BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 350 (De León) - Clean Energy and Pollution Reduction Act of  
          2015.
          
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          |Version: February 24, 2015      |Policy Vote: E., U., & C. 8 -   |
          |                                |          3, E.Q. 5 - 2         |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 18, 2015      |Consultant: Marie Liu           |
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          This bill meets the criteria for referral to the Suspense File. 


          Bill  
          Summary:  This bill would direct a 50% reduction in petroleum  
          use, require that 50% of electricity come from renewable  
          resources, and require a doubling of the energy efficiency of  
          existing buildings.


          Fiscal  
          Impact:  
           First year costs of $440,000 and $400,000 ongoing from various  
            special funds to the Air Resources Board to create a petroleum  
            use baseline and to implement necessary measures to reduce  
            use. 
           Unknown cost pressures to current programs from various  
            special funds to achieve a 50% petroleum reduction.
           Annual costs of $7.24 million from the General Fund for the  
            CEC for ongoing updates of its energy efficiency plans for  
            existing buildings and to implement the plans.







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           Annual costs of $900,000 from the Energy Resources Program  
            Account (General Fund) for the CEC for new responsibilities  
            ensuring compliance with RPS standards by the POUs
           Annual costs of $2.3 million for five years to the Public  
            Utilities Reimbursement Account (special) for CPUC contract  
            needs
           Annual costs of $471,000 for two years and $157,000 in the  
            third year. the Public Utilities Reimbursement Account  
            (special) for CPUC proceedings to adjust existing RPS and Long  
            Term Procurement Plan (LTPP) programs.
           Ongoing staffing needs of $350,000 annually to the Public  
            Utilities Reimbursement Account (special) for CPUC staffing  
            needs for ongoing enforcement of the higher RPS standards.
           Unknown ratepayer costs to the General Fund and various  
            special funds to the state as a ratepayer of electricity to  
            the extent that electricity prices may be affected by  
            increasing the RPS standard. 
           Unknown cost pressures to the Public Utilities Reimbursement  
            Account (special) and the Energy Resources Program Account  
            (General Fund) to the CPUC and the CEC to review renewable  
            integration needs and to consider grid integration in  
            proceedings implementing RPS requirements.


          Background:  Existing law requires the Air Resources Board (ARB) to adopt  
          and implement motor vehicle emission standards, in-use  
          performance standards, and motor vehicle fuel specifications for  
          the control of air contaminants and sources of air pollution.
          Existing law requires the California Energy Commission (CEC) to  
          develop and implement a comprehensive program to achieve greater  
          energy savings in California's existing residential and  
          nonresidential building stock (Public Resources Code §25943 et  
          seq.).  


          Existing law requires all retail sellers of electricity -  
          investor-owned utilities (IOU), community choice aggregators  
          (CCAs), and energy service providers (ESPs) - and publicly-owned  
          utilities (POU) 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 CPUC is  
          explicitly authorized to require retail sellers of electricity  
          to procure renewable energy resources in excess of the  








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          33-percent RPS requirement. (Public Utilities Code §399.11 et  
          seq.). The CPUC oversees RPS compliance with IOUs while the CEC  
          oversees POUs.


          Existing law also establishes the Electric Program Investment  
          Charge (EPIC) Fund, to fund projects that benefit electricity  
          ratepayers and lead to technological advancement and  
          breakthroughs to overcome the barriers that prevent the  
          achievement of the state's statutory energy goals. (PUC §25710  
          et seq.)




          Proposed Law:  
            This bill would enact the Clean Energy and Pollution Reduction  
          Act of 2015, which creates or expands three related clean-energy  
          goals to be achieved by 2030: (1) a 50 percent reduction in  
          petroleum used in motor vehicles; (2) generating 50 percent of  
          total retail sales of electricity from renewable resources; and  
          (3) a doubling of the energy efficiency of existing buildings.  


          Specifically in regards to the petroleum reduction goal, this  
          bill would:
           Require that the ARB's implementation of motor vehicle  
            emission standards, in-use performance standards, and motor  
            vehicle fuel specifications to also further the state's goal  
            in reducing petroleum use in motor vehicles by 50% by January  
            1, 2030.


           Require that the state transportation energy policy would also  
            be required to be in furtherance of reducing petroleum use in  
            the transportation sector by 50% by January 1, 2030.


