BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 726 (Lara) - California Global Warming Solutions Act of 2006:  
          Western Climate Initiative, Incorporated.
          
          Amended: April 8, 2013          Policy Vote: EQ 9-0
          Urgency: No                     Mandate: No
          Hearing Date: May 13, 2013      Consultant: Marie Liu
          
          This bill may meet the criteria for referral to the Suspense  
          File.
          
          
          Bill Summary: SB 726 would make several new requirements of the  
          Western Climate Initiative, Inc. (WCI), including requiring WCI  
          to comply with the Bagley-Keen Open Meeting Act, comply with the  
          California Public Records Act, report to the Legislature  
          regarding emission reductions achieved, and cease further work  
          on behalf of the state until its California voting board members  
          are confirmed by the Senate. This bill would also require that  
          expenditures and allocations of monies to WCI be included in the  
          Governor's budget for ARB. 

          Fiscal Impact: 
              Minor costs to comply with the Bagley-Keene Open Meeting  
              Act.
              Potential costs in the tens of thousands of dollars from  
              the Cost of Implementation (COI) Account (special) to comply  
              with the Public Records Act, depending on the number and  
              complexity of actual requests.
              Possible, but unlikely, costs in the tens of thousands of  
              dollars to low hundreds of thousands from the COI Account  
              for temporary cessation of work by the WCI on behalf of the  
              state, depending on the length of the cessation.

          Background: The California Global Warming Solutions Act of 2006  
          (AB 32 (Nunez/Pavley) Chapter 488/2006) requires the state's  
          greenhouse gas (GHG) emissions to be reduced to 1990 levels by  
          2020. One of the actions to achieve the required GHG reductions  
          is through a "cap and trade" market-based compliance mechanism  
          where permits to emit GHG emissions can be purchased and sold on  
          the open market with the goal that the overall emission  
          reduction is reached at the least cost. The first auction for  
          credits was on November 2013 and will continue quarterly.  








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          Revenues are deposited in the GHG Reduction Fund (fund). 

          WCI, Inc. is an independent nonprofit corporation formed to  
          develop compliance, tracking, and market monitoring functions  
          for jurisdictions participating in the auctions.  The Board of  
          Directors includes officials from California and the Canadian  
          provinces of Quebec and British Columbia. The Californian  
          members are the Secretary for Environmental Protection (EPA) or  
          his/her designee, the Chairperson of the Air Resources Board  
          (ARB) or his/her designee, an ex officio member appointed by the  
          Assembly, and an ex officio member appointed by the Senate. 

          Proposed Law: This bill would require WCI to cease all work on  
          behalf of the state commencing January 1, 2014 until the Chair  
          of ARB and the Secretary of CalEPA are confirmed by the Senate.

          This bill would require WCI to annually report to the Governor  
          and the Legislature on the GHG reductions achieved and general  
          plans to foster relationships with other localities.
          
          This bill would subject WCI to the Bagley-Keene Open Meeting Act  
          and the California Public Records Act and would require that  
          expenditures to WCI be included in the Governor's budget for  
          ARB.

          Staff Comments: This bill potentially results in a temporary  
          halt of services that WCI provides for the state. The length of  
          this hold is completely dependent on Senate action to confirm  
          the CA members of the WCI board. Should there be no halt in  
          services or a very brief one (on the order of days or maybe  
          weeks), there will likely be minimal or no cost to the state.  
          However, if the hold continues, the state will need to replace  
          the credit tracking and market monitoring services that is  
          currently provided by WCI and is integral to the state's cap and  
          trade program. ARB estimates that this could cost in the tens of  
          thousands to low hundreds of thousands of dollars to contract  
          out for these services. Because it will take approximately six  
          months to secure such contracts such contract costs won't be  
          incurred unless the hold is for a long period of time, however  
          staff work to begin soliciting such contracts will begin  
          immediately. If the hold continues on the order of months, there  
          would be additional, but speculative, costs for the delay of a  
          credit auction. Staff believes the Senate is likely to have  
          timely confirmation hearings so that costs due to the  








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          confirmation requirement of this bill are possible, but  
          unlikely. 

          Staff notes that several clarifications are needed regarding the  
          confirmation requirement in the bill. First, this bill requires  
          that the Senate confirm the voting CA members of the WCI.  
          However the voting members of WCI are the Chair of the ARB and  
          the Secretary of EPA. Both these people have technically been  
          confirmed already by the Senate for their existing position.  
          Presumably the bill intends that they be subject to Senate  
          confirmation separately for their role on WCI. Additionally, it  
          is unclear what would occur if either the chair or secretary  
          were denied confirmation and whether confirmation would be  
          required every time a new chair or secretary was appointed.

          This bill also requires WCI to report to the Legislature  
          annually on the emission reductions achieved pursuant to the  
          Western Climate Initiative and on their general plans to partner  
          with other localities, states, and nations in order to reduce  
          GHG emissions in California. Staff notes that these reporting  
          responsibilities might be more appropriate to ask of the ARB as  
          WCI does not track GHG emission reductions nor does it reach out  
          to other localities to foster relations.

          The cost to comply with the California Public Records Act (PRA)  
          will vary depending on the scope of the request. Cost recovery  
          for PRA requests also vary depending on the request as statute  
          allows agencies to recover copy costs in all cases and research  
          costs in some cases. Noting this variability, costs are likely  
          in the low tens of thousands for a conservative number of  
          requests annually.