BILL ANALYSIS                                                                                                                                                                                                    Ó






                                                                    AB 1937


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          Date of Hearing:  April 13, 2016


                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE


                                  Mike Gatto, Chair


          AB 1937  
          (Gomez) - As Amended April 4, 2016


          SUBJECT:  Electricity: procurement


          SUMMARY:  Modifies the procurement requirements applicable to  
          those electrical corporations regulated by the California Public  
          Utilities Commission (CPUC) to include consideration of  
          disadvantaged communities when contracting for electricity  
          supplies.  Specifically, this bill:  


          1)Requires electrical corporations' proposed procurement plans  
            to include a showing that the electrical corporations: a) in  
            soliciting bids for gas-fired generation resources, actively  
            seek bids that are not located in or adjacent to disadvantaged  
            communities; and b) in considering bids for, or negotiating  
            bilateral contracts for, gas-fired generation resources, give  
            priority to generation resources that are not located in or  
            adjacent to disadvantaged communities.
          2)Specifies that the above requirements apply to all procurement  
            of eligible renewable energy resources for California-based  
            projects whether the procurement occurs through all-source  
            requests for offers, eligible renewable energy resources only  
            requests for offers, or other procurement mechanisms.


          EXISTING LAW:  











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          1)Establishes requirements for electric service providers to  
            procure 50% of their electricity supplies from renewable  
            energy by 2030, otherwise known as the Renewable Portfolio  
            Standard (RPS). (Public Utilities Code Section 399.12) 


          2)Requires, in soliciting and procuring eligible renewable  
            energy resources for California-based projects, each  
            electrical corporation to 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.  
            (Public Utilities Code Section 399.13)


          3)Requires the CPUC to specify the allocation of electricity,  
            including quantity, characteristics, and duration of  
            electricity delivery, that the Department of Water Resources  
            shall provide under its power purchase agreements to the  
            customers of each electrical corporation, which shall be  
            reflected in the electrical corporation's proposed procurement  
            plan. Each electrical corporation shall file a proposed  
            procurement plan with the commission not later than 60 days  
            after the commission specifies the allocation of electricity.  
            The proposed procurement plan shall specify the date that the  
            electrical corporation intends to resume procurement of  
            electricity for its retail customers, consistent with its  
            obligation to serve. After the commission's adoption of a  
            procurement plan, the CPUC shall allow not less than 60 days  
            before the electrical corporation resumes procurement pursuant  
            to this section. (Public Utilities Code Section 454.5) 


          4)Requires a competitive procurement process under which the  
            electrical corporation may request bids for  
            procurement-related services, including the format and  











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            criteria of that procurement process. (Public Utilities Code  
            Section 454.5) 


          5)Establishes short-term and long-term goals and electricity  
            procurement guidelines for electrical corporations, which are  
            filed with the CPUC for approval. (Public Utilities Code  
            Section 454.5) 


          FISCAL EFFECT:  Unknown.


          COMMENTS:  


          1)Background: The CPUC issued D.13-02-015,<1> on February 13,  
            2013, and ordered Southern California Edison (SCE) to procure,  
            via a Request for Offers (RFO), a minimum of 215 megawatts  
            (MW) and a maximum of 290 MW of electrical capacity in the  
            Moorpark sub-area of the Big Creek/Ventura local reliability  
            area (Moorpark sub-area) to meet identified long-term local  
            capacity requirements (LCR) by 2021. The CPUC found this LCR  
            need existed, in large part, due to the expected retirement of  
            the Ormond Beach and Mandalay once-through-cooling generation  
            facilities, which are both located in Oxnard, California.  
            These facilities currently have approximately 2000 MW of  
            capacity. 
            On November 26, 2014, SCE filed an Application for approval of  
            the results of its 2013 LCR RFO for the Moorpark sub-area  
            seeking approval of 11 contracts. One of the contracts is a  
            20-year contract for gas-fired generation (totaling 262 MW of  
            capacity). This contract is a resource adequacy (RA) purchase  
            agreement with NRG Energy Center Oxnard, LLC (NRG) for a new  
            simple cycle peaking facility known as the Puente Power  
            --------------------------


          <1>  
           http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M158/K355/158355 
          879.PDF  









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            Project (NRG Puente Project).


            Environmental justice matters were raised in the proceeding in  
            connection with the NRG Puente Project. One argument focuses  
            on NRG's proposed use of a brownfield site for the NRG Puente  
            Project.  A second environmental justice argument raised in  
            the proceeding focuses on the community surrounding the site. 


