BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 645 Hearing Date: 7/7/2015
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|Author: |Williams |
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|Version: |2/24/2015 As Introduced |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Electricity: California Renewables Portfolio Standard
DIGEST: This bill increases the Renewable Portfolio Standard
target to require that 50 percent of electricity come from
renewable energy resources by 2030.
ANALYSIS:
Existing law requires retail sellers of electricity -
investor-owned utilities (IOUs), community choice aggregators, and
energy service providers - and publicly-owned utilities (POUs) to
increase purchases of renewable energy such that at least 33
percent of retail sales are procured from renewable energy
resources by December 31, 2020. This is known as the Renewable
Portfolio Standard (RPS). The California Public Utilities
Commission (CPUC) establishes the RPS for retail sellers and
ensures they progress in achieving it, and levies penalties for
failure. The governing board of each POU establishes its own RPS.
The California Energy Commission (CEC) may issue a notice of
violation against a POU for failure to adequately progress in
meeting RPS targets and refer the POU to the California Air
Resource Board (ARB), which may assess penalties against it. The
RPS provides numerous cost containment provisions and exceptions
to compliance obligations. (Public Utilities Code §399.11 et
seq.)
This bill modifies the RPS by (1) establishing a new RPS target of
50 percent by December 31, 2030; and (2) establishes a new,
interim compliance schedule of 38 percent by December 31, 2023, 44
percent by December 31, 2026, and 50 percent by December 31, 2030.
AB 645 (Williams) PageB of?
Background
State efforts to address environmental effects of energy use. In
California, the energy sector, broadly defined, accounts for more
than 85 percent of greenhouse gas (GHG) emissions. The two largest
sources of California's GHGs are transportation, at 39 percent,
and electricity production, at 21 percent.<1> Accordingly, the
state's existing clean energy and climate change programs focus on
the energy sector in general and the transportation and
electricity sectors specifically.
Principal among those programs are the California Global Warming
Solutions Act of 2006 (more commonly known as "AB 32"), which
requires a reduction of the state's GHG emissions to 1990 levels
by 2020, and the RPS, which requires the 33 percent of the state's
electricity come from renewable resources by 2020. AB 32 tasks
the ARB with developing a plan of measures that reduce GHG
emission levels, to be updated every five years. To that end,
ARB, in 2008, adopted a scoping plan that includes regulatory and
market-based measures applicable to the state's major economic
sectors. Among the regulatory measures included in the initial
scoping plan was a 33-percent RPS.
The Legislature approved the statutory RPS program in 2011 with
the passage of SBx1- 2 (Simitian, Chapter 1). Statute directs the
CPUC to establish the RPS for retail sellers and ensure they
progress in achieving it, levying penalties for failure. The
governing board of each POU establishes its own RPS. The CEC may
issue a notice of violation against a POU for failure to
adequately progress in meeting RPS targets and refer the POU to
the ARB, which may assess penalties against it. The state's
electric utilities report they are on track to meet, or exceed,
the RPS goals. The following table shows the progress to date of
the state's largest electric utilities:
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|Progress of Major Electric Utilities Towards Meetings RPS Goals |
| |
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|--------------------+------------------------+---------------------|
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<1> 2013 Integrated Energy Policy Report
(http://www.energy.ca.gov/2013publications/CEC-100-2013-001/CEC-100
-2013-001-CMF.pdf)
AB 645 (Williams) PageC of?
