivision  (b) 
 (e)  of Section 399.12.
   (b) Design and implement an accounting system to verify compliance
with the renewables portfolio standard by retail sellers  and
local publicly owned electric utilities  , to ensure that
electricity generated by an eligible renewable energy resource is
counted only once for the purpose of meeting the renewables portfolio
standard of this state or any other state, to certify renewable
energy credits produced by eligible renewable energy resources, and
to verify retail product claims in this state or any other state. In
establishing the guidelines governing this accounting system, the
Energy Commission shall collect data from electricity market
participants that it deems necessary to verify compliance of retail
sellers  and local publicly owned electric utilities  , in
accordance with the requirements of this article and the California
Public Records Act (Chapter 3.5 (commencing with Section 6250) of
Division 7 of Title 1 of the Government Code). In seeking data from
electrical corporations, the Energy Commission shall request data
from the commission. The commission shall collect data from
electrical corporations and remit the data to the Energy Commission
within 90 days of the request.
   (c) Establish a system for tracking and verifying renewable energy
credits that, through the use of independently audited data,
verifies the generation  and delivery  of
electricity associated with each renewable energy credit and protects
against multiple counting of the same renewable energy credit. The
Energy Commission shall consult with other western states and with
the  Western Electricity Coordinating Council  
WECC  in the development of this system.
   (d) Certify, for purposes of compliance with the 
renewable   renewables  portfolio standard
requirements by a retail seller, the eligibility of renewable energy
credits associated with  deliveries of electricity by an
 eligible renewable energy  resource to 
 resources procured by  a local publicly owned electric
utility, if the Energy Commission determines that  the
following conditions have been satisfied:  all of the
conditions of Section 399.31 have been met.  
   (1) The local publicly owned electric utility that is procuring
the electricity is in compliance with the requirements of Section
387.  
   (2) The local publicly owned electric utility has established an
annual renewables portfolio standard target comparable to those
applicable to an electrical corporation, is procuring sufficient
eligible renewable energy resources to satisfy the targets, and will
not fail to satisfy the targets in the event that the renewable
energy credit is sold to another retail seller. 
  SEC. 16.  Section 399.13 is added to the Public Utilities Code, to
read:
   399.13.  (a) (1) The commission shall direct each electrical
corporation to annually prepare a renewable energy procurement plan
that includes the matter in paragraph (5), 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) Every electrical corporation that owns electrical transmission
facilities shall annually prepare, as part of the Federal Energy
Regulatory Commission Order 890 process, and submit to the
commission, a report identifying any electrical transmission
facility, upgrade, or enhancement that is reasonably necessary to
achieve the renewables portfolio standard procurement requirements of
this article. Each report shall look forward at least five years
and, to ensure that adequate investments are made in a timely manner,
shall include a preliminary schedule when an application for a
certificate of public convenience and necessity will be made,
pursuant to Chapter 5 (commencing with Section 1001), for any
electrical transmission facility identified as being reasonably
necessary to achieve the renewable energy resources procurement
requirements of this article. Each electrical corporation that owns
electrical transmission facilities shall ensure that project-specific
interconnection studies are completed in a timely manner.
   (3) The commission shall direct each retail seller to prepare and
submit an annual compliance report that includes all of the
following:
   (A) The current status and progress made during the prior year
toward procurement of eligible renewable energy resources as a
percentage of retail sales, including, if applicable, the status of
any necessary siting and permitting approvals from federal, state,
and local agencies for those eligible renewable energy resources
procured by the retail seller, and the current status of compliance
with the portfolio content requirements of subdivision (c) of Section
399.16, including procurement of eligible renewable energy resources
located outside the state and within the WECC and unbundled
renewable energy credits.
   (B) If the retail seller is an electrical corporation, the current
status and progress made during the prior year toward construction
of, and upgrades to, transmission and distribution facilities and
other electrical system components it owns to interconnect eligible
renewable energy resources and to supply the electricity generated by
those resources to load, including the status of planning, siting,
and permitting transmission facilities by federal, state, and local
agencies.
   (C) Recommendations to remove impediments to making progress
toward achieving the renewable energy resources procurement
requirements established pursuant to this article.
   (4) The commission shall adopt, by rulemaking, all of the
following:
   (A) 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 California Renewables Portfolio Standard
Program obligations on a total cost basis. This process shall take
into account all of the following:
   (i) Estimates of indirect costs associated with needed
transmission investments and ongoing electrical corporation expenses
resulting from integrating and operating eligible renewable energy
resources.
   (ii) The cost impact of procuring the eligible renewable energy
resources on the electrical corporation's electricity portfolio.
   (iii) The viability of the project to construct and reliably
operate the eligible renewable energy resource, including the
developer's experience, the feasibility of the technology used to
generate electricity, and the risk that the facility will not be
built, or that construction will be delayed, with the result that
electricity will not be supplied as required by the contract.
   (iv) Workforce recruitment, training, and retention efforts,
including the employment growth associated with the construction and
operation of eligible renewable energy resources and goals for
recruitment and training of women, minorities, and disabled veterans.

   (B) Rules permitting retail sellers to accumulate, beginning
January 1, 2011, excess procurement in one compliance period to be
applied to any subsequent compliance period. The rules shall apply
equally to all retail sellers. In determining the quantity of excess
procurement for the applicable compliance period, the commission
shall deduct from actual procurement quantities, the total amount of
procurement associated with contracts of less than 10 years in
duration. In no event shall electricity products meeting the
portfolio content of paragraph (3) of subdivision (b) of Section
399.16 be counted as excess procurement.
   (C) 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, at a minimum, shall 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.
   (D) An appropriate minimum margin of procurement above the minimum
procurement level necessary to comply with the renewables portfolio
standard to mitigate the risk that renewable projects planned or
under contract are delayed or canceled. This paragraph does not
preclude an electrical corporation from voluntarily proposing a
margin of procurement above the appropriate minimum margin
established by the commission.
   (5) Consistent with the goal of 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.
   (B) Potential compliance delays related to the conditions
described in paragraph (4) of subdivision (b) of Section 399.15.
   (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 energy resources currently under contract.
   (E) Consideration of mechanisms for price adjustments associated
with the costs of key components for eligible renewable energy
resource projects with online dates more than 24 months after the
date of contract execution.
   (F) An assessment of the risk that an eligible renewable energy
resource will not be built, or that construction will be delayed,
with the result that electricity will not be delivered as required by
the contract.
   (6) In soliciting and procuring eligible renewable energy
resources, each electrical corporation shall offer contracts of no
less than 10 years duration, unless the commission approves of a
contract of shorter duration.
   (7) 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) A retail seller may enter into a combination of long- and
short-term contracts for 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 through contracts of at least 10 years' duration.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's renewable energy resource procurement plan
prior to the commencement of renewable energy procurement pursuant to
this article by an electrical corporation.
   (d) Unless previously preapproved by the commission, an electrical
corporation shall submit a contract for the generation of an
eligible renewable energy resource to the commission for review and
approval consistent with an approved renewable energy resource
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 resource procurement plan, the
commission shall exercise its authority pursuant to Section 2113 to
require compliance. The commission shall enforce comparable penalties
on any retail seller that is not an electrical corporation that
fails to meet the procurement targets established pursuant to Section
399.15.
   (f) (1) The commission may authorize a procurement entity to enter
into contracts on behalf of customers of a retail seller for
electricity products from eligible renewable energy resources to
satisfy the retail seller's renewables portfolio standard procurement
requirements. The commission shall 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 contracts
entered into by an electrical corporation for eligible renewable
energy resources pursuant to this article and approved by the
commission are reasonable and prudent 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, are "public works" for the purposes
of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2
of the Labor Code.
