Amended in Assembly January 27, 2014

Amended in Assembly January 15, 2014

Amended in Assembly January 8, 2014

Amended in Assembly January 6, 2014

Amended in Assembly June 5, 2013

Amended in Assembly April 9, 2013

Amended in Assembly March 21, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 177

Introduced by Assembly Member V. Manuel Pérez

January 24, 2013

An act to add Section 25328 to the Public Resources begin insert Code, and to amend Sections 454.5, 911, and 8341 of the Public Utilities end insert Code, relating to energy.

LEGISLATIVE COUNSEL’S DIGEST

AB 177, as amended, V. Manuel Pérez. Renewable energy resources: begin delete Salton Sea. end delete begin insert electrical corporations: procurement plans. end insert

The Warren-Alquist State Energy Resources Conservation and Development Act establishes the State Energy Resources Conservation and Development Commission. The act requires the State Energy Resources Conservation and Development Commission, beginning November 1, 2003, and by November 1 of every odd year thereafter, to adopt an integrated energy policy report which includes an overview of major energy trends and issues facing the state, an assessment and forecast of system reliability, and the need for resource additions, efficiency, and conservation. The act requires the State Energy Resources Conservation and Development Commission, beginning November 1, 2004, and by November 1 of each even year thereafter, to prepare an energy policy review to update the analyses from the integrated energy policy report or to raise energy issues that have emerged since the release of the integrated energy policy report.

The California Renewables Portfolio Standard Program, also known as the RPS program, requires a retail seller of electricity, as defined, and local publicly owned electric utilities to purchase specified minimum quantities of electricity products from eligible renewable energy resources, as defined, for specified compliance periods, sufficient to ensure that the procurement of electricity products from eligible renewable energy resources achieves 25% of retail sales by December 31, 2016, and 33% of retail sales by December 31, 2020, and in all subsequent years.

This bill would require the State Energy Resources Conservation and Development Commission, in cooperation and consultation with the Public Utilities Commission, the Natural Resources Agency, and the Salton Sea Authority, to convene a stakeholders group to advise the commission on the steps that should be taken to properly develop, integrate, and transmit the electricity generated by eligible renewable energy resources located in and around the Salton Sea. The bill would require the State Energy Resources Conservation and Development Commission to hold workshops and public hearings and to include its evaluations and recommendations in the next integrated energy policy report or energy policy review update.

begin insert

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations, as defined. The Public Utilities Act requires the Public Utilities Commission to review and adopt a procurement plan for each electrical corporation in accordance with specified elements, incentive mechanisms, and objectives. The act requires that an electrical corporation’s proposed procurement plan include certain elements. The act requires the Public Utilities Commission to review and accept, modify, or reject each electrical corporation’s procurement plan and requires that each approved procurement plan accomplish specified objectives.

end insert begin insert

This bill would require the Public Utilities Commission to establish a value for assessing all procurement contracts for eligible renewable energy resources that includes the cost of integration of those resources into the operation of the electrical grid and would authorize the commission to additionally include other values including voltage support. The bill would require that a procurement plan approved by the Public Utilities Commission accomplish the objective of providing for procurement of preferred resources in a manner that ensures electrical system reliability.

end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) There are substantial high-quality eligible renewable energy
resources located in and around the Salton Sea that can generate
electricity in a manner that will simultaneously do all of the
following:

(1) Assist in maintaining grid reliability.

(2) Provide lower costs for integrating eligible renewable energy
resources into the electrical grid.

(3) Help meet California’s renewables portfolio standard
procurement requirements and requirements for reducing emissions
of greenhouse gases.

(4) Provide significant local and regional environmental and
economic development benefits.

(b) There are similar high-quality eligible renewable energy
resources located in northern California that can generate electricity
in a manner that will simultaneously achieve the same benefits as
would be achieved by developing those resources near the Salton
Sea.

