BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chairman
û x1 2 (Simitian)
û
Hearing Date: û02/23/2011 Amended: As Introducedû
Consultant: ûMcCarthy, Brendan Policy Vote: EU&C 8-2û
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BILL SUMMARY:û SBx1 2 requires all retail electricity suppliers º
in the state (including publicly owned utilities) to procure 33 º
percent of their total electricity supplies from renewable º
energy sources by 2020. The bill specifies a "loading order" of º
renewable energy supplies, based on where the energy supplies º
are generated. The bill requires the Department of Fish and Game º
to create a division for the planning and permitting needed for º
renewable energy projects.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
û
Public Utilities Commission $1,500 $2,500 º
$2,500Special *
oversight
Energy Commission $1,450 $1,350 $1,350 General º
**
oversight
Air Resources Board Up to $300 per year Special º
***
enforcement
Department of Fish and Between $300 and $650 per year General º
/
Game planning and Special º
****
permitting
State agency energy costs Between $23,000 and $42,000 by º
2020 Various
Public Utility implementation Unknown, not reimbursableLocal
costs
SBx1 2 (Simitian), Page 1
* Public Utilities Commission Utilities Reimbursement Account.
** Energy Resources Program Account.
*** Air Pollution Control Fund.
**** Fish and Game Preservation Fund.
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STAFF COMMENTS: This bill meets the criteria for referral to the º
Suspense File.
û
Background. ûUnder current law (SB 1078, Sher, 2002 and SB 107 º
Simitian, 2006), investor owned utilities and energy service º
providers are required to procure 20 percent of their º
electricity supplies from renewable energy sources by 2010. º
(Commonly referred to as the "Renewables Portfolio Standard".) º
Provisions of existing law allow investor owned utilities to º
extend compliance until 2013, provided certain conditions are º
met. Existing law also requires publicly owned utilities to º
adopt their own Renewables Portfolio Standard.
When final information from 2010 becomes available in March, it º
is expected that the investor owned utilities collectively will º
have 18 percent of their electricity supplies coming from º
renewable energy sources, with 20 percent of supplies to come º
online sometime in 2011 or 2012.
The state's publicly owned utilities (which collectively serve º
about 25 percent of the state's electricity market) vary º
considerably in their procurement of renewable energy. The Los º
Angeles Department of Water and Power receives 14 percent from º
renewable sources, the Sacramento Municipal Utility district º
receives 21 percent, members of the Northern California Power º
Authority collectively receive 20 percent, and members of the º
Southern California Power authority receive between 2 percent º
and 20 percent from renewable sources.
In May of 2010, Governor Schwarzenegger issued an executive º
order to the Air Resources Board directing it to adopt a 33 º
percent renewable energy standard under authority granted to the º
Air Resources Board by AB 32 (Nunez, 2006). The Air Resources º
Board has developed the regulation, but has not yet formally º
adopted it. Staff notes that Legislative Counsel has opined that º
the Air Resources Board would exceed its existing statutory º
authority if it implements a renewable energy standard that goes º
beyond the statutorily required 20 percent Renewables Portfolio º
SBx1 2 (Simitian), Page 2
Standard.
SBx1 2 Provisions. ûThis bill increases the state's Renewables º
Portfolio Standard requirement to 33 percent of electricity º
supply by 2020 and broadens the Renewables Portfolio Standard º
mandate to include publicly owned utilities. To that end, the º
bill requires all electricity suppliers to provide an average of º
20 percent renewable energy for the period between January 1, º
2011 through December 31, 2013; 25 percent by December 31, 2016; º
and 33 percent by December 31, 2020.
Under the bill, all existing renewable energy contracts signed º
by June 1, 2010 would be "grandfathered" into the program. Going º
forward, new renewable energy contracts must meet a "loading º
order" that categorizes renewable resources.
The first category is renewable electricity that is º
delivered directly to California "balancing authorities" º
(entities such as the Independent System Operator that º
manage electricity transmission systems) or that can be º
dynamically transferred to a California balancing authority º
on an hourly basis. Electricity from this category must be º
at least 50 percent of an electricity provider's total º
renewable energy supplies through 2013, rising to 65 º
percent by December 31, 2016, and 75 percent by 2010 and º
thereafter.
The second category of renewable electricity is º
unbundled renewable energy credits that have been separated º
from the actual electricity generated from the renewable º
energy source. Electricity from this category can be no º
more than 25 percent of an electricity provider's total º
renewable energy supplies through 2013, declining to 15 º
percent by December 31, 2016, and 10 percent by 2020 and º
thereafter.
The third category is renewable electricity that is not º
delivered directly to a California balancing authority in º
real time, but does provide electricity to the state. This º
category would make up any remaining renewable energy º
sources for the electricity supplier.
The bill authorizes investor owned utilities to construct, º
operate, and own electricity generation facilities up to 8.25 º
percent of a utility's retail sales projected for 2020.
Public Utilities Commission Costs. ûThe bill requires the Public º
Utilities Commission to adopt a process for the selection of º
Renewables Portfolio Standard projects, based on cost and other º
SBx1 2 (Simitian), Page 3
factors. The Public Utilities Commission is also required to º
develop a "cost cap" to ensure that the Renewable Portfolio º
Standard does not impose disproportionate impacts on electricity º
ratepayers. If the cost of new renewables exceeds the cost cap, º
an investor owned utility may defer additional procurement of º
renewable energy resources. Publicly owned utilities are º
authorized to set their own cost cap consistent with the cost º
cap determined by the Public Utilities Commission. The bill also º
allows electricity providers to bank excess renewable generation º
between compliance periods for future years, under certain º
circumstances.
