Amended in Assembly April 29, 2015

Amended in Assembly March 26, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 197

Introduced by Assembly Member Eduardo Garcia

January 28, 2015

An act to amend Sections 399.13 and 399.15 of, and to add Section 636 to, the Public Utilities Code, relating to public utilities.

LEGISLATIVE COUNSEL’S DIGEST

AB 197, as amended, Eduardo Garcia. Public utilities: renewable resources.

(1) The Public Utilities Act requires the Public Utilities Commission (PUC), in consultation with the Independent System Operator, to establish resource adequacy requirements for all load-serving entities, including electrical corporations, in accordance with specified objectives. The act further requires each load-serving entity to maintain physical generating capacity adequate to meet its load requirements, including peak demand and planning and operating reserves, deliverable to locations and at times as may be necessary to provide reliable electric service.

The California Renewables Portfolio Standard (RPS) Program, requires a retail seller of electricity and local publicly owned electric utilities to purchase specified minimum quantities of electricity products from eligible renewable energy resources for specified compliance periods, sufficient to ensure that the procurement of electricity products from those resources achieves 25% of retail sales by December 31, 2016 and 33% of retail sales by December 31, 2020, and in all subsequent years. The RPS Program, consistent with the goals of procuring the least-cost and best-fit eligible renewable energy resources that meet project viability principles, requires that all retail sellers procure a balanced portfolio of electricity products from eligible renewable energy resources, as specified, referred to as the portfolio content requirements. The RPS Program requires the PUC, by rulemaking, to adopt a process that provides criteria for the rank ordering and selection of the least-cost and best-fit eligible renewable energy resources taking into account specified factors and to require an electrical corporation, in soliciting and procuring eligible renewable energy resources, to take specified actions. The RPS Program authorizes an electrical corporation to begin delete refraim end delete begin insert refrain end insert from entering into new contracts or constructing facilities beyond the quantity that can be procured within the cost limitation of the electrical corporation unless the eligible renewable energy resources can be procured without exceeding a de minis increase in rates consistent with the electrical corporation’s long-term procurement plan.

This bill would require the PUC, in adopting the process, to include consideration of any statewide greenhouse gas emissions limit established pursuant to the California Global Warming Solutions Act of 2006 and consideration of capacity and essential reliability services of the eligible renewable energy resource to ensure grid reliability. The bill would require the PUC to require begin delete an electrical corporation, end delete begin insert a retail seller of electricity, end insert in soliciting and procuring eligible renewable energy resources, to consider the best-fit attributes of resources types that ensure a balanced resource mix to maintain the reliability of the electrical grid. The bill would revise the authority of an electrical corporation to refrain from entering into new contracts or constructing facilities beyond the quantity that can be procured within the electrical corporation’s cost limitation, as specified.

(2) The Public Utilities Act requires an electrical corporation or a local publicly owned electric utility, in a long-term plan or a procurement plan, respectively, to adopt a strategy applicable both to a newly constructed or repowered generation owned and procured by the electrical corporation or local publicly owned electric utility to achieve efficiency in the use of fossil fuels and to address carbon emissions.

This bill would require an electrical corporation or local publicly owned electric utility, in adopting a procurement plan, to consider any statewide greenhouse gas emissions limit established pursuant to the California Global Warming Solutions Act of 2006 and consider capacity and essential reliability services to ensure grid reliability.

(3) Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the Public Utilities Commission is a crime.

Because the provisions of this bill are within the act, a violation of the requirements would impose a state-mandated local program by expanding the definition of a crime.

(4)  The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

begin insert

(5) This bill would become operative only if AB 645 of the 2015-16 Regular Session is enacted and becomes effective on or before January 1, 2016.

end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 399.13 of the Public Utilities Code is
amended to read:

399.13.  

(a) (1) The commission shall direct each electrical
corporation to annually prepare a renewable energy procurement
plan that includes the matter in paragraph (5), to satisfy its
obligations under the renewables portfolio standard. To the extent
feasible, this procurement plan shall be proposed, reviewed, and
adopted by the commission as part of, and pursuant to, a general
procurement plan process. The commission shall require each
electrical corporation to review and update its renewable energy
procurement plan as it determines to be necessary.

