BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1453|
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THIRD READING
Bill No: SB 1453
Author: De León (D), et al.
Introduced:2/19/16
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 7-0, 4/5/16
AYES: Hueso, Hertzberg, Hill, Lara, Leyva, McGuire, Pavley
NO VOTE RECORDED: Morrell, Cannella, Gaines, Wolk
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-1, 4/20/16
AYES: Wieckowski, Hill, Jackson, Leno, Pavley
NOES: Gaines
NO VOTE RECORDED: Bates
SENATE APPROPRIATIONS COMMITTEE: 5-1, 5/16/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NOES: Nielsen
NO VOTE RECORDED: Bates
SUBJECT: Electrical generation: greenhouse gases emission
performance standard
SOURCE: Author
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
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compliance.
ANALYSIS: Existing law, pursuant to Public Utilities Code Section
8340 et seq.:
1)Prohibits a load-serving entity - IOU, electric service provider
and community choice aggregator - 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. 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. Existing 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
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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 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. (California Energy Commission Energy
Almanac (http://energyalmanac.ca.gov/electricity/
total_system_power.html.) Following passage of SB 1368 (Perata,
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Chapter 598, Statutes of 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.
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.
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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.
Prior/Related Legislation
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 (1) 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
the Senate Energy, Utilities, and Communications Committee on a
vote of eight to three and ultimately was held on suspense by
Senate Appropriations Committee.
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FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
Approximately $131,000 (Public Utilities Commission Utilities
Reimbursement Account to the CPUC) for staffing costs.
Minor and absorbable costs to the ARB.
SUPPORT: (Verified5/17/16)
Asian Pacific Environmental Network
California Coastal Protection Network
California League of Conservation Voters
Coalition for Clean Air
Sierra Club California
The Utility Reform Network
Vote Solar
OPPOSITION: (Verified5/17/16)
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.
Prepared by: Jay Dickenson / E., U., & C. / (916) 651-4107
5/18/16 16:28:12
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