BILL ANALYSIS Ó SB 350 Page 1 Date of Hearing: September 10, 2015 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Das Williams, Chair SB 350 (De León) - As Proposed to be Amended SENATE VOTE: 24-14 SUBJECT: Clean Energy and Pollution Reduction Act of 2015 SUMMARY: Enacts the "Clean Energy and Pollution Reduction Act of 2015," which establishes targets to increase retail sales of renewable electricity to 50% by 2030 and double the energy efficiency savings in electricity and natural gas end uses by 2030. EXISTING LAW: 1)The California Renewables Portfolio Standard (RPS) requires "retail sellers" of electricity, i.e., investor-owned utilities (IOUs), energy service providers (ESPs) and community choice aggregators (CCAs), as well as publicly owned utilities (POUs), to procure eligible renewable energy resources to meet the following portfolio targets: a) 20% on average from January 1, 2011 to December 31, 2013. SB 350 Page 2 b) 25% by December 31, 2016. c) 33% by December 31, 2020 and each year thereafter. 2)Authorizes the Public Utilities Commission (PUC) to require retail sellers to procure eligible renewable energy resources in excess of these targets. 3)Provides that eligible renewable generation facilities must use biomass, solar thermal, photovoltaic, wind, geothermal, renewable fuel cells, small hydroelectric, digester gas, limited non-combustion municipal solid waste conversion, landfill gas, ocean wave, ocean thermal or tidal current. 4)Establishes "balanced portfolio" requirements for procurement based on the following three categories of renewable energy products: a) Renewable energy interconnected to the grid within, scheduled for direct delivery into, or dynamically transferred to, a California balancing authority (i.e., real renewable energy supplied to the California grid, located within or proximate to the state). Of the total renewable energy contracts executed after June 1, 2010, the following percentages must fall into this category: i) At least 50% for the 2011-2013 compliance period. ii) At least 65% for the 2014-2016 compliance period. iii) At least 75% thereafter. b) Renewable energy where substitute non-renewable energy is used to provide a reliable delivery schedule into a California balancing authority (i.e., firmed and shaped energy where substitute energy is used to compensate for delivery problems due to intermittent generation or inadequate transmission capacity from a remote renewable resource). SB 350 Page 3 c) Renewable energy products not meeting either condition above, including unbundled renewable energy credits (RECs) (i.e., the original source of renewable energy must be located within the western grid, but otherwise need not be delivered to the California grid). Of the total renewable energy contracts executed after June 1, 2010, the following percentages may fall into this category: i) Not more than 25% for the 2011-2013 compliance period. ii) Not more than 15% for the 2014-2016 compliance period. iii) Not more than 10% thereafter. 5)Requires the CEC to: a) Certify eligible renewable energy resources according to the criteria in the statute. b) Design and implement an accounting system to verify compliance, to ensure that electricity generated by an eligible renewable energy resource is counted only once for the purpose of meeting the RPS of this state or any other state, to certify RECs produced by eligible renewable energy resources, and to verify retail product claims in this state or any other state. c) Establish a system for tracking and verifying RECs that, through the use of independently audited data, verifies the generation of electricity associated with each REC and protects against multiple counting of the same REC. 6)Requires the PUC to establish a cost limit for each IOU according to specified criteria, requires the PUC to report to the Legislature by 2016 regarding whether IOUs can achieve 33% within the adopted cost limit, authorizes the PUC to revise SB 350 Page 4 the cost limit once after 2016 if necessary, and authorizes IOUs to stop procuring renewable energy beyond the cost limit, unless additional renewable energy can be procured without exceeding a de minimis increase in rates. 7)Permits retail sellers to take credit for compliance surpluses by requiring the PUC to adopt "banking" rules permitting retail sellers to apply excess procurement to subsequent compliance periods. Prohibits banking of procurement associated with contracts of less than 10 years, as well as RECs and other undelivered products. 8)Excuses retail sellers from enforcement for failure to meet targets if the retail seller demonstrates that any of the following conditions are beyond its control and will prevent compliance: a) Inadequate transmission capacity for delivery of sufficient renewable energy. b) Permitting, interconnection or other delays for renewable energy projects, or an insufficient supply of available renewable energy. c) Unanticipated curtailment of renewable energy necessary to address the needs of a balancing authority (e.g., the Independent System Operator). 