BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 767 - Lieu Hearing Date: April 30, 2013
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As Amended: April 4, 2013 Non-FISCAL
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DESCRIPTION
Current law requires investor-owned utilities, community choice
aggregators, and electric service providers (collectively
referred to as retail sellers) and local publicly-owned
utilities (POUs), 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 Renewables Portfolio Standard (RPS).
Current law requires the California Energy Commission (CEC) to
certify generating facilities for purposes of establishing
eligibility under the RPS and to design and implement an
accounting system to verify compliance with the RPS by retail
sellers and POUs.
Current law defines an eligible renewable electrical generation
facility and includes in that definition a facility that uses
landfill gas or digester gas (biomethane) delivered through a
common carrier pipeline if the source and delivery of the fuel
can be verified by the CEC. For facilities that rely on
biomethane, eligibility is distinguished by the contract date
for the fuel. If the contract was executed and reported to the
CEC before March 29, 2012, the biomethane must be flowing on or
before April 1, 2014. This is commonly referred to as the flow
date.
This bill extends the flow date until April 1, 2015.
BACKGROUND
Eligible Renewable Generation - Procurement from a renewable
facility cannot be counted for purposes of complying with the
RPS unless that facility has been certified as RPS-eligible by
the CEC. Facilities interested in obtaining a bilateral contract
or competing in a load-serving entity's RPS solicitation
generally pre-certify the facility with the CEC.
There are two types of certification: (1) RPS Certification,
and, (2) RPS Pre-Certification. Renewable facilities that are
under development may seek "pre-certification," with the
understanding that the CEC will verify the information submitted
in the pre-certification application once the facility has been
completed and is delivering electricity. All certified and
pre-certified facilities are subject to audit. The Western
Renewable Energy Generation Information System (WREGIS) has been
developed to satisfy current RPS tracking requirements. All
RPS-certified facilities must register with WREGIS.
The fourth edition of the CEC's RPS eligibility guidebook,
released in January 2011, introduced a number of changes to the
treatment of biomethane injected into the natural gas pipeline
system. Some of the more noteworthy changes were the creation of
the biogas section as a stand-alone section, the introduction of
the term "pipeline biomethane," and clarifying the delivery
requirements for delivering biogas (now called pipeline
biomethane, or biomethane) for use in an RPS-eligible electric
generating facility.
Pipeline biomethane stands out in the portfolio of eligible RPS
resources because it is transported to a natural gas facility
and it is the natural gas facility that gets certified as
RPS-eligible because some portion of the generation from the
facility is considered renewable based on the fuel source.
Other RPS-eligible facilities have the fuel source and
generating facility at the same site. Consequently, until the
adoption of AB 2196, in trying to define as RPS eligible,
pipeline biomethane, the CEC had to try and fit a square peg
into a round hole when it released its 2011 eligibility
guidebook.
Pipeline Biomethane Suspension - After the release of the 2011
eligibility guidebook by the CEC, controversy ensued over the
new classification of "pipeline biomethane." The adoption of SB
x1 2 with its product categories, delivery requirements, and
environmental objectives raised further question as to whether
pipeline biomethane as defined as eligible in the guidebook was
consistent with the RPS program. The guidelines for pipeline
landfill and digester gas do not require displacement of fossil
fuel consumption, the reduction of air pollution, or other
environmental benefits to California. Additionally, the
contracts being signed by some California retail sellers and
POUs were with landfills from as far away as Pennsylvania, Ohio
and Tennessee - locales which make it physically impossible to
verify delivery of the fuel to California particularly because
the flow of those pipelines passes through pipelines flowing in
the opposite direction of California. The RPS also intends that
the program achieve "additionality" - that new development of
renewables occurs - but in the case of many of the contracts,
the biomethane had been flowing for quite some time so that
there appeared to be no new capture or incremental capture
occurring. The 4th guidebook also lacked vigorous requirements
to verify that the claimed quantity of biomethane was actually
used by the designated power plant or that the necessary
biomethane attributes were transferred to the power plant
operator for purposes of the RPS and not double-counted for
other purposes.
The CEC recognized that its guidebook was inconsistent with the
requirements of SB x1 2 and on March 28, 2012, voted to suspend
the RPS eligibility guidelines relative to biomethane with
specified conditions.
AB 2196 (Chesbro, 2012) - The passage of this bill brought
clarity for biomethane eligibility and established standards for
the fuel source based on the contract execution date between the
biomethane supplier and the utility. For contracts executed
before the CEC's suspension, the CEC is to certify those
supplies as eligible under the rules in place at that time.
Contracts executed or amended on or after March 29, 2012, are
subject to new conditions as specified in AB 2196 and subsequent
rules adopted by the CEC. Those conditions include a "flow
date" requirement for the biomethane of April 1, 2014 meaning
that the biomethane source must be producing and capturing
biomethane and injecting it into a common carrier pipeline by
that date.
