BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: SB 1453
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|Author: |De León |
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|Version: |2/19/2016 |Hearing |4/20/2016 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Rebecca Newhouse |
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SUBJECT: Electrical generation: greenhouse gases emission
performance standard
ANALYSIS:
Existing law:
1) Requires California Public Utilities Commission (CPUC), by
February 1, 2007, in consultation with California Energy
Resources Conservation and Development Commission (CEC) and
the California Air Resources Board (ARB), to establish a
greenhouse gas (GHG) emission performance standard for all
baseload generation of load-serving entities at a rate of
emissions of GHG that is no higher than the rate of emissions
of GHGs for combined-cycle natural gas baseload generation.
2) Requires CEC, by June 30, 2007, in consultation with CPUC and
the ARB, to establish a GHG emission performance standard for
all baseload generation of publicly owned utilities (POU) at
a rate of emissions of GHG that is no higher than the rate of
emissions of GHGs for combined-cycle natural gas baseload
generation.
3) Prohibits a load-serving entity, or a POU, from entering into
a long-term financial commitment for baseload electricity
generation unless that generation complies with the GHG
emission performance standard.
4) Directs the CEC and the CPUC, each in consultation with ARB,
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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 Investor Owned Utility (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
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 PUC to review any capital expenditure proposed by an
IOU for baseload generation that does not comply with the GHG
emission performance standard and directs PUC to not allow
those costs to be recovered in rates if any of the following
are true:
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.
c) The accelerated retirement of the baseload generation
unit would promote state and regional goals for the
reduction of emissions of GHGs.
Background
1) SB 1368 and Coal-Generated Electricity. In the early
2000's, coal-fired powerplants supplied about one-fifth of
the electricity consumed in California, with about half of
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that from coal imports.
From 2007 to 2012, coal energy imports declined by 18%, and
energy from in-state coal and petroleum (pet) coke plants
declined by 62%.
According to a CEC report on current and expected coal use
updated in November of 2014, "Coal-based energy supplies
totaled 23,323 gigawatt hours (GWh) in 2012, equal to about
8% of the statewide energy requirements to serve California
loads. Nearly all these energy imports are tied to long-term
utility power purchase agreements, ownership interests or
procurement contracts, some of which have been in place for
decades. Publicly owned utilities in Southern California have
most of the long-term contracts with out-of-state coal
plants." Specifically, of the coal energy imports in 2012,
the largest share, 44% went to Los Angeles Department of
Water and Power, followed by 24% to Southern California
Edison, 7% to Anaheim, and 5% to California Department of
Water Resources.
"The supply of coal-fired energy procured by California
utilities from out-of-state plants or generated in California
by coal and pet coke plants is expected to decline by 38%
between 2012 and 2022. In these years, associated greenhouse
gas emissions are expected to drop from about 23.8 million
metric tons (MMT) of carbon dioxide equivalent (CO2e) to 14.8
million metric tons."
According to CEC, this decline in coal contract deliveries is
due in large part to the constraints imposed by the emission
performance standard (EPS) created by SB 1368 (Perata,
Chapter 598, Statutes of 2006).
Specifically, SB 1368 (Perata, Chapter 598, Statutes of 2006)
required CEC and PUC to adopt a greenhouse gas EPS for
baseload electricity generation and prohibits the state's
utilities from entering into long-term financial commitments
unless the baseload generation supplied under the long-term
financial commitment complies with the GHG emission
performance standard. SB 1368 required the EPS to be capped
at a rate of GHG emissions that did not exceed the rate of
GHG emitted by a natural gas-fired combined-cycle powerplant
used for baseload generation.
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Pursuant to SB 1368, the GHG emission performance standard
was set at 1,100 pounds of carbon dioxide (CO2) per
megawatt-hour (MWh) by PUC and CEC. Since all existing
contracts with coal-fired generating facilities provide
baseload energy supplies that exceed emissions limits defined
by the EPS (on average, coal combustion releases
approximately 2,250 pounds of carbon dioxide into the
atmosphere for each MWh generated), as these contracts
expire, they cannot be renewed or extended with another
long-term contract.
2) Alternative compliance under SB 1368. SB 1368 allows an IOU
that meets certain criteria to file a proposal for
alternative compliance with the EPS. The law permits PUC to
accept the proposal if a majority of the IOU's customers are
located outside of California and 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. PacifiCorp is a large electric utility serving
1.8 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.
SB 1453 would eliminate the alternative compliance option,
and require all IOUs operating in California to comply with
PUC's established emissions performance standard for GHG
emissions. This has the result of prohibiting PacifiCorp from
extending or renewing contracts for coal-fired electricity.
Additionally SB 1453 ensures costs associated with extending
the life of coal-fired powerplants are not born by the
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ratepayers. Specifically, the bill requires that any
proposed capital expenditures for baseload generation that do
not comply with the emissions performance standard for GHGs
(i.e., coal powerplants) be reviewed by PUC, and prohibits
PUC from allowing costs associated with the capital
expenditure be recoverable by rates if the proposal will
extend the life of the noncompliant baseload generation,
there are other viable options that comply with the GHG
emission performance standard, or retirement of the baseload
generation would advance state and regional GHG goals.
Comments
1) Purpose of Bill. 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 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 to extend the life of its
coal fleet to the detriment of California's policy goals and,
potentially, at the expense of California ratepayers.
Related/Prior Legislation
SB 180 (Jackson, 2015) would have defined "peaking" and
"nonpeaking" electricity generation, required establishment of
GHG emission performance standards for each type of generation
and 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.
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
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POUs.
DOUBLE REFERRAL:
This measure was heard in Senate Energy, Utilities and
Communications Committee on April 5, 2016, and passed out of
committee with a vote of 7-0.
SOURCE: Author
SUPPORT:
Asian Pacific Environmental Network
California Coastal Protection Network
Coalition for Clean Air
Sierra Club California
The Utility Reform Network
Vote Solar
OPPOSITION:
None received
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