BILL ANALYSIS                                                                                                                                                                                                    Ó






                                                                     SB 350


                                                                     Page A


          (Without Reference to File)





          SENATE THIRD READING


          SB  
          350 (De León)


          As Amended September 10, 2015


          Majority vote


          SENATE VOTE:  24-14


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Utilities       |9-5  |Rendon, Bonilla,      |Patterson,          |
          |                |     |Burke, Eggman,        |Achadjian, Hadley,  |
          |                |     |Cristina Garcia,      |Roger Hernández,    |
          |                |     |Quirk, Santiago,      |Obernolte           |
          |                |     |Ting, Williams        |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Natural         |6-2  |Williams, Cristina    |Hadley, Harper      |
          |Resources       |     |Garcia, McCarty,      |                    |
          |                |     |Rendon, Mark Stone,   |                    |
          |                |     |Wood                  |                    |











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          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |12-5 |Gomez, Bloom, Bonta,  |Bigelow, Chang,     |
          |                |     |Calderon, Nazarian,   |Gallagher, Jones,   |
          |                |     |Eggman, Eduardo       |Wagner              |
          |                |     |Garcia, Holden,       |                    |
          |                |     |Quirk, Rendon, Weber, |                    |
          |                |     |Wood                  |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Natural         |5-2  |Williams, Cristina    |Dahle, Harper       |
          |Resources       |     |Garcia, McCarty,      |                    |
          |                |     |Rendon, Mark Stone    |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
           ------------------------------------------------------------------ 


          SUMMARY:  Enacts the "Clean Energy and Pollution Reduction Act  
          of 2015" and 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.  Specifically, this bill:


          1)Establishes a Renewable Portfolio Standard (RPS) target of 50%  
            by December 31, 2030, and thereafter, for retail sellers and  
            publicly-owned utilities (POUs), including interim targets of  
            40% by the end of the 2021 to 2024 compliance period, 45% by  
            the end of the 2025 to 2027 compliance period, and 50% by the  
            end of the 2028 to 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.











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          3)Requires the California Public Utilities Commission (CPUC) to  
            direct each investor-owned utility (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, and  
            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 CPUC 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.


          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 community choice aggregators  
            (CCAs) or energy service providers (ESPs), and requires the  











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            CPUC 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 California Energy Commission (CEC) to adopt an  
               update to the AB 758 [(Skinner), Chapter 470, Statutes of  
               2009] 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 CPUC to authorize energy efficiency programs  
               to meet the 50% energy efficiency goal.


             g)   Specifies CPUC energy efficiency procurement and  
               reporting requirements.











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             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, 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 Air Resources Board (ARB) to identify and adopt  
               appropriate policies to remove regulatory disincentives  
               facing retail sellers from facilitating the achievement of  
               greenhouse gas (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 CPUC, 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  
               quality standards, achieve the goals set forth in the  
               Charge Ahead California Initiative, and reduce emissions of  











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               GHGs to 40% below 1990 levels by 2030, and to 80% below  
               1990 levels by 2050.  Requires the CPUC to approve programs  
               and investments that deploy charging infrastructure as  
               distribution system costs.


             c)   Requires the CPUC 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 CPUC 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 CPUC 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 CPUC and CEC to do all of the following in  
            furtherance of meeting the state's clean energy and pollution  
            reduction objectives:


             a)   Take into account the use of distributed generation to  
               the extent that it provides economic and environmental  
               benefits in disadvantaged communities.











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             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 CPUC 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.


             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.













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             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 CPUC to permit CCAs to submit proposals for  
            satisfying their portion of the renewable integration need.


          13)Requires the CPUC 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 GHG emissions  
               reductions of 40% from 1990 levels by 2030.


             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  











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               local communities.


             g)   Enhance distribution systems and demand-side energy  
               management.


             h)   Minimize localized air pollutants and other 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 CPUC, 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  
            system located in California constitutes a public works  











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            project, subjecting these projects to prevailing wage.


