BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                  SB 1139
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          SB 1139 (Hueso)
          As Amended  August 22, 2014
          Majority vote

           SENATE VOTE  :21-11  
           UTILITIES & COMMERCE              8-5               NATURAL  
          RESOURCES              6-2      
          |Ayes:|Bradford, Bonilla,        |Ayes:|Chesbro, Garcia,          |
          |     |Buchanan, Fong, Roger     |     |Muratsuchi, Skinner,      |
          |     |Hernández, Mullin,        |     |Stone, Williams           |
          |     |Rendon, Skinner           |     |                          |
          |     |                          |     |                          |
          |Nays:|Patterson, Chávez, Dahle, |Nays:|Dahle, Patterson          |
          |     |                          |     |                          |
          |     |Beth Gaines, Jones        |     |                          |
          |     |                          |     |                          |
           APPROPRIATIONS                                9-5           
          |Ayes:|Gatto, Bocanegra,         |     |                          |
          |     |Bradford,                 |     |                          |
          |     |Ian Calderon, Gomez,      |     |                          |
          |     |Holden, Pan,              |     |                          |
          |     |Ridley-Thomas, Weber      |     |                          |
          |     |                          |     |                          |
          |Nays:|Bigelow, Donnelly, Jones, |     |                          |
          |     |Linder, Wagner            |     |                          |
          |     |                          |     |                          |
           SUMMARY  :  Mandates that retail sellers procure a proportionate  
          share of a statewide total of 500 megawatts (MWs) of electricity  
          generated by baseload geothermal powerplants constructed after  
          January 1, 2015.  Specifically,  this bill  :   

          1)Requires, no later than December 31, 2024, each retail seller  
            of electricity to procure a proportionate share, as determined  
            by the California Public Utilities Commission (PUC), of a  
            statewide total of 500 MWs of electricity generated by  


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            baseload geothermal powerplants.  

          2)Requires that no later than January 1, 2016, each retail  
            seller file a plan for complying with the mandate with the  
            California Public Utilities Commission (PUC). 

          3)Requires each retail seller to procure at least one-half of  
            its proportionate share by December 31, 2019, and the full  
            allotment by December 31, 2024.  Plans may authorize a retail  
            seller to aggregate its proportionate share with the  
            proportionate share of another retail seller in order to  
            minimize administrative and contracting costs.

          4)Requires projects generating electricity procured demonstrate  
            an environmental benefit to California.

          5)States that PUC shall review and approve, modify, or reject  
            plans filed by retail sellers.

          6)Authorizes the PUC to determine whether this mandate shall  
            count toward meeting the requirements of the California  
            Renewable Portfolio Standard (RPS).

          7)Requires the PUC, no later than July 1, 2015, to issue an  
            order instituting an investigation to examine the expiration  
            of power purchase agreements between retail sellers and  
            existing geothermal generation facilities.

          8)Stipulates that electricity procured pursuant to this mandate  
            shall be procured to reasonably minimize costs.

          9)Specifies that the PUC shall not approve a power purchase  
            agreement to procure electricity that would result in a  
            cumulative increase in the average rate for electricity paid  
            by the ratepayers of the retail seller of one percent or more.

           FISCAL EFFECT  :  According to the Assembly Appropriations  

          1)One-time costs of $390,000 for two years from the Public  
            Utilities Reimbursement Account to the PUC to establish  
            proceedings and investigations necessary to implement the  
            procurement plan.

          2)Ongoing costs of $125,000 annually from the Public Utilities  


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            Reimbursement Account to the PUC for staff to review and  
            approve geothermal procurement plants for retail sellers and  
            to oversee compliance.

          3)Onetime costs of $272,000 annually from the General Fund to  
            the CEC for at least one year for the development of  
            regulations to determine proportionate shares of the  
            procurement requirement.

          4)Potential ongoing costs from the General Fund and various  
            special funds for increased electricity costs for electricity  
            used by the state.

           COMMENTS  :

          1)Geothermal projects in California:  According to the CEC's Web  
            site, in-state electric generation has not grown.  In fact,  
            between 2001 and 2013 generation averaged 13,000 gigawatt  
            hours.  As of 2013, generation was estimated at 12,485  
            gigawatt hours.  In-state generation capacity for geothermal  
            over the same time period ranged between 2,600 to 2,700  
             The PUC's analysis notes a report from the Geothermal Energy  
            Association which includes data on the quantity and capacity  
            of geothermal projects (on the supply-side) under development  
            in California.  The report indicates there are approximately  
            31 geothermal projects under development for a total capacity  
            of an estimated 1,100 megawatts.  It is unknown when these  
            projects will be completed and fully operational.

