BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  August 3, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          SB 1425  
          (Pavley) - As Amended August 1, 2016


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill requires CalEPA to enter into contract with The  
          Climate Registry, to develop a voluntary registry of greenhouse  
          gas (GHG) emissions resulting from the water-energy nexus using  
          the best available data.  This bill allows entities  
          participating in the registry to qualify for financial  
          incentives consistent with the AB 32 investment plan.


          FISCAL EFFECT:


           1) Increased ongoing annual costs of approximately $130,000  








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             (1PY) for CalEPA to oversee the development of the voluntary  
             registry (GF or special fund.)


            This bill requires CalEPA to execute a sole source contract  
            with The Climate Registry.  Without the ability to  
            competitively bid a contract for registry services, there may  
            be little control over the overall cost impact. As written, a  
            water-energy registry would be voluntary, thus CalEPA staff  
            would likely work closely with The Climate Registry to engage  
            water-energy stakeholders, train them, and regularly update  
            them on program opportunities and improvement.  

           2) CalEPA estimates annual contracting costs of $250,000 for  
             three years or more (GF or special fund). 

           3) The Climate Registry estimates the following costs (GF or  
             special fund):

             a)   One-time cost totaling between $600,000 and $700,000  
               over two years to convene a multi-stakeholder protocol  
               process to develop a protocol for the water-energy nexus  
               quantification  and build an SAS tool based on the  
               protocol.

             b)   Ongoing annual cost of between $250,000 and $300,000 for  
               software support and maintenance, protocol maintenance and  
               new software modules to incorporate updated protocols.

             c)   Additional miscellaneous annual costs depending upon the  
               number of services and participants ranging between $50,000  
               and $250,000.

            The Climate Registry would likely charge a service or  
            membership fee to water agencies.   It is important to note  
            the AB 32 Cost of Implementation Account may be proposed for  
            the purposes of this bill, however it is a fund derived from  
            fees on covered entities and may not be appropriate for this  
            purpose.








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          COMMENTS:


          1)Purpose. According to the author, this bill establishes a  
            voluntary emissions repository for projects that reduce the  
            carbon intensity of California's water system.  This new  
            registry will allow entities such as water agencies, large  
            water consumers, businesses and others to voluntarily track,  
            measure, and baseline their GHG emissions resulting from the  
            water-energy nexus.
            


          2)Water-Energy Nexus.  According to the California Energy  
            Commission (CEC), water-related energy use in California  
            consumes approximately 20% of the state's electricity and 30%  
            of the state's non-power plant natural gas.  The water sector  
            uses electricity to pump, treat, transport, deliver, and heat  
            water.  


            Electric utilities are required to disclose the sources of the  
            electricity they sell. However, this requirement does not  
            extend to water utilities that do not also provide retail  
            electricity. An April 2015 report from the Union of Concerned  
            Scientists titled, Clean Energy Opportunities in California's  
            Water Sector, found that although some water and wastewater  
            utilities independently report the sources of their  
            electricity, the information is not compiled in a standardized  
            format or updated on a regular schedule across the water  
            sector. 


            Because of this data gap, the report states that: 1) it is  
            difficult to get a clear picture of the amount and type of  
            electricity California's water and wastewater utilities rely  
            on; and 2) this information gap makes it difficult to  








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            understand how the water sector's electricity choices impact  
            global warming emissions and the state's efforts to  
            decarbonize the electricity sector.


          3)The Climate Registry and its Predecessor.  SB 1771 (Sher,  
            Chapter 1018, Statutes of 2006) required the Secretary of the  
            Resources Agency to establish the California Climate Action  
            Registry as a public benefit nonprofit corporation that would  
            record and register voluntary GHG emission reductions made by  
            California entities after 1990.  Following the enactment of  
            the Global Warming Solutions Act of 2006 (AB 32, Chapter 488,  
            Statutes of 2006) and the mandatory GHG registration  
            requirements, The California Climate Action Registry closed in  
            December 2010.  The Climate Registry formed as the successor  
            agency. It is a nonprofit organization, whose board of  
            directors comprises over 50 representatives from U.S. states  
            and Canadian provinces and territories.  The Climate Registry  
            offers tools and services for organizations to measure, verify  
            and report the carbon in their operations.   According to the  
            author, the registry is already doing much of the work  
            outlined in the bill.


          4)Suggested Clarification.  This bill allows registrants to  
            qualify for incentives to reduce GHG emissions consistent with  
            the AB 32 investment plan.  The author may wish to consider an  
            amendment that clarifies registrants must also meet all other  
            requirements of incentive programs and are not given funding  
            priority by participating in the registry.





          Analysis Prepared by:Jennifer Galehouse / APPR. / (916)  
          319-2081










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