BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 1122
Author: Rubio (D)
Amended: 8/24/12
Vote: 21
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 12-0, 04/24/12
AYES: Padilla, Fuller, Berryhill, Corbett, De León,
DeSaulnier, Emmerson, Kehoe, Pavley, Rubio, Strickland,
Wright
NO VOTE RECORDED: Simitian
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SENATE FLOOR : 38-0, 5/30/12
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De León, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Hancock, Harman,
Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio,
Simitian, Steinberg, Vargas, Walters, Wolk, Wright,
Wyland, Yee
NO VOTE RECORDED: Runner, Strickland
ASSEMBLY FLOOR : 56-14, 8/30/12 - See last page for vote
SUBJECT : Energy: renewable bioenergy
SOURCE : Clean Power Campaign
CONTINUED
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DIGEST : This bill requires statewide procurement of up
to 250 megawatts (MW) of renewable energy from small
biomass or biogas technologies that utilize low emission
technologies.
Assembly Amendments delete language in this bill relating
to biomass and biogas and instead relates to bioenergy;
delete language that states this bill requires the Public
Utilities Commission (PUC) to encourage gas and electrical
corporations to develop and offer, by December 31, 2013,
programs and services to facilitate the development of
in-state biogas and to facilitate the conditioning and
upgrading of biogas in order to enable biogas to be used
for a broad range of purposes; and make other clarifying
and technical changes.
ANALYSIS : Under existing law, the Public Utilities
Commission has regulatory authority over public utilities.
Existing law requires every electrical corporation to file
with the commission a standard tariff for electricity
generated by an electric generation facility, as defined,
that qualifies for the tariff, is owned and operated by a
retail customer of the electrical corporation, and is
located within the service territory of, and developed to
sell electricity to, the electrical corporation. Existing
law requires an electrical corporation to make the tariff
available to the owner or operator of an electric
generation facility within the service territory of the
electrical corporation, as specified, until the electrical
corporation meets its proportionate share of a statewide
cap of 750 megawatts, as specified.
This bill:
1.Requires the California Public Utilities Commission
(PUC), by June 1, 2013, to allocate 250 MW of
biomass/biogas procurement by the state's three major
investor owned utilities (IOUs).
2.Limits each project to no larger than three MW.
3.Allocates procurement by technology as follows:
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A. Dairy and other biogas from wastewater treatment,
municipal organic waste diversion, food processing and
codigestion, 110 MW.
B. Agricultural bioenergy 90 MW.
C. Bioenergy using byproducts of sustainable forest
management, 50 MW.
1.Defines, for purposes of this section, bioenergy to mean
biogas or biomass.
2.Specifies that any incentive or subsidy program for these
projects shall be used to reduce contract prices.
3.Deletes provisions prioritizing those projects that would
result in "the most greenhouse gas emissions."
4.Deletes provisions allocating costs proportionally to the
electric service provider and community choice
aggregators.
5.Specifies that the PUC shall encourage gas and electrical
corporations to develop and offer programs that
facilitate in-state biogas development.
6.Directs the PUC to work with the California Energy
Commission, the Air Resources Board, the Department of
Forestry and Fire Protection, the Department of Food and
Agriculture, and the Department of Resources Recycling
and Recovery to determine if the technology-specific MW
allocations should be reallocated among the categories.
Background
Feed-in-Tariff . A FiT is a simple, comprehensible,
transparent contracting mechanism for small renewable
generators to sell power to a utility at predefined terms
and conditions, without contract negotiations. For the
IOUs, the FiT operates as a "must-take" contract in its
portfolio. If the participant generates the power, the IOU
must take it and pay for it according to the pre-defined
terms of the FiT.
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Small renewable generator FiTs are available in the
territories of the three largest IOUs and provide a 10, 15,
or 20-year fixed-price, non-negotiable contract for systems
sized up to 1.5 MW. The PUC has a rulemaking open to
implement the terms of SB 32 (Negrete McLeod), Chapter 328,
Statutes of 2009, and SB x1 2 (Simitian), Chapter 1,
Statutes of 2011, to expand the IOU FiT to 3 MWs and
modify the pricing mechanism. The total program allocation
between the three IOUs, would be approximately 500 MWs.
