BILL ANALYSIS Ó
AB 793
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Date of Hearing: May 6, 2013
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 793 (Gray) - As Amended: April 22, 2013
SUBJECT : Renewable energy: publicly owned electric utility:
hydroelectric generation facility
SUMMARY : Requires the local publicly-owned electric utility
Merced Irrigation District (MID) to satisfy its Renewables
Portfolio Standard (RPS) procurement requirements by procuring
renewable energy to meet only the electricity demands
unsatisfied by MID's own hydroelectric generation in any given
year.
EXISTING LAW :
1)The RPS requires investor-owned utilities (IOUs),
publicly-owned utilities (POUs) and certain other retail
sellers of electricity, in order to fulfill unmet long-term
resource needs, to procure eligible renewable energy resources
to meet the following portfolio targets:
a) 20 percent on average from January 1, 2011 to December
31, 2013.
b) 25 percent by December 31, 2016.
c) 33 percent by December 31, 2020 and each year
thereafter.
2)Provides that eligible renewable generation facilities may
include small hydroelectric (generally 30 megawatts or less),
as well as biomass, solar thermal, photovoltaic, wind,
geothermal, renewable fuel cells, digester gas, limited
non-combustion municipal solid waste conversion, landfill gas,
ocean wave, ocean thermal or tidal current.
3)Requires the California Energy Commission (CEC), in
consultation with the Air Resources Board (ARB), to adopt
regulations for enforcement of the RPS on POUs, including
providing for the imposition of penalties by ARB pursuant to
AB 32, upon referral by the CEC, for failure to comply with
the RPS. Requires penalties imposed on POUs to be comparable
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to penalties imposed by the Public Utilities Commission (PUC)
on IOUs and other retail sellers.
4)Excuses a POU from enforcement for failure to meet RPS targets
if the POU demonstrates that any of the following conditions
are beyond its control and will prevent compliance:
a) Inadequate transmission capacity for delivery of
sufficient renewable energy.
b) Permitting, interconnection or other delays for
renewable energy projects, or an insufficient supply of
available renewable energy.
c) Unanticipated curtailment of renewable energy necessary
to address the needs of a balancing authority.
5)Requires the PUC to establish a cost limit for each IOU
according to specified criteria, requires the PUC to report to
the Legislature by 2016 regarding whether IOUs can achieve 33
percent within the adopted cost limit, authorizes the PUC to
revise the cost limit once after 2016 if necessary, and
authorizes IOUs to stop procuring renewable energy beyond the
cost limit, unless additional renewable energy can be procured
without exceeding a de minimis increase in rates. Authorizes
POU governing boards to adopt consistent cost limits.
THIS BILL requires MID, through the definition of "hydroelectric
generation facility" that only MID's New Exchequer hydroelectric
facility meets, to procure eligible renewable energy resources
to meet only the electricity demands unsatisfied by MID's own
hydroelectric generation in any given year to satisfy its RPS
procurement requirements. (MID's own hydroelectric generation
is not RPS-eligible because the facility exceeds the RPS 30
megawatt limit - New Exchequer's capacity is 95 megawatts.)
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's statement :
This bill aims to clarify MID's requirements and its need
for RPS procurement. It would require the District's RPS
requirement apply to the 33 percent of energy purchased
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from external sources to meet its customer load demand
beyond the generation output of the District's
community-owned hydroelectric generation project.
MID owns and operates New Exchequer Dam on Lake McClure.
The District has been under contract with PG&E for 50
years. Although it operates a 95 megawatt hydroelectric
project, PG&E has received the benefit of the electricity
for decades. That contract expires in 2014 and MID expects
to take full ownership of the electricity produced at its
facilities. At certain times, the generation can meet 100
percent of the District's energy needs. At other times,
MID must purchase outside additional power. On average,
the MID can generate 60 percent of its load demand.
MID is seeking to clarify its RPS requirement and have it
apply to the remaining amount of electricity it must
purchase. This would ensure this small public utility -
with 8,000 customers - is able to take full advantage of
its own generating facilities, to the benefit of the
community.
