BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 687 (Allen) - Renewable gas standard. ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: May 5, 2015 |Policy Vote: E., U., & C. 7 - | | | 3, E.Q. 5 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 18, 2015 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 687 would require the California Air Resources Board (ARB) to develop a carbon-based renewable gas standard (RGS) that requires each gas seller to provide specified percentages of renewable gas to retail end-use customers. Fiscal Impact: First year costs of $1.5 million and ongoing costs of $2.0 million from the Cost of Implementation Account (special) to the Air Resources Board to develop and implement the RGS. Annual ongoing costs of $270,000 from the Energy Resources Program Account (General Fund) to the California Energy Commission (CEC) to develop and implement the RGS and to assist in the development of the lifecycle biogas emissions analysis. One-time contract of $100,000 from the Energy Resources Program Account (General Fund) to the CEC to provide technical SB 687 (Allen) Page 1 of ? assistance with the renewable gas study. Ongoing costs of $350,000 annually to the Public Utilities Reimbursement Account (special) to the California Public Utilities Commission (CPUC) for implementation of the RGS. On-time costs of $160,000 to the Public Utilities Reimbursement Account (special) in FY 2015-16 to the California Public Utilities Commission (CPUC) to develop the information necessary for the ARB to develop the RGS. Unknown impacts to the General Fund and various special funds to the state as a natural gas customer. Background: The California Global Warming Solutions Act of 2006 (referred to as AB 32, HSC §38500 et seq.) requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level, to approve a statewide GHG emissions limit equivalent to that level that will be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with the regulations. All monies, except for fines and penalties, collected pursuant to a market-based mechanism are deposited in the Greenhouse Gas Reduction Fund (GGRF) (Government Code §16428.8). Existing law requires that the GGRF only be used to facilitate the achievement of reductions of GHG emissions consistent with AB 32 (HSC §39710 et seq.). To this end, the Department of Finance, in consultation with the ARB and any other relevant state agencies, is required to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. The investment plan must allocate a minimum of 25% of the funds to projects that benefit disadvantaged communities and to allocate 10% of the funds to projects located within disadvantaged communities. Additionally, the ARB, in consultation with CalEPA, is required to develop funding guidelines for administering agencies receiving allocations of GGRF funds that include a component for how agencies should maximize benefits to disadvantaged communities. 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 SB 687 (Allen) Page 2 of ? renewable energy resources by December 31, 2020. This is known as the Renewable Portfolio Standard (RPS). The California Public Utilities Commission (CPUC) is explicitly authorized to require retail sellers of electricity to procure renewable energy resources in excess of the 33-percent RPS requirement. (Public Utilities Code §399.11 et seq.). The CPUC oversees RPS compliance with IOUs while the California Energy Commission (CEC) oversees POUs. Existing law sets specific eligibility requirements for biomethane contracted after March 29, 2012 in order to qualify as an RPS-eligible source. Proposed Law: This bill would require gas sellers to provide an increasing percentage of renewable gas by a specified schedule. Specifically, this bill would: 1. Define "renewable gas" as gas generated from organic waste or other renewable sources, including electricity generated by an eligible renewable energy resource meeting RPS requirements. 2. Require the ARB, on or before June 30, 2017, and in consultation with CEC and CPUC, to adopt a carbon-based renewable gas standard (RGS) that requires each gas seller to provide certain percentages of renewable gas to retail end-use customers. 3. Requires ARB to require gas sellers to make reasonable progress sufficient to ensure that by the end of the compliance period, the following percentages of renewable gas supplied to retail end-use customers are met: A. 1% by 2019; B. 3% by 2022; C. 5% by 2024; D. 10% by 2029; SB 687 (Allen) Page 3 of ? 4. Requires that renewable gas, to be eligible to count towards the procurement requirements in the bill, must meet at least one of the following conditions: A. the renewable gas is used onsite by an end-use customer in the state; B. the renewable gas is used by an end-use customer in the state and delivered through a dedicated pipeline; C. the renewable gas is delivered to end-use customers in the state through a common carrier pipeline and meets specified requirements. 