BILL ANALYSIS Ó
SB 2 X1
Page 1
Date of Hearing: March 7, 2011
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 2 X1 (Simitian) - As Introduced: February 1, 2011
SENATE VOTE : 26-11
SUBJECT : Energy: renewable energy resources
SUMMARY : Increases California's Renewables Portfolio Standard
(RPS) goal from 20 percent by 2010 to 33 percent by 2020 and
revises specified provisions of the existing RPS statutes.
EXISTING LAW :
1)The RPS requires investor-owned utilities (IOUs) and certain
other retail sellers of electricity to achieve a 20 percent
renewable energy portfolio by 2010 and establishes a detailed
process and standards for renewable energy procurement.
a) Requires local publicly-owned utilities (POUs) to
implement and enforce their own RPS programs, and report
their activities to the California Energy Commission (CEC).
POUs are not subject to the same detailed process and
standards as IOUs and other retail sellers subject to the
jurisdiction of the Public Utilities Commission (PUC).
b) Provides that eligible renewable technologies are
biomass, solar thermal, photovoltaic, wind, geothermal,
renewable fuel cells, small hydroelectric (30 megawatts or
less), digester gas, limited non-combustion municipal solid
waste conversion, landfill gas, ocean wave, ocean thermal,
and tidal current.
c) Provides that renewable resources located outside the
state are eligible if the facility commences operation
after January 1, 2005 and is connected to California's
transmission grid or delivers energy to California.
d) Defines and permits the use of unbundled/tradable
renewable energy credits (RECs) for RPS compliance, subject
to PUC approval, and authorizes the PUC to limit the amount
of RECs a retail seller may use for RPS compliance.
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e) Requires IOUs to submit annual RPS procurements plans
and meet a one percent per year annual procurement target.
f) Requires the PUC to adopt a market price referent (MPR)
as a benchmark for reasonable prices for RPS procurement by
IOUs.
g) Designates funds (approximately $165 million per year)
available to cover IOUs' RPS procurement costs which exceed
the MPR. Once these funds are exhausted, IOUs are relieved
of their obligation to buy additional renewable energy
through the RPS procurement process, but may build or
continue to buy renewable energy through bilateral
contracts, notwithstanding this RPS "cost cap."
h) Permits specified multi-state IOUs with 60,000 or fewer
California customers to count renewable energy delivered in
other states under specified conditions.
2)Requires the PUC to certify the public convenience and
necessity require a power plant or transmission line before an
IOU may begin construction (Certificate of Public Convenience
and Necessity, or CPCN). The CPCN process includes
environmental review of the proposed project under the
California Environmental Quality Act (CEQA).
3)Grants the CEC exclusive authority to license thermal power
plants 50 megawatts and larger and requires consultation with
specified agencies. The CEC process is a certified regulatory
program under CEQA.
4)The California Global Warming Solutions Act (AB 32) requires
the Air Resources Board (ARB) to adopt a statewide greenhouse
gas (GHG) emissions limit equivalent to 1990 levels by 2020
and adopt regulations to achieve maximum technologically
feasible and cost-effective GHG emission reductions. Pursuant
to AB 32, ARB has adopted a Scoping Plan which includes
achieving a 33 percent RPS by 2020 as a key measure to achieve
the 2020 GHG emissions limit and, pursuant to Governor's
Executive Order S-21-09, ARB has adopted a 33 percent
Renewable Energy Standard by rulemaking.
THIS BILL :
1)Replaces the existing 20 percent by 2010 RPS target and one
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percent annual procurement targets applicable to "retail
sellers", which include IOUs, energy service providers and
community choice aggregators, with the following targets:
a) 20 percent on average from January 1, 2011 to December
31, 2013.
b) 25 percent by December 31, 2016.
c) 33 percent by December 31, 2020 and each year
thereafter.
Instead of regular annual procurement targets, the 25 and 33
percent targets are preceded by a compliance period where the
quantity of renewable energy procured must reflect reasonable
progress in the intervening years sufficient to meet the next
target.
2)Repeals existing provisions requiring POUs to implement and
enforce their own RPS programs and instead applies to POUs the
same targets and dates listed above.
3)Requires the CEC, in consultation with ARB, to adopt
regulations for enforcement of the RPS on POUs, including
providing for the imposition of penalties by ARB pursuant to
AB 32, upon referral by the CEC, for failure to comply with
the RPS. Requires penalties imposed on POUs to be comparable
to penalties imposed by the PUC on retail sellers. Requires
penalties collected by ARB to be expended for reducing air
pollution or greenhouse gases within the same geographic area
as the penalized POU.
4)Permits retail sellers to take credit for future compliance
surpluses by requiring the PUC to adopt "banking" rules
permitting retail sellers apply excess procurement to
subsequent compliance periods. Prohibits banking of
procurement associated with contracts of less than 10 years,
as well as RECs and other undelivered products.