(c) The County of Imperial and the Imperial Irrigation District
have signed a memorandum of understanding that pledges their
mutual efforts to advance the development of eligible renewable
energy resources and precious minerals extraction in the Imperial
Irrigation District balancing authority area and thereby provide a
funding source that will assist the state in meeting its mitigation
and restoration obligations pursuant to the Quantification
Settlement Agreement, as defined in subdivision (a) of Section 1
of Chapter 617 of the Statutes of 2002, and related and
implementing agreements.

(d) The Natural Resources Agency, in cooperation and
consultation with the Salton Sea Authority, is conducting a
feasibility study that will serve as the blueprint to guide future
efforts to restore the Salton Sea, develop the eligible renewable
energy resources located there, and provide direction to local,
regional, and state agencies responsible for the protection of the
health of those who could otherwise be subjected to the detrimental
air quality effects from an exposed lake bed.

SEC. 2.  

Section 25328 is added to the Public Resources Code,
to read:

25328.  

(a) The commission, in cooperation and consultation
with the Public Utilities Commission, the Natural Resources
Agency, and the Salton Sea Authority, shall convene a stakeholders
group to advise the commission on the steps that should be taken
to properly develop, integrate, and transmit the electricity generated
by eligible renewable energy resources, as defined in Section
399.12 of the Public Utilities Code, located in and around the
Salton Sea. The commission shall hold workshops and public
hearings to consider the recommendations of the stakeholders
group. At a minimum, the commission and stakeholders shall do
all of the following:

(1) Consider methods to expedite transmission line development
from the Imperial Irrigation District balancing authority area to
utilities and regional independent system operators.

(2) Analyze whether state loan guarantees, loans, or state funds
could be made available to assist developers of geothermal and
other eligible renewable energy resources to access capital and
long-term financing.

(3) Identify permitting issues and agencies responsible for
issuing those permits.

(4) Analyze the feasibility of granting blanket permits to
multiple geothermal project developments located near or under
the existing Salton Sea.

(5) Analyze the effectiveness of the value for assessing
procurement contracts for eligible renewable energy resources
begin insert established by the Public Utilities Commission pursuant to
subdivision (c) of Section 454.5 of the Public Utilities Code end insert that
includes integration of those resources into the operation of the
electrical grid, analyze whether the value has resulted in
development of new eligible renewable energy resources located
in and around the Salton Sea, and make recommendations on
whether other measures are appropriate to ensure that eligible
renewable energy resources are appropriately developed in and
around the Salton Sea.

(6) Analyze the costs and the value provided by eligible
renewable energy resource projects located in and around the
Salton Sea that provide baseload generation.

(7) Assist in the framing of a pilot project to evaluate algae and
solar energy facilities located on or near Salton Sea playa areas.

(8) Analyze the benefits and costs of rare earth extraction in
consultation with the relevant state and federal agencies.

(b) The commission shall include its evaluations and
recommendations in the next integrated energy policy report
adopted pursuant to subdivisions (a), (b), and (c) of, or energy
policy review update adopted pursuant to subdivision (d) of,
Section 25302.

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 454.5 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

454.5.  

(a) The commission shall specify the allocation of
electricity, including quantity, characteristics, and duration of
electricity delivery, that the Department of Water Resources shall
provide under its power purchase agreements to the customers of
each electrical corporation, which shall be reflected in the electrical
corporation’s proposed procurement plan. Each electrical
corporation shall file a proposed procurement plan with the
commission not later than 60 days after the commission specifies
the allocation of electricity. The proposed procurement plan shall
specify the date that the electrical corporation intends to resume
procurement of electricity for its retail customers, consistent with
its obligation to serve. After the commission’s adoption of a
procurement plan, the commission shall allow not less than 60
days before the electrical corporation resumes procurement
pursuant to this section.

