BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 197 Hearing Date: 6/30/2015
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|Author: |Eduardo Garcia |
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|Version: |4/29/2015 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Public utilities: renewable resources
DIGEST: This bill modifies the Renewable Portfolio Standard
procurement process to require consideration of the statutory
greenhouse gas emissions limit and grid reliability.
ANALYSIS:
Existing law:
1)Requires retail sellers of electricity - investor-owned
utilities (IOU), community choice aggregators, and energy
service providers - and publicly-owned utilities (POU) to
increase purchases of renewable energy such that at least
33percent of retail sales are procured from renewable energy
resources by December 31, 2020. This is known as the
Renewable Portfolio Standard (RPS). (Public Utilities Code
§399.11 et seq.)
2)Authorizes the California Public Utilities Commission (CPUC)
to require the procurement of eligible renewable energy
resources in excess of the quantities specified in the RPS.
3)Directs the CPUC to establish a limit for each electrical
corporation on the procurement expenditures for renewable
energy resources used to comply with the RPS and excuses an
electrical corporation from needing to enter into new
contracts or constructing facilities beyond that which can be
procured within the cost limit. (Public Utilities Code
§399.15 et seq.)
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4)Requires each electrical corporation to file a proposed
procurement plan with the CPUC that includes specified
information, including a showing that the corporation shall
procure resources to meet the requirements of the RPS.
(Public Utilities Code §454.5)
5)Requires the CPUC to adopt a process that provides criteria
for the rank ordering and selection of least-cost and best-fit
eligible energy resources to comply with the RPS on a total
cost basis. The process is to take into account issues
related to costs and expenses, project viability, and
workforce development and employment. (Public Resources Code
§399.13)
This bill:
1)Requires the procurement plan adopted by an electric utility -
whether IOU or POU - to give consideration to both (a) any
statewide greenhouse gas (GHG) emissions limit established
pursuant to the Global Warming Solutions Act, and (b) capacity
and essential reliability services to ensure grid reliability.
2)Adds "best-fit" to the basis by which the CPUC's process
provides criteria for the rank ordering and selection of
least-cost and best-fit eligible renewable energy resources.
3)Requires the process described in the preceding paragraph to
take into account consideration of (a) any statewide GHG
emissions limit established pursuant to the Global Warming
Solutions Act, and (b) capacity and essential reliability
services of the eligible renewable energy resource to ensure
grid reliability.
4)Requires an electrical corporation to enter into new contracts
or construct facilities beyond that which can be procured
within the RPS cost limit to the extent that the procurement
of renewable energy resources is authorized by a CPUC
requirement, pursuant to existing law, that electrical
corporations procure such resources in excess of RPS
requirements.
5)Conditions the operation of the entirety of this bill upon
enactment of AB 645 (Williams, 2015), which increases RPS
requirements to 50 percent by 2031.
AB 197 (Eduardo Garcia) PageC of?
Background
Electricity procurement to meet the Renewables Portfolio
Standard. The RPS requires that retail sellers of electricity
to procure at least 33 percent of their retail sales from
renewal energy resources by 2020. The IOUs, which are regulated
by the CPUC, individually submit plans to the CPUC that detail
how the IOUs intend to procure renewable energy resources in the
coming compliance period in keeping with RPS compliance
schedules.
Statute and CPUC decision direct the IOUs to rank and select
offers to supply electricity from renewable resources according
to "least-cost, best-fit" on a "total-cost" basis. In addition
to these principal criteria, statute and CPUC decision require
each IOU procurement plan to "take into account" a number of
other factors, as summarized below:
Estimates of indirect costs associated with needed
transmission investments.
The cost of procurement.
The project's viability.
Workforce development- and employment growth-related
issues.
The CPUC reviews each IOU's procurement plan according to these
primary and additional criteria and approves, modifies or
rejects the plan.
The CPUC describes the IOUs process of selecting-and-ranking as
a cost-benefit analysis by which the IOUs use quantitative and
qualitative criteria to determine the value of a proposed
renewable energy contract to the IOU's ratepayers. According
the CPUC, the IOUs judge the "least-cost" of a proposed contract
primarily according to quantitative criteria: the costs of the
contract itself, as well as related transmission, congestion,
and integration costs; the value of the energy (that is, the
cost to procure that same energy from other sources), and the
energy resource's capacity (meaning its maximum electric output
under specific conditions). In contrast, the CPUC describes the
IOUs' process for determining the "best fit" of a proposed
contract as a largely qualitative one, based on such factors as
project viability, benefits to low income or minority
communities, environmental stewardship, resource diversity, and
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supplier diversity.
Overemphasis of "least cost" to the detriment of "best fit."