            By the end of 2013, an estimated 17,400 MWs of RPS-eligible  
            renewable energy capacity were operating in California of  
            which approximately 15,500 MWs were sold to a utility or the  
            market (wholesale) and an additional 1,900 MWs was  
            self-generation.  Of the 15,500 MWs of wholesale generation,  
            46 projects are geothermal resources and represent 2,782 MWs  
            of capacity which is 4.4% of generation capacity.  However,  
            geothermal produces approximately 25% of the renewable  
            electricity supplied to California retail customers.  

            The distribution of the 46 online projects which serve  
            California load is:  

             a)   Imperial County, 20 projects; 705 MWs;


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             b)   Inyo County, three projects; 302 MWs;

             c)   Lake County, six projects; 418 MWs;

             d)   Mono County, four projects; 54 MWs;

             e)   Sonoma County, 12 projects; 1,238 MWs; and

             f)   State of Nevada, one project; 65 MWs.

          Projects under development include eight projects totaling 618  
          MWs have received environmental permits but are not yet  
           2)Existing Geothermal Projects with expiring contracts.  Calpine  
            Corporation, owner and operator of 725 MWs at The Geysers  
            (geothermal energy resource located in Lake and Sonoma  
            Counties) claims this measure jeopardizes its ability to  
            recontract approximately 650 MW of existing geothermal  
            capacity due to expire between 2017 and 2021.  Furthermore,  
            Calpine notes that it has made investments to develop and  
            permit two geothermal projects at The Geysers with project  
            labor agreements for each.

          3)Programs that promote specific renewable technologies:  This  
            bill mandates that no later than December 31, 2024, the  
            investor owned utilities (IOUs) procure a proportionate share  
            of a statewide total of 500 MW of electricity generated by  
            baseload geothermal powerplants constructed after January 1,  

            Opponents to this measure argue that it is bad public policy  
            to mandate procurement of a preferred renewable resource.   
            However, there are many "carve-out" programs for certain  
            renewable technologies created by the Legislature.  These  
            policies were envisioned to incentivize market transformation  
            for emerging technologies where ratepayer funds may return  
            long-term benefits to all Californian's.  The PUC's analysis  
            notes that geothermal technology, on the other hand, has been  
            commercially available for decades and may not reasonably be  
            considered an emerging technology.  See information below  
            detailing the many "carve-out" programs for specific renewable  


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             a)   Self-Generation Incentive Program (SGIP). Approximately  
               483 projects totaling 1,583 MWs have been developed to date  
               in this program. 

             b)   California Solar Initiative (CSI).  Since its creation,  
               135,588 projects totaling 1,500 megawatts have been  

             c)   Community Renewable Program provides mechanism where  
               customers can procure renewable generation for their home  
               or business.  Authorized capacity is 600 MWs. Most of this  
               will not count toward the IOUs RPS requirements.

             d)   Energy Storage.  Requires IOUs to procure 1,325  
               megawatts of storage by 2020 with installations no later  
               than 2024.

             e)   Bioenergy Feed-in Tariff.  Requires the IOUs to procure  
               a combined total of 250 MWs from bioenergy projects.   
               Procurement must be from projects that are three MWs or  
               smaller that achieve operation after June 1, 2013.  No  
               projects have been developed to date.

             f)   Combined Heat and Power (CHP), referred to as  
               cogeneration, is the simultaneous generation of useful heat  
               and electricity from a single fuel source.  Two projects,  
               for a combined total of 103.68 MWs have been developed thus  
               far.  Authorized capacity is 3,000 MWs.

             g)   Feed-in tariff (FiT)/Renewable Market Adjusting Tariff  
               (Re-MAT) program is a simplified procurement mechanism for  
               small renewable generators (three MWs or less) to sell  
               power to a utility at predefined terms and conditions. This  
               program applies to the IOUs.  The first program period of  
               FiT/ReMAT program began in October 2013.  No projects have  
               been developed to date.  Authorized capacity is 500 MWs.

             h)   The Renewable Auction Mechanism (RAM) is a simplified  
               market-based procurement mechanism for renewable generation  
               projects greater than 3 MW and up to 20 MWs.  The program  
               requires Pacific Gas and Electric Company, Southern  
               California Edison, and San Diego Gas and Electric to  
               procure a combined total of 1,330 MWs of renewable energy  
               over a three year period.  The first RAM auction contracts  
               were approved in April 2012 Authorized capacity is 1,000  


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               MWs (PUC Decision D.10-12-048)

             i)   IOUs are required to offer Net Energy Metering (NEM)  
               until they reach a cap of 5% of the electrical  
               corporations' peak capacity.  NEM projects are also exempt  
               from interconnection studies and costs.

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

                                                                FN: 0005281