9)Requires the CEC to establish regulations to develop and implement a comprehensive program to achieve greater energy savings in California's existing residential and nonresidential building stock [AB 758 (Skinner), Chapter 470, Statutes of 2009]. The AB 758 program is targeted at buildings that "fall significantly below" the current Title 24 energy efficiency standards. THIS BILL: 1)Establishes a RPS target of 50% by December 31, 2030 and SB 350 Page 5 thereafter for retail sellers and POUs, including interim targets of 40% by the end of the 2021-2024 compliance period, 45% by the end of the 2025-2027 compliance period, and 50% by the end of the 2028-2030 compliance period. 2)Authorizes unlimited banking of "bucket 1" resources, regardless of contract length, beginning in 2021. Requires at least 65% of RPS procurement be from contracts of 10 years or more or ownership of eligible renewable energy resources. Applies these standards uniformly to all retail sellers and POUs. 3)Requires the PUC to direct each IOU to include in its proposed procurement plan 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. Requires the net capacity costs of those resources to be allocated on a fully nonbypassable basis. 4)Removes specified criteria and reporting requirement from the RPS cost limit, instead directing the PUC to set the cost limit at a level that prevents disproportionate rate impacts. 5)Limits the RPS eligibility of a facility engaged in the combustion of municipal solid waste located in Stanislaus County to energy generated before January 1, 2017. 6)Permits a POU to exclude, from total retail sales, generation that is produced through a voluntary green pricing or shared renewable generation program. Prohibits use of any renewable energy credits associated with electricity credited to a customer to be counted toward procurement requirements. SB 350 Page 6 7)Allows compliance flexibility for those POUs that satisfy 50% or more of their retail sales from specified, large hydroelectric power, as well as POUs that have coal contracts, entered into prior to June 1, 2010, in their electricity resource mix. 8)Specifies that costs shifting cannot occur between customers of electrical corporations and CCAs or ESPs and requires the PUC to ensure that departing load does not experience cost increase as a result in an allocation of costs not incurred on behalf of departing load. 9)Includes the following provisions in furtherance of doubling the energy efficiency savings in electricity and natural gas end uses by 2030: a) Directs CEC to adopt an update to the AB 758 program, by January 1, 2017 and every three years thereafter. b) Defines energy savings and end uses. c) Directs the CEC to specify energy efficiency targets to meet the goal, and specifies programs that may be used to achieve the goal. d) Specifies how the goals will be measured and counted; makes clarifying changes. e) Requires assessments of the effects of energy efficiency on electricity demand statewide and locally, hourly, and seasonally. f) Directs the PUC to authorize energy efficiency programs to meet the 50% energy efficiency goal. SB 350 Page 7 g) Specifies PUC energy efficiency procurement and reporting requirements. h) Directs POUs to meet the energy efficiency targets specified by the CEC. i) Directs the CEC to establish consumer protection guidelines for energy efficiency products, and directs the CEC to promote greater project penetration in disadvantaged communities, and to use workforce development and job training for residents in disadvantaged communities. j) Directs the CEC to evaluate "negative therm interaction" effects generated as a result of electricity efficiency improvements. 10)Establishes the following "transportation electrification" provisions: a) Requires ARB to identify and adopt appropriate policies to remove regulatory disincentives facing retail sellers from facilitating the achievement of GHG emission reductions in other sectors through increased investments in transportation electrification, including an allocation of GHG emissions allowances to retail sellers to account for increased emissions in the electric sector from transportation electrification. b) Requires the PUC, in consultation with the ARB and CEC, to direct IOUs to propose multiyear programs and investments to accelerate widespread transportation electrification to reduce dependence on petroleum, meet air SB 350 Page 8 quality standards, achieve the goals set forth in the Charge Ahead California Initiative, and