BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          SB 1122 (Rubio) - Energy: renewable biomass and biogas projects.
          
          Amended: April 16, 2012         Policy Vote: EU&C 12-0
          Urgency: No                     Mandate: No
          Hearing Date: May 24, 2012      Consultant: Marie Liu
          
          SUSPENSE FILE.
          
          
          Bill Summary: SB 1122 would direct the California Public 
          Utilities Commission (PUC) to require the state's three largest 
          investor-owned utilities (IOUs) to collectively procure at least 
          250 megawatts of renewable generating capacity from small 
          renewable biomass or biogas projects unless and until the PUC 
          develops a methodology to account for environmental and rate 
          payer benefits of using biogas and biomass for electrical 
          generation.

          Fiscal Impact: 
              One-time costs of $270,000 from the Public Utilities 
              Commission Utilities Reimbursement Account (special fund) in 
              2013 for the development of a methodology calculating 
              benefits from generating electricity from biogas and 
              biomass.

          Background: The three largest investor-owned utilities (IOUs) 
          are statutorily required to offer small renewable generators 
          sized up to 1.5 megawatts (MW) a fixed-price, non-negotiable 
          contract known as a Feed-in-Tariff (FiT). The PUC currently has 
          a rulemaking open to implement a statutory requirement that the 
          IOU FiT be expanded to generators up to 3 MWs for a total 
          allocation of 500 MW. As issue in this rulemaking, as with past 
          discussions about the FiT program, is whether the pricing for a 
          FiT reflects all the potential benefits and characteristics of 
          renewables such as time-of-delivery, 
          location/interconnectedness, reduced grid transmission costs, 
          reduced emissions, and promotion of new technologies. 
           
          Proposed Law: This bill would require the PUC to develop a 
          methodology to account for the benefits to the ratepayers and 
          the environment from reducing air pollution and greenhouse gas 
          emissions by generating electricity from landfills and organic 








          SB 1122 (Rubio)
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          waste diversion, waste water treatment plants, food and 
          agricultural pricing, animal waste facilities, and farms (i.e. 
          biogas and biomass). While such a methodology is being 
          developed, the PUC would be required to direct large electrical 
          corporations to collectively procure at least 250 MW of 
          electrical generating capacity from small renewable biomass or 
          biogas projects by June 1, 2013. Each electrical corporation 
          would be required to procure this electricity with a standard 
          unilateral offer and must choose the least-cost, best-fit 
          resource.

          Staff Comments: This bill would require the creation a purchase 
          program for biomass and biogas. Such a requirement could be 
          satisfied with a program similar to the FiT in the PUC's PD. The 
          PD divides the FiT contracts into groups according to generation 
          characteristics of the power- baseload (e.g. bioenergy and 
          geothermal), leaking (e.g. solar), and as-available energy (e.g. 
          wind and hydro). These categories were created in recognition of 
          the fact that renewables have different generation 
          characteristics and benefits. This PD could be the basis for a 
          purchase program required by the bill, with several adjustments 
          (which would need to be made in a new proceeding), to create a 
          technology-specific program for biogas and biomass. The PUC has 
          rejected technology-specific programs in the past because rates 
          must be in the public interest, be "just and reasonable," and 
          not exceed the purchaser's incremental avoided costs. 
          Technology-specific programs conflict with the PUC's past 
          reliance on a competitive market approach for the procurement of 
          electricity. Also, such a purchase program would have to be 
          crafted to stay within the boundaries of federal law that allows 
          the PUC to differentiate renewable pricing, but prohibits 
          establishing technology-specific pricing. The PUC estimates that 
          creating such a purchase program would require a new proceeding 
          and ongoing contract review and approval for an annual cost of 
          $134,000.

          This bill would also require the PUC to adopt a methodology that 
          accounts for ratepayer and environmental benefits of electricity 
          generated from biomass and biogas, for example, a pricing 
          mechanism that would discount the bid-price of electricity 
          generated from biomass and biogas for the purposes of comparing 
          bids to other renewables. Arguably, the methodology required in 
          this bill would in essence make a "societal benefit" (i.e. the 
          reduction of methane emissions) also a "ratepayer benefit." Such 








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          a methodology would require a new proceeding that would likely 
          take much longer than the June 1, 2013 deadline in the bill. The 
          PUC estimates that such a proceeding would require 2.5 PYs for 
          legal counsel, an administrative law judge, and resource 
          analysts at a cost of $270,000.

          Recommended Amendments: The bill is somewhat unclear on whether 
          the author's intent is for the PUC to ultimately create both a 
          biogas methodology and a biogas purchase requirement or just one 
          or the other. As written, this bill may ultimately require the 
          PUC to create both a methodology and a purchase requirement. 
          However, if the author's intent is for only one of these actions 
          to be required, staff recommends that this intent be clarified. 

          Committee Amendments: Delete the requirement for a biogas 
          procurement program and allow and additional year to develop 
          required methodology.