(2) Every electrical corporation that owns electrical transmission
facilities shall annually prepare, as part of the Federal Energy
Regulatory Commission Order 890 process, and submit to the
commission, a report identifying any electrical transmission
facility, upgrade, or enhancement that is reasonably necessary to
achieve the renewables portfolio standard procurement
requirements of this article. Each report shall look forward at least
five years and, to ensure that adequate investments are made in a
timely manner, shall include a preliminary schedule when an
application for a certificate of public convenience and necessity
will be made, pursuant to Chapter 5 (commencing with Section
1001), for any electrical transmission facility identified as being
reasonably necessary to achieve the renewable energy resources
procurement requirements of this article. Each electrical
corporation that owns electrical transmission facilities shall ensure
that project-specific interconnection studies are completed in a
timely manner.

(3) The commission shall direct each retail seller to prepare and
submit an annual compliance report that includes all of the
following:

(A) The current status and progress made during the prior year
toward procurement of eligible renewable energy resources as a
percentage of retail sales, including, if applicable, the status of any
necessary siting and permitting approvals from federal, state, and
local agencies for those eligible renewable energy resources
procured by the retail seller, and the current status of compliance
with the portfolio content requirements of subdivision (c) of
Section 399.16, including procurement of eligible renewable energy
resources located outside the state and within the WECC and
unbundled renewable energy credits.

(B) If the retail seller is an electrical corporation, the current
status and progress made during the prior year toward construction
of, and upgrades to, transmission and distribution facilities and
other electrical system components it owns to interconnect eligible
renewable energy resources and to supply the electricity generated
by those resources to load, including the status of planning, siting,
and permitting transmission facilities by federal, state, and local
agencies.

(C) Recommendations to remove impediments to making
progress toward achieving the renewable energy resources
procurement requirements established pursuant to this article.

(4) The commission shall adopt, by rulemaking, all of the
following:

(A) A process that provides criteria for the rank ordering and
selection of least-cost and best-fit eligible renewable energy
resources to comply with the California Renewables Portfolio
Standard Program obligations on a total cost and best-fit basis.
This process shall take into account all of the following:

(i) Estimates of indirect costs associated with needed
transmission investments.

(ii) The cost impact of procuring the eligible renewable energy
resources on the electrical corporation’s electricity portfolio.

(iii) The viability of the project to construct and reliably operate
the eligible renewable energy resource, including the developer’s
experience, the feasibility of the technology used to generate
electricity, and the risk that the facility will not be built, or that
construction will be delayed, with the result that electricity will
not be supplied as required by the contract.

(iv) Workforce recruitment, training, and retention efforts,
including the employment growth associated with the construction
and operation of eligible renewable energy resources and goals
for recruitment and training of women, minorities, and disabled
veterans.

(v) (I) Estimates of electrical corporation expenses resulting
from integrating and operating eligible renewable energy resources,
including, but not limited to, any additional wholesale energy and
capacity costs associated with integrating each eligible renewable
resource.

(II) No later than December 31, 2015, the commission shall
approve a methodology for determining the integration costs
described in subclause (I).

(vi) Consideration of any statewide greenhouse gas emissions
limit established pursuant to the California Global Warming
Solutions Act of 2006 (Division 25.5 (commencing with Section
38500) of the Health and Safety Code).

(vii) Consideration of capacity and essential reliability services
of the eligible renewable energy resource to ensure grid reliability.

(B) Rules permitting retail sellers to accumulate, beginning
January 1, 2011, excess procurement in one compliance period to
be applied to any subsequent compliance period. The rules shall
apply equally to all retail sellers. In determining the quantity of
excess procurement for the applicable compliance period, the
commission shall deduct from actual procurement quantities the
total amount of procurement associated with contracts of less than
10 years in duration. In no event shall electricity products meeting
the portfolio content of paragraph (3) of subdivision (b) of Section
399.16 be counted as excess procurement.

(C) Standard terms and conditions to be used by all electrical
corporations in contracting for eligible renewable energy resources,
including performance requirements for renewable generators. A
contract for the purchase of electricity generated by an eligible
renewable energy resource, at a minimum, shall include the
renewable energy credits associated with all electricity generation
specified under the contract. The standard terms and conditions
shall include the requirement that, no later than six months after
the commission’s approval of an electricity purchase agreement
entered into pursuant to this article, the following information
about the agreement shall be disclosed by the commission: party
names, resource type, project location, and project capacity.

(D) An appropriate minimum margin of procurement above the
minimum procurement level necessary to comply with the
renewables portfolio standard to mitigate the risk that renewable
projects planned or under contract are delayed or canceled. This
paragraph does not preclude an electrical corporation from
voluntarily proposing a margin of procurement above the
appropriate minimum margin established by the commission.

