BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 1937 Hearing Date: 6/21/2016
-----------------------------------------------------------------
|Author: |Gomez |
|-----------+-----------------------------------------------------|
|Version: |6/14/2016 As Amended |
-----------------------------------------------------------------
------------------------------------------------------------------
|Urgency: |No |Fiscal: |Yes |
------------------------------------------------------------------
-----------------------------------------------------------------
|Consultant:|Jay Dickenson |
| | |
-----------------------------------------------------------------
SUBJECT: Electricity: procurement
DIGEST: This bill requires an electric investor-owned utility
(IOU) bids for new gas-fired generation resources to consider,
and give preference to, bids for resources that are not
gas-fired generation resources located in communities that
suffer from cumulative pollution burdens.
ANALYSIS:
Existing law:
1)Requires electric utilities to procure 50 percent of their
retail sales of electricity from renewable energy by 2030.
This is known as the Renewable Portfolio Standard (RPS).
(Public Utilities Code §399.11 et seq.)
2)Requires each IOU, in soliciting and procuring eligible
renewable energy resources for RPS-eligible California-based
projects, 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 (GHG). (Public Utilities
Code §399.13)
3)Requires each IOU to file with the California Public Utilities
Commission (CPUC), and requires the CPUC to review and accept,
modify or reject, each IOU's proposed electricity procurement
AB 1937 (Gomez) PageB of?
plan. Among other elements, the procurement plan must include
a showing that it will achieve the following:
a) The IOU will procure eligible renewable energy
resources in an amount sufficient to meet its procurement
requirements pursuant to the California RPS Program.
b) The IOU will create or maintain a diversified
procurement portfolio consisting of both short-term and
long-term electricity and electricity-related and demand
reduction products.
c) The IOU will first meet its unmet resource needs
through all available energy efficiency and demand
reduction resources that are cost effective, reliable,
and feasible.
(Public Utilities Code §454.5)
4)Requires the CPUC to adopt a process for each IOU to file an
integrated resource plan (IRP) to ensure IOUs meet the GHG
emissions reduction targets for the electricity sector;
procure at least 50 percent eligible renewable energy
resources by December 31, 2030; enable each IOU to fulfill its
obligation to serve its customers at just and reasonable
rates; minimize impacts on ratepayers' bills; ensure system
and local reliability; strengthen the diversity,
sustainability, and resilience of the bulk transmission and
distribution systems, and local communities; enhance
distribution systems and demand-side energy management; and
minimize localized air pollutants and other GHG emissions,
with early priority on disadvantaged communities. (Public
Resources Code §454.52)
5)Prohibits the construction of a thermal powerplant or electric
transmission line without certification from California Energy
Commission (CEC), which serves as the lead permitting agency,
and authorizes CEC to require the applicant for certification
to submit any information, document, or data, it determines is
reasonably necessary to make any decision on the application.
AB 1937 (Gomez) PageC of?
(Public Resources Code §§25517 and 25519).
This bill:
1)Requires an IOU's proposed procurement plan to include a
showing that the procurement plan will achieve the following:
a) The IOU, in soliciting bids for gas-fired generation
resources from new facilities, actively seeking bids for
resources that are not gas-fired generation resources
located in communities that suffer from cumulative
pollution burdens, including, but not limited to, high
emission levels of toxic air contaminants, criteria air
pollutants, and GHGs.
b) The IOU, in considering bids for, or negotiating
contracts for, new gas-fired generation resources,
providing greater preference to resources that are not
gas-fired generation resources located in communities
that suffer from cumulative pollution burdens, including,
but not limited to, high emission levels of toxic air
contaminants, criteria air pollutants, and GHGs.
c) The IOU undertaking all feasible efforts to meet any
identified resource need through available renewable
energy, energy storage, energy efficiency, and demand
reduction resources that are cost-effective, reliable,
and feasible.
d) The CPUC, prior to approving a contract for any new
or repowered gas-fired generation resource, requiring the
IOU to demonstrate it has complied with the IOU's
approved procurement plan.
2)States that the requirement in existing law - that each IOU
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 GHGs - applies all procurement of eligible
renewable energy resources for California-based projects,
whether the procurement occur through all-source requests for
offers, eligible renewable resources only requests for offers,
or other procurement mechanisms and declares this statement to
be declarative of existing law.
AB 1937 (Gomez) PageD of?