  SEC. 17.  Section 399.14 of the Public Utilities Code is repealed.

   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.
   (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 of total retail sales of electricity
from eligible renewable energy resources.
   (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.
   (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 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.
   (B) Provisions 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.
   (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.
   (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.
   (b) 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.
   (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) 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.
   (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. 18.  Section 399.14 is added to the Public Utilities Code, to
read:
   399.14.  (a) (1) An electrical corporation, pursuant to Chapter 5
(commencing with Section 1001), and in order to meet its unmet
renewables portfolio standard procurement requirements, may apply to
the commission for approval to construct, own, and operate an
eligible renewable energy resource.
   (2) If the proposed eligible renewable energy resource complies
with the requirements of subdivision (b), the commission shall
approve an application filed pursuant to paragraph (1), until the
commission has approved applications for eligible renewable energy
resources for the electrical corporation that, when constructed and
operating, will provide 8.25 percent of the electrical corporation's
anticipated retail sales by December 31, 2020, and thereafter.
   (3) The commission may approve additional applications for
eligible renewable energy resources once the commission has approved
sufficient applications for eligible renewable energy resources for
the electrical corporation that, when constructed and operating, will
provide 8.25 percent of the electrical corporation's anticipated
retail sales by December 31, 2020, and thereafter.
   (b) The commission shall not approve any application by an
electrical corporation pursuant to subdivision (a) unless both of the
following conditions are met:
   (1) The eligible renewable energy resource utilizes a viable
technology at a reasonable cost.
   (2) The eligible renewable energy resource provides comparable or
superior value to ratepayers when compared to then recent contracts
for generation provided by eligible renewable energy resources.
   (c) In approving any application by an electrical corporation for
approval to construct, own, and operate an eligible renewable energy
resource, the commission shall apply traditional cost-of-service
ratemaking. When applying traditional cost-of-service ratemaking, the
commission, in the certificate authorizing the new construction,
shall specify the maximum cost determined to be reasonable and
prudent for the construction of the facility and the cost of initial
operation of the facility. Upon a filing by the electrical
corporation, the commission may authorize an increase in the maximum
cost of construction if it determines that the cost has in fact
increased, that the cost increase is determined to be reasonable and
prudent, and that the present or future public convenience or
necessity require construction of the project at the increased cost.
  SEC. 19.  Section 399.15 of the Public Utilities Code is repealed.

   399.15.  (a) In order to fulfill unmet long-term resource needs,
the commission shall establish a renewables portfolio standard
requiring all electrical corporations to procure a minimum quantity
of electricity generated by eligible renewable energy resources as a
specified percentage of total kilowatthours sold to their retail
end-use customers each calendar year, subject to limits on the total
amount of costs expended above the market prices determined in
subdivision (c), to achieve the targets established under this
article.
   (b) The commission shall implement annual procurement targets for
each retail seller as follows:
   (1) Each retail seller shall, pursuant to subdivision (a),
increase its total procurement of eligible renewable energy resources
by at least an additional 1 percent of retail sales per year so that
20 percent of its retail sales are procured from eligible renewable
energy resources no later than December 31, 2010. A retail seller
with 20 percent of retail sales procured from eligible renewable
energy resources in any year shall not be required to increase its
procurement of renewable energy resources in the following year.
   (2) For purposes of setting annual procurement targets, the
commission shall establish an initial baseline for each retail seller
based on the actual percentage of retail sales procured from
eligible renewable energy resources in 2001, and to the extent
applicable, adjusted going forward pursuant to Section 399.12.
   (3) Only for purposes of establishing these targets, the
commission shall include all electricity sold to retail customers by
the Department of Water Resources pursuant to Section 80100 of the
Water Code in the calculation of retail sales by an electrical
corporation.
   (4) In the event that a retail seller fails to procure sufficient
eligible renewable energy resources in a given year to meet any
annual target established pursuant to this subdivision, the retail
seller shall procure additional eligible renewable energy resources
in subsequent years to compensate for the shortfall, subject to the
limitation on costs for electrical corporations established pursuant
to subdivision (d).
   (c) The commission shall establish a methodology to determine the
market price of electricity for terms corresponding to the length of
contracts with eligible renewable energy resources, in consideration
of the following:
   (1) The long-term market price of electricity for fixed price
contracts, determined pursuant to an electrical corporation's general
procurement activities as authorized by the commission.
   (2) The long-term ownership, operating, and fixed-price fuel costs
associated with fixed-price electricity from new generating
facilities.
   (3) The value of different products including baseload, peaking,
and as-available electricity.
   (d) The commission shall establish, for each electrical
corporation, a limitation on the total costs expended above the
market prices determined in subdivision (c) for the procurement of
eligible renewable energy resources to achieve the annual procurement
targets established under this article.
   (1) The cost limitation shall be equal to the amount of funds
transferred to each electrical corporation by the Energy Commission
pursuant to subdivision (b) of Section 25743 of the Public Resources
Code and the 51.5 percent of the funds which would have been
collected through January 1, 2012, from the customers of the
electrical corporation based on the renewable energy public goods
charge in effect as of January 1, 2007.
   (2) The above-market costs of a contract selected by an electrical
corporation may be counted toward the cost limitation if all of the
following conditions are satisfied:
   (A) The contract has been approved by the commission and was
selected through a competitive solicitation pursuant to the
requirements of subdivision (d) of Section 399.14.
   (B) The contract covers a duration of no less than 10 years.
   (C) The contracted project is a new or repowered facility
commencing commercial operations on or after January 1, 2005.
   (D) No purchases of renewable energy credits may be eligible for
consideration as an above-market cost.
   (E) The above-market costs of a contract do not include any
indirect expenses including imbalance energy charges, sale of excess
energy, decreased generation from existing resources, or transmission
upgrades.
   (3) If the cost limitation for an electrical corporation is
insufficient to support the total costs expended above the market
prices determined in subdivision (c) for the procurement of eligible
renewable energy resources satisfying the conditions of paragraph
(2), the commission shall allow the electrical corporation to limit
its procurement to the quantity of eligible renewable energy
resources that can be procured at or below the market prices
established in subdivision (c).
   (4) Nothing in this section prevents an electrical corporation
from voluntarily proposing to procure eligible renewable energy
resources at above-market prices that are not counted toward the cost
limitation. Any voluntary procurement involving above-market costs
shall be subject to commission approval prior to the expense being
recovered in rates.
   (e) The establishment of a renewables portfolio standard shall not
constitute implementation by the commission of the federal Public
Utility Regulatory Policies Act of 1978 (Public Law 95-617).
   (f) The commission shall consult with the Energy Commission in
calculating market prices under subdivision (c) and establishing
other renewables portfolio standard policies. 
  SEC. 20.  Section 399.15 is added to the Public Utilities Code, to
read:
   399.15.  (a) In order to fulfill unmet long-term resource needs,
the commission shall establish a renewables portfolio standard
requiring all retail sellers to procure a minimum quantity of
electricity products from eligible renewable energy resources as a
specified percentage of total kilowatthours sold to their retail
end-use customers each compliance period to achieve the targets
established under this article. For any retail seller procuring at
least 14 percent of retail sales from eligible renewable energy
resources in 2010, the deficits associated with any previous
renewables portfolio standard shall not be added to any procurement
requirement pursuant to this article.
   (b) The commission shall implement renewables portfolio standard
procurement requirements only as follows:
   (1) Each retail seller shall procure a minimum quantity of
eligible renewable energy resources for each of the following
compliance periods:
   (A) January 1, 2011, to December 31, 2013, inclusive.
   (B) January 1, 2014, to December 31, 2016, inclusive.
