Amended in Senate March 28, 2016

Senate BillNo. 1299


Introduced by Senator Hertzberg

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(Coauthors: Assembly Members Dodd and Eduardo Garcia)

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February 19, 2016


An act to amendbegin delete Sectionend deletebegin insert Sections 399.13 andend insert 399.21 of the Public Utilities Code, relating to electricity.

LEGISLATIVE COUNSEL’S DIGEST

SB 1299, as amended, Hertzberg. California Renewables Portfolio Standard Program: renewable energy credits.

The California Renewables Portfolio Standard Program requires the Public Utilities Commission to establish abegin delete rewewablesend deletebegin insert renewablesend insert portfolio standard requiring all retail sellers, as defined, to procure a minimum quantity of electricity products from eligible renewable energy resources, as defined, at specified percentages of the total kilowatthours sold to their retailbegin delete end-customersend deletebegin insert end-use customersend insert during specified compliance periods. The program additionally requires each local publicly owned electric utility, as defined, to procure a minimum quantity of electricity products from eligible renewable energy resources to achieve the targets established by the program.begin insert The program, consistent with the goals of procuring the least-cost and best-fit eligible renewable energy resources that meet project viability principles, requires that all retail sellers procure a balanced portfolio of electricity products from eligible renewable energy resources, as specified, referred to as the portfolio content requirements.end insert The program requires the commission to authorize the use of renewable energy credits to satisfy the renewables portfolio standard procurement requirements, subject to specifiedbegin delete conditions.end deletebegin insert conditions and limitations for unbundled renewable energy credits. One condition placed on renewable energy credits is that they not be created for electricity generated under any electricity purchase contract executed after January 1, 2005, pursuant to the federal Public Utility Regulatory Policies Act of 1978, also known as PURPA.end insert

This bill wouldbegin delete make nonsubstantial revisions to the requirement that the commission authorize the use of renewable energy credits to satisfy the renewables portfolio standard procurement requirements.end deletebegin insert require that renewable energy credits be created for electricity generated under an electricity purchase contract executed after January 1, 2017, pursuant to PURPA, with those credits being owned by the owner of the eligible renewable energy resource unless otherwise agreed to by the owner. The bill would prohibit the commission from requiring, as a condition of entering into an electricity purchase contract pursuant to PURPA, that the generator sell its renewable energy credits to the electrical corporation pursuant to the contract. The bill would provide that when electricity products and the renewable energy credits associated with those electricity products are sold to the same electrical corporation pursuant to 2 or more separate purchase contracts with identical start and end dates, the credits and electricity products would be treated as bundled.end insert

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Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

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Because the provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

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The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

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This bill would provide that no reimbursement is required by this act for a specified reason.

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Vote: majority. Appropriation: no. Fiscal committee: begin deleteno end deletebegin insertyesend insert. State-mandated local program: begin deleteno end deletebegin insertyesend insert.

The people of the State of California do enact as follows:

P3    1begin insert

begin insertSECTION 1.end insert  

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begin insertSection 399.13 of the end insertbegin insertPublic Utilities Codeend insertbegin insert is
2amended to read:end insert

3

399.13.  

(a) (1) The commission shall direct each electrical
4corporation to annually prepare a renewable energy procurement
5plan that includes the matter in paragraph (5), to satisfy its
6obligations under the renewables portfolio standard. To the extent
7feasible, this procurement plan shall be proposed, reviewed, and
8adopted by the commission as part of, and pursuant to, a general
9procurement plan process. The commission shall require each
10electrical corporation to review and update its renewable energy
11procurement plan as it determines to be necessary. The commission
12shall require all other retail sellers to prepare and submit renewable
13energy procurement plans that address the requirements identified
14in paragraph (5).

15(2) Every electrical corporation that owns electrical transmission
16facilities shall annually prepare, as part of the Federal Energy
17Regulatory Commission Order 890 process, and submit to the
18commission, a report identifying any electrical transmission
19facility, upgrade, or enhancement that is reasonably necessary to
20achieve the renewables portfolio standard procurement
21requirements of this article. Each report shall look forward at least
22five years and, to ensure that adequate investments are made in a
23timely manner, shall include a preliminary schedule when an
24application for a certificate of public convenience and necessity
25will be made, pursuant to Chapter 5 (commencing with Section
261001), for any electrical transmission facility identified as being
27reasonably necessary to achieve the renewable energy resources
28procurement requirements of this article. Each electrical
29corporation that owns electrical transmission facilities shall ensure
30that project-specific interconnection studies are completed in a
31timely manner.