MID expects its RPS purchase requirement to cost upward of
$30 million without recognition of its ability to meet much
of its own demand.
The MID serves a region with unemployment continuing to
linger near 19 percent, with 26 percent of residents at or
below the federal poverty level and with household and
median incomes approximately half that of the state
average. Under the District's current RPS requirement, the
average family would see a 20 percent rate increase with
electric bills increasing from approximately $225 per month
to $270. Businesses would be more significantly affected
by the RPS cost shifting thus causing further stagnation of
the local economy. Rates would remain more affordable for
MID customers under this bill while still achieving
carbon-emission-free energy.
2)What does the bill actually do? The actual effect of this
bill is a bit unclear and difficult to reconcile with the
stated intent. The effect is unclear because the bill hinges
on the undefined term "consumption load demand" rather than
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the prevailing RPS metric of "retail sales." The effect is
also unclear because it depends largely on the actual energy
output of MID's New Exchequer project in "any given year,"
compared to MID's total energy needs. However, relying on the
numbers supplied by the author and MID, if New Exchequer
supplies 60 percent of MID's energy needs on average, this
bill may well be interpreted to increase MID's renewable
procurement obligation to 40 percent in 2014 and thereafter
(assuming the bill is enacted this year), compared to the
current statewide RPS target of 33 percent by 2020.
The model apparently used for this bill is the San Francisco
RPS provision [subdivision (j) of Section 399.30, which
appears on page 5, lines 9-18 of this bill], which was adopted
in recognition that nearly all of the San Francisco Public
Utility's load is met by the Hetch Hetchy water and power
system. However, that model doesn't seem to fit MID or
comport with MID's intent. San Francisco was willing to
procure renewable energy for all of its energy needs not met
by Hetch Hetchy, and that's what the San Francisco provision
requires.
However, the author's intent appears to be to discard the New
Exchequer power from the RPS equation, so that MID's RPS would
be reduced to 33 percent of the remaining 40 percent, or 13
percent of MID's total retail sales. It is based on this
assumption that a variety of RPS advocates oppose the bill.
However, the bill as written does not do that, and the
controversy would likely result in a protracted battle at the
CEC over interpretation of its provisions.
3)Existing flexible compliance provisions of the RPS may address
the stated reasons for this bill. The issues raised in
connection to this bill are not unique to MID. Multiple small
and large POUs and IOUs in Northern California, ranging from
the City of Biggs (which isn't very big) to PG&E, have large,
RPS-ineligible hydroelectric resources in their portfolios.
If these large hydroelectric resources were deducted from the
utilities' retail sales, their RPS obligation would be
significantly reduced, and the benefits of the RPS policy
would be compromised.
The RPS already accounts for situations where a utility's
long-term power needs are less than the RPS targets - the
so-called "unmet need" standard. The RPS also accounts for
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economic impacts through the cost limit procedures described
in the existing law item 5 above. As a POU, MID is authorized
to adopt its own cost limit, subject to oversight by the CEC.
Finally, the RPS provides a variety of "offramps," described
in existing law item 4 above, to address other complications
that may be associated with procuring renewable energy.
4)Suggested amendments. The author and the committee may wish
to consider amending the bill to clarify its effect by
replacing paragraph (1) of subdivision (k), on page 5, lines
19-25, with a statement that MID is not required to procure
additional renewable energy if the portion of its retail sales
supplied by its own large hydroelectric generation exceeds the
applicable RPS target, or MID has exceeded its adopted cost
limit beyond a de minimis amount.
5)Related legislation. SB 591 (Cannella), which is similar to
this bill, is pending in the Senate Appropriations Committee.
6)Double referral. This bill was approved by the Assembly
Utilities and Commerce Committee on April 15 by a vote of
12-0.
REGISTERED SUPPORT / OPPOSITION :
Support
Merced Irrigation District (sponsor)
Association of California Water Agencies
California Farm Bureau Federation
Opposition
California Hydropower Reform Coalition
California Wind Energy Association
Large-Scale Solar Association
Natural Resources Defense Council
Sierra Club California
The Utility Reform Network (TURN)
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
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