   (C) January 1, 2017, to December 31, 2020, inclusive.
   (2) (A) No later than January 1, 2012, the commission shall
establish the quantity of electricity products from eligible
renewable energy resources to be procured by the retail seller for
each compliance period. These quantities shall be established in the
same manner for all retail sellers and result in the same percentages
used to establish compliance period quantities for all retail
sellers.
   (B) In establishing quantities for the compliance period from
January 1, 2011, to December 31, 2013, inclusive, the commission
shall require procurement for each retail seller equal to an average
of 20 percent of retail sales. For the following compliance periods,
the quantities shall reflect reasonable progress in each of the
intervening years sufficient to ensure that the procurement of
electricity products from eligible renewable energy resources
achieves 25 percent of retail sales by December 31, 2016, and 33
percent of retail sales by December 31, 2020. The commission shall
require retail sellers to procure not less than 33 percent of retail
sales of electricity products from eligible renewable energy
resources in all subsequent years.
   (C) Retail sellers shall be obligated to procure no less than the
quantities associated with all intervening years by the end of each
compliance period. Retail sellers shall not be required to
demonstrate a specific quantity of procurement for any individual
intervening year.
   (3) The commission shall not require the procurement of eligible
renewable energy resources in excess of the quantities identified in
paragraph (2). A retail seller may voluntarily increase its
procurement of eligible renewable energy resources beyond the
renewables portfolio standard procurement requirements.
   (4) Only for purposes of establishing the renewables portfolio
standard procurement requirements of paragraph (1) and determining
the quantities pursuant to paragraph (2), the commission shall
include all electricity sold to retail customers by the Department of
Water Resources pursuant to Division 27 (commencing with Section
80000) of the Water Code in the calculation of retail sales by an
electrical corporation.
   (5) The commission shall waive enforcement of this section if it
finds that the retail seller has demonstrated any of the following
conditions are beyond the control of the retail seller and will
prevent compliance:
   (A) There is inadequate transmission capacity to allow for
sufficient electricity to be delivered from proposed eligible
renewable energy resource projects using the current operational
protocols of the Independent System Operator. In making its findings
relative to the existence of this condition with respect to a retail
seller that owns transmission lines, the commission shall consider
both of the following:
   (i) Whether the retail seller has undertaken, in a timely fashion,
reasonable measures under its control and consistent with its
obligations under local, state, and federal laws and regulations, to
develop and construct new transmission lines or upgrades to existing
lines intended to transmit electricity generated by eligible
renewable energy resources. In determining the reasonableness of a
retail seller's actions, the commission shall consider the retail
seller's expectations for full-cost recovery for these transmission
lines and upgrades.
   (ii) Whether the retail seller has taken all reasonable
operational measures to maximize cost-effective deliveries of
electricity from eligible renewable energy resources in advance of
transmission availability.
   (B) Permitting, interconnection, or other circumstances that delay
procured eligible renewable energy resource projects, or there is an
insufficient supply of eligible renewable energy resources available
to the retail seller. In making a finding that this condition
prevents timely compliance, the commission shall consider whether the
retail seller has done all of the following:
   (i) Prudently managed portfolio risks, including relying on a
sufficient number of viable projects.
   (ii) Sought to develop one of the following: its own eligible
renewable energy resources, transmission to interconnect to eligible
renewable energy resources, or energy storage used to integrate
eligible renewable energy resources. This clause shall not require an
electrical corporation to pursue development of eligible renewable
energy resources pursuant to Section 399.14.
   (iii) Procured an appropriate minimum margin of procurement above
the minimum procurement level necessary to comply with the renewables
portfolio standard to compensate for foreseeable delays or
insufficient supply.
   (iv) Taken reasonable measures, under the control of the retail
seller, to procure cost-effective distributed generation and
allowable unbundled renewable energy credits.
   (C) Unanticipated curtailment of eligible renewable energy
resources necessary to address the needs of a balancing authority.
   (6) If the commission waives the compliance requirements of this
section, the commission shall establish additional reporting
requirements on the retail seller to demonstrate that all reasonable
actions under the control of the retail seller are taken in each of
the intervening years sufficient to satisfy future procurement
requirements.
   (7) The commission shall not waive enforcement pursuant to this
section, unless the retail seller demonstrates that it has taken all
reasonable actions under its control, as set forth in paragraph (5),
to achieve full compliance.
   (8) If a retail seller fails to procure sufficient eligible
renewable energy resources to comply with a procurement requirement
pursuant to paragraphs (1) and (2) and fails to obtain an order from
the commission waiving enforcement pursuant to paragraph
                             (5), the commission shall exercise its
authority pursuant to Section 2113.
   (9) Deficits associated with the compliance period shall not be
added to a future compliance period.
   (c) The commission shall establish a limitation for each
electrical corporation on the procurement expenditures for all
eligible renewable energy resources used to comply with the
renewables portfolio standard. In establishing this limitation, the
commission shall rely on the following:
   (1) The most recent renewable energy procurement plan.
   (2) Procurement expenditures that approximate the expected cost of
building, owning, and operating eligible renewable energy resources.

   (3) The potential that some planned resource additions may be
delayed or canceled.
   (d) In developing the limitation pursuant to subdivision (c), the
commission shall ensure all of the following:
   (1) The limitation is set at a level that prevents
disproportionate rate impacts.
   (2) The costs of all procurement credited toward achieving the
renewables portfolio standard are counted towards the limitation.
   (3) Procurement expenditures do not include any indirect expenses,
including imbalance energy charges, sale of excess energy, decreased
generation from existing resources, transmission upgrades, or the
costs associated with relicensing any utility-owned hydroelectric
facilities.
   (e) (1) No later than January 1, 2016, the commission shall
prepare a report to the Legislature assessing whether each electrical
corporation can achieve a 33-percent renewables portfolio standard
by December 31, 2020, and maintain that level thereafter, within the
adopted cost limitations. If the commission determines that it is
necessary to change the limitation for procurement costs incurred by
any electrical corporation after that date, it may propose a revised
cap consistent with the criteria in subdivisions (c) and (d). The
proposed modifications shall take effect no earlier than January 1,
2017.
   (2) Notwithstanding Section 10231.5 of the Government Code, the
requirement for submitting a report imposed under paragraph (1) is
inoperative on January 1, 2021.
   (3) A report to be submitted pursuant to paragraph (1) shall be
submitted in compliance with Section 9795 of the Government Code.
   (f) If the cost limitation for an electrical corporation is
insufficient to support the projected costs of meeting the renewables
portfolio standard procurement requirements, the electrical
corporation may refrain from entering into new contracts or
constructing facilities beyond the quantity that can be procured
within the limitation, unless eligible renewable energy resources can
be procured without exceeding a de minimis increase in rates,
consistent with the long-term procurement plan established for the
electrical corporation pursuant to Section 454.5.
   (g) (1) The commission shall monitor the status of the cost
limitation for each electrical corporation in order to ensure
compliance with this article.
   (2) If the commission determines that an electrical corporation
may exceed its cost limitation prior to achieving the renewables
portfolio standard procurement requirements, the commission shall do
both of the following within 60 days of making that determination:
   (A) Investigate and identify the reasons why the electrical
corporation may exceed its annual cost limitation.
   (B) Notify the appropriate policy and fiscal committees of the
Legislature that the electrical corporation may exceed its cost
limitation, and include the reasons why the electrical corporation
may exceed its cost limitation.
   (h) The establishment of a renewables portfolio standard shall not
constitute implementation by the commission of the federal Public
Utility Regulatory Policies Act of 1978 (Public Law 95-617).