(b) An electrical corporation’s proposed procurement plan shall
include, but not be limited to, all of the following:

(1) An assessment of the price risk associated with the electrical
corporation’s portfolio, including any utility-retained generation,
existing power purchase and exchange contracts, and proposed
contracts or purchases under which an electrical corporation will
procure electricity, electricity demand reductions, and
electricity-related products and the remaining open position to be
served by spot market transactions.

(2) A definition of each electricity product, electricity-related
product, and procurement related financial product, including
support and justification for the product type and amount to be
procured under the plan.

(3) The duration of the plan.

(4) The duration, timing, and range of quantities of each product
to be procured.

(5) A competitive procurement process under which the
electrical corporation may request bids for procurement-related
services, including the format and criteria of that procurement
process.

(6) An incentive mechanism, if any incentive mechanism is
proposed, including the type of transactions to be covered by that
mechanism, their respective procurement benchmarks, and other
parameters needed to determine the sharing of risks and benefits.

(7) The upfront standards and criteria by which the acceptability
and eligibility for rate recovery of a proposed procurement
transaction will be known by the electrical corporation prior to
execution of the transaction. This shall include an expedited
approval process for the commission’s review of proposed contracts
and subsequent approval or rejection thereof. The electrical
corporation shall propose alternative procurement choices in the
event a contract is rejected.

(8) Procedures for updating the procurement plan.

(9) A showing that the procurement plan will achieve the
following:

(A) The electrical corporation, in order to fulfill its unmet
resource needs, shall procure resources from eligible renewable
energy resources in an amount sufficient to meet its procurement
requirements pursuant to the California Renewables Portfolio
Standard Program (Article 16 (commencing with Section 399.11)
of Chapter 2.3).

(B) The electrical corporation shall create or maintain a
diversified procurement portfolio consisting of both short-term
and long-term electricity and electricity-related and demand
reduction products.

(C) The electrical corporation shall first meet its unmet resource
needs through all available energy efficiency and demand reduction
resources that are cost effective, reliable, and feasible.

(10) The electrical corporation’s risk management policy,
strategy, and practices, including specific measures of price
stability.

(11) A plan to achieve appropriate increases in diversity of
ownership and diversity of fuel supply of nonutility electrical
generation.

(12) A mechanism for recovery of reasonable administrative
costs related to procurement in the generation component of rates.

begin insert

(c) The commission shall establish a value for assessing all
procurement contracts for eligible renewable energy resources
that includes the cost of integration of those resources into the
operation of the electrical grid. The commission may also include
other values including, but not limited to, voltage support.

end insert begin delete

(c)

end delete

begin insert (d) end insert  The commission shall review and accept, modify, or reject
each electrical corporation’s procurement plan. The commission’s
review shall consider each electrical corporation’s individual
procurement situation, and shall give strong consideration to that
situation in determining which one or more of the features set forth
in this subdivision shall apply to that electrical corporation. A
procurement plan approved by the commission shall contain one
or more of the following features, provided that the commission
may not approve a feature or mechanism for an electrical
corporation if it finds that the feature or mechanism would impair
the restoration of an electrical corporation’s creditworthiness or
would lead to a deterioration of an electrical corporation’s
creditworthiness:

(1) A competitive procurement process under which the
electrical corporation may request bids for procurement-related
services. The commission shall specify the format of that
procurement process, as well as criteria to ensure that the auction
process is open and adequately subscribed. Any purchases made
in compliance with the commission-authorized process shall be
recovered in the generation component of rates.

(2) An incentive mechanism that establishes a procurement
benchmark or benchmarks and authorizes the electrical corporation
to procure from the market, subject to comparing the electrical
corporation’s performance to the commission-authorized
benchmark or benchmarks. The incentive mechanism shall be
clear, achievable, and contain quantifiable objectives and standards.
The incentive mechanism shall contain balanced risk and reward
incentives that limit the risk and reward of an electrical corporation.

