BILL ANALYSIS Ó
AB 177
Page 1
Date of Hearing: January 13, 2014
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 177 (V. M. Perez) - As Amended: January 8, 2014
SUBJECT : Public Utilities; greenhouse gas emission reductions;
renewable resources
SUMMARY : This bill will establish a 2030 greenhouse gas
emission limit for electrical corporations and publicly owned
electric utilities; codify electricity procurement preferences
for electrical utilities; remove any statutory or administrative
limitations on electricity procurement; and require electrical
corporations to procure all electricity needs consistent with
the procurement preferences, as specified. Specifically, this
bill :
a)Requires the California Air Resources Board (ARB), by January
1, 2016, to adopt a statewide greenhouse gas emissions limit
for electrical corporations and local publicly owned electric
utilities to be achieved by 2030.
b)States the policy of the state to require all retail sellers
of electricity, including investor-owned electrical
corporations and local publicly owned electric utilities, to
procure all available cost-effective, reliable, and feasible
energy efficiency, demand response, and renewable resources,
so as to achieve grid reliability and greenhouse gases
emission reductions simultaneously, in the most cost-effective
and affordable manner practicable.
c)Removes limitations on electricity procurement established by
statute or regulatory decision.
d)Requires electrical corporations to procure all available
cost-effective, reliable, and feasible energy efficiency,
demand response, and renewable energy resources, and to
consider procuring available cost-effective energy storage
technologies.
EXISTING LAW
a)Establishes procurement requirements which electrical
corporations and public utilities must meet in order to attain
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a target of 33% renewable generation in its electricity supply
portfolios by 2020. (Public Utilities Code 399.11)
b)Directs the California Public Utilities Commission (PUC) to
review and approve electricity procurement plans proposed by
electrical corporations. The plans are to meet specified
objectives, including just and reasonable rates and moderating
price risks associated with serving utility customers. (Public
Utilities Code 454.5)
c)Directs the PUC to identify all potential cost effective
electricity energy efficiency savings and establish targets to
be achieved by electrical corporations. (Public Utilities Code
454.55)
d)Directs the California Air Resources Board (ARB) to regulate
greenhouse gas emissions (GHG) in order to reduce those
emissions to 1990 levels by 2020. Also directs the ARB to make
recommendations to the Governor and Legislature on how to
continue emission reductions beyond 2020. (Health and Safety
Code 38550)
FISCAL EFFECT : Unknown
COMMENTS :
1) Author's Statement. California has long led the nation in
the development of cutting edge public policy to combat
climate change. From the Renewable Portfolio Standard (RPS)
to the first-of-its-kind cap and trade carbon reduction
system, California has made strides toward reducing its
impact on the environment.
But while the state has not lacked for good ideas, it has
failed to adequately coordinate its myriad of environmental
policies to ensure each works toward the common goal of
ensuring an affordable, reliable supply of energy that is
renewable and addresses the root cause of climate change:
greenhouse gas emissions. And today, many analysts,
including those at the Lawrence Berkeley National
Laboratory, believe California will not meet its 2050
greenhouse gas goal.
To address these challenges, and calibrate how the state
procures its energy resources, AB 177 will codify a key
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recommendation from both the 2013 AB 32 Scoping Plan Update
and the 2013 Integrated Energy Policy Report (IEPR): the
establishment of a 2030 interim greenhouse house gas
reduction target for the electricity sector. AB 177 will
direct the ARB to adopt a 2030 interim greenhouse gas (GHG)
emission target consistent with the state's adopted goal
(E.O. S-3-05) of reducing emissions by 80% of 1990 levels by
2050.
Acknowledging that it will take ARB time to develop the 2030
target, AB 177 will also codify the PUC's "Loading Order,"
making permanent the existing requirement that utilities
meet their energy needs first, to the maximum extent
feasible and cost-effective, through energy efficiency,
demand response and renewable resources before procuring
conventional generation resources. Codifying this policy
will place the electricity sector firmly on the path toward
decarbonization while also sending a clear signal to the
market that clean technologies will continue to be a
valuable and integral part of California's energy future.