  SEC. 21.  Section 399.16 of the Public Utilities Code is amended
and renumbered to read:
    399.16.   399.21.   (a) The commission,
by rule,  may   shall  authorize the use
of renewable energy credits to satisfy  the requirements of
 the renewables portfolio standard  procurement
requirements  established pursuant to this article, subject to
the following conditions:
   (1) Prior to authorizing any renewable energy credit to be used
toward satisfying  annual procurement targets  
the renewables portfolio standard procurement requirements  ,
the commission and the Energy Commission shall conclude that the
tracking system established pursuant to subdivision (c) of Section
 399.13   399.25  , is operational, is
capable of independently verifying  the   that
 electricity  earning the credit is  generated by an
eligible renewable energy resource  and delivered to the
retail seller  , and can ensure that renewable energy
credits shall not be double counted by any seller of electricity
within the service territory of the  Western Electricity
Coordinating Council (WECC)   WECC  .
   (2)  A   Each  renewable energy credit
shall be counted only once for compliance with the renewables
portfolio standard of this state or any other state, or for verifying
retail product claims in this state or any other state. 
   (3) The electricity is delivered to a retail seller, the
Independent System Operator, or a local publicly owned electric
utility.  
   (4) 
    (3)  All revenues received by an electrical corporation
for the sale of a renewable energy credit shall be credited to the
benefit of ratepayers. 
   (5) No renewable 
    (4)     Renewable  energy credits
shall  not  be created for electricity generated pursuant to
any electricity purchase contract with a retail seller or a local
publicly owned electric utility executed before January 1, 2005,
unless the contract contains explicit terms and conditions specifying
the ownership or disposition of those credits.  Deliveries
  Procurement  under those contracts shall be
tracked through the accounting system described in subdivision (b) of
Section  399.13   399.25  and included in
the  baseline  quantity of eligible renewable energy
resources of the purchasing retail seller pursuant to Section
399.15. 
   (6) No renewable 
    (5)     Renewable  energy credits
shall  not  be created for electricity generated under any
electricity purchase contract executed after January 1, 2005,
pursuant to the federal Public Utility Regulatory Policies Act of
1978 (16 U.S.C. Sec. 2601 et seq.).  Deliveries 
Procurement  under the electricity purchase contracts shall be
tracked through the accounting system  described in 
 implemented by the Energy Commission pursuant to 
subdivision (b) of Section  399.12   399.25
 and count toward the renewables portfolio standard 
obligations   procurement requirements  of the
purchasing retail seller. 
   (7) The commission may limit the quantity of renewable energy
credits that may be procured unbundled from electricity generation by
any retail seller, to meet the requirements of this article.
 
   (8) No electrical corporation shall be obligated to procure
renewable energy credits to satisfy the requirements of this article
in the event that the total costs expended above the applicable
market prices for the procurement of eligible renewable energy
resources exceeds the cost limitation established pursuant to
subdivision (d) of Section 399.15.  
   (9) Any additional condition that the commission determines is
reasonable.  
   (6) A renewable energy credit shall not be eligible for compliance
with a renewables portfolio standard procurement requirement unless
it is retired in the tracking system established pursuant to
subdivision (c) of Section 399.25 by the retail seller or local
publicly owned electric utility within 36 months from the initial
date of generation of the associated electricity. 
   (b) The commission shall allow an electrical corporation to
recover the reasonable costs of purchasing  renewable energy
credits   , selling, and administering renewable energy
credit contracts  in rates.
  SEC. 22.  Section 399.16 is added to the Public Utilities Code, to
read:
   399.16.  (a) Various electricity products from eligible renewable
energy resources located within the WECC transmission network service
area shall be eligible to comply with the renewables portfolio
standard procurement requirements in Section 399.15. These
electricity products may be differentiated by their impacts on the
operation of the grid in supplying electricity, as well as, meeting
the requirements of this article.
   (b) Consistent with the goals of procuring the least-cost and
best-fit electricity products from eligible renewable energy
resources that meet project viability principles adopted by the
commission pursuant to paragraph (4) of subdivision (a) of Section
399.13 and that provide the benefits set forth in Section 399.11, a
balanced portfolio of eligible renewable energy resources shall be
procured consisting of the following portfolio content categories:
   (1) Eligible renewable energy resource electricity products that
meet either of the following criteria:
   (A) Have a first point of interconnection with a California
balancing authority, have a first point of interconnection with
distribution facilities used to serve end users within a California
balancing authority area, or are scheduled from the eligible
renewable energy resource into a California balancing authority
without substituting electricity from another source. The use of
another source to provide real-time ancillary services required to
maintain an hourly or subhourly import schedule into a California
balancing authority shall be permitted, but only the fraction of the
schedule actually generated by the eligible renewable energy resource
shall count toward this portfolio content category.
   (B) Have an agreement to dynamically transfer electricity to a
California balancing authority.
   (2) Firmed and shaped eligible renewable energy resource
electricity products providing incremental electricity and scheduled
into a California balancing authority.
   (3) Eligible renewable energy resource electricity products, or
any fraction of the electricity generated, including unbundled
renewable energy credits, that do not qualify under the criteria of
paragraph (1) or (2).
   (c) In order to achieve a balanced portfolio, all retail sellers
shall meet the following requirements for all procurement credited
towards each compliance period:
   (1) Not less than 50 percent for the compliance period ending
December 31, 2013, 65 percent for the compliance period ending
December 31, 2016, and 75 percent thereafter of the eligible
renewable energy resource electricity products associated with
contracts executed after June 1, 2010, shall meet the product content
requirements of paragraph (1) of subdivision (b).
   (2) Not more than 25 percent for the compliance period ending
December 31, 2013, 15 percent for the compliance period ending
December 31, 2016, and 10 percent thereafter of the eligible
renewable energy resource electricity products associated with
contracts executed after June 1, 2010, shall meet the product content
requirements of paragraph (3) of subdivision (b).
   (3) Any renewable energy resources contracts executed on or after
June 1, 2010, not subject to the limitations of paragraph (1) or (2),
shall meet the product content requirements of paragraph (2) of
subdivision (b).
   (d) Any contract or ownership agreement originally executed prior
to June 1, 2010, shall count in full towards the procurement
requirements established pursuant to this article, if all of the
following conditions are met:
   (1) The renewable energy resource was eligible under the rules in
place as of the date when the contract was executed.
   (2) For an electrical corporation, the contract has been approved
by the commission, even if that approval occurs after June 1, 2010.
   (3) Any contract amendments or modifications occurring after June
1, 2010, do not increase the nameplate capacity or expected
quantities of annual generation, or substitute a different renewable
energy resource. The duration of the contract may be extended if the
original contract specified a procurement commitment of 15 or more
years.
   (e) A retail seller may apply to the commission for a reduction of
a procurement content requirement of subdivision (c). The commission
may reduce a procurement content requirement of subdivision (c) to
the extent the retail seller demonstrates that it cannot comply with
that subdivision because of conditions beyond the control of the
retail seller as provided in paragraph (5) of subdivision (b) of
Section 399.15. The commission shall not, under any circumstance,
reduce the obligation specified in paragraph (1) of subdivision (c)
below 65 percent for any compliance obligation after December 31,
2016.
  SEC. 23.  Section 399.17 of the Public Utilities Code is repealed.

   399.17.  (a) Subject to the provisions of this section, the
requirements of this article apply to an electrical corporation with
60,000 or fewer customer accounts in California that serves retail
end-use customers outside California.
   (b) For an electrical corporation with 60,000 or fewer customer
accounts in California that serves retail end-use customers outside
California, an eligible renewable energy resource includes a facility
that is located outside California, if the facility is connected to
the Western Electricity Coordinating Council (WECC) transmission
system, provided all of the following conditions are met:
   (1) The electricity generated by the facility is procured by the
electrical corporation on behalf of its California customers, and is
not used to fulfill renewable energy procurement requirements in
other states.