(3) Upfront achievable standards and criteria by which the
acceptability and eligibility for rate recovery of a proposed
procurement transaction will be known by the electrical corporation
prior to the execution of the bilateral contract for the transaction.
The commission shall provide for expedited review and either
approve or reject the individual contracts submitted by the electrical
corporation to ensure compliance with its procurement plan. To
the extent the commission rejects a proposed contract pursuant to
this criteria, the commission shall designate alternative procurement
choices obtained in the procurement plan that will be recoverable
for ratemaking purposes.

begin delete

(d)

end delete

begin insert (e) end insert  A procurement plan approved by the commission shall
accomplish each of the following objectives:

(1) Enable the electrical corporation to fulfill its obligation to
serve its customers at just and reasonable rates.

(2) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation’s actions in compliance with an
approved procurement plan, including resulting electricity
procurement contracts, practices, and related expenses. However,
the commission may establish a regulatory process to verify and
ensure that each contract was administered in accordance with the
terms of the contract, and contract disputes that may arise are
reasonably resolved.

(3) Ensure timely recovery of prospective procurement costs
incurred pursuant to an approved procurement plan. The
commission shall establish rates based on forecasts of procurement
costs adopted by the commission, actual procurement costs
incurred, or combination thereof, as determined by the commission.
The commission shall establish power procurement balancing
accounts to track the differences between recorded revenues and
costs incurred pursuant to an approved procurement plan. The
commission shall review the power procurement balancing
accounts, not less than semiannually, and shall adjust rates or order
refunds, as necessary, to promptly amortize a balancing account,
according to a schedule determined by the commission. Until
January 1, 2006, the commission shall ensure that any
overcollection or undercollection in the power procurement
balancing account does not exceed 5 percent of the electrical
corporation’s actual recorded generation revenues for the prior
calendar year excluding revenues collected for the Department of
Water Resources. The commission shall determine the schedule
for amortizing the overcollection or undercollection in the
balancing account to ensure that the 5 percent threshold is not
exceeded. After January 1, 2006, this adjustment shall occur when
deemed appropriate by the commission consistent with the
objectives of this section.

(4) Moderate the price risk associated with serving its retail
customers, including the price risk embedded in its long-term
supply contracts, by authorizing an electrical corporation to enter
into financial and other electricity-related product contracts.

(5) Provide for just and reasonable rates, with an appropriate
balancing of price stability and price level in the electrical
corporation’s procurement plan.

begin insert

(6) Provide for procurement of preferred resources in a manner
that ensures electrical system reliability.

end insert begin delete

(e)

end delete

begin insert (f) end insert  The commission shall provide for the periodic review and
prospective modification of an electrical corporation’s procurement
plan.

begin delete

(f)

end delete

begin insert (g) end insert  The commission may engage an independent consultant or
advisory service to evaluate risk management and strategy. The
reasonable costs of any consultant or advisory service is a
reimbursable expense and eligible for funding pursuant to Section
631.

begin delete

(g)

end delete

begin insert (h) end insert  The commission shall adopt appropriate procedures to ensure
the confidentiality of any market sensitive information submitted
in an electrical corporation’s proposed procurement plan or
resulting from or related to its approved procurement plan,
including, but not limited to, proposed or executed power purchase
agreements, data request responses, or consultant reports, or any
combination, provided that the Office of Ratepayer Advocates and
other consumer groups that are nonmarket participants shall be
provided access to this information under confidentiality
procedures authorized by the commission.

begin delete

(h)

end delete

begin insert (i) end insert  Nothing in this section alters, modifies, or amends the
commission’s oversight of affiliate transactions under its rules and
decisions or the commission’s existing authority to investigate and
penalize an electrical corporation’s alleged fraudulent activities,
or to disallow costs incurred as a result of gross incompetence,
fraud, abuse, or similar grounds. Nothing in this section expands,
modifies, or limits the State Energy Resources Conservation and
Development Commission’s existing authority and responsibilities
as set forth in Sections 25216, 25216.5, and 25323 of the Public
Resources Code.

