BILL ANALYSIS                                                                                                                                                                                                              1





                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                 ALEX PADILLA, CHAIR
          

          SB 591 -  Cannella                                Hearing Date:   
          April 2, 2013              S
          As Introduced: February 22, 2013             Non-FISCAL       B
                                                                        
                                                                        5
                                                                        9
                                                                        1

                                      DESCRIPTION
           
           Current law  requires investor-owned utilities, publicly owned  
          utilities (POUs), community choice aggregators, and energy  
          service providers to increase purchases of renewable energy such  
          that at least 33% of total retail sales are procured from  
          renewable energy resources by December 31, 2020. In the interim  
          each entity would be required to procure an average of 20% of  
          renewable energy for the period of January 1, 2011 through  
          December 31, 2013 and 25% by December 31, 2016.  This is known  
          as the Renewables Portfolio Standard (RPS).  (PUC 399.11 et seq)
           
          Current law  defines as RPS eligible, specified electric  
          generation resources including small hydroelectric generation of  
          30 megawatts (MWs) or less and hydroelectric generation units  
          sized below 40 MWs, if operated as part of a water supply or  
          conveyance system and operative prior to 2005. (PRC 25741)
           
          Current law  permits specified POUs that have ownership or  
          long-term contracts for generation from large hydroelectric  
          generation resources including Trinity and the San Francisco  
          Public Utilities Commission to meet only the electricity demands  
          unsatisfied by hydroelectric generation.  (PUC 399.30)
           
          This bill  limits the RPS procurement obligation for a POU that  
          owns and operates a hydroelectric facility that came into  
          service in 1967, and for which the POU will take the generation  
          rights in 2014, to the electricity demands unsatisfied by that  
          hydroelectric generation. 


                                      BACKGROUND











           
          The New Exchequer Dam - This bill would only apply to one POU,  
          Merced Irrigation District (MID), and one hydroelectric  
          facility, the New Exchequer Dam, which is part of the Merced  
          River Hydroelectric Project in Mariposa County, about 23 miles  
          northeast of the City of Merced. The dam and hydroelectric  
          facility were originally constructed in 1926, enlarged in the  
          mid-1960s, and put into service in 1967.  The project is a water  
          supply/flood control/recreation/power project under the  
          jurisdiction of the Federal Energy Regulatory Commission and  
          occupies 2,942 acres of federal land under the jurisdiction of  
          the Bureau of Land Management.  The plant capacity is 94.5  
          megawatts and produces approximately 250,000 megawatt hours of  
          electricity each year.  Although the hydroelectric facility was  
          constructed by, and is owned and operated by the MID, PG&E has  
          had a contractual right to the generation since 1967 which  
          expires on July 1, 2014.  

          Proposed Regulations - On March 1st the California Energy  
          Commission (CEC) released proposed regulations for enforcement  
          rules and procedures for the RPS for POUs as required by SB x1 2  
          (Simitian, Stats. 2011, 1st Ex. Sess., ch. 1).  The proposed  
          regulations establish the rules and procedures that the CEC will  
          use to assess a POU's procurement actions and determine  
          compliance with the RPS.  If appropriate, the CEC will issue a  
          notice of violation and correction for a POU's failure to comply  
          and refer the violation to the State Air Resources Board for  
          potential penalties. 


                                       COMMENTS
           
              1.   Author's Purpose  .  Although the RPS statute specifies  
               that the renewable procurement obligation extends to  
               electricity demand not met by long-term resource needs, the  
               law does not provide a clear definition of unmet need.  The  
               MID is in the unique position of having owned and operated  
               a 95 megawatt hydroelectric facility since the 1960s but  
               when the facility was built MID entered into a contract  
               with PG&E to sell it the electricity.  That contract  
               terminates on July 1, 2014 at which time the electricity  
               supply will revert to MID.  The author argues that MID  
               should only have to procure renewables for the generation  
               needs not met by the hydroelectric facility that it owns. 











              2.   Unmet Need  .  Current law requires the utilities to  
               procure renewable resources "in order to fulfill unmet  
               long-term resource needs."  This provision was intended to  
               ensure that a utility is not obligated to procure renewable  
               resources beyond its retail electricity needs and  
               generation contracted for or owned by a utility.  In  
               application this would mean if a utility has no load growth  
               or expiring contracts in its portfolio, compliance with the  
               RPS would not be required or would be reduced.  

              3.   CEC Implementation  .  The CEC's proposed regulations to  
               establish POU enforcement rules and procedures for the RPS  
               does not address the issue raised by this bill or unmet  
               need.  The proposed regulations require renewable  
               procurement strictly based on total retail sales.  The CEC  
               opines that the unmet need reference in statute conflicts  
               with several provisions that reference total retail sales  
               as part of the metric for determining procurement targets.   
               There are more than 45 POUs in the state and the impact of  
               the CEC's exclusion of the unmet need consideration is not  
               clear.  The committee may wish to consider amendments to  
               require the CEC to consult with the POUs and determine  
               whether the regulations will result in surplus electricity  
               sales, under what circumstances that has or may occur, and  
               report back to the Legislature no later than July 1, 2014  
               on its findings.

              4.   Suggested Amendments  .  Should this measure be adopted by  
               the committee, clarifying amendments are suggested to  
               ensure that the hydroelectric facility to which the bill  
               applies is clear and also that the generation does not  
               absolve the utility from its RPS procurement requirement  
               for the compliance period ending prior to January 1, 2014. 

               a)     Page 5, line 13, strike "50", strike lines 14-15,  
                 and insert:  

                      greater than 50 percent of its electricity sources  
                      from hydroelectric generation that it owns and  
                      operates, and that does not meet the definition of a  
                      'renewable electrical generation facility' pursuant  
                      to Section 25741 of the Public Resources Code"











               b)     Page 5, strike line 21, and insert: 

                    generation" means electricity generated from a  
                    hydroelectric facility that satisfies all"

               c)     Page 5, line 36, insert:

                      Nothing in this section is intended to reduce or  
                      eliminate any renewable procurement requirement for  
                      any compliance period ending prior to January 1,  
                      2014.


                                       POSITIONS
           
           Sponsor:
           
          Merced Irrigation District

           Support:
           
          None on file

           Oppose:
           
          California Wind Energy Association
          Large-Scale Solar Association
          Sierra Club California
          The Utility Reform Network


          






          Kellie Smith 
          SB 591 Analysis
          Hearing Date:  April 2, 2013