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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