Critics of the CPUC-directed renewable energy resources
procurement process contend the process overemphasizes least
cost, to the detriment of best fit. In effect, according to
these critics, the cost-driven process has led to the selection
of renewable energy projects that entail fewer up-front costs
but that do not result in an energy portfolio that provides as
much overall value, given the state energy and environmental
goals. As evidence, critics point to California's renewable
energy portfolio mix today and in the near future, in which
large-scale solar and wind projects dominate. (See figure below
for a depiction of the IOUs' actual and forecast renewable
energy resources procurement.<1>)
Solar and wind projects, which generate electricity
intermittently, must be supported by other energy sources that
can provide electricity when these intermittent power sources
cannot. To date, much of this support has been provided by
natural-gas fired powerplants. (See figure below.<2>)
Critics of CPUC's least-cost, best-fit procurement process note
that natural-gas electricity generation emits GHGs, whereas use
of renewable energy resources, instead of natural gas, would not
(or would emit fewer GHGs). Therefore, they call for a more
balanced energy portfolio that relies less on natural gas and
more on renewable energy resources.
A low bar. Bill proponents advocate modifying the criteria
governing the CPUC-directed procurement process to require the
IOUs to explicitly consider two additional factors:
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<1>
http://cpuc.ca.gov/NR/rdonlyres/8EB096A9-8000-4A1D-9623-DB3EB9F1B
FB5/0/2015Q1RPSReport.pdf.
<2>
http://energyalmanac.ca.gov/electricity/electric_generation_capac
ity.html . (Note: these data include all electricity generated
in the state, rather than just the electricity generated for IOU
procurement.)
AB 197 (Eduardo Garcia) PageE of?
The statewide GHG emissions limit.
Capacity and essential reliability services of the
eligible renewable energy resource to ensure grid
reliability.
Similarly, the bill requires that a procurement plan adopted by
a POU or an IOU consider these two criteria. Bill proponents
contend that addition of these criteria will lead to a
least-cost, best-fit procurement process that better values the
GHG emissions and grid reliability attributes of various energy
resources. The result will be a more balanced energy portfolio
that better fits with California's overall environmental and
energy needs.
The bill merely requires the electric utility procurement
planning processes to "take into account" the additional
criteria listed above. In this sense, the bill sets a low bar
that the electric utilities, in developing their procurement
plans, and the CPUC in reviewing the IOUs' plans, should easily
clear. And it is wholly appropriate that procurement plans take
into account the state GHG emission reduction goals and grid
reliability. In fact, the CPUC reports that the procurement
process already considers these factors. It, therefore, remains
to be seen what practical effect adding these considerations to
statute will have on electric utilities' procurement processes.
The Legislature will need to continue to monitor RPS compliance
to ensure electric utility procurement results in a portfolio
that furthers the state's interrelated environmental and energy
goals.
Contingent enactment. This bill takes effect only if AB
645(Williams, Rendon) becomes law. AB 645 increases the RPS so
that 50 percent of retail electricity sales in California are
generated from renewable energy resources by December 31, 2030.
Bill proponents contend that any such increase in RPS goals
furthers the need to ensure a more-balanced energy portfolio
that helps achieve the state's GHG emissions reduction goals and
ensure grid reliability.
Prior/Related Legislation
AB 645 (Williams/Rendon, 2015) increases the RPS to 50 percent
AB 197 (Eduardo Garcia) PageF of?
by 2031. The bill is scheduled to be heard in this committee on
July 7th.
SB 32 (Pavley, 2015) establishes 2050 GHG standards. The bill
is in the Assembly Committee on Natural Resources waiting to be
set for a hearing.
SB 350 (De León, 2015) increases the RPS to 50 percent. The
bill is scheduled to be heard in the Assembly Committee on
Utilities and Commerce on July 6th.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
ASSEMBLY VOTES:
Assembly Floor (55-21)
Assembly Appropriations Committee (12-4)
Assembly Natural Resources Committee(6-2)
Assembly Utilities and Commerce Committee (10-3)
SUPPORT:
California Biomass Energy Alliance
Clean Power Campaign
EnergySource LLC
Environmental Defense Fund
Greenleaf Power
IHI Power Services Corp.
Imperial Irrigation District
Rio Bravo Fresno
Rio Bravo Rocklin
The Utility Reform Network
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: Currently, state law only requires
total cost basis for ranking and selecting least-cost and
best-fit eligible renewable energy resources. As California
moves towards a cleaner, low-carbon electrical grid, procurement
planning process should also take into consideration best fit in
AB 197 (Eduardo Garcia) PageG of?
addition to total cost to ensure that any available renewable
energy resources with attributes that provide grid reliability,
and reduce greenhouse gas emissions, are taken into account. In
short, many experts have indicated that in the long term there
is high cost to procuring renewable energy sources namely due to
their low-price. Adhering solely to the total cost basis for
ranking and selecting renewable energy could mean that
California continues to rely on natural gas in the long run,
which can run counter to the state's GHG goals, or procuring
resources that exacerbate the current grid reliability issues
due to factors such as over-generation.
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