BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 350| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 350 Author: De León (D) and Leno (D), et al. Amended: 9/11/15 Vote: 21 SENATE ENERGY, U. & C. COMMITTEE: 8-3, 4/7/15 AYES: Hueso, Hertzberg, Hill, Lara, Leyva, McGuire, Pavley, Wolk NOES: Fuller, Cannella, Morrell SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-2, 4/29/15 AYES: Wieckowski, Hill, Jackson, Leno, Pavley NOES: Gaines, Bates SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NOES: Bates, Nielsen SENATE FLOOR: 24-14, 6/3/15 AYES: Allen, Beall, Block, De León, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Wieckowski, Wolk NOES: Anderson, Bates, Berryhill, Cannella, Fuller, Gaines, Galgiani, Huff, Moorlach, Morrell, Nguyen, Runner, Stone, Vidak NO VOTE RECORDED: Nielsen, Roth ASSEMBLY FLOOR: Not available SUBJECT: Clean Energy and Pollution Reduction Act of 2015 SOURCE: Author SB 350 Page 2 DIGEST: This bill enacts the "Clean Energy and Pollution Reduction Act of 2015," which establishes targets to increase retail sales of renewable electricity to 50 percent by 2030 and double the energy efficiency savings in electricity and natural gas end uses by 2030. Assembly Amendments remove petroleum reduction goals in their entirety; remove a requirement that the Air Resources Board (ARB) develop an integrated action plan to improve freight efficiency; direct the ARB to adopt measures to remove disincentives to utilities and service providers from achieving greenhouse gas emissions reductions from other sectors through transportation electrification; deem most types of work on the electric transmission system located in California as a public works project; require state agencies to complete studies on barriers to solar photovoltaic generation and to access to renewable energy by low-income customers, to contracting opportunities for local small businesses in disadvantaged communities, and to low-income customer ownership of zero-emission and near-zero-emission vehicles; require the California Public Utilities Commission (CPUC) to enforce performance standards for energy efficiency measures; require a local publicly owned electric utility with an annual electrical demand exceeding 700 gigawatt hours to adopt an integrated resource plan; and establish a process by which the California Independent System Operator (CAISO) evolves into a regional organization. ANALYSIS: 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 §25200 et seq.) SB 350 Page 3 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 §25943 et seq.) 3) Requires 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 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 the 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 §399.11 et seq.) 4) Establishes the CAISO, comprised of five board members appointed by the governor and subject to Senate confirmation, and requires it to manage the transmission grid and related energy markets and make the most efficient use of available energy resources including energy, capacity, ancillary services, and demand bid into markets administered by the CAISO. (Public Utilities Code §345.5) This bill: 1) Establishes an RPS target of 50 percent by December 31, 2030, and thereafter for retail sellers and POUs, including interim targets of 40 percent by the end of the 2021-2024 compliance period, 45 percent by the end of the 2025-2027 compliance period, and 50 percent by the end of the 2028-2030 compliance period. 2) Specifies that costs shifting cannot occur between customers SB 350 Page 4 of electrical corporations and CCAs or ESPs and requires the 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. 3) 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 CPUC to authorize energy efficiency programs to meet the 50 percent energy efficiency goal. g) Specifies CPUC 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. 4) Requires ARB to identify and adopt appropriate policies to remove regulatory disincentives facing retail sellers from facilitating the achievement of greenhouse gas (GHG) emission SB 350 Page 5 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. 5) 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 greenhouse gases to 40 percent below 1990 levels by 2030 and to 80 percent below 1990 levels by 2050. Requires the CPUC to approve programs and investments that deploy charging infrastructure as distribution system costs. 6) Requires the CPUC and CEC to take specific actions in furtherance of meeting the state's clean energy and pollution reduction objectives. 7) Requires the CPUC to permit community choice aggregators (CCAs) to submit proposals for satisfying their portion of the renewable integration need. 8) Requires the CPUC to adopt a process for IOUs, CCAs, and electric service providers (ESPs) to file an integrated resource plans. 