5)Excuses retail sellers from current and future accumulated
compliance deficits by prohibiting the addition of compliance
deficits from the existing RPS (for any retail seller
procuring at least 14 percent in 2010), as well as deficits
associated with the compliance periods created by the bill, to
a future compliance period.
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6)Excuses retailer sellers from enforcement for failure to meet
targets if the retail seller demonstrates that any of the
following conditions are beyond its control and will prevent
compliance:
a) Inadequate transmission capacity for delivery of
sufficient renewable energy.
b) Permitting, interconnection or other delays for
renewable energy projects, or an insufficient supply of
available renewable energy.
c) Unanticipated curtailment of renewable energy necessary
to address the needs of a balancing authority (e.g. the
Independent System Operator).
7)Repeals existing MPR, above-market funds and cost cap
provisions and instead requires the PUC to establish a cost
limit for each IOU according to specified criteria, requires
the PUC to report to the Legislature by 2016 regarding whether
IOUs can achieve 33 percent within the adopted cost limit,
authorizes the PUC to revise the cost limit once after 2016 if
necessary, and authorizes IOUs to stop procuring renewable
energy beyond the cost limit, unless additional renewable
energy can be procured without exceeding a de minimis increase
in rates.
8)Sets aside 25 percent of the 33 percent renewable market for
IOU-owned generation by requiring the PUC to approve an
application by an IOU to construct, own and operate a
renewable energy facility until IOU-owned renewable facilities
equal 8.25 percent of the IOU's anticipated 2020 retail sales.
9)Revises eligibility conditions to establish "balanced
portfolio" requirements for future procurement based on the
following three categories of renewable energy products:
a) Renewable energy interconnected to the grid within,
scheduled for direct delivery into, or dynamically
transferred to, a California balancing authority (i.e.,
real renewable energy supplied to the California grid,
located within or directly proximate to the state). Of the
total renewable energy contracts executed after June 1,
2010, the following percentages must fall into this
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category:
i) At least 50 percent for the 2011-2013 compliance
period.
ii) At least 65 percent for the 2014-2016 compliance
period.
iii) At least 75 percent thereafter.
b) Renewable energy where substitute non-renewable energy
is used to provide a reliable delivery schedule into a
California balancing authority (i.e., firmed and shaped
energy where substitute energy is used to compensate for
delivery problems due to intermittent generation or
inadequate transmission capacity from a remote renewable
resource).
c) Renewable energy products not meeting either condition
above, including unbundled RECs (i.e., the original source
of renewable energy must be located within the western
grid, but otherwise need not have a physical connection to
California). Of the total renewable energy contracts
executed after June 1, 2010, the following percentages may
fall into this category:
i) Not more than 25 percent for the 2011-2013
compliance period.
ii) Not more than 15 percent for the 2014-2016
compliance period.
iii) Not more than 10 percent thereafter.
10)Requires the PUC to authorize the use of RECs, subject to the
percent limits described above, and limits the use of RECs to
36 months from the initial date of generation of the
associated electricity.
11)Increases eligibility for existing small hydroelectric
generation units from 30 megawatts to 40 megawatts, if the
unit is operated as part of a water supply or conveyance
system.
12)Revises existing exceptions for multi-state IOUs with 60,000
or fewer California customers and adds new exceptions for
certain small IOUs and POUs, relaxing these utilities
obligations to procure eligible renewable energy resources,
according to their particular circumstances.
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13)Amends existing "feed-in tariff" statute for small renewable
generators, which relies on the RPS MPR for pricing, to
account for this bill's repeal of the MPR, by requiring the
PUC to set a similar market price specifically for purposes of
the feed-in tariff statute.
14)Requires the ISO and other California balancing authorities
to work cooperatively to integrate and interconnect renewable
energy resources according to specified criteria.
15)Requires the PUC to determine the effective load carrying
capacity of wind and solar energy resources and use those
values in establishing the contribution of those resources
toward meeting resource adequacy requirements.
16)Requires the Department of Fish and Game to establish an
internal division to perform comprehensive planning,
streamlined environmental compliance services, and ensure
timely completion of Natural Community Conservation Plans
related to development of renewable energy projects.
17)Requires an applicant for certification by the CEC of a power
plant that is proximate to a military installation to notify
the Department of Defense (DOD) and include any comments
provided by DOD with its application.
18)Requires the CEC to study, and report to the Legislature by
June 30, 2011, "run-of-river" hydroelectric facilities in
British Columbia to consider specified environmental impacts
and determine whether the facilities are, or should be,
eligible for RPS compliance.
19)Requires the PUC and CEC to report every other year regarding
procurement and permitting progress, and requires the PUC to
report annually regarding specified RPS compliance issues,
including rate and cost impacts.
20)Requires the PUC to approve an application to construct a
transmission line within 18 months under specified conditions.
21)Appropriates $322,000 from the PUC Utilities Reimbursement
Account to the PUC for additional staffing related to
transmission lines.
