BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 591
                                                                  Page  1

          Date of Hearing:   July 1, 2013

                               Steven Bradford, Chair
                    SB 591 (Cannella) - As Amended:  June 25, 2013

           SENATE VOTE  :   39-0
          SUBJECT  :   Renewable energy: publicly owned electric utility:  
          hydroelectric generation facility

          SUMMARY  :   Limits the Merced Irrigation District's Renewables  
          Portfolio Standard (RPS) obligation to the electricity demands  
          that are unsatisfied by the New Exchequer Dam.

           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 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  
            Renewable Portfolio Standard (RPS). (Public Utilities Code  
            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  
            Resources Code 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.  (Public Utilities  
            Code 399.30)
           FISCAL EFFECT  :   Unknown.

           COMMENTS  :  


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           1)Author's Statement.  According to the author, "in an effort to  
            reduce the unintended economic impacts of the Renewable  
            Portfolio Standard (RPS) program on the customers of the  
            Merced Irrigation District (MID) this bill will allow the  
            greenhouse gas-free hydroelectric power produced at the  
            Exchequer Dam in excess of 67% of MID's total power needs to  
            be counted towards their RPS requirements. This will result in  
            significantly lower rate increases to MID customer with zero  
            negative effects to air quality.

           2)Background  . The Merced Irrigation District owns and operates  
            the Merced River Hydroelectric Project located in Mariposa  
            County.  The New Exchequer Dam, which is part of the Merced  
            River Hydroelectric Project, is about 23 miles northeast of  
            the City of Merced. The dam and hydroelectric facility were  
            originally constructed in 1926, and began service in 1967.   
            The project is a water supply/flood control/recreation/power  
            project under the jurisdiction of the Federal Energy  
            Regulatory Commission (FERC) and occupies nearly 3,000 acres  
            of federal land under the jurisdiction of the Bureau of Land  
            Management. The project has a capacity of 95 megawatts and  
            supplies irrigation water to more than 2,000 independently  
            owned farms in the San Joaquin Valley.  An existing contract  
            between MID and Pacific Gas & Electric (PG&E) Company allows  
            PG&E to receive the benefit of the electricity produced at the  
            project since 1967 which expires mid-2014.  Upon expiration of  
            the contract MID will begin to receive the full benefit of  
            this electricity which could account for approximately 60% of  
            MIDs electricity demand.

            MID expects its RPS purchase requirement to cost upward of $30  
            million. MID serves a region with an unemployment rate near  
            19%; with 26% of residents at or below the federal poverty  
            level; and household median incomes that are approximately  
            half the state average.  Under MID's current RPS requirement,  
            the average family would see a 20% rate increase with electric  
            bills increasing from approximately $225 per month to $270.  
            MID argues that "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.

           3)CEC RPS rules  . On March 1st the California Energy Commission  


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            (CEC) released proposed Regulations for enforcement rules and  
            procedures for the RPS for POUs pursuant to SB 2 x1 (Simitian,  
            Chapter 1, Statutes of 2011/2012 First Extraordinary Session).  
             The proposed regulations establish the rules and procedures  
            that the CEC will use to assess a POUs procurement actions and  
            determine compliance with the RPS. The CEC also has the  
            authority to issue a notice of violation and correction for a  
            POUs failure to comply and refer the violation to the State  
            Air Resources Board for potential penalties.  According to the  
            CEC if the bill were enacted, the proposed RPS regulations  
            would need to be updated.  The CEC's proposed regulations do  
            not address the issues raised by this bill or unmet need.  The  
            proposed regulations require renewable procurement strictly  
            based on total retail sales.

           4)Unmet need provision in RPS  .  Existing law requires the  
            utilities to procure renewable resources "in order to fulfill  
            unmet long-term resource needs". The 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.  SB 591 allows MID to  
            meet its electricity demands unsatisfied by hydroelectric  
            generation to satisfy RPS obligations.  

           5)Related legislation  . AB 793 (Gray) allows RPS eligibility of a  
            legacy hydroelectric facility operated by Merced Irrigation  
            District without absolving the District of its obligation to  
            meet its June 2014 RPS compliance periods. This bill is  
            pending a hearing in Senate Energy, Utilities and  
            Communications Committee.

          6)Technical amendment  . AB 793 was recently amended to strike the  
            description of the specific facility. The author may wish to  
            amend the bill to include the description of the specific  
            facility to ensure that it is clear that this bill applies  
            only to that facility and is consistent with the provisions in  
            AB 793. Specifically:

             399.30 Has a maximum penstock flow capacity of no more than  
            line 2 3,200 cubic feet per second and includes a regulating  
            reservoir line 3 with a small hydroelectric generation  


                                                                 SB 591
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            facility producing fewer line 4 than 20 megawatts with a  
            maximum penstock flow capacity of no line 5 more than 3,000  
            cubic feet per second. 

          California Farm Bureau Federation
          Merced Irrigation District 
          Modesto Irrigation District
          California Wind Energy Association (CalWEA) (unless amended)
          Large Scale Solar Association (LSA) (unless amended)
          Sierra Club Calfornia
          The Utility Reform Network (TURN)
          Union of Concerned Scientists (UCS)

           Analysis Prepared by  :    DaVina Flemings / U. & C. / (916)