32(3) The commission shall direct each retail seller to prepare and
33submit an annual compliance report that includes all of the
34following:

35(A) The current status and progress made during the prior year
36toward procurement of eligible renewable energy resources as a
37percentage of retail sales, including, if applicable, the status of any
38necessary siting and permitting approvals from federal, state, and
P4    1local agencies for those eligible renewable energy resources
2procured by the retail seller, and the current status of compliance
3with the portfolio content requirements of subdivision (c) of
4Section 399.16, including procurement of eligible renewable energy
5resources located outside the state and within the WECC and
6unbundled renewable energy credits.

7(B) If the retail seller is an electrical corporation, the current
8status and progress made during the prior year toward construction
9of, and upgrades to, transmission and distribution facilities and
10other electrical system components it owns to interconnect eligible
11renewable energy resources and to supply the electricity generated
12by those resources to load, including the status of planning, siting,
13and permitting transmission facilities by federal, state, and local
14agencies.

15(C) Recommendations to remove impediments to making
16progress toward achieving the renewable energy resources
17procurement requirements established pursuant to this article.

18(4) The commission shall adopt, by rulemaking, all of the
19following:

20(A) A process that provides criteria for the rank ordering and
21selection of least-cost and best-fit eligible renewable energy
22resources to comply with the California Renewables Portfolio
23Standard Program obligations on a total cost and best-fit basis.
24This process shall take into account all of the following:

25(i) Estimates of indirect costs associated with needed
26transmission investments.

27(ii) The cost impact of procuring the eligible renewable energy
28resources on the electrical corporation’s electricity portfolio.

29(iii) The viability of the project to construct and reliably operate
30the eligible renewable energy resource, including the developer’s
31experience, the feasibility of the technology used to generate
32electricity, and the risk that the facility will not be built, or that
33construction will be delayed, with the result that electricity will
34not be supplied as required by the contract.

35(iv) Workforce recruitment, training, and retention efforts,
36including the employment growth associated with the construction
37and operation of eligible renewable energy resources and goals
38for recruitment and training of women, minorities, and disabled
39veterans.

P5    1(v) (I) Estimates of electrical corporation expenses resulting
2from integrating and operating eligible renewable energy resources,
3including, but not limited to, any additional wholesale energy and
4capacity costs associated with integrating each eligible renewable
5resource.

6(II) No later than December 31, 2015, the commission shall
7approve a methodology for determining the integration costs
8described in subclause (I).

9(vi) Consideration of any statewide greenhouse gas emissions
10limit established pursuant to the California Global Warming
11Solutions Act of 2006 (Division 25.5 (commencing with Section
1238500) of the Health and Safety Code).

13(vii) Consideration of capacity and system reliability of the
14eligible renewable energy resource to ensure grid reliability.

15(B) Rules permitting retail sellers to accumulate, beginning
16January 1, 2011, excess procurement in one compliance period to
17be applied to any subsequent compliance period. The rules shall
18apply equally to all retail sellers. In determining the quantity of
19excess procurement for the applicable compliance period, the
20commission shall retain the rules adopted by the commission and
21in effect as of January 1, 2015, for the compliance period specified
22in subparagraphs (A) to (C), inclusive, of paragraph (1) of
23subdivision (b) of Section 399.15. For any subsequent compliance
24period, the rules shall allow the following:

25(i) For electricity products meeting the portfolio content
26requirements of paragraph (1) of subdivision (b) of Section 399.16,
27contracts of any duration may count as excess procurement.

28(ii) Electricity products meeting the portfolio content
29requirements of paragraph (2) or (3) of subdivision (b) of Section
30399.16 shall not be counted as excess procurement. Contracts of
31any duration for electricity products meeting the portfolio content
32requirements of paragraph (2) or (3) of subdivision (b) of Section
33399.16 that are credited towards a compliance period shall not be
34deducted from a retail seller’s procurement for purposes of
35calculating excess procurement.

36(iii) If a retail seller notifies the commission that it will comply
37with the provisions of subdivision (b) for the compliance period
38beginning January 1, 2017, the provisions of clauses (i) and (ii)
39shall take effect for that retail seller for that compliance period.

P6    1(C) Standard terms and conditions to be used by all electrical
2corporations in contracting for eligible renewable energy resources,
3including performance requirements for renewable generators.begin delete Aend delete
4begin insert Except as provided in paragraph (5) of subdivision (a) of Section
5399.21, aend insert
contract for the purchase of electricity generated by an
6eligible renewable energy resource, at a minimum, shall include
7the renewable energy credits associated with all electricity
8generation specified under the contract. The standard terms and
9conditions shall include the requirement that, no later than six
10months after the commission’s approval of an electricity purchase
11agreement entered into pursuant to this article, the following
12information about the agreement shall be disclosed by the
13commission: party names, resource type, project location, and
14project capacity.

