BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 1453 Hearing Date: 4/5/2016
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|Author: |De León |
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|Version: |2/19/2016 As Introduced |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Electrical generation: greenhouse gases emission
performance standard
DIGEST: This bill requires the California Public Utilities
Commission (CPUC) to not allow an investor-owned electrical
utility (IOU) to recover in rates the cost of any capital
expenditure for baseload generation that does not comply with
California's greenhouse gas (GHG) emission performance standard.
This bill also repeals existing statute that effectively allows
the Pacific Corp electrical utility, with CPUC permission, to
meet the state's emission performance standard through an
alternative form of compliance.
ANALYSIS:
Existing law:
Public Utilities Code §8340 et seq.:
1.Prohibits a load-serving entity - IOU, electric service
provider (ESP) and community choice aggregator (CCA) - or a
local publicly-owned utility (POU) from entering into a
long-term financial commitment for baseload electricity
generation - meaning either a new ownership investment in
baseload generation or a new or renewed contract with a term
of five or more years for such generation - unless that
generation complies with a GHG emission performance standard.
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Existing law directs the CPUC and the California Energy
Commission (CEC) to establish the GHG emission performance
standard applicable to load-serving entities and POUs,
respectively.
2.Requires the CPUC, by February 1, 2007, in consultation with
the CEC and the California Air Resources Board (ARB), to
establish a GHG emission performance standard for all baseload
generation of load-serving entities and POUs at a rate of
emissions of GHG that is no higher than the rate of emissions
of such gases for combined-cycle natural gas baseload
generation. Current law defines "baseload generation" as
electricity generation from a powerplant that is designed and
intended to provide electricity at an annualized plant
capacity factor of at least 60 percent.
3.Requires the CEC, by June 30, 2007, in consultation with the
CPUC and the ARB, to establish a GHG emission performance
standard for all baseload generation of POU at a rate of
emissions of GHG that is no higher than the rate of emissions
of such gases for combined-cycle natural gas baseload
generation. Statute makes requirements of the CEC in relation
to its adoption of the emission performance standard with
powers and responsibilities regarding its emission performance
standard and the POUs that largely parallel the CPUC's powers
and responsibilities regarding its emission performance
standard and the load-serving entities.
4.Directs the CEC and the CPUC, each in consultation with ARB,
to reevaluate and continue, modify, or replace the GHG
emission performance standard once an enforceable standard is
in place for POUs and load-serving entities, respectively.
5.Authorizes an IOU that provides electric service to 75,000 or
fewer customers in California to file with CPUC a proposed
alternative for compliance with the emission performance
standard. The CPUC may accept upon a showing that (a) the IOU
customers are located outside of California and (b) the
emissions of GHGs to generate electricity for the IOU
customers are subject to review by the utility regulatory
commission of at least one other state in which the IOU
provides regulated retail electric service.
This bill:
1.Repeals from statute the authorization for an IOU that
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provides electric service to 75,000 or fewer customers in
California to file with CPUC a proposal for alternative
compliance with the state's emission performance standard.
2.Requires CPUC to review any capital expenditure proposed by an
IOU for baseload generation that does not comply with the GHG
emission performance standard. Directs CPUC to not allow
those costs to be recovered in rates if (a) the proposed
capital expenditure will materially extend the service life of
the baseload generation; (b) cost-effective alternative
resources not already owned or contracted for by the IOU would
provide superior long-term value to customers and satisfy the
GHG emission performance standard or (c) the accelerated
retirement of the baseload generation unit would promote state
and regional goals for the reduction of emissions of GHGs.
Background
The GHG Emission Performance Standard. In the early 2000s,
coal-fired powerplants supplied about one-fifth of the
electricity consumed in California.<1> Following passage of SB
1368 (Perata, 2006), the CEC and the CPUC adopted an emission
performance standard (EPS) for baseload electricity generation,
meaning generation from a powerplant designed and intended to
provide electricity of at least 60 percent the powerplant's
capacity. The two agencies set the standard at an emissions
rate of 1,100 pounds of carbon dioxide (CO2) per megawatt-hour
(MWh). This was, according to the agencies' calculations, a
rate that did not exceed the rate of GHG emitted by a natural
gas-fired combined-cycle powerplant used for baseload
generation, the standard established by SB 1368.
The effect of the EPS was to prevent the state's retail sellers
of electricity and POUs from entering into new contracts for
coal-fired generation of electricity or from renewing such
contracts. In 2012, the CEC concluded the EPS had:
Successfully prevented new long-term investments by
California utilities in high-emitting baseload resources,
such as coal facilities.
Encouraged the early divestiture of existing high-GHG
emitting baseload resources.
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<1> Source: California Energy Commission Energy Almanac
(http://energyalmanac.ca.gov/electricity/total_system_power.html)
.
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In 2013, coal-fired powerplants supplied less than eight percent
of the electricity consumed in California. Coal should provide
even less of California's power in coming years as older
contracts for coal-generated electricity expire.
PacifiCorp allowed alternative to emission performance standard.
SB 1368 allows an IOU that meets certain criteria to file with
the CPUC a proposal for alternative compliance with the EPS.
The law permits CPUC to accept the proposal if (a) a majority of
the IOU's customers are located outside of California and (b)
the emissions of GHGs to generate electricity for the IOU
customers are subject to review by the utility regulatory
commission of at least one other state in which the IOU provides
regulated retail electric service. This alternative compliance
option applies to any IOU that serves 75,000 or fewer customers
in California.
PacifiCorp is large electric utility - it serves 1.7 million
customers in six states in the Pacific Northwest and Rocky
Mountain regions. However, PacifiCorp serves approximately only
45,000 customers in Northern California. Thus, PacifiCorp is
the only IOU that qualifies for the alternative compliance
provisions of SB 1386. The rationale for the PacifiCorp's'
special treatment is that the IOU has a much smaller customer
base over which PacifiCorp could spread the costs of compliance
than do the state's larger IOUs. In addition, a large portion
of PacifiCorp's' California customers are low income.
Bill proponents argue it is time to end PacifiCorp's treatment
under the emission performance statute." They note that, today,
and unlike other California IOUs, PacifiCorp's receives most of
its electricity from coal-fired powerplants that cannot meet
California's emission performance standard. In addition,
proponents complain of PacifiCorp's' efforts at the CPUC to
recover in rates the costs associated with capital investments
in coal-fired power generation. Proponents argue this bill will
end a "loophole," which allows PacifiCorp's to extend the life
of its coal fleet to the detriment of California's policy goals
and, potentially, at the expense of California ratepayers.
Double-referred. Should this bill be approved by this
committee, it has been referred to the Senate Committee on
Environmental Quality.
Prior/Related Legislation
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SB 1368 (Perata, Chapter 598, Statutes of 2006) required CPUC
and CEC, respectively, to establish a GHG emission performance
standard applicable to new long-term financial commitments for
baseload electricity generation of load-serving entities and
POUs.
SB 180 (Jackson, 2015) would have defined "peaking" and
"nonpeaking" electricity generation, (2) required establishment
of GHG emission performance standards for each type of
generation and (3) prohibited long-term financial commitments
with generating sources that do not meet the emission standards.
The bill passed this committee on a vote of eight to three and
ultimately was held on suspense by Senate Committee on
Appropriations.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
Coalition for Clean Air
Sierra Club California
The Utility Reform Network
Vote Solar
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: Proponents argue the changes in SB 1453
are necessary to ensure consistent application of California's
GHG policies to all utilities operating in the state. They also
contend this bill protects California ratepayers from having to
pay the capital costs of PacifiCorp's' coal-fired powerplants
located in other Western states.
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