| | | Percentage of RPS |
| | RPS Procurement | Procurement |
| | Percentages for the | Currently Under |
| | 2011-13 Procurement | Contract for 2020 |
| | Period | |
| | | |
|--------------------+------------------------+---------------------|
| | 23.8% | 31.3% |
| Pacific Gas and | | |
| Electric| | |
| | | |
|--------------------+------------------------+---------------------|
| | 21.6% | 23.5% |
|Southern California | | |
| Edison| | |
| | | |
|--------------------+------------------------+---------------------|
| | 23.6% | 38.8% |
| San Diego Gas and | | |
| Electric| | |
| | | |
|--------------------+------------------------+---------------------|
| | 20.1% | not available |
| Sacramento | | |
|Municipal Utilities | | |
| District| | |
| | | |
|--------------------+------------------------+---------------------|
| | 20.0% | not available |
| Los Angeles | | |
|Department of Water | | |
| and Power| | |
| | | |
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|*IOU RPS procurement is as reported by the CPUC. See |
|http://www.cpuc.ca.gov/PUC/energy/Renewables/index.htm. |
|*The POUs report their own progress on the RPS to the CEC. See |
|http://www.energy.ca.gov/portfolio/pou_rulemaking/2013-RPS-01/POU_R|
|eported_2011-2013_RPS_Percentage_Table.pdf. |
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New target; no new details. This bill establishes a new RPS
target - 50 percent renewable energy by 2050 - and a new schedule
of compliance - 38 percent by December 31, 2023; 44 percent by
AB 645 (Williams) PageD of?
December 31, 2026; and 50 percent by December 31, 2030. This
bill makes no other changes to the RPS statute. The author
contends the danger of continued anthropogenic climate change
renders the higher RPS goal imperative. The author contends that
the RPS program has been a success, both in terms of procurement
of increasing amounts of renewable energy resources and in terms
of cost to California ratepayers. This contention is accurate:
as shown above, the state's major electric utilities expect to
meet or exceed the 2020 RPS target, and the cost of doing so is
well within costs contemplated by the Legislature when it
considered the RPS statute.<2>
However, this committee has considered and approved another bill,
SB 350 (De León), that, among other things, also establishes a
goal of generating 50 percent of total retail sales of electricity
from renewable resources by 2030. SB 350 also calls for several
changes to the RPS program, in addition to establishing the 2030
renewable energy goal. For example, SB 350 makes the following
changes to the RPS statute:
Directs the CPUC to require all retail sellers of
electricity to annually prepare renewable energy procurement
plans and, for each IOU procurement plan, require the IOU to
include a strategy for procuring a diverse portfolio of
resources that provide a reliable electricity supply,
including renewable energy integration needs, using zero
carbon-emitting resources to the maximum extent reasonable,
the net capacity costs of which shall be allocated on a
nonbypassable basis.
Requires retail sellers and POUs to ensure that, for each
compliance period after 2020, at least 75 percent of the
incremental renewable energy procurement is from generation
either (1) directly connected to a California Balancing
Authority (CBA), or, (2) connected to another balancing
authority and providing power to a CBA via dynamic transfers
or by scheduling power from the facility into a CBA on an
hourly basis.
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<2> The CPUC's Energy Division estimates that the RPS has
increased electricity rates by four to five percent, a range well
within that contemplated by the Legislature during its
deliberation of SB 2 X1. See, for example, the Assembly
Appropriations Committee analysis of SB 2 X1, which referenced a
CPUC estimate that the 33 percent RPS might raise rates as much as
7.7 percent.
AB 645 (Williams) PageE of?
Limits to 10 percent, for each compliance period after
2020, the incremental renewable power a retail seller or a
POU may receive from unbundled RECs from generators not
directly connected to a CBA.
Directs the CPUC to establish limitations for each IOU on
procurement expenditures for RPS compliance at a level that
prevents disproportionate rate impacts and deletes provisions
of existing law requiring the CPUC to report to the
Legislature, by January 1, 2016, on the ability of each IOU
to meet and maintain the 33 percent 2020 target within
existing cost limitations.
Authorizes the CPUC to assess penalties against a retail
seller, and the CEC to assess penalties against a POU, for
noncompliance with an RPS interim goal and, in the case of an
IOU, prohibits the IOU from collecting the cost of the
penalties in rates.
Directs penalties collected from a retail seller or a POU
to be used for renewable energy programs and research,
development, and demonstration programs.
