BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 1332 - Negrete McLeod Hearing
Date: April 17, 2012 S
As Amended: April 9, 2012 FISCAL B
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DESCRIPTION
Current law requires all investor-owned utilities (IOUs) and
publicly-owned utilities (POUs), that serve more than 75,000
retail customers, to develop a standard contract or tariff (aka
feed-in-tariff or FiT) available for renewable energy facilities
up to three megawatts (MWs). Statewide participation is capped
at 750 MWs.
Current law requires the FiT contract price for IOUs to 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.
This bill requires that the contract price for electricity
purchased through a FiT, adopted by specified POUs, include the
value of avoided costs of distribution and transmission
upgrades, the offset of peak demand and all current and
anticipated environmental and greenhouse gas reduction
compliance costs and avoided costs.
This bill requires that the specified POUs adopt a FiT by March
1, 2013.
BACKGROUND
What is a 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.
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 California Public Utilities Commission (CPUC) has a
rulemaking open to implement the terms of SB 32 (Negrete McLeod,
2009) and expand the IOU FiT to 3 MWs. The total program
allocation between the three IOUs, is approximately 500 MWs.
Applicable POUs - Current law requires that only the largest
POUs adopt a FiT and specifies that those serving a population
of 75,000 customers or more make a FiT available to renewable
developers in those territories. The affected POUs are: Anaheim,
Glendale, Imperial, Los Angeles, Modesto, Riverside, Turlock,
and Sacramento. The total program allocation between the nine
POUs is approximately 250 MWs.
COMMENTS
1. Author's Purpose . According to the author "SB 32 did
not specify a date by which the covered utilities must
begin offering FiT/CLEAN Contracts under this program. For
the IOUs, the CPUC has jurisdiction and is in the process
of requiring the launch of the IOU SB 32 programs by
mid-2012. However, there is no comparable agency for the
POUs and implementation has varied greatly?SB 32 directed
the governing board of each POU to set the price paid for
clean energy based on the 'value of each kilowatt hour
(kWh) of electricity generated on a time-of-delivery
basis.' However, the definition of 'value' is left up to
the discretion of the utility."
2. FiT Pricing . The author notes that four POUs out of
nine have complied with the FiT mandate but that the
pricing of the contracts offered varied widely because the
bill "didn't provide direction in what should be considered
when developing the rate, for example, avoided costs. This
vagueness has led to uneven results in the pricing design
of the launched programs and thus participation."
Four POUs have complied with SB 32 - SMUD priced its FiT at
14 cents kWh and is fully contracted; LADWP just announced
a 10 MW pilot which will be competitively bid; Riverside
offered 5 cents and has had no contracts; and Anaheim's
price varies yearly and is based average prices for
renewable and non-renewable electricity in state and
western electricity markets.
The author argues that this disparity of contract offerings
and participation between the utilities warrants further
direction on contract pricing to stimulate economic
development. Consequently, this bill specifies the
components that POUs must consider when calculating the
price offered to projects in the FiT program. Those
components include: avoided costs for distribution and
transmission upgrades, offsets of peak demand (if any), and
all current and anticipated environmental and greenhouse
gas reduction compliance costs, and avoided costs of
generation. POUs opine that these elements would mandate
that they increase the offered prices of their FiT and
impose unwarranted costs on their ratepayers to meet their
RPS goals.
It is important to note that contracts secured through this
pricing mechanism count toward the utility's RPS
requirements. Regardless of how the POU decides to pay for
its renewable generation - FiT contract, utility-owned
generation, or power-purchase agreements - the POU will
still be required to procure the same amount of renewable
generation. To what degree should the Legislature mandate
the pricing mechanism used to pay for that renewable
generation?
3. FiT Deadline . In the two-plus years since the FiT was
mandated only four POUs have attempted to comply with the
SB 32 requirement. There is no enforcement mechanism for
failure to comply with the terms of SB 32. In response the
author has included a deadline of March 1, 2013 for
adoption of the FiT program. She states that "without a
clear timeframe for program implementation, utilities may
continue to delay program development." It is important to
note that there is no penalty under current law if the POU
fails to adopt the program and there would still be no
penalty on the utility for failure to comply if this bill
passes. With the exception of the RPS statutes, POUs have
not been subject to penalties for failure to comply with
energy mandates including energy efficiency and the
California Solar Initiative. As a consequence, many
utilities have ignored the mandates or interpreted them in
ways unintended by the Legislature.
4. Technical Amendment . Page 4, at the end of line 10,
strike "399.20" and insert "399.30."
POSITIONS
Sponsor:
Clean Coalition
Support:
American Biogas Council
Los Angeles Business Council
Sierra Club California
Solar Developers Council
Union of Concerned Scientists
Oppose:
Southern California Public Power Authority
Kellie Smith
SB 1332 Analysis
Hearing Date: April 17, 2012