Background
Procurement plans tell how an IOU will procure electricity to
meet the needs of its customers. The CPUC describes its
long-term procurement plan (LTPP) proceedings as intended to
ensure a safe, reliable and cost-effective electricity supply in
California through integration and refinement of a comprehensive
set of procurement policies, practices and. LTPP proceedings
take a 10-year-ahead look at system, local, and flexible needs.
Proceeding assumptions are revised every two years to
incorporate changes in the resource mix and revisions to state
policies.
An IOU's procurement plan - part of an LTPP proceeding - details
what and how an IOU is going to procure. These plans must
adhere to state policies, including the loading order, which
mandates that utilities seek to meet need first though
cost-effective energy efficiency and demand response, followed
by procurement of renewable energy and, lastly, procurement of
fossil-fuel-generated electricity. If an IOU's procurement plan
does not comply with state policies or adequately balance
safety, reliability, cost, and environmental goals, the CPUC
orders the IOU to modify the plan.
Author seeks to modify procurement plan requirements because
IOUs will continue to procure new natural gas-fired electricity
generation. This bill amends the requirements of the IOUs'
procurement plans. This bill requires that an IOU's procurement
plan make several additional showings, each related to the IOU's
procurement of new natural-gas-fired generation resources.
Specifically, this bill requires the procurement plan to newly
show that the IOU will:
Actively seek bids for resources that are not gas-fired
generation resources located in communities that suffer
from cumulative pollution burdens, including, but not
limited to, high emission levels of toxic air contaminants,
criteria air pollutants, and GHGs.
In considering bids for, or negotiating contracts for,
new gas-fired generation resources, provide greater
preference to resources that are not gas-fired generation
resources located in communities that suffer from
cumulative pollution burdens, including, but not limited
to, high emission levels of toxic air contaminants,
AB 1937 (Gomez) PageE of?
criteria air pollutants, and GHGs.
Undertake all feasible efforts to meet any identified
resource need through available renewable energy, energy
storage, energy efficiency, and demand reduction resources
that are cost-effective, reliable, and feasible.
The IOUs will continue to procure natural-gas-fired generation
resources, even as they pursue the state's renewable and clean
energy goals. The author is concerned that such procurement may
result in the construction of gas-fired generators in
communities already disproportionately harmed by pollution.
As an example, the author points to recent experience in the
Oxnard area in Ventura County. As described in the CPUC's
proceeding documents<1>, in Decision 13-02-015, issued on
February 13, 2013, the CPUC ordered Southern California Edison
(SCE) to procure 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 to meet identified
long-term local capacity requirements by 2021. The CPUC found
this 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.
In response to the CPUC order, SCE, in 2014, sought approval of
11 contracts, including a 20-year contract for gas-fired
generation with NRG Energy Center Oxnard, LLC for a new
simple-cycle peaking facility known as the Puente Power Project.
Some interested parties objected that the project would occur
in a community already disproportionately harmed by pollution
and in other ways disadvantaged; other parties disagreed. In
any case, the CPUC determined that the CEC through the
powerplant site certification process, and not the CPUC through
the procurement process, has jurisdiction over environmental
issues, including environmental justice. In the end, on May
26th of this year, the CPUC approved SCE's 20-year contract with
the Puente Power Project.
This bill would have no effect on SCE's procurement of energy
from the Puente Power Project - the CPUC approved the purchase
agreement. However, the author intends this bill to explicitly
---------------------------
<1>
http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M158/K355/158355
879.PDF.
AB 1937 (Gomez) PageF of?
require an IOU, when engaged in procurement similar to that
which SCE undertook in pursuant to CPUC Decision 13-02-015, to
consider and give priority to energy resources that are not
gas-fired generation resources located in communities
disproportionately harmed by pollution.
What about integrated resource plans? In 2015, the Legislature
passed SB 350 (De Leon, Chapter 547, Statutes of 2015). In
addition to significantly increasing the state's commitment to
renewable energy and energy efficiency, the statute requires the
IOUs (as well as the publicly owned utilities) to develop and
regularly update IRPs. The plans, which the CPUC must review
and approve, are to detail how each IOU is to meet the state's
clean energy and environmental objectives. Included among the
objectives to be addressed by each IRP is the minimization of
localized air pollutants and other GHG emissions, with early
priority on disadvantaged communities. The CPUC, in approving
an IOU's proposed procurement, is to ensure the proposal is
consistent with the IOU's IRP.
There is no dispute that there is overlap between the IRP
requirements and the requirements of this bill. The author says
this overlap is by design. According to the author, the IRP
addresses localized air pollutants and related issues at the
planning stage, while the requirements of this bill address
similar issues at the procurement stage. However, if the IRP
process works as intended, then it is unclear there is a need
for this bill.