   (2) The electrical corporation participates in, and complies with,
the accounting system administered by the Energy Commission pursuant
to subdivision (b) of Section 399.13.
   (3) The Energy Commission verifies that the electricity generated
by the facility is eligible to meet the annual procurement targets of
this article.
   (c) The commission shall determine the annual procurement targets
for an electrical corporation with 60,000 or fewer customer accounts
in California that serves retail end-use customers outside
California, as a specified percentage of total kilowatthours sold by
the electrical corporation to its retail end-use customers in
California in a calendar year.
   (d) An electrical corporation with 60,000 or fewer customer
accounts in California that serves retail end-use customers outside
California, may use an integrated resource plan prepared in
compliance with the requirements of another state utility regulatory
commission, to fulfill the requirement to prepare a renewable energy
procurement plan pursuant to this article, provided the plan meets
the requirements of Sections 399.11, 399.12, 399.13, and 399.14, as
modified by this section.
   (e) Procurement and administrative costs associated with long-term
contracts entered into by an electrical corporation with 60,000 or
fewer customer accounts in California that serves retail end-use
customers outside California, for eligible renewable energy resources
pursuant to this article, at or below the market price determined by
the commission pursuant to subdivision (c) of Section 399.15, shall
be deemed reasonable per se, and shall be recoverable in rates of the
electrical corporation's California customers, provided the costs
are not recoverable in rates in other states served by the electrical
corporation. 
  SEC. 24.  Section 399.17 is added to the Public Utilities Code, to
read:
   399.17.  (a) (1) Subject to this section, the requirements of this
article apply to an electrical corporation that as of January 1,
2010, had 60,000 or fewer customer accounts in California and met
either of the following requirements:
   (A) Served retail end-use customers outside California.
   (B) Was located in a control area that is not under the
operational balancing authority of the Independent System Operator or
other California balancing authority and receives the majority of
its electrical requirements from generating facilities located
outside of California.
   (2) This section applies to a successor entity to all or a portion
of the service territory of an electrical corporation meeting the
requirements of paragraph (1), but only to the extent that the
successor entity will have 60,000 or fewer customer accounts in
California.
   (b) For an electrical corporation or qualifying successor entity
meeting the requirements of subdivision (a), electricity products
from eligible renewable energy resources may be used for compliance
with the renewables portfolio standard procurement requirements
notwithstanding any procurement content limitation in Section 399.16
and an eligible renewable energy resource includes a facility that is
located outside California, if the facility is connected to the WECC
transmission system, provided all of the following conditions are
met:
   (1) Any portion of the electricity generated by the facility and
allocated by the electrical corporation or qualifying successor
entity for its California customers, and is not used to fulfill
renewable energy procurement requirements in other states.
   (2) The electrical corporation or qualifying successor entity
participates in, and complies with, the accounting system
administered by the Energy Commission pursuant to subdivision (b) of
Section 399.25.
   (3) The Energy Commission verifies that the electricity generated
by the facility is eligible to meet the procurement requirements of
this article.
   (c) The commission shall determine the procurement requirements
for an electrical corporation or qualifying successor entity meeting
the requirements of subdivision (a) as a specified percentage of
total kilowatthours sold by the electrical corporation to its retail
end-use customers in California in a compliance period.
   (d) An electrical corporation or qualifying successor entity
meeting the requirements of subdivision (a) may use an integrated
resource plan prepared in compliance with the requirements of another
state utility regulatory commission, to fulfill the requirement to
prepare a renewable energy procurement plan pursuant to this article,
provided the plan meets the requirements of Sections 399.13, 399.14,
and 399.25, as modified by this section.
   (e) Procurement and administrative costs associated with long-term
contracts for eligible renewable energy resources pursuant to this
article entered into by an electrical corporation or qualifying
successor entity meeting the requirements of subdivision (a) and
approved by the commission, are reasonable and prudent and shall be
recoverable in rates of the electrical corporation or its successor's
California customers, provided the costs are not recoverable in
rates in other states served by the electrical corporation.
   (f) Procurement expenditures for electricity products from
eligible renewable energy resources pursuant to this section by an
electrical corporation or successor entity meeting the requirements
of subdivision (a) shall be subject to a limitation on procurement
expenditures established by the commission pursuant to subdivision
(c) of Section 399.15.
  SEC. 25.  Section 399.18 is added to the Public Utilities Code, to
read:
   399.18.  (a) This section applies to an electrical corporation
that as of January 1, 2010, met either of the following conditions:
   (1) Served 30,000 or fewer customer accounts in California and had
issued at least four solicitations for eligible renewable energy
resources prior to June 1, 2010.
   (2) Had 1,000 or fewer customer accounts in California and was not
connected to any transmission system or to the California
Independent System Operator.
   (b) For an electrical corporation or its successor, electricity
products from eligible renewable energy resources may be used for
compliance with this article, notwithstanding any procurement content
limitation in Section 399.16, provided that both of the following
conditions are met:
   (1) The electrical corporation or its successor participates in,
and complies with, the accounting system administered by the Energy
Commission pursuant to subdivision (b) of Section 399.25.
   (2) The Energy Commission verifies that the electricity generated
by the facility is eligible to meet the requirements of Section
399.15.
  SEC. 26.  Section 399.19 is added to the Public Utilities Code, to
read:
   399.19.  The commission, in consultation with the Energy
Commission, shall report to the Legislature by January 1 of every
even-numbered year on all of the following:
   (a) The progress and status of procurement activities by each
retail seller.
   (b) The status of permitting and siting eligible renewable energy
resources and transmission facilities necessary to supply electricity
generated to load, including the time taken to permit each eligible
renewable energy resource and transmission line or upgrade,
explanations of failures to meet permitting milestones, and
recommendations for improvements to expedite permitting and siting
processes.
   (c) The projected ability of each electrical corporation to meet
the renewables portfolio standard procurement requirements under the
cost limitations in subdivision (d) of Section 399.15 and any
recommendations for revisions of those cost limitations.
   (d) Any barriers to, and policy recommendations for, achieving the
renewables portfolio standard pursuant to this article.
  SEC. 27.  Section 399.20 of the Public Utilities Code is amended to
read:
   399.20.  (a) It is the policy of this state and the intent of the
Legislature to encourage electrical generation from eligible
renewable energy resources.
   (b) As used in this section, "electric generation facility" means
an electric generation facility located within the service territory
of, and developed to sell electricity to, an electrical corporation
that meets all of the following criteria:
   (1) Has an effective capacity of not more than three megawatts.
   (2) Is interconnected and operates in parallel with the electrical
transmission and distribution grid.
   (3) Is strategically located and interconnected to the electrical
transmission and distribution grid in a manner that optimizes the
deliverability of electricity generated at the facility to load
centers.
   (4) Is an eligible renewable energy resource.
   (c) Every electrical corporation shall file with the commission a
standard tariff for electricity purchased from an electric generation
facility. The commission may modify or adjust the requirements of
this section for any electrical corporation with less than 100,000
service connections, as individual circumstances merit.
   (d) (1) The tariff shall provide for payment for every
kilowatthour of electricity purchased from an electric generation
facility for a period of 10, 15, or 20 years, as authorized by the
commission. The payment shall be the market price determined by the
commission pursuant to  Section 399.15  
paragraph (2)  and shall include all current and anticipated
environmental compliance costs, including, but not limited to,
mitigation of emissions of greenhouse gases and air pollution offsets
associated with the operation of new generating facilities in the
local air pollution control or air quality management district where
the electric generation facility is located. 