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FISCAL EFFECT : Unknown
COMMENTS :
The existing RPS statute requires IOUs and certain other retail
energy providers, collectively referred to as "retail sellers,"
to buy renewable electricity to the extent funds are available
to pay for any costs exceeding a market price set by the PUC.
Each IOU is required to increase its renewable procurement each
year by at least one percent of total sales, so that 20 percent
of its sales are renewable energy sources by December 31, 2010.
Once a 20 percent portfolio is achieved, no further increase is
required. The PUC is required to adopt comparable requirements
for direct access energy service providers and community choice
aggregators. Each local POU is required to implement and
enforce its own RPS, and report its progress to the CEC.
For retail sellers, the RPS requires the PUC to adopt processes
for determining market prices, ranking renewable bids according
to cost and fit, flexible compliance rules and standard contract
terms. The RPS requires IOUs to offer contracts of at least 10
years, unless the PUC approves shorter contracts. This is
intended to support the development of new renewable energy
resources.
The original RPS bill, SB 1078 (Sher), Chapter 516, Statutes of
2002, set a goal of 20 percent by 2017. SB 107 (Simitian),
Chapter 464, Statutes of 2006, accelerated the deadline for 20
percent to 2010. In the eight years since the RPS was enacted,
IOUs have advanced beyond their 2002 average starting point of
12 percent RPS, but none achieved 20 percent by the end of 2010.
According to the PUC, in 2010, the three largest IOUs served
17.9 percent of their load with renewable energy on average, up
from 15 percent in 2009. PG&E achieved 17.7 percent, SCE 19.4
percent and SDG&E 11.9 percent. POUs have adopted a range of
RPS standards and achieved a range of results. The largest
POUs, Los Angeles Department of Water and Power and Sacramento
Municipal Utility District, have adopted 20 percent by 2010
targets and goals of at least 33 percent RPS by 2020. They
report achieving 14 percent and 21 percent respectively through
2009.
In 2009, the Governor vetoed companion bills passed by the
Legislature to establish a 33 percent RPS - SB 14 (Simitian) and
AB 64 (Krekorian). Following the vetoes, the Governor issued an
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executive order directing ARB to implement a 33 percent RPS as a
GHG reduction measure pursuant to its authority under AB 32.
ARB adopted its 33 percent "renewable electricity standard"
(RES) on September 23, 2010. The ARB rules are more stringent
than this bill with respect to compliance (e.g. ARB permits
fewer compliance and enforcement excuses), but less stringent
with respect to eligibility (e.g. ARB does not limit the use of
unbundled RECs). On paper, the ARB rules promise to yield more
renewable energy procurement by 2020. However, questions have
been raised regarding the permanence and legality of an RES
regulation based on an executive order.
This bill is nearly identical to the final version of SB 722
(Simitian), which passed the Assembly in the final hour of the
2009-2010 session, but was held in the Senate for lack of a vote
before the session adjourned at midnight.
REGISTERED SUPPORT / OPPOSITION :
Support
AES
American Federation of State, County and Municipal Employees
American Lung Association
Amonix
Breathe California
BrightSource Energy
CalEnergy
California Apollo Alliance
California Association of Sanitation Agencies
California Biomass Energy Alliance
California Coalition of Utility Employees
California Conference of Carpenters
California Interfaith Power & Light
California Labor Federation
California League of Conservation Voters
California State Pipe Trades Council
California Wind Energy Association
Calpine
Catholic Charities, Diocese of Stockton
City of Santa Clara
Clean Air Now
Clean Power Campaign
CleanTECH San Diego
Coalition for Clean Air
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Construction Employers' Association
Covanta
Division of Ratepayer Advocates
Ella Baker Center for Human Rights
Energy Independence Now
Environmental Defense Fund
Environmental Entrepreneurs
enXco
First Solar
Glendale Water & Power
Horizon Wind Energy
Iberdrola Renewables
Independent Energy Producers Association
Large Scale Solar Association
National Parks and Conservation Association
Natural Resources Defense Council
NextEra Energy Resources
Planning and Conservation League
Power Company of Wyoming
San Diego Gas and Electric
Sanitation Districts of Los Angeles County
Sierra Club California
Southern California Edison
State Association of Electrical Workers
State Building & Construction Trades Council of California,
AFL-CIO
Sun Power Corporation
Terra-Gen Power
The Solar Alliance
The Utility Reform Network (TURN)
Union of Concerned Scientists
Vestas
Vote Solar Initiative
Western States Council of Sheetmetal Workers
Opposition
Alliance for Retail Energy Markets
California Alliance for Choice in Energy Solutions
California Business Properties Association
California Grocers Association
California Manufacturers & Technology Association
California Retailers Association
California League of Food Processors
Chemical Industry Council of California
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Direct Energy Services, LLC
School Project for Utility Rate Reduction
Western States Petroleum Association
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092