reduce emissions of greenhouse gases to 40% below 1990 levels by 2030 and to 80% below 1990 levels by 2050. Requires the PUC to approve programs and investments that deploy charging infrastructure as distribution system costs. c) Requires the PUC to review data concerning current and future electric transportation adoption rates and charging infrastructure utilization rates no less than every three years and prior to any further authorization to collect additional new program costs related to transportation electrification in ratepayer rates. If market barriers unrelated to the investment prevent electric transportation from adequately utilizing available charging infrastructure, the PUC shall not permit additional investments without adequate assurance that the investments would not result in stranded costs recoverable from ratepayers. d) Establishes a new RPS compliance "offramp" for unanticipated increases in retail sales due to transportation electrification, if the waiver would not result in an increase in GHG emissions. In making a finding, the PUC must consider whether transportation electrification significantly exceeded forecasts in that retail seller's service territory and whether the retail seller has taken reasonable measures to procure sufficient resources to account for the unanticipated increases. 11)Requires the PUC and CEC to do all of the following in furtherance of meeting the state's clean energy and pollution reduction objectives: SB 350 Page 9 a) Take into account the use of distributed generation to the extent that it provides economic and environmental benefits in disadvantaged communities. b) Take into account the opportunities to decrease costs and increase benefits, including pollution reduction and grid integration. c) Where feasible, authorize procurement of resources to provide grid reliability services that minimize reliance on system power and fossil fuel resources and, where feasible, cost-effective, and consistent with other state policy objectives, increase the use of large- and small-scale energy storage with a variety of technologies, targeted energy efficiency, demand response, eligible renewable energy resources, or other technologies to protect system reliability. d) Review technology incentive, research, development, deployment, and market facilitation programs overseen by the PUC and CEC and make recommendations to advance state clean energy and pollution reduction objectives and provide benefits to disadvantaged communities. e) To the extent feasible, give first priority to the manufacture and deployment of clean energy and pollution reduction technologies that create employment opportunities, including high wage, highly skilled employment opportunities, and increased investment in the state. SB 350 Page 10 f) Establish a publicly available tracking system to provide up-to-date information on progress toward meeting the clean energy and pollution reduction goals of the Clean Energy and Pollution Reduction Act of 2015. g) Establish an advisory group consisting of representatives from disadvantaged communities to review and advise on programs proposed to achieve clean energy and pollution reduction and determine whether those proposed programs will be effective and useful in disadvantaged communities. 12)Requires the PUC to permit community choice aggregators to submit proposals for satisfying their portion of the renewable integration need. 13)Requires the PUC to adopt a process for IOUs, CCAs, and ESPs to file an integrated resource plan (IRP) to: a) Meet the greenhouse gas emissions reduction targets established by the ARB for the electricity sector and each load-serving entity that reflect the electricity sector's percentage in achieving economy-wide greenhouse gas emissions reductions of 40% from 1990 levels by 2030. SB 350 Page 11 b) Procure at least 50% eligible renewable energy resources by December 31, 2030, consistent with the RPS. c) Enable each IOU to fulfill its obligation to serve its customers at just and reasonable rates. d) Minimize impacts on ratepayers' bills. e) Ensure system and local reliability. f) Strengthen the diversity, sustainability, and resilience of the bulk transmission and distribution systems, and local communities. g) Enhance distribution systems and demand-side energy management. SB 350 Page 12 h) Minimize localized air pollutants and other greenhouse gas (GHG) emissions. 14)Requires POUs to adopt IRPs according to similar standards, subject to review by the CEC. 15)Requires the California Independent System Operator (ISO) to prepare proposed governance modifications to facilitate the transformation of the ISO into a regional organization, requires the ISO to study specified issues, the PUC, CEC and ARB to hold a joint workshop to review the ISO's proposed modifications, and provides that the proposed governance modifications do not take effect unless the Legislature enacts a statute implementing them. 16)Requires the CEC to study barriers for low-income customers to access solar photovoltaic, other renewable energy, energy efficiency, and weatherization investments. 