9) Requires locally owned public utilities to adopt IRPs, subject to review by the CEC. 10)Requires the CAISO to prepare proposed governance modifications to facilitate the transformation of the CAISO into a regional organization 11)Requires the CEC to study barriers for low-income customers to access solar photovoltaic, other renewable energy, energy SB 350 Page 6 efficiency, and weatherization investments. 12)Requires ARB to study barriers for low-income customers to access zero-emission and near zero-emission transportation options. 13)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 project, subjecting these projects to prevailing wage. Background State efforts to address environmental effects of energy use. In California, the energy sector, broadly defined, accounts for more than 85 percent of greenhouse gas emissions. The two largest sources of California's greenhouse gases are transportation, at 39 percent, and electricity production, at 21 percent.[ 2013 Integrated Energy Policy Report (http://www.energy.ca.gov/2013publications/CEC-100-2013-001/CEC-1 00-2013-001-CMF.pdf)] Accordingly, the state's existing clean energy and climate change programs focus on the energy sector in general and the transportation and electricity sectors specifically. Principal among those programs are the California Global Warming Solutions Act of 2006 (more commonly known as "AB 32"), which requires a reduction of the state's greenhouse gas emissions to 1990 levels by 2020, and the RPS, which requires the 33 percent of the state's electricity come from renewable resources by 2020. AB 32 tasks the ARB with developing a plan of measures that reduce greenhouse gas emission levels, to be updated every five years. To that end, ARB, in 2008, adopted a scoping plan that includes regulatory and market-based measures applicable to the state's major economic sectors. Among the regulatory measures included in the initial scoping plan were numerous energy efficiency measures, measures to encourage the development and adoption of alternative fuels, and a 33 percent RPS. In 2014, ARB released an update to its scoping plan. The ARB approved its first update to the scoping plan in May of 2014, which shows that the state has reduced its overall SB 350 Page 7 emissions of greenhouse gases since passage of AB 32. The Legislature approved the statutory RPS program in 2011 with the passage of SB 2 x1 (Simitian, Chapter 1). Statute directs the CPUC to establish the RPS for retail sellers and ensure they progress in achieving it, levying 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 the adequately progress in meeting RPS targets and refer the POU to the ARB, which may assess penalties against it. The state's electric utilities report they are on track to meet, or exceed, the RPS goals. Other state programs directly address energy efficiency. The state's loading order, established by the energy agencies in 2003, calls for meeting new electricity needs first with efficiency and demand response, followed by renewable energy and distributed generation, and then with fossil generation. [2003 Energy Action Plan (http://www.energy.ca.gov/energy_action_plan/2003-05-08_ACTION_PL AN.PDF)]. Under statute guidelines, the CPUC authorizes IOU spending for all available energy efficiency that is cost effective, reliable and feasible. In recent years the CPUC has authorized close to $1 billion per year in energy efficiency spending to meet this mandate based on feasibility studies and the record developed in CPUC's energy efficiency proceedings. Since 1977, the CEC, acting under the broad authority provided to it under the Warren-Alquist Act, has set energy efficiency standards for appliances and new buildings; many credit these standards, in part, with keeping California's per-capita electricity consumption flat over the past three decades. [See, for example, http://switchboard.nrdc.org/blogs/mwaltner/energy_savings_on_the_ way_for.html] Further, CEC, acting according to statutory mandate, recently released a draft plan to achieve cost-effective energy savings in California's existing residential and nonresidential buildings, which, generally, are not subject to CEC's building efficiency standards. [Existing Buildings Energy Efficiency Action Plan - Draft (http://www.energy.ca.gov/ab758/).] Building upon existing structure to create new "Golden SB 350 Page 8 Standards". In his 2015 State-of-the-State speech, Governor Brown announced three ambitious new energy goals that would take state clean energy policy beyond 2020: (1) 50 percent of California's electricity to come from renewable energy sources; (2) reducing by 50 percent the amount of petroleum used in cars and trucks; and (3) doubling the energy efficiency of existing buildings, all by 2030. The author has described this bill as an effort to execute on the Governor's "bold vision." To a large extent, this bill builds upon existing state programs, which the author describes as already making significant progress to the bill's two goals. This bill builds upon existing statutory authority to achieve the expanded RPS goal. As existing statute makes extensive, specific requirements of the RPS program, so too does this bill. