BILL ANALYSIS                                                                                                                                                                                                    Ó

                               Senator Ben Hueso, Chair
                                 2015 - 2016  Regular 

          Bill No:          AB 645            Hearing Date:    7/7/2015
          |Author:    |Williams                                             |
          |Version:   |2/24/2015    As Introduced                           |
          |Urgency:   |No                     |Fiscal:      |Yes             |
          |Consultant:|Jay Dickenson                                        |
          |           |                                                     |
          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.

          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  

          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?


          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:

          |Progress of Major Electric Utilities Towards Meetings RPS Goals    |
          |                                                                   |

          <1> 2013 Integrated Energy Policy Report  


          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|                        |                     |
          |                    |                        |                     |
          |                                                                   |
          |*IOU RPS procurement is as reported by the CPUC.  See              |
          |            |
          |*The POUs report their own progress on the RPS to the CEC. See     |
          |eported_2011-2013_RPS_Percentage_Table.pdf.                        |
          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. 
          <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  

          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 Floor                                 (46-29)
          Assembly Appropriations Committee                         (12-5)
          Assembly Natural Resources Committee                (6-3)
          Assembly Utilities and Commerce Committee           (10-5)


          Advanced Energy Economy
          American Lung Association in California
          Asian Pacific Environmental Network
          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


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          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


          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  


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          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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