17)Requires ARB to study barriers for low-income customers to access zero-emission and near zero-emission transportation options. 18)Amends the public works provision of the Labor Code to specify that construction, alteration, demolition, installation, or repair work on the electric transmission SB 350 Page 13 system located in California constitutes a public works project, subjecting these projects to prevailing wage. FISCAL EFFECT: According to the Assembly Appropriations Committee: 1)Ongoing annual costs of $5.6 million for staffing and one-time costs of $3.5 million in contracts [General Fund (GF) and special fund] for the CEC to implement the requirements of the bill. 2)Ongoing annual costs of $1.65 million for personnel services and $2.3 million in operating expenses (special fund) for the PUC to fulfill the requirements of the bill. 3)Ongoing annual costs of up to $275,000 (various special funds) for ARB to develop policies to remove regulatory disincentives and facilitate GHG reductions through transportation electrification. 4)Unknown ratepayer costs to the GF and various special funds to the state, as an electricity user and ratepayer to the extent electricity prices are affected by increasing the RPS standard. 5)Unknown costs pressures (special fund) for the PUC and CEC to review renewable integration needs and consider grid integration in RPS implementation proceedings. COMMENTS: SB 350 Page 14 1)Governor's goals. In his January 5, 2015 Inaugural Address, Governor Brown announced the following "objectives for 2030 and beyond": Toward that end, I propose three ambitious goals to be accomplished within the next 15 years: Increase from one-third to 50% our electricity derived from renewable sources; Reduce today's petroleum use in cars and trucks by up to 50%; and, Double the efficiency of existing buildings and make heating fuels cleaner. We must also reduce the relentless release of methane, black carbon and other potent pollutants across industries. And we must manage farm and rangelands, forests and wetlands so they can store carbon. All of this is a very tall order. It means that we continue to transform our electrical grid, our transportation system and even our communities. I envision a wide range of initiatives: more distributed SB 350 Page 15 power, expanded rooftop solar, micro-grids, an energy imbalance market, battery storage, the full integration of information technology and electrical distribution and millions of electric and low-carbon vehicles. How we achieve these goals and at what pace will take great thought and imagination mixed with pragmatic caution. It will require enormous innovation, research and investment. And we will need active collaboration at every stage with our scientists, engineers, entrepreneurs, businesses and officials at all levels. Taking significant amounts of carbon out of our economy without harming its vibrancy is exactly the sort of challenge at which California excels. This is exciting, it is bold and it is absolutely necessary if we are to have any chance of stopping potentially catastrophic changes to our climate system. 1)RPS. The RPS is the centerpiece of California's effort to develop a clean energy system and reduce pollution and GHG emissions associated with electricity consumption. The original RPS bill, SB 1078 (Sher), Chapter 516, Statutes of 2002, set a goal of 20% by 2017. SB 107 (Simitian), Chapter 464, Statutes of 2006, accelerated the deadline for 20% to 2010. SBX1 2 (Simitian), Chapter 1, Statutes of 2011-12 First Extraordinary Session, codified the current 33% by 2020 RPS target and also established product content categories (or "buckets"), which place the highest value (Bucket 1) on renewable energy that is directly delivered into California because it has the greatest economic, environmental and reliability benefits. Since the RPS was enacted, IOUs have advanced beyond their 2002 average starting point of 12% renewables. According to the PUC's RPS reports, IOUs' actual RPS procurement in 2013 was 23.8% for Pacific Gas and Electric (PG&E), 21.6% for SB 350 Page 16 Southern California Edison (SCE), and 23.6% for San Diego Gas & Electric (SDG&E). The PUC reports also show that the IOUs are on track to meet the RPS requirement of 25% renewables by 2016 and are well-positioned to meet the 33% requirement by 2020. RPS procurement currently under contract for 2020 is 31.3% for PG&E, 23.5% for SCE, and 38.8% for SDG&E. REGISTERED SUPPORT / OPPOSITION: Support Calpine