BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    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





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          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.








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           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)
          Modesto Irrigation District

           OPPOSITION :    (Verified  4/10/13)

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







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           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








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