   (2) The commission shall establish a methodology to determine the
market price of electricity for terms corresponding to the length of
contracts with an electric generation facility, in consideration of
the following:  
   (A) The long-term market price of electricity for fixed price
contracts, determined pursuant to an electrical corporation's general
procurement activities as authorized by the commission.  
   (B) The long-term ownership, operating, and fixed-price fuel costs
associated with fixed-price electricity from new generating
facilities.  
   (C) The value of different electricity products including
baseload, peaking, and as-available electricity.  
   (2) 
    (3)  The commission may adjust the payment rate to
reflect the value of every kilowatthour of electricity generated on a
time-of-delivery basis. 
   (3) 
    (4)  The commission shall ensure, with respect to rates
and charges, that ratepayers that do not receive service pursuant to
the tariff are indifferent to whether a ratepayer with an electric
generation facility receives service pursuant to the tariff.
   (e) An electrical corporation shall provide expedited
interconnection procedures to an electric generation facility located
on a distribution circuit that generates electricity at a time and
in a manner so as to offset the peak demand on the distribution
circuit, if the electrical corporation determines that the electric
generation facility will not adversely affect the distribution grid.
The commission shall consider and may establish a value for an
electric generation facility located on a distribution circuit that
generates electricity at a time and in a manner so as to offset the
peak demand on the distribution circuit.
   (f) An electrical corporation shall make the tariff available to
the owner or operator of an electric generation facility within the
service territory of the electrical corporation, upon request, on a
first-come-first-served basis, until the electrical corporation meets
its proportionate share of a statewide cap of 750 megawatts
cumulative rated generation capacity served under this section and
Section 387.6. The proportionate share shall be calculated based on
the ratio of the electrical corporation's peak demand compared to the
total statewide peak demand.
   (g) The electrical corporation may make the terms of the tariff
available to owners and operators of an electric generation facility
in the form of a standard contract subject to commission approval.
   (h) Every kilowatthour of electricity purchased from an electric
generation facility shall count toward meeting the electrical
corporation's renewables portfolio standard annual procurement
targets for purposes of paragraph (1)
                     of subdivision (b) of Section 399.15.
   (i) The physical generating capacity of an electric generation
facility shall count toward the electrical corporation's resource
adequacy requirement for purposes of Section 380.
   (j) (1) The commission shall establish performance standards for
any electric generation facility that has a capacity greater than one
megawatt to ensure that those facilities are constructed, operated,
and maintained to generate the expected annual net production of
electricity and do not impact system reliability.
   (2) The commission may reduce the three megawatt capacity
limitation of paragraph (1) of subdivision (b) if the commission
finds that a reduced capacity limitation is necessary to maintain
system reliability within that electrical corporation's service
territory.
   (k) (1) Any owner or operator of an electric generation facility
that received ratepayer-funded incentives in accordance with Section
379.6 of this code, or with Section 25782 of the Public Resources
Code, and participated in a net metering program pursuant to Sections
2827, 2827.9, and 2827.10 of this code prior to January 1, 2010,
shall be eligible for a tariff or standard contract filed by an
electrical corporation pursuant to this section.
   (2) In establishing the tariffs or standard contracts pursuant to
this section, the commission shall consider ratepayer-funded
incentive payments previously received by the generation facility
pursuant to Section 379.6 of this code or Section 25782 of the Public
Resources Code. The commission shall require reimbursement of any
funds received from these incentive programs to an electric
generation facility, in order for that facility to be eligible for a
tariff or standard contract filed by an electrical corporation
pursuant to this section, unless the commission determines ratepayers
have received sufficient value from the incentives provided to the
facility based on how long the project has been in operation and the
amount of renewable electricity previously generated by the facility.

   (3) A customer that receives service under a tariff or contract
approved by the commission pursuant to this section is not eligible
to participate in any net metering program.
   (l) An owner or operator of an electric generation facility
electing to receive service under a tariff or contract approved by
the commission shall continue to receive service under the tariff or
contract until either of the following occurs:
   (1) The owner or operator of an electric generation facility no
longer meets the eligibility requirements for receiving service
pursuant to the tariff or contract.
   (2) The period of service established by the commission pursuant
to subdivision (d) is completed.
   (m) Within 10 days of receipt of a request for a tariff pursuant
to this section from an owner or operator of an electric generation
facility, the electrical corporation that receives the request shall
post a copy of the request on its Internet Web site. The information
posted on the Internet Web site shall include the name of the city in
which the facility is located, but information that is proprietary
and confidential, including, but not limited to, address information
beyond the name of the city in which the facility is located, shall
be redacted.
   (n) An electrical corporation may deny a tariff request pursuant
to this section if the electrical corporation makes any of the
following findings:
   (1) The electric generation facility does not meet the
requirements of this section.
   (2) The transmission or distribution grid that would serve as the
point of interconnection is inadequate.
   (3) The electric generation facility does not meet all applicable
state and local laws and building standards  ,  and
utility interconnection requirements.
   (4) The aggregate of all electric generating facilities on a
distribution circuit would adversely impact utility operation and
load restoration efforts of the distribution system.
   (o) Upon receiving a notice of denial from an electrical
corporation, the owner or operator of the electric generation
facility denied a tariff pursuant to this section shall have the
right to appeal that decision to the commission.
   (p) In order to ensure the safety and reliability of electric
generation facilities, the owner of an electric generation facility
receiving a tariff pursuant to this section shall provide an
inspection and maintenance report to the electrical corporation at
least once every other year. The inspection and maintenance report
shall be prepared at the owner's or operator's expense by a
California-licensed contractor who is not the owner or operator of
the electric generation facility. A California-licensed electrician
shall perform the inspection of the electrical portion of the
generation facility.
   (q) The contract between the electric generation facility
receiving the tariff and the electrical corporation shall contain
provisions that ensure that construction of the electric generating
facility complies with all applicable state and local laws and
building standards, and utility interconnection requirements.
   (r) (1) All construction and installation of facilities of the
electrical corporation, including at the point of the output meter or
at the transmission or distribution grid, shall be performed only by
that electrical corporation.
   (2) All interconnection facilities installed on the electrical
corporation's side of the transfer point for electricity between the
electrical corporation and the electrical conductors of the electric
generation facility shall be owned, operated, and maintained only by
the electrical corporation. The ownership, installation, operation,
reading, and testing of revenue metering equipment for electric
generating facilities shall only be performed by the electrical
corporation.
  SEC. 28.  Section 399.26 is added to the Public Utilities Code, to
read:
   399.26.  (a) In order for the state to meet the requirements of
the California Renewables Portfolio Standard Program, substantially
increased amounts of electricity generated by eligible renewable
energy resources must be integrated with, and interconnected to, the
transmission grid that is either owned by, or under the operational
control of, the local publicly owned electric utilities and the
transmission grid that is under the operational control of the
Independent System Operator.
   (b) The Independent System Operator and the balancing authority of
each area in California shall do both of the following:
   (1) Work cooperatively to integrate and interconnect eligible
renewable energy resources to the transmission grid by the most
efficient means possible with the goal of minimizing the impact and
cost of new transmission needed to meet both reliability needs and
the renewables portfolio standard procurement requirements.
   (2) Accomplish the requirements of paragraph (1) in a manner that
respects the ownership, business, and dispatch models for
transmission facilities owned by electrical corporations, local
publicly owned electric utilities, joint powers agencies, and
independent transmission companies.
   (c) The Independent System Operator shall seek any approvals from
the Federal Energy Regulatory Commission that are necessary to
accomplish the goals and requirements of this article.