5. Requires ARB to notify all gas sellers in California of how to comply with the renewable gas standard procurement requirements, and authorizes the State Board of Equalization to supply ARB with specified information to assist in the identification of gas sellers that are not gas corporations. 6. Requires PUC to notify ARB of each gas corporation that provides gas service to end-use customers in the state. 7. Requires ARB to maintain and publicize a list of eligible renewable gas providers. 8. Requires ARB, in consultation with CEC, to adopt a flexible compliance mechanism, such as tradable renewable gas credits, and specifies that if ARB adopts tradable credits, those credits are to be based on the carbon intensity of the renewable gas, give equal value to renewable gas used onsite and renewable gas injected into a common carrier pipeline, and allow for credit banking and borrowing. 9. Requires ARB to consult with CPUC in development of regulations, as they affect gas corporations subject to regulations by CPUC, to implement the RGS, in order to minimize duplicative reporting and regulatory requirements. 10.Require ARB, in consultation with CPUC and CEC, to develop a coordinated investment plan to ensure that moneys made SB 687 (Allen) Page 4 of ? available through the Greenhouse Gas Reduction Fund, or from the Alternative and Renewable Fuel and Vehicle Technology Program, or the Air Quality Improvement Program, are used to reduce the costs to implement the RGS. 11.Requires ARB waive the enforcement of the RGS if it finds that a gas seller has demonstrated specified conditions beyond the control of the gas seller and that prevent compliance. 12.Requires ARB to issue a lifecycle GHG emissions analysis for various biogas types and end uses, and that also includes an assessment of other public health and environmental benefits. 13.Requires CEC to provide an assessment to ARB and the Legislature, on or before January 1, 2018, on the following: A. Opportunities to colocate renewable gas production with existing vehicle fleets and other transportation fueling opportunities; B. Renewable energy production sites that can use renewable gas onsite to reduce fossil fuel gas consumption for electricity generation, heating or cooling, or other purposes; C. Recommendations to reduce the costs of pipeline interconnection for renewable gas projects in the state. Staff Comments: This bill would require significant ARB activity including identifying market and regulatory barriers to implementation, evaluating technical feasibility of biomethane availability, developing life-cycle analysis, and to develop and SB 687 (Allen) Page 5 of ? implement regulations. In all, the ARB anticipates first year costs of $1.5 million followed by on-going costs of $2.0 million. As these activities further the reduction of GHG emissions, ARB anticipates paying for these costs from the Cost of Implementation account which receives revenues from a fee on industries subject to AB 32. The CEC anticipates needing two positions to consult with the ARB in developing the RGS and to assist in the development of lifecycle biogas emissions analysis. The CEC would also have one-time contract costs for technical assistance. Staff notes that the CEC is likely to have additional costs to provide the assessment required by the bill regarding colocation opportunities, certain renewable energy production sites, renewable energy production sites, and recommendations to reduce the cost of pipeline interconnection for renewable gas. Some of this information is addressed in existing CEC reports, but other elements may require additional workload. This bill would require the CPUC to coordinate with the ARB on several fronts and specifically would be required to develop information necessary to assist the ARB in adopting a RGS. The CPUC anticipates needing a new proceeding for this process at a one-time cost of approximately $160,000 in FY 2015-16. Once the information is developed, the CPUC would anticipate ongoing costs to coordinate with the ARB and CEC in implementing the standard. As this bill would intersect with the CPUC's RPS program, it's regulation of natural gas utility service, and CPUC's oversight of AB 32 compliance by electric and natural gas utilities, the CPUC anticipates ongoing costs to be $350,000 annually. The state, as a customer of natural gas and electricity produced from natural gas, may experience additional fiscal impacts depending on how this bill ultimately impacts gas rates, which is unknown and speculative at this time. -- END -- SB 687 (Allen) Page 6 of ?