15(D) An appropriate minimum margin of procurement above the
16minimum procurement level necessary to comply with the
17renewables portfolio standard to mitigate the risk that renewable
18projects planned or under contract are delayed or canceled. This
19paragraph does not preclude an electrical corporation from
20voluntarily proposing a margin of procurement above the
21appropriate minimum margin established by the commission.

22(5) Consistent with the goal of increasing California’s reliance
23on eligible renewable energy resources, the renewable energy
24procurement plan shall include all of the following:

25(A) An assessment of annual or multiyear portfolio supplies
26and demand to determine the optimal mix of eligible renewable
27energy resources with deliverability characteristics that may include
28peaking, dispatchable, baseload, firm, and as-available capacity.

29(B) Potential compliance delays related to the conditions
30described in paragraph (5) of subdivision (b) of Section 399.15.

31(C) A bid solicitation setting forth the need for eligible
32renewable energy resources of each deliverability characteristic,
33required online dates, and locational preferences, if any.

34(D) A status update on the development schedule of all eligible
35renewable energy resources currently under contract.

36(E) Consideration of mechanisms for price adjustments
37associated with the costs of key components for eligible renewable
38energy resource projects with online dates more than 24 months
39after the date of contract execution.

P7    1(F) An assessment of the risk that an eligible renewable energy
2resource will not be built, or that construction will be delayed,
3with the result that electricity will not be delivered as required by
4the contract.

5(6) In soliciting and procuring eligible renewable energy
6resources, each electrical corporation shall offer contracts of no
7less than 10 years duration, unless the commission approves of a
8contract of shorter duration.

9(7) In soliciting and procuring eligible renewable energy
10resources for California-based projects, each electrical corporation
11shall give preference to renewable energy projects that provide
12environmental and economic benefits to communities afflicted
13with poverty or high unemployment, or that suffer from high
14emission levels of toxic air contaminants, criteria air pollutants,
15and greenhouse gases.

16(8) In soliciting and procuring eligible renewable energy
17resources, each retail seller shall consider the best-fit attributes of
18resource types that ensure a balanced resource mix to maintain the
19reliability of the electrical grid.

20(b) A retail seller may enter into a combination of long- and
21short-term contracts for electricity and associated renewable energy
22credits. Beginning January 1, 2021, at least 65 percent of the
23procurement a retail seller counts toward the renewables portfolio
24standard requirement of each compliance period shall be from its
25contracts of 10 years or more in duration or in its ownership or
26ownership agreements for eligible renewable energy resources.

27(c) The commission shall review and accept, modify, or reject
28each electrical corporation’s renewable energy resource
29procurement plan prior to the commencement of renewable energy
30procurement pursuant to this article by an electrical corporation.
31The commission shall assess adherence to the approved renewable
32energy resource procurement plans in determining compliance
33with the obligations of this article.

34(d) Unless previously preapproved by the commission, an
35electrical corporation shall submit a contract for the generation of
36an eligible renewable energy resource to the commission for review
37and approval consistent with an approved renewable energy
38resource procurement plan. If the commission determines that the
39bid prices are elevated due to a lack of effective competition among
P8    1the bidders, the commission shall direct the electrical corporation
2to renegotiate the contracts or conduct a new solicitation.

3(e) If an electrical corporation fails to comply with a commission
4order adopting a renewable energy resource procurement plan, the
5commission shall exercise its authority to require compliance.

6(f) (1) The commission may authorize a procurement entity to
7enter into contracts on behalf of customers of a retail seller for
8electricity products from eligible renewable energy resources to
9satisfy the retail seller’s renewables portfolio standard procurement
10requirements. The commission shall not require any person or
11corporation to act as a procurement entity or require any party to
12purchase eligible renewable energy resources from a procurement
13entity.

14(2) Subject to review and approval by the commission, the
15procurement entity shall be permitted to recover reasonable
16administrative and procurement costs through the retail rates of
17end-use customers that are served by the procurement entity and
18are directly benefiting from the procurement of eligible renewable
19energy resources.

20(g) Procurement and administrative costs associated with
21contracts entered into by an electrical corporation for eligible
22renewable energy resources pursuant to this article and approved
23by the commission are reasonable and prudent and shall be
24recoverable in rates.