          EXISTING LAW:  


          1)Directs the CEC to continually assess energy consumption  
            trends and to analyze the social, economic, and environmental  
            consequences of these trends; carry out energy conservation  
            measures; and recommend to the Governor and the Legislature  
            new and expanded energy conservation measures.  (Public  
            Resources Code Section 25200, et seq.)


          2)Requires the 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 Section 25943, et seq.)  


          3)Establishes the Electric Program Investment Charge 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. (Public Utilities Code Section 25710, et seq.)


          4)Requires retail sellers of electricity - IOUs, CCAs, ESPs, and  
            POUs - to increase purchases of renewable energy such that at  
            least 33% of retail sales are procured from renewable energy  
            resources by December 31, 2020.  This is known as the RPS.   
            The CPUC establishes the RPS for retail sellers and ensures  
            they progress in achieving it, and levies penalties for  
            failure.  The governing board of each POU establishes its own  
            RPS.  The CEC may issue a notice of violation against a POU  
            for failure to adequately progress in meeting RPS targets and  
            refer the POU to the ARB, which may assess penalties against  
            it.  The RPS provides numerous cost containment provisions and  
            exceptions to compliance obligations.  (Public Utilities Code  











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            Section 99.11, et seq.)


          5)Requires all renewable electricity products to meet the  
            requirements of a "loading order" that mandates minimum and  
            maximum quantities of three product categories (or "buckets"),  
            which includes renewable resources directly connected to a  
            California balancing authority or provided in real time  
            without substitution from another energy source, energy not  
            connected or delivered in real time yet still delivering  
            electricity, and unbundled renewable energy credits (RECs).   
            (Public Utilities Code Section 399.16.)


          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  
            this bill.


          2)Ongoing annual costs of $1.65 million for personnel services  
            and $2.3 million in operating expenses (special fund) for the  
            CPUC 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.











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          5)Unknown costs pressures (special fund) for the CPUC and CEC to  
            review renewable integration needs and consider grid  
            integration in RPS implementation proceedings.


          COMMENTS:


          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.












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               I envision a wide range of initiatives:  more  
               distributed 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)Regional energy market.  This bill sets in motion a process  
            for allowing the California ISO to expand its wholesale  
            electricity market programs to include out-of-state  
            transmission owners. While there may be benefits to  
            regionalizing the wholesale electricity market, there are a  
            number of issues that are not understood about this effort,  
            specifically:


             a)   How will this affect California's efforts to expand  
               energy efficiency, demand response, and distributed  
               generation if the wholesale market operator projects and  
               determines that electricity, reliability, or other services  
               shall be fulfilled through transmission and generation  
               projects?












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             b)   How will this affect other Balancing Authorities  
               operating in California with respect to having equal access  
               and address interactions between participants and  
               non-participants in the new market?


             c)   How will transmission costs be allocated to ensure that  
               California ratepayers do not bear a disproportionate  
               burden?


             d)   How will California's greenhouse gas goals be honored?


          2)Integrated Resource Planning.  According to a recent survey<1>  
            by Lawrence Berkeley Labs of the utilities in the Western  
            States, the IRP they have prepared are done inconsistently.   
            All utilities in the Western State have formal IRP reporting  
            processes, except for California, which has a Long Term  
            Procurement Planning Process.  One issue that was raised in  
            this study is that there are significant data inconsistencies  
            between IRPs.  One issue discovered in this survey is that  
                                                                 load-serving entities "rarely reported additions (or  
            improvements) to transmission interconnections, fuel delivery  
            systems, and energy storage facilities. Furthermore, there are  
            numerous examples of resource plans that do not provide  
            sufficient clarity on units of measurement related to  
            important risks (e.g., short tons vs. long tons of GHGs;  
            carbon price vs. CO2e price; hub vs. delivered natural gas  
            price)."


            The CPUC may need to ensure that all of the IRPs that are  
            prepared pursuant to this new statute are done consistently  
            --------------------------


          <1>


            http://emp.lbl.gov/sites/all/files/lbnl-6545e.pdf  










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            and in coordination with POUs to ensure that the results of  
            the effort are usable. 




          Analysis Prepared by:  Sue Kateley / U. & C. / (916) 319-2083     
            FN: 0002409