2) Post-2020 Greenhouse Gas Emissions Goals. In October 2013,
the ARB issued a discussion draft of its updated Climate
Change Scoping Plan. This draft has not yet been adopted by
the Board. The draft plan does suggest that a midterm goal
should be adopted toward meeting a 2050 goal: "A target that
reflects the scientifically-based level of emission
reductions the state needs to achieve by 2030 will help
guide ongoing and future policy decisions and provide a
clear market signal for continued investment in low-carbon
technologies." It also states that, "ARB will develop
post-2020 emissions caps to reflect the establishment of a
2030 midterm target. The program will need to reflect the
inclusion of any additional trading partners and may need to
include broader emissions scope. In the section addressing
continuing progress post-2020, the Scoping Plan states that,
"The State needs an overarching energy plan to ensure that
long term climate goals can be achieved" and "The plan
should address a number of important administrative,
financial, and technological issues to guide investment and
planning in the electricity sector."
The GHG emissions goals apply to all sectors of California,
including the electricity sector, but also transportation,
agriculture, commercial and residential buildings, other
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Global Warming Potential products, and the industrial
sector.
Assuming both the targets and the plan are included in the
final scoping plan, it is unclear why it is necessary to
establish a 2030 goal for only one of the regulated sectors.
The author may wish to consider striking Section 1 of this
section of the bill.
3) Intent Language addressing the Salton Sea. Section 2
includes a Legislative finding that substantial high quality
renewable resources are located in Imperial County that can
provide electricity to the grid, provide grid reliability,
and reduce greenhouse gas emissions in a manner that will
provide local environmental and economic benefits.
Technical reports suggest that Imperial County may have
between 2,000 and 2,500 MW of geothermal potential. In
Northern California, estimated geothermal energy projects
are in excess of 750 MW. Yet few of these projects have not
been successful in renewable solicitations authorized by the
PUC. The vast majority of pending contracts have been
awarded to photovoltaic or wind projects.
While Imperial County is clear that it has a variety of
renewable resource opportunities available, not solely
geothermal.
The author may wish to make revisions to Section 2 of this
bill.
4) Codifying the "Loading Order." The "Loading Order" is
policy guidance that was first developed in 2003 through a
coordination effort between the ARB, the California Energy
Commission (CEC), and the PUC through an activity known as
the "Energy Action Plan."
Over time the Loading Order has remained generally the same
as its initial concept in the 2003 Energy Action Plan: to
guide decisions made by the agencies jointly and singly by
optimizing all strategies for increasing conservation and
energy efficiency to minimize increases in electricity and
natural gas demand.
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In the most recent Energy Action Plan (2008) states that the
State's Loading Order would invest first in energy
efficiency and demand-side resources, followed by renewable
resources, and only then in clean conventional electricity
supply.
The PUC applies the loading order to the annual energy
procurement directives it gives to the electric utilities
and specifies that preferred resources are to be procured to
the extent that they are feasibly available and cost
effective. (PUC Decision 13-02-015). Current law codifies
that the PUC shall require all potentially achievable
cost-effective electricity efficiency savings be set as
targets for electrical corporations to achieve.
The sponsors of AB 177 suggest that they are codifying
existing policies. However, the language proposed in AB 177
is not consistent with the 2008 Energy Action Plan language
and adds new language to include air quality, reduce GHG
emissions, preserve electric grid reliability, and that
"procurement shall not be limited by any targets established
for these resources by statute or regulatory decision." It
is unclear if the author intent to provide the PUC with
authority to order procurement without any statutory
limitations or Legislative oversight or vest the PUC.
While the Loading Order provides guidance to energy
agencies, it is not binding. This has the advantage of
allowing agencies to modify the Loading Order to reflect
changes in availability and cost of technologies that fit
the definition of preferred resources. For example, the
Loading Order does not distinguish between large scale or
distributed resources, retail versus wholesale procurement
priorities, or the various new technologies that appear to
be achieving significant cost reductions that could be
deemed preferred. It is also silent on developing
vehicle-to-grid opportunities.
For these reasons, codifying the Loading Order may produce
limitations that make it difficult for state agencies to be
responsive to new technologies or new methods of addressing
California's energy preferences.
The author may wish to revise strike Sections 3 and 4 of
this bill.
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5) Procurement of Intermittent and Variable Resources in the
Renewable Portfolio Standard. The most recent quarterly
reports from the Investor owned utilities show that the
trend is weighted heavily toward wind and solar
photovoltaics. The chart below is based on data reported by
PG&E, SDG&E, and SCE in its most recent compliance report.
