BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                  SB 591
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          SB 591 (Cannella)
          As Amended  August 20, 2013
          Majority vote 

           UTILITIES & COMMERCE             11-0               NATURAL  
          RESOURCES               8-0     
          |Ayes:|Bradford, Patterson,      |Ayes:|Chesbro, Grove, Bigelow,  |
          |     |Bonilla, Buchanan,        |     |Garcia, Muratsuchi,       |
          |     |Chávez, Beth Gaines,      |     |Patterson, Skinner, Stone |
          |     |Garcia, Gorell, Roger     |     |                          |
          |     |Hernández, Jones, Rendon  |     |                          |
          |     |                          |     |                          |
           SUMMARY  :  Limits the Merced Irrigation District's Renewables  
          Portfolio Standard (RPS) obligation to the electricity demands  
          that are unsatisfied by the New Exchequer Dam.

           FISCAL EFFECT  :  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 (FY) 2013-14.

           COMMENTS  :  

           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, and  


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            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 1, the California Energy Commission  
            (CEC) released proposed Regulations for enforcement rules and  
            procedures for the RPS for POUs pursuant to SB 2 X1 (Simitian,  
            et al.), Chapter 1, Statutes of 2011-12 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  


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            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.  This bill allows MID to  
            meet its electricity demands unsatisfied by hydroelectric  
            generation to satisfy RPS obligations.  

           5)Related legislation  . AB 793 (Gray) currently in the Senate  
            Appropriations Committee, allows RPS eligibility of a legacy  
            hydroelectric facility operated by Merced Irrigation District  
            without absolving the MID of its obligation to meet its June  
            2014 RPS compliance periods. The language in this bill is  
            consistent with AB 793.

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

                                                                FN: 0001847