The IRP process is in its early stages of development. It is as
yet unknown how effectively the process will function.
Good for the goose but not the gander? New resources, but not
repowers. In the latest amendments, the author modified the
bill to exclude repowers of existing powerplants from the
requirements of the bill. At the time this analysis was
finalized, the author's office was unable to provide a policy
rationale for the amendment.
In any case, it is unclear why the protections the author seeks
to apply to bids for new gas-fired generation resources would
not apply to bids to repower equivalent resources. The
potential environmental harm to communities that suffer from
cumulative pollution burdens caused by a gas-fired powerplant is
independent of whether the powerplant is new or repowered.
AB 1937 (Gomez) PageG of?
Representatives of organized labor, who support removing
repowers from the requirement of the bill, contend that the
contracting process for repowers, compared to the process for
new powerplants, is relatively simple. Including repowers in
this bill, these representatives continue, would complicate the
contracting process, thereby reducing the likelihood a bid for
repower would be successful.
When is a contract an obligation? State laws cannot impair the
obligation of contracts.<2> Nor can they take effect
retrospectively.
SCE has requested an amendment to this bill that states that the
bill shall not apply to contracts signed before January 1, 2017.
At first blush, this amendment seems unnecessary: this bill
takes effect January 1, 2017, and it cannot impair the
obligation of contracts in any case.
However, it is unclear that a contract signed by an IOU becomes
an obligation at the time it is signed. The CPUC must approve
an IOU's contract after it has been signed. Arguably, an IOU
contract is not an obligation until it has been approved by the
CPUC. SCE goes further still, contending a contract might not
be considered an obligation until all legal remedies are
exhausted. To clarify that the provisions of this bill are not
meant to apply to contracts signed before January 1, 2017, the
author should amend the bill as requested by SCE.
A procurement plan can't show what the CPUC must do. This bill
makes one other requirement of an IOU's procurement plan. As
written, this bill requires an IOU's procurement plan to include
a showing of how the CPUC shall require an IOU to demonstrate
the IOU has complied with its CPUC-approved procurement plan
before the CPUC approves a contract for any new gas-fired
generation resource. Because of where it is placed in the code,
the requirement is as convoluted as the preceding sentence
reads. For clarity's sake, better to move the requirement -
Public Resources Code §454.5(b)(9)(E)(ii) in the current version
of this bill - to the end of the code section to stand alone as
an independent requirement on the CPUC.
Double referral. Should this bill be approved by this
---------------------------
<2> See Article I Section 10 of the Constitution of the United
States.
AB 1937 (Gomez) PageH of?
committee, it will be re-referred to the Senate Committee on
Rules.
Prior/Related Legislation
SB 350 (De Leon, Chapter 547, Statutes of 2015) created, among
other things, the obligation that IOUs develop and regularly
update IRPs, which the CPUC must review and approve, and are to
detail how each IOU is to meet the state's clean energy and
environmental objectives.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT:
Audubon California
Azul
California Environmental Justice Alliance and CEJA Action
California League of Conservation Voters
Clean Power Campaign
Coalition for Clean Air
Environment California
Environmental Defense Fund
Sierra Club California
Union of Concerned Scientists
OPPOSITION:
Independent Energy Producers Association (Prior version)
ARGUMENTS IN SUPPORT: According to the author:
The negative public health and environmental impacts of
gas-fired power plants are well documented. Air pollution and
particulate matter from power plants are linked to asthma,
respiratory ailments, and chronic mortality; heavy metals are
linked to cancer; and carbon dioxide emissions and methane
leakage contribute significantly to climate change. With the
decommissioning of nuclear power plants and once-through cooling
facilities, utilities are procuring new gas-fired generation. It
is imperative that utilities make every feasible effort to meet
reliability needs through cleaner, preferred resources. If the
need to procure new, gas-fired generation persists, utilities
AB 1937 (Gomez) PageI of?
should provide greater priority to resources that do not
exacerbate the pollution burdens of communities that have
disproportionately borne the brunt of environmental pollution
for decades. As we transition away from fossil fuels and towards
a cleaner energy future, we must ensure that California's most
impacted communities are not left behind. AB 1937 will ensure
that utilities' procurement plans examine options for siting of
fossil fuel plants outside of already polluted disadvantaged
communities and help them to actively seek clean, renewable
generation that benefits these communities.
-- END --