(5) Consistent with the goal of increasing California’s reliance
on eligible renewable energy resources, the renewable energy
procurement plan submitted by an electrical corporation shall
include all of the following:

(A) An assessment of annual or multiyear portfolio supplies
and demand to determine the optimal mix of eligible renewable
energy resources with deliverability characteristics that may include
peaking, dispatchable, baseload, firm, and as-available capacity.

(B) Potential compliance delays related to the conditions
described in paragraph (5) of subdivision (b) of Section 399.15.

(C) A bid solicitation setting forth the need for eligible
renewable energy resources of each deliverability characteristic,
required online dates, and locational preferences, if any.

(D) A status update on the development schedule of all eligible
renewable energy resources currently under contract.

(E) Consideration of mechanisms for price adjustments
associated with the costs of key components for eligible renewable
energy resource projects with online dates more than 24 months
after the date of contract execution.

(F) An assessment of the risk that an eligible renewable energy
resource will not be built, or that construction will be delayed,
with the result that electricity will not be delivered as required by
the contract.

(6) In soliciting and procuring eligible renewable energy
resources, each electrical corporation shall offer contracts of no
less than 10 years duration, unless the commission approves of a
contract of shorter duration.

(7) In soliciting and procuring eligible renewable energy
resources for California-based projects, each electrical corporation
shall give preference to renewable energy projects that provide
environmental and economic benefits to communities afflicted
with poverty or high unemployment, or that suffer from high
emission levels of toxic air contaminants, criteria air pollutants,
and greenhouse gases.

(8) In soliciting and procuring eligible renewable energy
resources, each begin delete electrical corporation end delete begin insert retail seller end insert shall consider
the best-fit attributes of resource types that ensure a balanced
resource mix to maintain the reliability of the electrical grid.

(b) A retail seller may enter into a combination of long- and
short-term contracts for electricity and associated renewable energy
credits. The commission may authorize a retail seller to enter into
a contract of less than 10 years’ duration with an eligible renewable
energy resource, if the commission has established, for each retail
seller, minimum quantities of eligible renewable energy resources
to be procured through contracts of at least 10 years’ duration.

(c) The commission shall review and accept, modify, or reject
each electrical corporation’s renewable energy resource
procurement plan prior to the commencement of renewable energy
procurement pursuant to this article by an electrical corporation.

(d) Unless previously preapproved by the commission, an
electrical corporation shall submit a contract for the generation of
an eligible renewable energy resource to the commission for review
and approval consistent with an approved renewable energy
resource procurement plan. If the commission determines that the
bid prices are elevated due to a lack of effective competition among
the bidders, the commission shall direct the electrical corporation
to renegotiate the contracts or conduct a new solicitation.

(e) If an electrical corporation fails to comply with a commission
order adopting a renewable energy resource procurement plan, the
commission shall exercise its authority pursuant to Section 2113
to require compliance. The commission shall enforce comparable
penalties on any retail seller that is not an electrical corporation
that fails to meet the procurement targets established pursuant to
Section 399.15.

(f) (1) The commission may authorize a procurement entity to
enter into contracts on behalf of customers of a retail seller for
electricity products from eligible renewable energy resources to
satisfy the retail seller’s renewables portfolio standard procurement
requirements. The commission shall not require any person or
corporation to act as a procurement entity or require any party to
purchase eligible renewable energy resources from a procurement
entity.

(2) Subject to review and approval by the commission, the
procurement entity shall be permitted to recover reasonable
administrative and procurement costs through the retail rates of
end-use customers that are served by the procurement entity and
are directly benefiting from the procurement of eligible renewable
energy resources.

(g) Procurement and administrative costs associated with
contracts entered into by an electrical corporation for eligible
renewable energy resources pursuant to this article and approved
by the commission are reasonable and prudent and shall be
recoverable in rates.

(h) Construction, alteration, demolition, installation, and repair
work on an eligible renewable energy resource that receives
production incentives pursuant to Section 25742 of the Public
Resources Code, including work performed to qualify, receive, or
maintain production incentives, are “public works” for the purposes
of Chapter 1 (commencing with Section 1720) of Part 7 of Division
2 of the Labor Code.

SEC. 2.  

Section 399.15 of the Public Utilities Code is amended
to read:

399.15.  