Directs the CPUC and the CEC to consider the benefits of
distributed generation; allow for consideration of costs and
benefits of grid integration in RPS proceedings; minimize
system power and fossil fuel purchases; recommend how to
better align state incentive programs with the state's clean
energy and pollution reduction goals and provide benefits to
disadvantaged communities; and give preference to the
manufacture and deployment of clean energy and pollution
reduction technologies that create jobs and investment in the
state.
This committee considered and approved the policy and program
prescriptions in SB 350. The author and committee may wish to
consider amending AB 645 to conform its provisions to the
provisions of SB 350 as they relate to the RPS.
Prior/Related Legislation
AB 327 (Perea, Chapter 611, Statutes of 2013) authorized the CPUC
to require procurement above the 33 percent RPS.
AB 645 (Williams) PageF of?
SB2 X1 (Simitian, Chapter 1, Statutes of 2011-12 First
Extraordinary Session) codified the current 2020 RPS target.
AB 197 (Garcia, 2015) modifies the RPS procurement process to
require consideration of the statutory GHG limit and grid
reliability. The bill is awaiting consideration in the Senate
Committee on Appropriations.
SB 350 (De León, 2015) enacts the Clean Energy and Pollution
Reduction Act of 2015. The bill will be considered on July 6th in
the Assembly Committee on Utilities and Commerce.
FISCAL EFFECT: Appropriation: No Fiscal Com.:
Yes Local: Yes
ASSEMBLY VOTES:
Assembly Floor (46-29)
Assembly Appropriations Committee (12-5)
Assembly Natural Resources Committee (6-3)
Assembly Utilities and Commerce Committee (10-5)
SUPPORT:
Advanced Energy Economy
American Lung Association in California
Asian Pacific Environmental Network
Azul
California Biomass Energy Alliance
California Energy Storage Alliance
California Environmental Justice Alliance
California Hydropower Reform Coalition
California League of Conservation Voters
California Municipal Utilities Association, if amended
California State Association of Electrical Workers
California State Pipe Trades Council
California Wind Energy Association
Center for Biological Diversity
City of Santa Monica
Clean Power Campaign
Clean Water Action
AB 645 (Williams) PageG of?
Climate Action Campaign
Coalition of California Utility Employees
Coastal Environmental Rights Foundation
Elevator Constructors Union
EnergySource LLC
Environment California
Environmental Action Committee West Marin
Environmental Defense Fund
Independent Energy Producers Association
Large-Scale Solar Association
Natural Resources Defense Council
NextGen Climate
Office of Ratepayer Advocates
Sacramento Municipal Utility District, if amended
San Diego County Water Authority, if amended
Sierra Club California
Solar Energy Industries Association
State Building and Construction Trades Council
The Utility Reform Network, if amended
US Green Building Council, California
Union of Concerned Scientists
Vote Solar
Western States Council of Sheet Metal Workers
OPPOSITION:
California Chamber of Commerce
California Manufacturers & Technology Association
Southern California Edison, unless amended
Southwest California Legislative Council
ARGUMENTS IN SUPPORT: California is well on its way to meeting
its near-term climate change goals as the state currently uses
renewable resources for about 25 percent of its electricity use
and is on a trajectory to use 33 percent by 2020. However, in
order to meet long term climate change goals, we must derive 50
percent of the state's electricity from renewable resources by
2030. Currently, most energy utilities have bought or have built
enough energy resources to meet the 33 percent RPS before the
target year. Without revising the state's existing RPS
requirement, there isn't a driving force for utilities to procure
beyond 33 percent. This bill provides that driving force.
ARGUMENTS IN OPPOSITION: Some opponents contend this bill fails
to modify the RPS program in light of the lessons learned since
AB 645 (Williams) PageH of?
the program's implementation. Other opponents worry the bill's
higher RPS target might lead to higher electricity rates and
destabilize electrical supply.
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