   (d) In order to maintain electric service reliability and to
minimize the construction of fossil fuel electrical generation
capacity to support the integration of intermittent renewable
electrical generation into the electrical grid, by July 1, 2011, the
commission shall determine the effective load carrying capacity of
wind and solar energy resources on the California electrical grid.
The commission shall use those effective load carrying capacity
values in establishing the contribution of wind and solar energy
resources toward meeting the resource adequacy requirements
established pursuant to Section 380.
  SEC. 29.  Section 399.30 is added to the Public Utilities Code, to
read:
   399.30.  (a) In order to fulfill unmet long-term generation
resource needs, each local publicly owned electric utility shall
adopt and implement a renewable energy resources procurement plan
that requires the utility to procure a minimum quantity of
electricity products from eligible renewable energy resources,
including renewable energy credits, as a specified percentage of
total kilowatthours sold to the utility's retail end-use customers,
each compliance period, to achieve the targets of subdivision (c).
   (b) The governing board shall implement procurement targets for a
local publicly owned electric utility that require the utility to
procure a minimum quantity of eligible renewable energy resources for
each of the following compliance periods:
   (1) January 1, 2011, to December 31, 2013, inclusive.
   (2) January 1, 2014, to December 31, 2016, inclusive.
   (3) January 1, 2017, to December 31, 2020, inclusive.
   (c) The governing board of a local publicly owned electric utility
shall ensure all of the following:
   (1) The quantities of eligible renewable energy resources to be
procured for the compliance period from January 1, 2011, to December
31, 2013, inclusive, are equal to an average of 20 percent of retail
sales.
   (2) The quantities of eligible renewable energy resources to be
procured for all other compliance periods reflect reasonable progress
in each of the intervening years sufficient to ensure that the
procurement of electricity products from eligible renewable energy
resources achieves 25 percent of retail sales by December 31, 2016,
and 33 percent of retail sales by December 31, 2020. The local
governing board shall require the local publicly owned utilities to
procure not less than 33 percent of retail sales of electricity
products from eligible renewable energy resources in all subsequent
years.
   (3) A local publicly owned electric utility shall adopt
procurement requirements consistent with Section 399.16.
   (d) The governing board of a local publicly owned electric utility
may adopt the following measures:
   (1) Rules permitting the utility to apply excess procurement in
one compliance period to subsequent compliance periods in the same
manner as allowed for retail sellers pursuant to Section 399.13.
   (2) Conditions that allow for delaying timely compliance
consistent with subdivision (b) of Section 399.15.
   (3) Cost limitations for procurement expenditures consistent with
subdivision (c) of Section 399.15.
   (e) The governing board of the local publicly owned electric
utility shall adopt a program for the enforcement of this article on
or before January 1, 2012. The program 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 program. Not less
than 10 days' notice shall be given to the public before any meeting
is held to make a substantive change to the program.
   (f) (1) Each local publicly owned electric utility shall annually
post notice, in accordance with Chapter 9 (commencing with Section
54950) of Part 1 of Division 2 of Title 5 of the Government Code,
whenever its governing body will deliberate in public on its
renewable energy resources procurement plan.
   (2) Contemporaneous with the posting of the notice of a public
meeting to consider the renewable energy resources procurement plan,
the local publicly owned electric utility shall notify the Energy
Commission of the date, time, and location of the meeting in order to
enable the Energy Commission to post the information on its Internet
Web site. This requirement is satisfied if the local publicly owned
electric utility provides the uniform resource locator (URL) that
links to this information.
   (3) Upon distribution to its governing body of information related
to its renewable energy resources procurement status and future
plans, for its consideration at a noticed public meeting, the local
publicly owned electric utility shall make that information available
to the public and shall provide the Energy Commission with an
electronic copy of the documents for posting on the Energy Commission'
s Internet Web site. This requirement is satisfied if the local
publicly owned electric utility provides the uniform resource locator
(URL) that links to the documents or information regarding other
manners of access to the documents.
   (g) A local publicly owned electric utility shall annually submit
to the Energy Commission documentation regarding eligible renewable
energy resources procurement contracts that it executed during the
prior year, as follows:
   (1) A description of the eligible renewable energy resource,
including the duration of the contract or electricity purchase
agreement.
   (2) A description and identification of the electrical generating
facility providing the eligible renewable energy resource under the
contract.
   (3) An estimate of the percentage increase in the utility's total
retail sales of electricity from eligible renewable energy resources
that will result from the contract.
   (h) A public utility district that receives all of its electricity
pursuant to a preference right adopted and authorized by the United
States Congress pursuant to Section 4 of the Trinity River Division
Act of August 12, 1955 (Public Law 84-386) shall be in compliance
with the renewable energy procurement requirements of this article.
   (i) For a local publicly owned electric utility that was in
existence on or before January 1, 2009, that provides retail electric
service to 15,000 or fewer customer accounts in California, and is
interconnected to a balancing authority located outside this state
but within the WECC, an eligible renewable energy resource includes a
facility that is located outside California that is connected to the
WECC transmission system, if all of the following conditions are
met:
   (1) The electricity generated by the facility is procured by the
local publicly owned electric utility, is delivered to the balancing
authority area in which the local publicly owned electric utility is
located, and is not used to fulfill renewable energy procurement
requirements of other states.
   (2) The local publicly owned electric utility participates in, and
complies with, the accounting system administered by the Energy
Commission pursuant to this article.
   (3) The Energy Commission verifies that the electricity generated
by the facility is eligible to meet the renewables portfolio standard
procurement requirements.
   (j) Notwithstanding subdivision (a), for a local publicly owned
electric utility that is a joint powers authority of districts
established pursuant to state law on or before January 1, 2005, that
furnish electric services other than to residential customers, and is
formed pursuant to the Irrigation District Law (Division 11
(commencing with Section 20500) of the Water Code), the percentage of
total kilowatthours sold to the district's retail end-use customers,
upon which the renewables portfolio standard procurement
requirements in subdivision (b) are calculated, shall be based on the
authority's average retail sales over the previous seven years. If
the authority has not furnished electric service for seven years,
then the calculation shall be based on average retail sales over the
number of completed years during which the authority has provided
electric service.
   (k) A local publicly owned electric utility in a city and county
that only receives greater than 67 percent of its electricity sources
from hydroelectric generation located within the state that it owns
and operates, and that does not meet the definition of a "renewable
electrical generation facility" pursuant to Section 25741 of the
Public Resources Code, shall be required to procure eligible
renewable energy resources, including renewable energy credits, to
meet only the electricity demands unsatisfied by its hydroelectric
generation in any given year, in order to satisfy its renewable
energy procurement requirements.
   (l) Each local publicly owned electric utility shall report, on an
annual basis, to its customers and to the Energy Commission, all of
the following:
   (1) Expenditures of public goods funds collected pursuant to
Section 385 for eligible renewable energy resource development.
Reports shall contain a description of programs, expenditures, and
expected or actual results.
   (2) The resource mix used to serve its customers by energy source.

   (3) The utility's status in implementing a renewables portfolio
standard pursuant to subdivision (a) and the utility's progress
toward attaining the standard following implementation.
   (m) A local publicly owned electric utility shall retain
discretion over both of the following:
   (1) The mix of eligible renewable energy resources procured by the
utility and those additional generation resources procured by the
utility for purposes of ensuring resource adequacy and reliability.
   (2) The reasonable costs incurred by the utility for eligible
renewable energy resources owned by the utility.
   (n) On or before July 1, 2011, the Energy Commission shall adopt
regulations specifying procedures for enforcement of this article.