Competitive Procurement v. Fixed Price. Since the
restructuring of the electricity industry in California in
the 1990s, the PUC has relied on a "competitive market
first" approach for the procurement of electricity. The
IOUs develop an annual procurement plan which includes
plans under which the IOUs solicit bids for electricity
deliveries. The underlying premise of wholesale
competitive procurement is that ratepayers benefit as a
result of lower cost electricity deliveries. Competitive
procurement also underlies the RPS program which requires
IOUs to establish a competitive process to select renewable
contracts based on least cost and best fit. Competitive
markets are generally thought to benefit ratepayers by
using competitive pressures to lower total costs.
In contrast, a textbook FIT uses administrative processes
to set a fixed price for the purchase of electricity by the
IOU, the price of which does not benefit from competition.
Although a FiT may result in lower transaction costs to
renewable developers, it is not clear that it will result
in the best price for renewable electricity deliveries for
ratepayers. It is difficult if not impossible to
administratively set the right price for a FiT. If the FiT
price is too high, the FiT results in a gold rush for
renewable developers at the expense of ratepayers who will
overpay; if the FiT price is too low the FiT will not
attract new investment.
Additionally, under a traditional FiT structure the utility
generally has no control over where power is built, whether
it's needed, or whether it is consistent with its renewable
procurement plan. This is particularly critical for
renewable resources, some of which (e.g. solar and wind) do
not provide base load power but are intermittent and must
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be firmed and shaped by the IOU or ISO.
Federal FiT Restriction . The Federal Power Act grants the
Federal Energy Regulatory Commission jurisdiction over
wholesale electric sales in interstate commerce, including
sales made entirely intrastate and sales delivered locally
to a distribution system. The PUC can set rates but the
rate at which a utility must purchase power from a facility
must be:
"Just and reasonable" to consumers;
In the public interest;
Not discriminate against the facility; and
Not exceed the purchaser's incremental avoided cost.
The commission has litigated the issue of FiT pricing at
the FERC and based on that proceeding has determined that
it can differentiate renewable pricing for particular
sources of energy (e.g. based-load, peaking) but cannot,
under federal law, establish technology-specific pricing.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/30/12)
Clean Power Campaign (source)
Agricultural Council of California
Agricultural Energy Consumers Association
Alliance of Western Milk Producers
American Biogas Council
Association of California Water Agencies
Biogas & Electric, LLC
California Association of Sanitation Agencies
California Bioenergy
California Cotton Ginners and Growers Associations
California Farm Bureau Federation
California Poultry Federation
Caterpillar, Inc.
Clean Coalition
Clean World Partners
Clear Horizons, LLC
E. & J. Gallo Winery
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E3
Eastern Municipal Water District
Electrochaea
Energy Development Group of Idaho
FlexEnergy Inc.
Harvest Power
Hawthorne Power Systems
Milk Producers Council
Organic Waste Systems, Inc.
Peterson Power Systems
R-Qubed Energy, Inc.
Sanitation Districts of Los Angeles County
Solar Turbines Incorporated
South Coast Air Quality Management District
SUMA America, Inc.
Sustainable Conservation
Sustainable Conservation
Tetra Tech, Inc.
Western Agricultural Processors Association
OPPOSITION : (Verified 8/30/12)
Division of Ratepayer Advocates
Southern California Edison
ASSEMBLY FLOOR : 56-14, 8/30/12
AYES: Achadjian, Allen, Atkins, Beall, Block, Blumenfield,
Bonilla, Bradford, Brownley, Buchanan, Charles Calderon,
Campos, Carter, Cedillo, Chesbro, Conway, Davis,
Dickinson, Feuer, Fletcher, Fong, Fuentes, Furutani, Beth
Gaines, Galgiani, Gatto, Gordon, Gorell, Hall, Hayashi,
Roger Hernández, Hill, Huber, Huffman, Knight, Lara,
Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning,
Nestande, Olsen, Pan, Perea, V. Manuel Pérez, Portantino,
Skinner, Solorio, Swanson, Torres, Valadao, Wieckowski,
Williams, Yamada, John A. Pérez
NOES: Cook, Donnelly, Garrick, Hagman, Harkey, Jeffries,
Jones, Logue, Mansoor, Miller, Morrell, Norby, Silva,
Wagner
NO VOTE RECORDED: Alejo, Ammiano, Bill Berryhill, Butler,
Eng, Grove, Halderman, Hueso, Nielsen, Smyth
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RM:n 8/31/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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