begin delete

(i)

end delete

begin insert (j) end insert  An electrical corporation that serves less than 500,000 electric
retail customers within the state may file with the commission a
request for exemption from this section, which the commission
shall grant upon a showing of good cause.

begin delete

(j)

end delete

begin insert (k) end insert  (1) Prior to its approval pursuant to Section 851 of any
divestiture of generation assets owned by an electrical corporation
on or after the date of enactment of the act adding this section, the
commission shall determine the impact of the proposed divestiture
on the electrical corporation’s procurement rates and shall approve
a divestiture only to the extent it finds, taking into account the
effect of the divestiture on procurement rates, that the divestiture
is in the public interest and will result in net ratepayer benefits.

(2) Any electrical corporation’s procurement necessitated as a
result of the divestiture of generation assets on or after the effective
date of the act adding this subdivision shall be subject to the
mechanisms and procedures set forth in this section only if its
actual cost is less than the recent historical cost of the divested
generation assets.

(3) Notwithstanding paragraph (2), the commission may deem
proposed procurement eligible to use the procedures in this section
upon its approval of asset divestiture pursuant to Section 851.

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 911 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

911.  

(a) Notwithstanding subdivision begin delete (g) end delete begin insert (h) end insert of Section 454.5
and Section 583, no later than February 1, 2012, and annually
thereafter, the commission shall release to the Legislature the costs
of all electricity procurement contracts for eligible renewable
energy resources, including unbundled renewable energy credits,
and all costs for utility-owned generation approved by the
commission. The first report shall include all costs commencing
January 1, 2003. Subsequent reports shall include only costs for
the preceding calendar year.

(1) For power purchase contracts, the commission shall release
costs in an aggregated form categorized according to the year the
procurement transaction was approved by the commission, the
eligible renewable energy resource type, including bundled
renewable energy credits, the average executed contract price, and
average actual recorded costs for each kilowatthour of production.
Within each renewable energy resource type, the commission shall
provide aggregated costs for different project size thresholds.

(2) For each utility-owned renewable generation project, the
commission shall release the costs forecast by the electrical
corporation at the time of initial approval and the actual recorded
costs for each kilowatthour of production during the preceding
calendar year.

(b) This section does not require the release of the terms of any
individual electricity procurement contracts for eligible renewable
energy resources, including unbundled renewable energy credits,
approved by the commission. The commission shall aggregate
data to the extent required to ensure protection of the confidentiality
of individual contract costs even if this aggregation requires
grouping contracts of different energy resource type. The
commission shall not be required to release the data in any year
when there are fewer than three contracts approved.

(c) The commission may combine the information required by
this section with the report prepared pursuant to Section 910, as
added by Chapter 1 of the First Extraordinary Session of the
Statutes of 2011.

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 8341 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

8341.  

(a) No load-serving entity or local publicly owned
electric utility may enter into a long-term financial commitment
unless any baseload generation supplied under the long-term
financial commitment complies with the greenhouse gases emission
performance standard established by the commission, pursuant to
subdivision (d), for a load-serving entity, or by the Energy
Commission, pursuant to subdivision (e), for a local publicly owned
electric utility.

(b) (1) The commission shall not approve a long-term financial
commitment by an electrical corporation unless any baseload
generation supplied under the long-term financial commitment
complies with the greenhouse gases emission performance standard
established by the commission pursuant to subdivision (d).

(2) The commission may, in order to enforce this section, review
any long-term financial commitment proposed to be entered into
by an electric service provider or a community choice aggregator.

(3) The commission shall adopt rules to enforce the requirements
of this section, for load-serving entities. The commission shall
adopt procedures, for all load-serving entities, to verify the
emissions of greenhouse gases from any baseload generation
supplied under a contract subject to the greenhouse gases emission
performance standard to ensure compliance with the standard.