25(h) Construction, alteration, demolition, installation, and repair
26work on an eligible renewable energy resource that receives
27production incentives pursuant to Section 25742 of the Public
28Resources Code, including work performed to qualify, receive, or
29maintain production incentives, are “public works” for the purposes
30of Chapter 1 (commencing with Section 1720) of Part 7 of Division
312 of the Labor Code.

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Section 399.21 of the Public Utilities Code is amended
34to read:

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399.21.  

(a) The commission, by rule, shall authorize the use
36of renewable energy credits to satisfy the renewables portfolio
37standard procurement requirements established pursuant to this
38article, subject to the following conditions:

39(1) The commission and the Energy Commission shall ensure
40that the tracking system established pursuant to subdivision (c) of
P9    1Section 399.25, is operational, is capable of independently
2verifying that electricity earning the credit is generated by an
3eligible renewable energy resource, and can ensure that renewable
4energy credits shall not be double counted by any seller of
5electricity within the service territory of the WECC.

6(2) Each renewable energy credit shall be counted only once
7for compliance with the renewables portfolio standard of this state
8or any other state, or for verifying retail product claims in this state
9or any other state.

10(3) All revenues received by an electrical corporation for the
11sale of a renewable energy credit shall be credited to the benefit
12of ratepayers.

13(4) Renewable energy credits shall not be created for electricity
14generated pursuant to any electricity purchase contract with a retail
15seller or a local publicly owned electric utility executed before
16January 1, 2005, unless the contract contains explicit terms and
17conditions specifying the ownership or disposition of those credits.
18Procurement under those contracts shall be tracked through the
19accounting system described in subdivision (b) of Section 399.25
20and included in the quantity of eligible renewable energy resources
21of the purchasing retail seller pursuant to Section 399.15.

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22(5) Renewable energy credits shall not be created for electricity
23generated under any electricity purchase contract executed after
24January 1, 2005, pursuant to the federal Public Utility Regulatory
25Policies Act of 1978 (16 U.S.C. Sec. 2601 et seq.). Procurement
26under the electricity purchase contracts shall be tracked through
27the accounting system implemented by the Energy Commission
28pursuant to subdivision (b) of Section 399.25 and count toward
29the renewables portfolio standard procurement requirements of
30the purchasing retail seller.

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31
(5) Renewable energy credits shall be created for electricity
32generated by an eligible renewable energy resource pursuant to
33an electricity purchase contract executed on or after January 1,
342017, pursuant to the federal Public Utility Regulatory Policies
35Act of 1978 (16 U.S.C. Sec. 2601 et seq.), also known as PURPA.
36The renewable energy credit shall be owned by the owner of the
37eligible renewable energy resource unless otherwise agreed to by
38the owner. The commission shall not require, as a condition of
39entering into an electricity purchase contract pursuant to PURPA,
40that the generator sell its renewable energy credits to the electrical
P10   1corporation pursuant to the contract. Electricity products and the
2renewable energy credits associated with those electricity products
3that are sold to the same electrical corporation pursuant to two
4or more separate purchase contracts that contain identical start
5and end dates shall be classified as meeting the portfolio content
6category of paragraph (1) of subdivision (b) of Section 399.16.

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P3   1 7(6) Nothing in the amendments to this article made by the Clean
8Energy and Pollution Reduction Act of 2015 (Chapter 547 of the
9Statutes of 2015) is intended to change commission Decision
1011-12-052 (December 15, 2011), Decision Implementing Portfolio
11Content Categories For The Renewables Portfolio Standard
12Program, regarding the classification of renewable energy credits
13from generation on the customer side of the meter.

9 14(7) A renewable energy credit shall not be eligible for
15compliance with a renewables portfolio standard procurement
16requirement unless it is retired in the tracking system established
17pursuant to subdivision (c) of Section 399.25 by the retail seller
18or local publicly owned electric utility within 36 months from the
19initial date of generation of the associated electricity.

20(b) The commission shall allow an electrical corporation to
21recover the reasonable costs of purchasing, selling, and
22administering renewable energy credit contracts in rates.

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No reimbursement is required by this act pursuant to
24Section 6 of Article XIII B of the California Constitution because
25the only costs that may be incurred by a local agency or school
26district will be incurred because this act creates a new crime or
27infraction, eliminates a crime or infraction, or changes the penalty
28for a crime or infraction, within the meaning of Section 17556 of
29the Government Code, or changes the definition of a crime within
30the meaning of Section 6 of Article XIII B of the California
31Constitution.

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