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Assembly Appropriations Committee: 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. 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. 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. 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. Unknown costs pressures (special fund) for the CPUC and CEC to review renewable integration needs and consider grid SB 350 Page 9 integration in RPS implementation proceedings. SUPPORT: (Verified9/11/15) 350 Bay Area/Marin Academy of Pediatrics- California Advanced Energy Economy Alameda Building Trades Council Alameda County Board of Supervisors Alliance for Solar Choice American Academy of Pediatrics American Cancer Society Cancer Action Network American Farmland Trust American Lung Association American Lung Association-California American White Water Annies's Natural Foods Artesia City Councilmember Ali Sajjad Taj Asian Pacific Environmental Network Asthma and Sinus Center Asthma Coalition of Los Angeles County Attorney General Kamala Harris Audubon Autodesk AzTech Aztec Energy Azul Baz Allergy Ben & Jerry's Beneficial State Bank Berkeley Mayor Tom Bates Berkshire Hathaway Energy Biosynthetic Technologies Blattner Energy Bloom Energy Bonnie J. Adario Lung Cancer Foundation Borrego Solar Breathe California Bright Power BYD Motors, Inc. SB 350 Page 10 CA Local conservation corps California Association of Sanitation Agencies California Bicycle Coalition California Biomass Energy Alliance California Black Health Network California Catholic Conference California Conference of Directors of Environmental Health California Conservation Corps California District Council of Ironworkers California Energy Efficiency Industry Council California Energy Storage Alliance California Environmental Justice Alliance California Equity Leaders Network California Federation of Teachers California League of Conservation Voters California Municipal Utilities Association California Natural Gas Vehicle Coalition California Nurses Association California Pan Ethnic Health Network California Public Health Association- North California Solar California Solar Energy Industry Association California State Association of Electrical Workers California State Pipes Trade Council California Teamsters Public Affairs Council California Thoracic Society California Trout California Walks California Wind Energy Association California-Nevada Conference of Operating Engineers Californians Against Waste CalSTART Canadian Solar Catholic Charities Diocese of Stockton Center for Climate Change and Health Center for Sustainable Energy Center on Race Poverty and the Environment Central California Asthma Collaborative Chai Energy ChangeLab Solutions Circulate San Diego City of Glendale SB 350 Page 11 City of Huntington Park City of Los Angeles City of Santa Monica Clean Energy Collective Clean Energy and Clean Energy Renewable Fuels Clean Fuel Partners Clean Power Campaign Clean Power Finance Clean Water Action CleanTech San Diego Cleveland National Forest Foundation CLIF Bar & Co. Climate Parents Climate Resolve Coalition for Clean Air Coalition for Renewables and Gas Coalition for Sustainable Transportation Coalition of California Utility Employees Coastal Environmental Rights Foundation Code REDD Contra Costa Building Trades Council Controller Betty Yee County of Los Angeles Public Health Dignity Health Distinguished Outreach Services Doctors for Climate Health Dr. Carl Wunsch (Harvard) Dr. Roger Bales (UC Merced) Eagle Creek Eagle Crest Energy Eco Factor EDF Renewable Energy Endangered Habitats League EnergyHub energyhippo Energy Source Environment California Environmental and Energy Consulting Environmental Defense Fund Environmental Entrepreneurs Eon Energy EtaGen SB 350 Page 12 First Fuel First Solar Fresno, Madera, and Kings Building Trades Council Friends Committee on Legislation of California Friends of the River fs energy Gaia Development Services Gap, Inc. Genability Greenbelt Alliance Greenlining institute Green Star Solutions greentech GRID Alternatives Harvest Power Hawthorne City Councilmember Angie Reyes English Health Care Without Harm Health Officers Association of California Heat and Frost Insulators and Allied Workers Home Energy Analytics Humboldt/Del Norte Building Trades Council Hydropower Reform Coalition icontrol Networks Inglewood City Councilmember Eloy Morales Imperial Building Trades Council Independent Energy Producers Association Insurance Commissioner Dave Jones International Brotherhood of Boilermakers International Brotherhood of Electrical Workers International Union of Painters and Allied Trades Investor Confidence Project KB Home Kern, Inyo & Mono Building