(a) In order to fulfill unmet long-term resource needs,
the commission shall establish a renewables portfolio standard
requiring all retail sellers to procure a minimum quantity of
electricity products from eligible renewable energy resources as
a specified percentage of total kilowatthours sold to their retail
end-use customers each compliance period to achieve the targets
established under this article. For any retail seller procuring at least
14 percent of retail sales from eligible renewable energy resources
in 2010, the deficits associated with any previous renewables
portfolio standard shall not be added to any procurement
requirement pursuant to this article.

(b) The commission shall implement renewables portfolio
standard procurement requirements only as follows:

(1) Each retail seller shall procure a minimum quantity of
eligible renewable energy resources for each of the following
compliance periods:

(A) January 1, 2011, to December 31, 2013, inclusive.

(B) January 1, 2014, to December 31, 2016, inclusive.

(C) January 1, 2017, to December 31, 2020, inclusive.

(2) (A) No later than January 1, 2012, the commission shall
establish the quantity of electricity products from eligible
renewable energy resources to be procured by the retail seller for
each compliance period. These quantities shall be established in
the same manner for all retail sellers and result in the same
percentages used to establish compliance period quantities for all
retail sellers.

(B) In establishing quantities for the compliance period from
January 1, 2011, to December 31, 2013, inclusive, the commission
shall require procurement for each retail seller equal to an average
of 20 percent of retail sales. For the following compliance periods,
the quantities shall reflect reasonable progress in each of the
intervening years sufficient to ensure that the procurement of
electricity products from eligible renewable energy resources
achieves 25 percent of retail sales by December 31, 2016, and 33
percent of retail sales by December 31, 2020. The commission
shall require retail sellers to procure not less than 33 percent of
retail sales of electricity products from eligible renewable energy
resources in all subsequent years.

(C) Retail sellers shall be obligated to procure no less than the
quantities associated with all intervening years by the end of each
compliance period. Retail sellers shall not be required to
demonstrate a specific quantity of procurement for any individual
intervening year.

(3) The commission may require the procurement of eligible
renewable energy resources in excess of the quantities specified
in paragraph (2).

(4) Only for purposes of establishing the renewables portfolio
standard procurement requirements of paragraph (1) and
determining the quantities pursuant to paragraph (2), the
commission shall include all electricity sold to retail customers by
the Department of Water Resources pursuant to Division 27
(commencing with Section 80000) of the Water Code in the
calculation of retail sales by an electrical corporation.

(5) The commission shall waive enforcement of this section if
it finds that the retail seller has demonstrated any of the following
conditions are beyond the control of the retail seller and will
prevent compliance:

(A) There is inadequate transmission capacity to allow for
sufficient electricity to be delivered from proposed eligible
renewable energy resource projects using the current operational
protocols of the Independent System Operator. In making its
findings relative to the existence of this condition with respect to
a retail seller that owns transmission lines, the commission shall
consider both of the following:

(i) Whether the retail seller has undertaken, in a timely fashion,
reasonable measures under its control and consistent with its
obligations under local, state, and federal laws and regulations, to
develop and construct new transmission lines or upgrades to
existing lines intended to transmit electricity generated by eligible
renewable energy resources. In determining the reasonableness of
a retail seller’s actions, the commission shall consider the retail
seller’s expectations for full-cost recovery for these transmission
lines and upgrades.

(ii) Whether the retail seller has taken all reasonable operational
measures to maximize cost-effective deliveries of electricity from
eligible renewable energy resources in advance of transmission
availability.

(B) Permitting, interconnection, or other circumstances that
delay procured eligible renewable energy resource projects, or
there is an insufficient supply of eligible renewable energy
resources available to the retail seller. In making a finding that this
condition prevents timely compliance, the commission shall
consider whether the retail seller has done all of the following:

(i) Prudently managed portfolio risks, including relying on a
sufficient number of viable projects.

(ii) Sought to develop one of the following: its own eligible
renewable energy resources, transmission to interconnect to eligible
renewable energy resources, or energy storage used to integrate
eligible renewable energy resources. This clause shall not require
an electrical corporation to pursue development of eligible
renewable energy resources pursuant to Section 399.14.

(iii) Procured an appropriate minimum margin of procurement
above the minimum procurement level necessary to comply with
the renewables portfolio standard to compensate for foreseeable
delays or insufficient supply.

(iv) Taken reasonable measures, under the control of the retail
seller, to procure cost-effective distributed generation and allowable
unbundled renewable energy credits.

(C) Unanticipated curtailment of eligible renewable energy
resources necessary to address the needs of a balancing authority.