The bill authorizes the Public Utilities Commission to impose º
penalties on investor owned utilities or energy service º
providers for failure to meet the bill's requirements
The bill requires the Public Utilities Commission to issue a º
decision on applications for new electricity transmission º
projects within 18 months.
Staff estimates the cost to the Public Utilities Commission to º
oversee investor owned utility compliance with the 33 percent º
Renewable Portfolio Standard and expedite approval of proposed º
electricity transmission projects to be about $2.5 million per º
year.
ûThe bill appropriates $322,000 from the Public Utilities º
Commission Utilities Reimbursement Account to the Public º
Utilities Commission for the review of proposed electricity º
transmission infrastructure needed to meet the 33 percent º
Renewables Portfolio Standard.
Energy Commission Costs. ûThe bill requires the Energy Commission º
to monitor compliance by publicly owned utilities and refer º
non-compliant publicly owned utilities to the Air Resources º
Board, which is authorized to impose penalties for º
non-compliance. Fines imposed by the Air Resources Board would º
be available, upon appropriation of the Legislature, for º
projects to reduce air pollution emissions in the region of the º
violation.
The bill directs the Energy Commission to study whether certain º
hydroelectric facilities in British Columbia should be eligible º
for inclusion in the Renewables Energy Portfolio.
The Energy Commission indicates that it will cost about $1.4 º
SBx1 2 (Simitian), Page 4
million per year to oversee compliance by publicly owned º
utilities.
The Energy Resources Program Account is primarily supported by a º
surcharge on electricity use in the state. Due to the economic º
recession, energy use in the state has declined, reducing º
revenues into the Account. In the fall of 2010, the Energy º
Commission raised the surcharge to near its statutory maximum. º
Based on the increased surcharge, the Account has a projected º
fund balance of about $10 million at the end of the 2011-12 º
budget year. However, the Energy Commission also projects º
expenditures to be larger than revenues in 2011-12 and º
thereafter.
SBx1 1(Steinberg) includes legislative intent to appropriate $8 º
million per year for five years from the Energy Resources º
Program Account. If both this bill and SBx1 1 are enacted, the º
administration will likely have to reduce other program º
expenditures by the Energy Commission by up to $8 million per º
year to keep the Energy Resources Program Account in balance. º
(As the state's economy recovers, revenues into the Account º
should recover, ultimately mitigating the need for program º
reductions.)
Air Resources Board Costs. ûStaff estimates that the Air º
Resources Board will incur costs up to $300,000 per year, º
depending on the number of violations referred to the Board from º
the Energy Commission.
Department of Fish and Game Costs. ûThe bill requires the º
Department of Fish and Game to create an internal division for º
comprehensive planning and permitting for renewable energy º
projects. (Many proposed and potential renewable energy projects º
will need permits from the Department of Fish and Game, º
specifically Endangered Species Act permits.) The bill requires º
the Department of Fish and Game to ensure the timely completion º
of plans under the Natural Communities Conservation Planning Act º
(a tool used to plan for habitat and protected species º
conservation, which provides regulatory assurances under the º
Endangered Species Act).
Staff estimates the Department of Fish and Game will incur º
expenses between $300,000 and $650,000 per year to conduct º
planning and permitting related to additional development of º
renewable resources. These activities would likely be funded º
from the Fish and Game Preservation Fund or the General Fund.
SBx1 2 (Simitian), Page 5
State Mandate. ûThe bill imposes a state mandate on publicly º
owned utilities, which are local government agencies. However, º
because publicly owned utilities are able to pass any º
implementation costs along to their customers, the bill does not º
impose a reimbursable state mandate.
Energy Costs for State Agencies. ûIn addition to direct costs to º
state agencies, the bill imposes indirect costs on state º
agencies through higher electricity bills. Both the Public º
Utilities Commission and the Air Resources Board have conducted º
studies on the ratepayer impacts of various 33 percent º
Renewables Portfolio Standard scenarios. According to those º
studies, in 2020, average retail electricity rates (in current º
dollars) are projected to be between $0.006 and $0.011 per º
kilowatt-hour higher than they otherwise would be under current º
law (including the existing 20 percent Renewables Portfolio º
Standard). Based on current electricity use by state agencies, º
the state would face projected electricity costs in 2020 that º
would likely be between $23 million and $42 million higher than º
they would be under current law.
Deadlines in the Bill. ûStaff notes that some of the timelines º
included by the bill will be difficult for state agencies to º
achieve. For example, the bill requires the Energy Commission to º
conduct a study on certain hydroelectric facilities in British º
Columbia by June 30, 2011. Also, the bill requires the Energy º
Commission to adopt regulations implementing the bill's mandates º
on publicly owned utilities by July 1, 2011. Similarly, the bill º
requires the Public Utilities Commission to determine the amount º
of renewable energy every retail electricity supplier will need º
to procure to meet the bill's renewable energy mandate by º
January 1, 2012.
Staff recommendsû these timelines be delayed to more accurately º
reflect the time it will take to accomplish these tasks.
Prior Legislation. ûSB 722 (2010, Simitian) was substantively º
similar to this bill. SB 722 died on the Senate Floor.
SB 14 (2009, Simitian) also imposed a 33 percent Renewables º
Portfolio Standard. Some details regarding what types of º
renewable energy sources would have counted under SB 14 differ º
from this bill. Governor Schwarzenegger vetoed SB 14, citing º
constraints on including out-of-state renewable energy sources º
SBx1 2 (Simitian), Page 6
under that bill.