(4) In determining whether a long-term financial commitment
is for baseload generation, the commission shall consider the design
of the powerplant and the intended use of the powerplant, as
determined by the commission based upon the electricity purchase
contract, any certification received from the Energy Commission,
any other permit or certificate necessary for the operation of the
powerplant, including a certificate of public convenience and
necessity, any procurement approval decision for the load-serving
entity, and any other matter the commission determines is relevant
under the circumstances.

(5) Costs incurred by an electrical corporation to comply with
this section, including those costs incurred for electricity purchase
agreements that are approved by the commission that comply with
the greenhouse gases emission performance standard, are to be
treated as procurement costs incurred pursuant to an approved
procurement plan and the commission shall ensure timely cost
recovery of those costs pursuant to paragraph (3) of subdivision
begin delete (d) end delete begin insert (e) end insert of Section 454.5.

(6) A long-term financial commitment entered into through a
contract approved by the commission, for electricity generated by
a zero- or low-carbon generating resource that is contracted for,
on behalf of consumers of this state on a cost-of-service basis,
shall be recoverable in rates, in a manner determined by the
commission consistent with Section 380. The commission may,
after a hearing, approve an increase from one-half to 1 percent in
the return on investment by the third party entering into the contract
with an electrical corporation with respect to investment in zero-
or low-carbon generation resources authorized pursuant to this
subdivision.

(c) (1) The Energy Commission shall adopt regulations for the
enforcement of this chapter with respect to a local publicly owned
electric utility.

(2) The Energy Commission may, in order to ensure compliance
with the greenhouse gases emission performance standard by local
publicly owned electric utilities, apply the procedures adopted by
the commission to verify the emissions of greenhouse gases from
baseload generation pursuant to subdivision (b).

(3) In determining whether a long-term financial commitment
is for baseload generation, the Energy Commission shall consider
the design of the powerplant and the intended use of the
powerplant, as determined by the Energy Commission based upon
the electricity purchase contract, any certification received from
the Energy Commission, any other permit for the operation of the
powerplant, any procurement approval decision for the load-serving
entity, and any other matter the Energy Commission determines
is relevant under the circumstances.

(d) (1) On or before February 1, 2007, the commission, through
a rulemaking proceeding, and in consultation with the Energy
Commission and the State Air Resources Board, shall establish a
greenhouse gases emission performance standard for all baseload
generation of load-serving entities, at a rate of emissions of
greenhouse gases that is no higher than the rate of emissions of
greenhouse gases for combined-cycle natural gas baseload
generation. Enforcement of the greenhouse gases emission
performance standard shall begin immediately upon the
establishment of the standard. All combined-cycle natural gas
powerplants that are in operation, or that have an Energy
Commission final permit decision to operate as of June 30, 2007,
shall be deemed to be in compliance with the greenhouse gases
emission performance standard.

(2) In determining the rate of emissions of greenhouse gases
for baseload generation, the commission shall include the net
emissions resulting from the production of electricity by the
baseload generation.

(3) The commission shall establish an output-based methodology
to ensure that the calculation of emissions of greenhouse gases for
cogeneration recognizes the total usable energy output of the
process, and includes all greenhouse gases emitted by the facility
in the production of both electrical and thermal energy.

(4) In calculating the emissions of greenhouse gases by facilities
generating electricity from biomass, biogas, or landfill gas energy,
the commission shall consider net emissions from the process of
growing, processing, and generating the electricity from the fuel
source.

(5) Carbon dioxide that is injected in geological formations, so
as to prevent releases into the atmosphere, in compliance with
applicable laws and regulations shall not be counted as emissions
of the powerplant in determining compliance with the greenhouse
gases emissions performance standard.

(6) In adopting and implementing the greenhouse gases emission
performance standard, the commission, in consultation with the
Independent System Operator shall consider the effects of the
standard on system reliability and overall costs to electricity
customers.