These percentages represent the percent of Megawatt-hours,
by technology, that each utility has contracted with to meet
the RPS goals.
----------------------------------------------------
| 2020 RPS Procurement, August 1, 2013 Compliance |
| Reports |
| Percent by Technology |
----------------------------------------------------
|-----------------+------------+---------+-----------|
| | PG&E | SDG&E | SCE |
|-----------------+------------+---------+-----------|
|Biopower | 10 | 3 | 1 |
|-----------------+------------+---------+-----------|
|Geothermal | 10 | 0 | 20 |
|-----------------+------------+---------+-----------|
|Small Hydro | 9 | 0 | 3 |
|-----------------+------------+---------+-----------|
|Conduit Hydro | 0 | 0 | 1 |
|-----------------+------------+---------+-----------|
|Solar | 34 | 52 | 33 |
|Photovoltaic | | | |
|(PV) | | | |
|-----------------+------------+---------+-----------|
|Solar Thermal | 15 | 0 | 3 |
|-----------------+------------+---------+-----------|
|Wind | 22 | 45 | 39 |
|-----------------+------------+---------+-----------|
|Ocean/Tidal | 0 | 0 | 0 |
|-----------------+------------+---------+-----------|
|Fuel Cells | 0 | 0 |0 |
----------------------------------------------------
The Procurement trends indicate that California is steadily
increasing its reliance on wind and solar PV. Pacific Gas
and Electric Company's (PG&E) 2012 Procurement percentages
change from 1% Solar PV to 24% and Wind procurement grows
from 15% to 25%. Geothermal procurement changes from 47%
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to 10%. Similar trends for San Diego Gas & Electric
(SDG&E) and Southern California Edison (SCE) are shown.
SDG&E's Solar PV procurement grows from less than 1% in
2012 to 52% by 2020. Wind procurement decreases from 59% to
45%. Geothermal procurement decreases from 23% to zero.
6) The Duck Chart. In 2013, the California Independent System
Operator (CAISO) released a graphic that is now known as
"the Duck Chart." The Duck Chart provides an example of the
results of current policy direction and warns that
California may experience challenges with grid reliability
due to a convergence of policies that will result in closure
of at least some of the coastally-located gas power plants,
the closure of the San Onofre Nuclear Generation Station
(SONGS), the lack of transmission flexibility into the San
Diego and Southern Orange County regions, hourly demand
forecasts, and the performance characteristics of forecasted
wind and solar procurement facilities.
Because wind and solar facilities can produce large upward
ramps of output and large downward ramps of output, without
predictability or advance warning (when the wind starts and
stops and the sun is blocked by weather conditions), the
Duck Chart demonstrates that if current procurement trends
continue, there may be added cost burdens and perhaps
reliability challenges in order to maintain compliance with
federal reliability standards. Possible remedies include
paying renewable generators to curtail generation, pay
natural gas generators to stand by to respond to large
ramps, or even possibly pay other states to take excess
generation. This scenario might occur if nothing is done to
reduce the size of the ramps, such as but not limited to
building more natural gas plants, modify renewable
procurement practices within the renewable portfolio, or
increasing the size and effectiveness of energy efficiency
and demand response programs.
Geothermal and biopower have different characteristics and
can provide power output consistently over a 24 hour period.
These renewable technologies may be part of the mix of
possible policy actions to address the issues raised by the
Duck Chart.
7) Cost Comparisons . The cost of generation is paid by
ratepayers. The PUC is charged with ensuring safe, reliable,
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affordable supplies of electricity to customers and that the
costs paid are just and reasonable.
According to the March 2013 Report to the Legislature on RPS
costs:
"The weighted average time-of-delivery (TOD) adjusted price
was approximately 9.6 cents/kilowatt hour (kWh) for all
contracts approved in 2012 (including renewable energy
credit only, or REC only, transactions), and approximately
9.9 cents/kWh for bundled energy product (excluding REC
transactions)."
Table A-1 in this report also reports that the Average TOD
RPS Procurement from Geothermal projects ranged from 0.0748
to $0.0671. Photovoltaic projects ranged from $0.1533/kWh
to $0.23/kWh.