            Some groups contend that the City of Oxnard is not a  
            disadvantaged community and that projects will be built in  
            affluent communities. According to the author, the top 30%  
            environmentally-burdened communities in Oxnard include: 


             a)   85% Latino; 
             b)   29.03% linguistic isolation (percent of households in  
               which no one age 14 and over speaks English "very well" or  
               speaks English only), placing these residents in the top  
               10% of linguistically isolated households;


             c)   56.44% of the population living below two times the  
               federal poverty level, placing these residents in the top  
               20% of poverty stricken households; and


             d)   46.5% of the population over 25 years of age with less  
               than a high school education, placing these residents in  
               the top 10-20% of California residents.


            The CPUC concluded in its alternate decision that the  
            California Energy Commission (CEC) has jurisdiction to review  
            environmental issues, including environmental justice. In its  
            discussion on the decision the CPUC pointed out that, "The CEC  
            has clear jurisdiction to review the environmental impact of  
            the NRG Puente Project." The CEC Web site (Energy Facilities  











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            Licensing Process) at  
             http://www.energy.ca.gov/siting/guide_license_process.html   
            states: "The [CEC's] thorough site certification process  
            provides a timely review and analysis of all aspects of a  
            proposed project, including need, public health and  
            environmental impacts, safety, efficiency, and reliability."


          2)Considering Preferred Resources: The CPUC has a long-standing  
            policy to promote "the loading order," which means that energy  
            procurement focuses first on energy efficiency and clean  
            energy resources prior to procuring from fossil-fuel  
            resources. As the Center for Energy Efficiency and Renewable  
            Technology (CEERT) points out in a March 2, 2016 letter to the  
            CPUC Commissioners: 
                 [?.] none of these proposed decisions examine why  
                 this RFO failed for preferred resources and what  
                 could be changed to achieve different, more  
                 environmentally beneficial results. While CEERT is  
                 not a party to this application, it is clearly  
                 concerned with all of the SCE and [San Diego Gas and  
                 Electric] RFO outcomes, alone and especially in  
                 combination with each other, which are putting this  
                 State on track away from, not toward, a low carbon  
                 energy future.


                 The results of that RFO for California's clean  
                 energy future are the most troubling - where the so  
                 called "reliability need" has always been in  
                 question, and the RFO resulted in less than 5% of  
                 the procurement being from preferred resources (with  
                 no demand response), and the remaining 95%  
                 represented by gas fired generation.


          3)Clarification needed:  Current statute requires consideration  
            of communities afflicted with poverty or high unemployment, or  
            that suffer from high emission levels of toxic air  











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            contaminants, criteria air pollutants, and greenhouse gases in  
            the utility solicitations for  renewable energy projects  . A  
            similar statute does not exist for  fossil-fueled energy   
            projects.
            This bill requires consideration of those locations that are  
            listed in "CalEnviroScreen" tool used to inform the investment  
            of state cap-and-trade funds specifically targeted for  
            disadvantaged communities.


            The author may wish to modify the language in the bill to  
            reflect the same language used for renewable energy projects  
            instead of referencing a tool that was specifically developed  
            for cap-and-trade fund investments.


            In addition, the author may wish to clarify that the  
            provisions apply to new or repowered gas facilities.


           4)Suggested amendment:  
             454.5 (b)(9)(D). The electrical corporation, in soliciting  
            bids for gas-fired generation resources  from new or repowered  
            facilities  , shall actively seek bids for generation resources  
            that are not located in or adjacent to  disadvantaged  
            communities identified pursuant to Section 39711 of the Health  
            and Safety Code.   communities afflicted with poverty or high  
            unemployment, or that suffer from high emission levels of  
            toxic air contaminants, criteria air pollutants, and  
            greenhouse gases  . In considering bids for, or negotiating  
            contracts for,  new or repowered  gas-fired generation  
            resources, the electrical corporation shall provide greater  
            priority to gas-fired generation resources that are not  
            located in or adjacent to  disadvantaged communities identified  
            pursuant to Section 39711 of the Health and Safety Code.   
             communities afflicted with poverty or high unemployment, or  
            that suffer from high emission levels of toxic air  
            contaminants, criteria air pollutants, and greenhouse gases  . 












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          5)Arguments in Support:  Supporters argue that this bill will  
            close a loophole by requiring the CPUC to consider  
            disadvantaged communities in its energy procurement process.  
            They point out that California's disadvantaged communities  
            already bear disproportionate burdens of pollution and  
            poverty.
          6)Arguments in Opposition: Opponents are concerned that there is  
            a casual use of the term "environmental justice" being used as  
            a tool to thwart projects that are needed for electric  
            reliability purposes and they state that clean natural gas  
            plants are important for system and local reliability  
            requirements. These resources are also needed to complement  
            California's move to a 50% RPS, when the sun is not shining  
            and the wind is not blowing.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Audubon California
          Azul
          California Environmental Justice Alliance
          California League of Conservation Voters
          Clean Power Campaign
          Coalition for Clean Air
          Environment California
          Environmental Defense Fund


          Opposition


          Independent Energy Producers











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          Sacramento Municipal Utility District




          Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083