(7) In developing and implementing the greenhouse gases
emission performance standard, the commission shall address
long-term purchases of electricity from unspecified sources in a
manner consistent with this chapter.

(8) In developing and implementing the greenhouse gases
emission performance standard, the commission shall consider
and act in a manner consistent with any rules adopted pursuant to
Section 824a-3 of Title 16 of the United States Code.

(9) An electrical corporation that provides electric service to
75,000 or fewer retail end-use customers in California may file
with the commission a proposal for alternative compliance with
this section, which the commission may accept upon a showing
by the electrical corporation of both of the following:

(A) A majority of the electrical corporation’s retail end-use
customers for electric service are located outside of California.

(B) The emissions of greenhouse gases to generate electricity
for the retail end-use customers of the electrical corporation are
subject to a review by the utility regulatory commission of at least
one other state in which the electrical corporation provides
regulated retail electric service.

(e) (1) On or before June 30, 2007, the Energy Commission,
at a duly noticed public hearing and in consultation with the
commission and the State Air Resources Board, shall establish a
greenhouse gases emission performance standard for all baseload
generation of local publicly owned electric utilities at a rate of
emissions of greenhouse gases that is no higher than the rate of
emissions of greenhouse gases for combined-cycle natural gas
baseload generation. The greenhouse gases emission performance
standard established by the Energy Commission for local publicly
owned electric utilities shall be consistent with the standard adopted
by the commission for load-serving entities. Enforcement of the
greenhouse gases emission performance standard shall begin
immediately upon the establishment of the standard. All
combined-cycle natural gas powerplants that are in operation, or
that have an Energy Commission final permit decision to operate
as of June 30, 2007, shall be deemed to be in compliance with the
greenhouse gases emission performance standard.

(2) The greenhouse gases emission performance standard shall
be adopted by regulation pursuant to the Administrative Procedure
Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code).

(3) In determining the rate of emissions of greenhouse gases
for baseload generation, the Energy Commission shall include the
net emissions resulting from the production of electricity by the
baseload generation.

(4) The Energy Commission shall establish an output-based
methodology to ensure that the calculation of emissions of
greenhouse gases for cogeneration recognizes the total usable
energy output of the process, and includes all greenhouse gases
emitted by the facility in the production of both electrical and
thermal energy.

(5) In calculating the emissions of greenhouse gases by facilities
generating electricity from biomass, biogas, or landfill gas energy,
the Energy Commission shall consider net emissions from the
process of growing, processing, and generating the electricity from
the fuel source.

(6) Carbon dioxide that is captured from the emissions of a
powerplant and that is permanently disposed of in geological
formations in compliance with applicable laws and regulations,
shall not be counted as emissions from the powerplant.

(7) In adopting and implementing the greenhouse gases emission
performance standard, the Energy Commission, in consultation
with the Independent System Operator, shall consider the effects
of the standard on system reliability and overall costs to electricity
customers.

(8) In developing and implementing the greenhouse gases
emission performance standard, the Energy Commission shall
address long-term purchases of electricity from unspecified sources
in a manner consistent with this chapter.

(9) In developing and implementing the greenhouse gases
emission performance standard, the Energy Commission shall
consider and act in a manner consistent with any rules adopted
pursuant to Section 824a-3 of Title 16 of the United States Code.

(f) The Energy Commission, in a duly noticed public hearing
and in consultation with the commission and the State Air
Resources Board, shall reevaluate and continue, modify, or replace
the greenhouse gases emission performance standard when an
enforceable greenhouse gases emissions limit is established and
in operation, that is applicable to local publicly owned electric
utilities.

(g) The commission, through a rulemaking proceeding and in
consultation with the Energy Commission and the State Air
Resources Board, shall reevaluate and continue, modify, or replace
the greenhouse gases emission performance standard when an
enforceable greenhouse gases emissions limit is established and
in operation, that is applicable to load-serving entities.