8) Addressing Renewable Integration Costs. "Renewable
Integration Costs" is refers to the cost of reliable
operation of the electrical grid as California moves toward
a larger percentage of renewable generation in in utility
portfolios.
The PUC has indicated that the addition of renewable energy
to meet at 33% portfolio may lead to "integration costs" to
maintain California electric system reliability. But, since
2004 the PUC has mandated that integration costs be assumed
to be zero.
In the PUC's proceeding to establish RPS procurement plans,
the PUC received comments from PG&E suggesting a renewable
integration adder. The Center for Energy Efficiency and
Renewable Technology (CEERT), California Wind Energy
Association and SCE filed comments asking that a process and
timeline for the development of a renewable integration cost
adder be established. The PUC decided (D.12-11-016,
November 2012) that integration costs would remain set at
zero until more information and a public review had
occurred. The PUC invited comments on the integration cost
adder in a separate Long Term Procurement Planning (LTPP)
proceeding, R.12-03-014. This proceeding started in March
2012 and is still underway.
By restricting integration costs to zero, the PUC, utility
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procurement provides no value to renewable technologies with
different characteristics (intermittent, variable,
dispatchable, baseload). This may be a contributing factor
to both the utility procurement shifting toward greater
levels of intermittent and variable renewable generation and
also may be one of the factors that created the Duck Chart.
The author may wish to amend Section 454.4 of the Public
Utilities Code to specify that integration costs be included
in renewable procurement.
In addition, the author may wish to add a requirement that
the California Energy Commission, through its Integrated
Policy Report, to convene a stakeholder group to provide
advice on developing and transmitting renewable energy
projects located in Imperial County.
9) Support and Opposition
Supporters of AB 177 suggest that:
AB 177 is an important next step that ensures
California's grid of the future is based on the proper
balance between all energy resources, the need for GHG
reduction, and ratepayer protection.
AB 177 will improve coordination between various state
agencies in implementing the Renewable Portfolio Standard,
the California Solar Initiative, and various other energy
goals.
Codifying the loading order will send a clear signal to
market that clean technologies will continue to be a
valuable and integral part of California's energy future.
AB 177 will be a benefit for Environmental Justice
Communities throughout the state of California.
Opponents to AB 177 suggest that:
Specific provisions in AB 177 are confusing,
inconsistent with existing policy approaches, and could
prove counterproductive.
The bill appears to be aimed at mandating that
particular resources be used to serve system reliability
needs rather than other resources or practices that might
more cost-effectively address these needs
counterproductive.
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AB 177's GHG provisions are premature and should not
create a sector specific cap.
There is an ongoing process at ARB via the Scoping Plan
to make recommendations on additional emission reductions
by 2020 and it is premature to legislate post-2020 targets
at this time.
AB 177 bill would allow all of the procurement of new
renewable generation above 33% to be from unbundled REC's.
These RECs could be procured from anywhere in the world.
The procurement plan does not have to be approved by the
PUC. The bill places no requirements whatsoever on the new
renewable procurement, thus eliminating all of the
carefully balanced requirements in the Renewable Portfolio
Standard.
A long term limit for GHG emissions from the electric
sector is not necessary and could increase already high
electric rates.
AB 177 creates cost and reliability risks by adopting a
new loading order that could interfere with rational
procurement strategies.
AB 177 may undermine the regulatory framework created
through the comprehensive approach of AB 32 by "carving
out" specific industry for additional regulation.
1)Suggested Amendments. The author may wish to amend AB 177 to:
a) Require the PUC to establish a value for renewable
integration costs or other values it identifies, for each
technology, bidding into renewable procurement contract
opportunities authorized by the PUC to ensure that the
costs and benefits of each type of renewable technology is
assessed for both its energy value and its effect on
electric reliability.
b) Require the Energy Commission, through its Integrated
Energy Policy Report, to convene a stakeholder group to
advise the CEC, on developing and transmitting renewable
energy projects located in Imperial County.