Corporation Insurance Commissioner Dave Jones Los Angeles County Board of Supervisors Prior version: American Academy of Pediatrics - California American Cancer Society Cancer Action Network, California SB 350 Page 17 American Lung Association in California Asthma Coalition of Los Angeles County Audubon California Autodesk Baz Allergy, Asthma and Sinus Center Ben & Jerry's Bonnie J. Adario Lung Cancer Foundation BOSCH Breathe California Business for Innovative Climate & Energy Policy CALSTART California Association of Electrical Workers California Biodiesel Alliance SB 350 Page 18 California Black Health Network California Catholic Conference California Conference of Directors of Environmental Health California Energy Efficiency Industry Council California League of Conservation Voters California Energy Storage Alliance California Nurses Association California Pan Ethnic Health Network California Public Health Association - North California State Pipe Trades Council California Thoracic Society California Voices for Progress Californians Against Waste SB 350 Page 19 Center for Climate Change and Health; Public Health Institute Central California Asthma Collaborative Ceres ChargePoint Clean Tech San Diego Clean Power Campaign Clean Water Action Climate Action Climate Parents Climate Ready Solutions Coalition for Clean Air Coalition of California Utility Employees Coastal Environmental Rights Foundation SB 350 Page 20 Code REDD Consumer Attorneys of California Consumers Union Dignity Health Doctors for Climate Health Eagle Creek Environment California Environmental Defense Fund Gaia Development Services Gap Green Star Solution Health Care Without Harm Iberdrola Renewables SB 350 Page 21 Large-Scale Solar Association Levi Strauss & Co. Medical Advocates for Healthy Air Mercury Press International Mountain Rider's Alliance National Parks Conservation Association Natural Resources Defense Council New Moon Girl Media Nextgen Climate North Face Pacific Forest Trust Physicians for Social Responsibility - Los Angeles Physicians for Social Responsibility - San Francisco Bay Area Chapter SB 350 Page 22 Planning and Conservation League Proof Lab Surf Shop Public Health Institute Quest Refill Shoppe Regional Asthma Management and Prevention (RAMP) Rio Theater San Francisco Asthma Task Force Santa Clara County Medical Society Sierra Business Council Sierra Club California Sirius Mac Solutions SmartWool SB 350 Page 23 Sonoma County Asthma Coalition Solar Energy Industries Association South Coast Air Quality Management District State Building and Construction Trades Council of California Sungevity Thinkshift Communications Transform Trust for Public Lands U.S. Green Building Council Union of Concerned Scientists Voices for Progress West Marin Environmental Action Committee Western States Sheet Metal Workers SB 350 Page 24 31 individuals Opposition California Manufacturers & Technology Association CalTax (prior version) Agricultural Council of California American Alliance Authority & Compliance American Alliance Drug Testing Associated Builders and Contractors of California Associated General Contractors Building Owners and Managers Association SB 350 Page 25 California Association of Nurseries and Garden Centers California Business Properties Association California Chamber of Commerce California Concrete Bumpers Alliance California Construction Trucking Association California Cotton Ginners Association California Cotton Growers Association California Dairies California Farm Bureau Federation California Fresh Fruit Association California Independent Oil Marketers Association California Independent Petroleum Association California Metals Coalition SB 350 Page 26 California Retailers Association Chemical Industry Council of California Coalition of American-Latino Truckers Family Business Association Far West Equipment Dealers Association Food 4 Less/Rancho San Miguel Foster Farms Fullerton Chamber of Commerce Harris Farms Heavy Haul Conference Industrial Environmental Association International Council of Shopping Centers Kern County Board of Supervisors SB 350 Page 27 NAOIP - Commercial Real Estate Development Association National Federation of Independent Business National Tank Truck Carriers Orange County Business Council San Joaquin County Hispanic Chamber of Commerce Simi Valley Chamber of Commerce Southwest California Legislative Council Torrance Chamber of Commerce United Valley Industry and Commerce Association (VICA) West Coast Lumber and Building Material Association Western Aerosol Information Bureau Western Agricultural Processors Association SB 350 Page 28 Western Growers Association Western Plant Health Association Western States Petroleum Association Western Trucking Alliance Analysis Prepared by:Lawrence Lingbloom / NAT. RES. / (916) 319-2092