BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  SB 591
          Author:   Cannella (R), et al.
          Amended:  5/28/13
          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

           SENATE APPROPRIATIONS COMMITTEE  :  7-0, 5/23/13
          AYES:  De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg


            SUBJECT  :    Renewable energy resources:  local publicly owned  
                      electric utility:  hydroelectric generation facility  


           SOURCE  :     Merced Irrigation District


           DIGEST  :    This bill limits the Merced Irrigation Districts  
          Renewables Portfolio Standard (RPS) obligation to the  
          electricity demands that are unsatisfied by the New Exchequer  
          Dam.

           ANALYSIS  :    

          Existing law: 

          1.  Requires investor-owned utilities, publicly owned utilities  
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             (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 is 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 RPS.  

          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.  

          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.  

          This bill provides that a local POU that receives greater than  
          50% of its annual retail sales from its own hydroelectric  
          generation that is not an eligible renewable energy resource  
          shall not be required to procure additional eligible renewable  
          energy resources in excess of either of the following:

          1. The portion of its retail sales not supplied by its own  
             hydroelectric generation.

          2. The cost limitation provided in existing law.

           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  

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          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.  

          On March 1 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, 1st 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

          According to the Senate Appropriations Committee:

             One-time costs of $75,000 to $150,000 from the Energy  
             Resources Programs Account (General Fund) to update  
             regulations in fiscal year 2013-14.

             Minor and absorbable costs to CEC to report to the  
             Legislature as required.

           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

           ARGUMENTS IN SUPPORT  :    According to the Merced Irrigation  
          District, this bill recognizes the unique situation of the MID  

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          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:RM:k  5/28/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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