Specifically, the suggested amendments are:
SECTION 1. Section 38550 of the Health and Safety Code is
amended to read:
38550. (a) By January 1, 2008, the state board shall,
after one or more public workshops, with public notice, and an
opportunity for all interested parties to comment, determine
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what the statewide greenhouse gas emissions level was in 1990,
and approve in a public hearing, a statewide greenhouse gas
emissions limit that is equivalent to that level, to be
achieved by 2020. In order to ensure the most accurate
determination feasible, the state board shall evaluate the
best available scientific, technological, and economic
information on greenhouse gas emissions to determine the 1990
level of greenhouse gas emissions.
(b) By January 1, 2016, the state board, after conducting
one or more public workshops with public notice and an
opportunity for all interested parties to comment, and
performing an analysis of the progress being made to achieve
the 2020 statewide greenhouse gas emissions limit, shall adopt
in a public hearing a statewide greenhouse gas emissions limit
for electrical corporations, as defined in Section 218 of the
Public Utilities Code, and local publicly owned electric
utilities, as defined in Section 224.3 of the Public
Utilities Code, to be achieved by 2030.
SEC 2. Section 399.23 is added to the Public Utilities Code,
to read:
399.23. (a) The Legislature finds and declares all of the
following:
(1) There is increasing uncertainty with regard to the
availability of California's fleet of older powerplants, as
well as the state's ability to reduce greenhouse gas emissions
beyond the target established for 2020, creating the need for
both increased electrical generation from renewable energy
resources and reduced demand through energy efficiency and
demand response.
(2) It is in the best interest of the electricity consumers
of this state that sufficient renewable energy generation
supply and demand-side resources are procured to meet
electricity demand, and that this supply and these resources
provide the highest value, including providing safe, reliable,
and affordable electricity supplies and minimizing air quality
impacts to consumers in the most cost-effective manner
practicable.
(3) Renewable energy generation from renewable energy
resources that qualify as local capacity resources are
essential to maintaining reliable electricity deliveries.
(4) There are substantial high-quality renewable energy
resources in the County of Imperial near the Salton Sea with
the ability to reduce greenhouse gas emissions that can
generate electricity in a manner that will simultaneously meet
local capacity requirements, maintain grid reliability, and
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provide significant local and regional environmental and
economic development benefits.
(5) The commitment to a loading order of preferred resources
in the manner prescribed in Section 454.55 is necessary to the
continued health and safety of California electric consumers.
(b) Consistent with the loading order adopted by the Energy
Commission and the commission that sets forth state policy for
preferred resources to meet electrical load needs, it is the
intent of the Legislature, and the policy of the state, that
all retail sellers of electricity, including investor-owned
electrical corporations and local publicly owned electric
utilities, shall procure all available cost-effective ,
reliable, and feasible energy efficiency, demand response, and
renewable energy resources, so as to achieve grid reliability
and greenhouse gases emission reductions simultaneously, in
the most cost-effective and affordable manner practicable.
Procurement shall not be limited by any targets established
for these resources by statute or regulatory decision.
SEC. 3. Section 454.55 of the Public Utilities Code is
repealed.
SEC. 4. Section 454.55 is added to the Public Utilities Code,
to read:
454.55. Pursuant to a loading order of preferred resources to
meet electricity demand in a manner that improves the state's
air quality, reduces greenhouse gas emissions, and preserves
electric grid reliability, electrical corporations shall
procure all available cost-effective , reliable, and feasible
energy efficiency, demand response, and renewable energy
resources, and shall consider procuring available
cost-effective energy storage technologies. Procurement of
conventional or gas fired generation shall only be undertaking
to meet residual need forecasted for the long-term planning
period that is not otherwise met by preferred resources. In
measuring the cost-effectiveness of the procurement of
preferred resources, the commission shall determine and
include the value of grid reliability, including the value of
grid reliability of diversity in renewable electric generation
by resource type, size and location, both alone and in
combination with nontransmission alternatives, and local
environmental benefits provided by each renewable energy
resource type technology in disadvantaged communities that
have been identified by the California Environmental
protection agency pursuant to Section 39711 of the Health and
Safety Code. This procurement shall not be limited by any
targets established for these resources by statute or
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regulatory decision. However, the commission shall continue to
establish efficiency targets for an electrical corporation to
achieve pursuant to Section 454.5.