The regulations shall include a public process under which the Energy
Commission may issue a notice of violation and correction against a
local publicly owned electric utility for failure to comply with this
article, and for referral of violations to the State Air Resources
Board for penalties pursuant to subdivision (o).
   (o) (1) Upon a determination by the Energy Commission that a local
publicly owned electric utility has failed to comply with this
article, the Energy Commission shall refer the failure to comply with
this article to the State Air Resources Board, which may impose
penalties to enforce this article consistent with Part 6 (commencing
with Section 38580) of Division 25.5 of the Health and Safety Code.
Any penalties imposed shall be comparable to those adopted by the
commission for noncompliance by retail sellers.
   (2) If Division 25.5 (commencing with Section 38500) of the Health
and Safety Code is suspended or repealed, the State Air Resources
Board may take action to enforce this article on local publicly owned
electric utilities consistent with Section 41513 of the Health and
Safety Code, and impose penalties on a local publicly owned electric
utility consistent with Article 3 (commencing with Section 42400) of
Chapter 4 of Part 4 of, and Chapter 1.5 (commencing with Section
43025) of Part 5 of, Division 26 of the Health and Safety Code.
   (3) For the purpose of this subdivision, this section is an
emissions reduction measure pursuant to Section 38580 of the Health
and Safety Code.
   (4) If the State Air Resources Board has imposed a penalty upon a
local publicly owned electric utility for the utility's failure to
comply with this article, the State Air Resources Board shall not
impose an additional penalty for the same infraction, or the same
failure to comply, with any renewables procurement requirement
imposed upon the utility pursuant to the California Global Warming
Solutions Act of 2006 (Division 25.5 (commencing with Section 38500)
of the Health and Safety Code).
   (5) Any penalties collected by the State Air Resources Board
pursuant to this article shall be deposited in the Air Pollution
Control Fund and, upon appropriation by the Legislature, shall be
expended for reducing emissions of air pollution or greenhouse gases
within the same geographic area as the local publicly owned electric
utility.
   (p) The commission has no authority or jurisdiction to enforce any
of the requirements of this article on a local publicly owned
electric utility.
  SEC. 30.  Section 399.31 is added to the Public Utilities Code, to
read:
   399.31.  A retail seller may procure renewable energy credits
associated with deliveries of electricity by an eligible renewable
energy resource to a local publicly owned electric utility, for
purposes of compliance with the renewables portfolio standard
requirements, if both of the following conditions are met:
   (a) The local publicly owned electric utility has adopted and
implemented a renewable energy resources procurement plan that
complies with the renewables portfolio standard adopted pursuant to
Section 399.30.
   (b) The local publicly owned electric utility is procuring
sufficient eligible renewable energy resources to satisfy the target
standard, and will not fail to satisfy the target standard in the
event that the renewable energy credit is sold to the retail seller.
  SEC. 31.  Section 454.5 of the Public Utilities Code is amended to
read:
   454.5.  (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  ,
  shall procure resources from eligible renewable energy
resources in an amount sufficient to meet its procurement
requirements pursuant to the California Renewables Portfolio Standard
Program (Article 16 (commencing with Section 399.11) of Chapter 2.3)
 .
   (B) The electrical corporation  will   shall
 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   shall
 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
  ensure  that each contract was administered in
accordance with the terms of the contract, and contract disputes
 which   that  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. 32.  Article 11 (commencing with Section 910) is added to
Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to
read:

      Article 11.  Reports


   910.  (a) By February 1 of each year, the commission shall prepare
and submit to the policy and fiscal committees of the Legislature a
written report summarizing the following information:
   (1) All electrical corporation revenue requirement increases
associated with meeting the renewables portfolio standard, as defined
in Section 399.12, including direct procurement costs for eligible
renewable energy resources and renewable energy credits,
administrative expenses for procurement, expenses incurred to ensure
a reliable supply of electricity, and expenses for upgrades to the
electrical transmission and distribution grid necessary to the
delivery of electricity from eligible renewable energy resources to
load.
   (2) All cost savings experienced, or costs avoided, by electrical
corporations as a result of meeting the renewables portfolio
standard.
   (3) All costs incurred by electrical corporations for incentives
for distributed and renewable generation, including the
self-generation incentive program, the California Solar Initiative,
and net energy metering.
   (4) All cost savings experienced, or costs avoided, by electrical
corporations as a result of incentives for distributed and renewable
generation.
   (5) All renewable, fossil fuel, and nuclear procurement costs,
research, study, or pilot program costs, or other program costs for
which an electrical corporation is seeking recovery in rates, that is
pending determination or approval by the commission.
   (6) The decision number for each decision of the commission of
recovery in rates of costs incurred by an electrical corporation
since the preceding report.
   (7) Any change in the electrical load serviced by an electrical
corporation since the preceding report.
   (8) The efforts each electrical corporation is taking to recruit
and train employees to ensure an adequately trained and available
workforce, including the number of new employees hired by the
electrical corporation for purposes of implementing the requirements
of Article 16 (commencing with Section 399.11) of Chapter 2.3, the
goals adopted by the electrical corporation for increasing women,
minority, and disabled veterans trained or hired for purposes of
implementing the requirements of Article 16 (commencing with Section
399.11) of Chapter 2.3, and, to the extent information is available,
the number of new employees hired and the number of women, minority,
and disabled veterans trained or hired by persons or corporations
owning or operating eligible renewable energy resources under
contract with an electrical corporation. This paragraph does not
provide the commission with authority to engage in, regulate, or
expand its authority to include, workforce recruitment or training.
   (b) The commission may combine the information required by this
section with the reports prepared pursuant to Article 16 (commencing
with Section 399.11) of Chapter 2.3.
  SEC. 33.  Section 1005.1 is added to the Public Utilities Code, to
read:
   1005.1.  (a) The commission shall issue a decision on an
application for a certificate within 18 months of the date of filing
of the completed application, when all of the following are true:
   (1) The application is for a certificate for building or upgrading
an electrical transmission line that the commission finds necessary
to provide transmission to load centers for electricity generated in
a high priority renewable energy zone or is reasonably necessary to
facilitate achievement of the renewables portfolio standard
established in Article 16 (commencing with Section 399.11) of Chapter
2.3.
   (2) The commission has considered all of the following:
   (A) The utilization of rights-of-way by upgrading existing
transmission facilities instead of building new transmission
facilities, where technically and economically justifiable.
   (B) The expansion of existing rights-of-way, if technically and
economically feasible, when construction of new transmission lines is
required.
   (C) The creation of new rights-of-way when justified by
environmental, technical, and economic reasons.
   (D) The availability of cost-effective alternatives to
transmission, such as energy efficiency measures and distributed
generation.
   (3) The commission has not expressly found any of the following:
   (A) That the investment is not reasonable and necessary to
maintain or enhance reliability of the transmission grid.
   (B) That the building or upgrading of the electrical transmission
line will not maintain or enhance efficient use of the transmission
grid.
   (C) That the transmission line fails to meet other applicable
standards and requirements for approval and construction.
   (b) An extension of time may be granted by the commission if it
finds the extension is necessary for completion of review pursuant to
the California Environmental Quality Act (Division 13 (commencing
with Section 21000) of the Public Resources Code).
  SEC. 34.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because a
local agency or school district has the authority to levy service
charges, fees, or assessments sufficient to pay for the program or
level of service mandated by this act or because 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.
  SEC. 35.  The sum of three hundred twenty-two thousand dollars
($322,000) is hereby appropriated from the Public Utilities
Commission Utilities Reimbursement Account to the Public Utilities
Commission for additional staffing to identify, review, and approve
transmission lines reasonably necessary or appropriate to facilitate
achievement of the renewables portfolio standard established in
Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1
of Division 1 of the Public Utilities Code.
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