(6) If the commission waives the compliance requirements of
this section, the commission shall establish additional reporting
requirements on the retail seller to demonstrate that all reasonable
actions under the control of the retail seller are taken in each of
the intervening years sufficient to satisfy future procurement
requirements.

(7) The commission shall not waive enforcement pursuant to
this section, unless the retail seller demonstrates that it has taken
all reasonable actions under its control, as set forth in paragraph
(5), to achieve full compliance.

(8) If a retail seller fails to procure sufficient eligible renewable
energy resources to comply with a procurement requirement
pursuant to paragraphs (1) and (2) and fails to obtain an order from
the commission waiving enforcement pursuant to paragraph (5),
the commission shall exercise its authority pursuant to Section
2113.

(9) Deficits associated with the compliance period shall not be
added to a future compliance period.

(c) The commission shall establish a limitation for each electrical
corporation on the procurement expenditures for all eligible
renewable energy resources used to comply with the renewables
portfolio standard. In establishing this limitation, the commission
shall rely on the following:

(1) The most recent renewable energy procurement plan.

(2) Procurement expenditures that approximate the expected
cost of building, owning, and operating eligible renewable energy
resources.

(3) The potential that some planned resource additions may be
delayed or canceled.

(d) In developing the limitation pursuant to subdivision (c), the
commission shall ensure all of the following:

(1) The limitation is set at a level that prevents disproportionate
rate impacts.

(2) The costs of all procurement credited toward achieving the
renewables portfolio standard are counted towards the limitation.

(3) Procurement expenditures do not include any indirect
expenses, including imbalance energy charges, sale of excess
energy, decreased generation from existing resources, transmission
upgrades, or the costs associated with relicensing any utility-owned
hydroelectric facilities.

(e) (1) No later than January 1, 2016, the commission shall
prepare a report to the Legislature assessing whether each electrical
corporation can achieve a 33-percent renewables portfolio standard
by December 31, 2020, and maintain that level thereafter, within
the adopted cost limitations. If the commission determines that it
is necessary to change the limitation for procurement costs incurred
by any electrical corporation after that date, it may propose a
revised cap consistent with the criteria in subdivisions (c) and (d).
The proposed modifications shall take effect no earlier than January
1, 2017.

(2) Notwithstanding Section 10231.5 of the Government Code,
the requirement for submitting a report imposed under paragraph
(1) is inoperative on January 1, 2021.

(3) A report to be submitted pursuant to paragraph (1) shall be
submitted in compliance with Section 9795 of the Government
Code.

(f) If the cost limitation for an electrical corporation is
insufficient to support the projected costs of meeting the
renewables portfolio standard procurement requirements, the
electrical corporation may refrain from entering into new contracts
or constructing facilities beyond the quantity that can be procured
within the limitation, unless eligible renewable energy resources
can be procured without exceeding a de minimis increase in rates
or to the extent that the procurement of renewable energy resources,
separate from the renewables portfolio standard procurement
requirements, is authorized by the commission for the long-term
procurement plan established for the electrical corporation pursuant
to Section 454.5.

(g) (1) The commission shall monitor the status of the cost
limitation for each electrical corporation in order to ensure
compliance with this article.

(2) If the commission determines that an electrical corporation
may exceed its cost limitation prior to achieving the renewables
portfolio standard procurement requirements, the commission shall
do both of the following within 60 days of making that
determination:

(A) Investigate and identify the reasons why the electrical
corporation may exceed its annual cost limitation.

(B) Notify the appropriate policy and fiscal committees of the
Legislature that the electrical corporation may exceed its cost
limitation, and include the reasons why the electrical corporation
may exceed its cost limitation.

(h) The establishment of a renewables portfolio standard shall
not constitute implementation by the commission of the federal
Public Utility Regulatory Policies Act of 1978 (Public Law
95-617).

SEC. 3.  

Section 636 is added to the Public Utilities Code, to
read:

636.  

In a procurement plan adopted by an electrical corporation
or a local publicly owned electric utility, the electrical corporation
or local publicly owned electric utility shall give consideration to
both of the following:

(a) Any statewide greenhouse gas emissions limit established
pursuant to the California Global Warming Solutions Act of 2006
(Division 25.5 (commencing with Section 38500) of the Health
and Safety Code).

(b) Capacity and essential reliability services to ensure grid
reliability.

SEC. 4.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert This act shall become operative only if Assembly Bill
645 of the 2015 end insert begin insert -16 Regular Session is enacted and becomes
effective on or before January 1, 2016. end insert