The CEC certifies an "eligible renewable facility." In the case
of pipeline biomethane, the CEC will certify a natural gas plant
that will receive pipeline biomethane. Until the passage of AB
2196 (Chesbro) last year (Chapter 605, Statutes of 2012) the CEC
did not consider the execution date of a contract or the flow
date in its certification process.
RPS Eligibility Guidebook, Seventh Edition - Although AB 2196
grandfathered some biomethane purchases, some of those contracts
had been executed but the biomethane source had not been
developed and the fuel wasn't flowing. Consequently, those
sources still need pre-certification and certification under the
rules to be adopted by the CEC according to the provisions of AB
2196. To implement the bill, the CEC released a "Staff Concept
Paper" in January which was based on consultation with the
CalEPA, California Air Resources Board, CalRecycle, and
California Department of Food and Agriculture, and many
interested stakeholders. Agency and stakeholder input received
in response to the paper from those same parties informed the
development of eligibility, reporting, and verification and
compliance requirements pertaining to electricity generation
facilities using biomethane and are now reflected the draft "RPS
Eligibility Guidebook, Seventh Edition" which was released for
public comment in March. The guidebook not only concerns
biomethane but describes the eligibility requirements and
process for certifying all eligible renewable energy resources
for RPS and describes the CEC's accounting system to verify
compliance with the RPS.
Adoption of the guidebook by the CEC is scheduled for its April
30th business meeting. At that time the CEC will also lift the
suspension on biomethane as an eligible fuel source under the
RPS. Any developer of biomethane that has not previously
certified the facility into which the fuel will flow, will then
file a new application if one was not filed before the
suspension, or a form supplementing the prior application, with
the CEC for pre-certification. Once the biomethane is flowing,
a final request for certification is filed with the CEC. The
process is awkward since, unlike other RPS eligible generation,
the both fuel source and the facility are reviewed by the CEC
(in contrast to a solar or wind facility for instance where the
fuel and the generator are at the same physical site). Some
natural gas plants in California are already certified as RPS
eligible and also receive biomethane from multiple sources and
under multiple contracts.
COMMENTS
1. Author's Purpose . The author opines that there have
been unanticipated delays in the implementation of AB 2196
related to the execution of biomethane contracts and as a
result, it appears as if the projects won't meet the flow
date set in AB 2196 and need additional time to complete
the projects. SB 767 makes a minor change to existing law
governing procurements for biomethane executed and reported
to the CEC prior to 3/29/12. It extends by one year the
flow date for these projects due to unanticipated delays in
implementation of AB 2196 by the CEC. The change is meant
to allow adequate time for completion of biomethane
projects once the CEC certifies the procurements as
eligible for use in RPS compliance.
2. Upends Delicate Negotiation . The path for AB 2196 was
bumpy and fraught with controversy. Every element of the
bill was carefully considered. Nearing the end of the 2012
legislative session, the flow date in AB 2196 was January,
2014. The flow date of April 1, 2014 required in current
law was the result of a very sensitive negotiation and
reflects the request of the landfill representatives which
provide the biogas. They indicated that the April, 2014
date would give them a fair chance to complete projects
underway and the bill was amended accordingly.
This bill "undoes" a deal which neutralized the opposition
of many legislators and stakeholders. The Utility Reform
Network (TURN) in its opposition to AB 2196 states that the
April 2014 flow "date was a compromise that gave certain
developers an opportunity to demonstrate the near-term
viability of their projects...To the extent that these
developers cannot successfully produce or inject biomethane
into a common carrier pipeline prior to April 1, 2014, the
projects would remain eligible to provide renewable fuel
under Public Utilities Code �399.12.6(b) so long as the
sellers can demonstrate physical delivery of the biomethane
to California and prove that legitimate environmental
benefits accrue to the residents of this state."
Supporters of this bill represent that the change in the
flow date does not increase the volume of biogas permitted
under the pre-March, 2012 contracts but merely ensures that
those contracts are allowed to be fulfilled as intended by
the Legislature. The author opines that the CEC has not
responded to the requirements of AB 2196 causing a delay in
implementing the bill. The committee staff has monitored
the progress of the CEC's work to implement AB 2196
including periodic briefings by CEC staff. When the CEC
adopts the guidelines on April 30th, which also required
consultation with several agencies and public notice and
comment periods, it will have fully implemented the bill -
four months after the bill took effect.
3. Referral to Rules . Should this bill be approved by the
committee, it will be referred to the Senate Committee on
Rules for its consideration of the re-referral request from
the Senate Committee on Appropriations.
POSITIONS
Sponsor:
Author
Support:
Burbank Water and Power
Element Markets Renewables LLC
Imperial Irrigation District
Southern California Public Power Authority
The Coalition for Renewable Natural Gas
Oppose:
California Wind Energy Association
Large-Scale Solar Association
Solar Energy Industries Association
The Utility Reform Network
Kellie Smith
SB 767 Analysis
Hearing Date: April 30, 2013