SECTION 1. The Legislature finds and declares all of the
following:
(1) There are substantial high-quality renewable resources in
the County of Imperial near the Salton Sea with the ability to
reduce greenhouse gas emissions that can generate electricity
in a manner that will simultaneously assist in maintaining
grid reliability, provide lower renewable integration costs,
help meet California's renewable portfolio standard and
greenhouse gas mitigation regulations, and provide significant
local and regional environmental and economic development
benefits.
(2) There are similar high-quality renewable resources located
in Northern California with the ability to reduce greenhouse
gas emissions that can generate electricity in a manner that
will simultaneously assist in maintaining grid reliability,
provide lower renewable integration costs, help meet
California's renewable portfolio standard and greenhouse gas
mitigation regulations, and provide significant local and
regional environmental and economic development benefits.
(2) The County of Imperial and the Imperial Irrigation
District ("IID") have signed a memorandum of understanding
that pledges their mutual efforts to advance the development
of renewable resources and precious minerals extraction in the
IID Balancing Authority and thereby provide a funding source
that will assist the State of California meet its mitigation
and restoration obligations pursuant to the Quantification
Settlement Agreement.
(3) 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
renewable 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 454.5 of the Public Utilities Code is amended,
to read:
454.5(a) The commission shall specify the allocation of
electricity, including quantity, characteristics, and duration
of electricity delivery, that the Department of Water
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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
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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, and electric system
reliability.
(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.
(c) The commission shall establish a value for assessing all
renewable procurement contracts that includes the cost of
renewable integration. The commission may also include other
values, such as but not limited to voltage support.
(c) (d) 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
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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.
(d) (e) 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.
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(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.
(6) Provide for procurement of preferred resources in a
manner that ensures electric system reliability.
(e) (f) The commission shall provide for the periodic review
and prospective modification of an electrical corporation's
procurement plan.
(f) (g) 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.
(g) (h) The commission shall adopt appropriate procedures to
ensure the confidentiality of any market sensitive information
submitted in an electrical corporation's proposed procurement
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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.
(h) (i) 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.
(i) 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.
(j) (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.
SEC 3. Section 25328 is added to the Public Resources Code, to
read:
The commission shall, in cooperation and consultation with the
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Public Utilities Commission, the Natural Resources Agency, and
the Salton Sea Authority, convene a stakeholders group to
advise the commission on the steps that should be taken to
properly develop, integrate, and transmit the renewable energy
resources located in and around the Salton Sea. Workshops and
public hearings shall be held to consider the recommendations
of the stakeholders group. The commission and the
stakeholders shall consider at least the following:
(1) Methods to expedite transmission line development from the
Imperial Irrigation District Balancing Authority to utilities
and regional Independent System Operators.
(2) Analyze whether State loan guarantees loans or State funds
could be made available to assist geothermal and other
renewables developers access capital and long term financing.
(3) Identify permitting issues and responsible agencies.
(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 used for renewable
integration specified in Section 454.5 of the Public Utilities
Code and whether it has resulted in new Salton Sea renewables
development and make recommendations on whether other measures
are appropriate to ensure that Salton Sea renewable
development occurs.
(6) Analyze the costs and the value provided by base load
renewable energy projects at the Salton Sea.
(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.
REGISTERED SUPPORT / OPPOSITION :
Support
CalEnergy Operating Corporation
Coalition for Clean Air
Energy Source
Imperial County Board of Supervisors
San Joaquin Valley Latino Environmental Advancement Project
(Valley LEAP)
Opposition
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California Business Properties Association
California Chamber of Commerce (CalChamber)
California Farm Bureau Federation
California Large Energy Consumers Association (CLECA)
California League of Food Processors
California Manufacturers & Technology Association (CMTA)
California Municipal Utilities Association (CMUA)
California Retailers Association
California Wind Energy Association (CalWEA)
Calpine Corporation
Coalition of California Utility Employees (CCUE)
Independent Energy Producers Association (IEP)
Large-Scale Solar Association (LSA)
Northern California Power Agency (NCPA)
Pacific Gas and Electric Company (PG&E)
PacificCorp
Plumbing-Heating-Cooling Contractors Association of California
San Diego Gas and Electric Company (SDG&E)
Southern California Edison (SCE)
Southern California Gas Company
Southern California Public Power Authority (SCPPA)
Terra-Gen Power
The Utility Reform Network (TURN) (unless amended)
Western Electrical Contractors Association
Western States Petroleum Association
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083