BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 591| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 591 Author: Cannella (R), et al. Amended: 4/10/13 Vote: 21 SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 8-1, 4/2/13 AYES: Padilla, Fuller, Cannella, Hill, Knight, Pavley, Wolk, Wright NOES: Corbett NO VOTE RECORDED: De León, DeSaulnier SUBJECT : Renewable energy: publicly owned electric utility: hydroelectric generation facility SOURCE : Merced Irrigation District DIGEST : This bill requires a local publicly owned electric utility that receives greater than 50% 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 as specified, to meet only the electricity demands unsatisfied by its hydroelectric generation in any given year to satisfy its portfolio content requirements. Requires that, on or before July 1, 2014, the Energy Commission report to the Legislature on whether regulations it adopted pursuant to existing law result in surplus electricity sales and the circumstances under which surplus electricity sales have occurred or may occur. ANALYSIS : CONTINUED SB 591 Page 2 Existing law: 1. 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). (Public Utilities Code (PUC) Section 399.11 et seq) 2. 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. (Public Resource Code Section 25741) 3. 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 Section 399.30) This bill 1. 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. 2. Requires, on or before July 1, 2014, the Energy Commission, in consultation with the local publicly owned electric utilities, report to the Legislature on whether regulations it adopted pursuant to existing law result in surplus electricity sales and the circumstances under which surplus electricity sales have occurred or may occur. Sunsets this reporting requirements January 1, 2019. CONTINUED SB 591 Page 3 Background The New Exchequer Dam . This bill only applies 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 MWs and produces approximately 250,000 MW 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 2X1 (Simitian, Chapter 1, Statutes of 2011, First Extraordinary Session). 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 Air Resources Board for potential penalties. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 4/10/13) Merced Irrigation District (source) OPPOSITION : (Verified 4/10/13) California Wind Energy Association Large-Scale Solar Association Sierra Club California The Utility Reform Network CONTINUED SB 591 Page 4 ARGUMENTS IN SUPPORT : According to the MID, this bill recognizes the unique situation of the MID as the power generated at New Exchequer Hydroelectric Project will begin to benefit MID, starting in 2014, instead of benefitting PG&E as it has done under contract since 1967. The greenhouse gas-free power generated at the dam is forecasted to be enough in many years to meet all of MID's energy customers' needs. However, under existing law, it appears MID will be required to purchase additional and unneeded power that is no friendlier to the environment that what we will already be producing. This bill allows the MID to save ratepayers significant money by granting the same accommodations that were given to the San Francisco Municipal Utilities District and the Trinity Public Utilities District who found themselves in very similar situations. ARGUMENTS IN OPPOSITION : According to The Utility Reform Network (TURN), this bill significantly reduces the RPS program obligations for any POU that receives at least 50% of its "consumption load demand" from "hydroelectric generation and other renewable energy resources." Other provisions in this bill suggest that the sole beneficiary of this treatment would be the MID. As a long-standing supporter of board-based renewable energy policies, TURN generally opposed special treatment for individual load-serving entities and believes that all utilities, whether public or private, should contribute equally to meeting California's renewable energy goals. The RPS program was enacted to address a variety of concerns including reducing reliance on fossil fuels, minimizing local air pollution, stabilizing electric rates, curtailing the impact of natural gas price volatility and mitigating climate change. Since all Californians are intended to benefit, TURN believes that the Legislature should require all utilities to participate on equal footing. Unfortunately, this bill allows MID to meet significantly lower RPS targets without sufficient justification. JG:k 4/10/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED SB 591 Page 5 CONTINUED