          Specifically in regards to the energy efficiency goal, this bill  
          would require the CEC, by January 1, 2017, and at least once  
          every three years thereafter, to adopt and update its  
          comprehensive program to achieve greater energy savings in  
          California's existing residential and nonresidential building  
          stock - known as the California Existing Buildings Energy  








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          Efficiency Action Plan - in order to achieve a doubling of the  
          energy efficiency of existing buildings by January 1, 2030.

          Specifically in regards to the renewable energy goal, this bill  
          would:
           Declare that it is the intent of the Legislation that the CEC  
            and the CPUC implement the California Renewable Portfolio  
            Standard Program to achieve 50% of the total retail sales of  
            electricity in California come from renewable sources by  
            December 31, 2030. 


           Require that all retail sellers of electricity submit to the  
            CPUC a renewable energy procurement plan, not just IOUs. Allow  
            the CPUC to enforce this requirement on all electrical  
            corporations. Penalties assessed for failure to comply with  
            adopting a procurement plan shall be deposited into the  
            Electric Program Investment Charge Fund.


           Set minimum RPS requirements so that 40% of resources are from  
            eligible renewable sources by the end of 2024, 45% by the end  
            of 2027, and 50% by the end of 2030. 


           Require that at least 75% of the renewable energy procurement  
            be from Californian's resources


           Establish the following RPS compliance periods and renewable  
            energy goals for retail sellers and POUs: January 1, 2021, to  
            December 31, 2024 - 40 percent; January 1, 2025, to December  
            31, 2027 - 45 percent; and January 1, 2028, to December 31,  
            2030 - 50 percent.

           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  








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            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  
            the EPIC Fund, 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. 


          Staff  
          Comments:  In regards the petroleum reduction goals, ARB would  
          need to do the following: 
           Develop a baseline of petroleum use, 
           Determine the best methods to assist with meeting the goal, 
           Potentially develop amendments to current motor vehicle  
            emissions standards, in-use performance standards, and motor  
            vehicle fuel specifications, and 
           Monitor progress relative to the 50% target.

          ARB anticipates needing approximately $440,000 in the first year  
          and $400,000 ongoing from various special funds to achieve these  
          efforts.

          Staff notes that these costs are just for staffing costs.  
          Modifying existing programs to achieve the reductions may  
          require significant additional investments to implement the  
          larger programs, including incentives such as through the Carl  
          Moyer Program. As such, this bill would create unknown cost  
          pressures for various programs. 

          In regards to the energy efficiency of existing buildings, the  
          CEC has been updating its Building Energy Efficiency Program  








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          approximately every three years, with the next update to be  
          adopted in 2016 and with a January 1, 2017 effective date. These  
          updates have occurred as part of the implementation of AB 758  
          (Skinner) Chapter 470, Statutes of 2009. To continue this  
          effort, the CEC would redirect all of the resources it currently  
          receives to just update the plan on a continuous basis. The CEC  
          would then need additional funds to implement the plan, which is  
          estimated to be $3.5 million annually in contract funds plus  
          $3.7 million in workload for the CEC. 

          In regards to the renewable energy goal, this bill would give  
          the CEC new regulatory authority over POUs by allowing it to  
          impose penalties for noncompliance on POUs. 
          The CEC estimates that it would need six additional positions at  
          an approximate cost of $900,000 to support the collection of  
          additional data from the POUs for additional renewable energy  
          procurement and to enforce the requirements.

          The CPUC additionally anticipates needing significant funds for  
          consultants and IT needs. For the RPS and LTPP changes required  
          by this bill, the CPUC estimates it will need $2.3 million  
          annually in contract funds for five years. In addition, the CPUC  
          anticipates it will have one-time proceeding cost of $471,000  
          annually for two years and $157,000 for the third year. Ongoing  
          staffing needs of $350,000 annually would be needed to oversee  
          the implementation of the higher RPS standards, such as  
          increased review of procurement contracts.

          Staff notes that this bill would require that penalties for  
          noncompliance of RPS standards to be deposited into the electric  
          Program Investment Charge Fund. Under existing law, penalties  
          assessed by the CPUC would be deposited into the General Fund.  
          However, as there have never been any penalties collected for  
          RPS non-compliance, this change is likely to have a minor impact  
          on the General Fund.




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