Trades Council kW Engineering Lancaster Choice Energy Large Scale Solar Association League of Women Voters of California Levi Strauss & Co. Lieutenant Governor Gavin Newsom Long Beach Mayor Robert Garcia Los Angeles City Council SB 350 Page 13 Los Angeles County Board of Supervisors Los Angeles Mayor Eric Garcetti Los Angeles Sustainability Collaborative Los Angeles Unified School District Board of Education Los Angeles/Orange Building Trades Council Lyft Marin Building Trades Council Marin Clean Energy Mars, Inc. McCarthy Building Companies, Inc. Medical Advocates for Healthy Air Mercury Press International Mid Valley Building Trades Council Mission Data Empowering Energy Savings Moms Clean Air Force Montebello Mayor Jack Hadjinian Monterey/Santa Cruz Building Trades Council Motiv Power Solutions Mountain Riders Alliance Move LA Napa/Solano Building Trades Council Natel Energy National Parks Conservation Association Natural Resource Defense Council Nature Conservancy Nest NextGen Climate NextTracker, Inc Nobel economist Dr. Kenneth Arrow (Stanford) Nobel Prize-winning scientist Dr. Mario Molina (UCSD) Northeastern, Shasta, Trinity, Lassen & Tehama Building Trades Council Northface NRG Energy, Inc. Oakland City Council Office of Ratepayer Advocates OPEN Pacific Ethanol Pacific Gas and Electric Company Pattern Energy Physicians for Social Responsibility - Los Angeles SB 350 Page 14 Physicians for Social Responsibility - San Francisco Bay Area Chapter plotwatt PolicyLink Propel Proterra, Inc. Public Advocates Public Health Institute Rainforest Automation Recurrent Energy Redlands Area Democratic Club Regional Asthma Management and Prevention Rep. Adam Schiff Rep. Alan Lowenthal Rep. Anna Eshoo Rep. Barbara Lee Rep. Doris Matsui Rep. Eric Swalwell Rep. Janice Hahn Rep. Jared Huffman Rep. Jerry McNerney Rep. John Garamendi Rep. Juan Vargas Rep. Judy Chu Rep. Julia Brownley Rep. Karen Bass Rep. Lois Capps Rep. Loretta Sanchez Rep. Lucille Roybal-Allard Rep. Mark DeSaulnier Rep. Mark Takano Rep. Mike Honda Rep. Mike Thompson Rep. Nancy Pelosi Rep. Scott Peters Rep. Susan Davis Rep. Ted Lieu Rep. Zoe Lofgren Retroficiency Sacramento Electric Vehicle Association Sacramento Municipal Utility District Sacramento/Sierra Building Trades Council SB 350 Page 15 San Bernardino/Riverside Building Trades Council San Diego Building Trades Council San Fernando City Councilmember Antonio Lopez San Fernando City Councilmember Robert Gonzales San Francisco Asthma Task Force San Francisco Board of Supervisors San Francisco Building Trades Council San Francisco Public Utilities Commission San Joaquin, Calaveras & Alpine Building Trades Council San Mateo Building Trades Council Santa Ana City Councilmember Michele Martinez Santa Barbara County Air Quality Control District Santa Clara County Medical Society Santa Clara/San Benito Building Trades Council Sempra Energy Utilities Sequoia Riverlands Trust Service Employees International Union - California Sierra Business Council Sierra Club California Signal Energy, LLC Silicon Valley Leadership Group Small Business California SmartWool Solar City Solar Energy Industries Association Sonoma Clean Power Sonoma County Asthma Coalition Sonoma, Mendocino & Lake Building Trades Council South Yuba River Citizens League Southern California Edison Southern California Public Power Southwest Wetlands Interpretive Association Stanislaus, Merced & Mariposa Building Trades Council State Association of Electrical Workers State Building and Construction Trade Council of California Stem, Inc. Sun Edison Sungevity Sunpower Superintendent of Public Instruction Tom Torlakson Sustainable Power Group SB 350 Page 16 Symantec The Utility Reform Network Thinkshift Communications TransForm Treasurer John Chiang Tri-Counties Building Trades Council Trust for Public Lands Tulare County Citizens for Responsible Growth U.S. Senator Boxer U.S. Senator Feinstein Unilever Union of Bricklayers and Allied Craftworkers Union of Concerned Scientists Union of Elevator Constructors United Union of Roofers, Waterpoofers and Allied Trades US Green Building Council UtiliSave Valley Clean Air Now Verdafera Vivint Solar Vote Solar Watersmart Software Watsonville City Council WeatherBug Home Western Council of Sheet Metal Workers Western State Council Wireless Advanced Vehicle Electrification OPPOSITION:(Verified 9/11/15) None received ARGUMENTS IN SUPPORT: Supporters note the need to build upon the success of the state's existing clean energy policies and note many co-benefits, such as cleaner air, innovation forcing, and energy supply diversity, and the value of as a leader in the fight against climate change and for clean energy. ARGUMENTS IN OPPOSITION: Opponents contend the bill will SB 350 Page 17 lead to higher energy prices, which the state's poorest members will be least able to pay. Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107 9/11/15 21:12:29 **** END ****