BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1937|
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THIRD READING
Bill No: AB 1937
Author: Gomez (D) and Williams (D), et al.
Amended: 8/17/16 in Senate
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 7-3, 6/21/16
AYES: Hueso, Hertzberg, Lara, Leyva, McGuire, Pavley, Wolk
NOES: Morrell, Cannella, Gaines
NO VOTE RECORDED: Hill
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-2, 6/29/16
AYES: Wieckowski, Hill, Jackson, Leno, Pavley
NOES: Gaines, Bates
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/1/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NOES: Bates, Nielsen
ASSEMBLY FLOOR: 51-26, 5/23/16 - See last page for vote
SUBJECT: Electricity: procurement
SOURCE: Author
DIGEST: This bill requires an electric investor-owned utility
(IOU), when considering bids for 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.
Senate Floor Amendments of 8/17/16 add a new section that
include the provisions of AB 1937 itself, as well as the
provisions of another bill - AB 2454 (Williams) - that also
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Page 2
affects Public Utilities Code §454.5. The amendments also add a
contingency clause stating that this bill only becomes effective
if (a) both it and AB 2454 are enacted, (b) each bill amend
Public Utilities Code §454.5, and (c) this bill is enacted after
AB 2454, in which case the amended language becomes inoperative.
Senate Floor Amendments of 8/11/16 apply the requirements of
this bill to "new generating units." The prior version of this
bill instead applied to bids for "gas-fired generation resources
from new facilities." The author intends the change to
encompass bids for new facilitates as well as bids for new
generating units at existing facilities. The amendments also
remove language that would have required IOUs to 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.
ANALYSIS:
Existing law:
1)Requires each IOU, in soliciting and procuring eligible
renewable energy resources for Renewable Portfolio Standard
(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)
2)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
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
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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)
3)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)
4)Requires the California Environmental Protection Agency
(CalEPA) to identify disadvantaged communities for purposes of
cap-and-trade auction proceeds investment opportunities and
requires those communities be identified based on geographic,
socioeconomic, public health, and environmental hazard
criteria. (HSC §39711)
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,
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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.
(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 new gas-fired generation
units, 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 units, 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,
criteria air pollutants, and GHGs.
2)Requires the CPUC, prior to approving a contract for any new
gas-fired generating unit, to require the IOU to demonstrate
it has complied with the IOU's approved procurement plan.
3)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.
Background
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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 generating units, whether a
wholly new "greenfield" development or a new unit at an existing
facility. Specifically, this bill requires the procurement plan
to newly show that the IOU will:
Actively seek bids for resources that are not gas-fired
generating units 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 generating units, provide greater preference to
resources that are not gas-fired generation resources located
in communities that suffer from cumulative pollution burdens,
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including, but not limited to, high emission levels of toxic
air contaminants, criteria air pollutants, and GHGs.
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
[http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M158/K355/15835
5879.PDF ], 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.
It seems this bill would not affect SCE's procurement of energy
from the Puente Power Project. The bill explicitly states that
its provisions do not apply to contract signed by an electrical
corporation and approved by the CPUC prior to January 1, 2017,
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and the CPUC has approved the purchase agreement. However, the
author intends this bill to explicitly 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 is no obvious 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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Senate Committee on Appropriations one-time
costs of approximately $93,000 to the CPUC (Utilities
Reimbursement Account) to conduct a rulemaking.
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SUPPORT: (Verified8/17/16)
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: (Verified8/17/16)
None received
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 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
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seek clean, renewable generation that benefits these
communities.
ASSEMBLY FLOOR: 51-26, 5/23/16
AYES: Alejo, Atkins, Baker, Bloom, Bonilla, Bonta, Brown,
Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper,
Dababneh, Daly, Dodd, Frazier, Cristina Garcia, Eduardo
Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Roger
Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low,
Maienschein, McCarty, Medina, Mullin, Nazarian, O'Donnell,
Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,
Thurmond, Ting, Weber, Williams, Wood, Rendon
NOES: Achadjian, Travis Allen, Bigelow, Brough, Chang, Chávez,
Dahle, Beth Gaines, Gallagher, Gray, Grove, Hadley, Harper,
Jones, Kim, Lackey, Linder, Mathis, Mayes, Melendez,
Obernolte, Olsen, Steinorth, Wagner, Waldron, Wilk
NO VOTE RECORDED: Arambula, Eggman, Patterson
Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107
8/18/16 16:50:27
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