BILL ANALYSIS Ó
SB 1453
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Date of Hearing: June 29, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
SB
1453 (De León) - As Introduced February 19, 2016
SENATE VOTE: 26-10
SUBJECT: Electrical generation: greenhouse gases emission
performance standard
SUMMARY: Requires the California Public Utilities Commission
(CPUC) to disallow an electrical corporation 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 (EPS). Repeals an exemption allowing
Pacificorp to meet the state's EPS through an alternative form
of compliance. Specifically, this bill:
1)Requires the CPUC to review any capital expenditure proposed
by an electrical corporation for baseload generation that does
not comply with the GHG EPS.
2)Directs the CPUC to not allow those costs to be recovered in
rates if:
a) The proposed capital expenditure will materially extend
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the service life of the baseload generation;
b) Cost-effective alternative resources not already owned
or contracted for by the investor-owned utility (IOU) would
provide superior long-term value to customers and satisfy
the GHG EPS; or
c) The accelerated retirement of the baseload generation
unit would promote state and regional goals for the
reduction of emissions of GHGs.
3)Repeals from statute the authorization for an IOU that
provides electric service to 75,000 or fewer customers in
California to file with the CPUC a proposal for alternative
compliance with the state's EPS.
EXISTING LAW:
1)Prohibits any load-serving entity (electrical corporations,
electric service providers, and community choice aggregators)
serving end-use customers in the state, and any local publicly
owned electric utility, from entering into a long-term
financial commitment for baseload generation unless that
baseload generation complies with a GHGs EPS. (Public
Utilities Code Section 8341(a))
2)Allows an electrical corporation that provides electric
service to 75,000 or fewer retail end-use customers in
California to file a proposal at the CPUC for alternative
compliance with this section, which the CPUC may accept if:
a) a majority of the electrical corporation's retail end-use
customers for electric service are located outside of
California; and b) the emissions of GHGs to generate
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electricity for the retail end-use customers of the electrical
corporation are subject to a review by a utility regulatory
commission of at least one other state in which the electrical
corporation provides regulated retail electric service.
((Public Utilities Code Section 8341(d)(9))
3)Requires the CPUC to establish a GHG EPS for all baseload
generation of load-serving entities. (Public Utilities Code
Section 8341(b))
4)Requires the California Energy Commission (CEC) to establish
the GHGs EPS for all baseload generation of local publicly
owned electric utilities. (Public Utilities Code Section
8341(c))
FISCAL EFFECT: Unknown.
COMMENTS:
1)The Greenhouse Gas 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), Chapter 598, Statutes of 2006,
the CEC and the CPUC adopted an EPS of 1,100 pounds of carbon
dioxide per megawatt-hour for baseload generation. This was,
---------------------------
<1>
Source: California Energy Commission Energy Almanac
(http://energyalmanac.ca.gov/electricity/total_system_power.html)
.
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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 publicly-owned utilities (POUs)
from entering into new contracts for coal-fired generation of
electricity or from renewing such contracts.
2)PacifiCorp allowed alternative 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 the 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 a large electric utility serving 1.7 million
customers in six states in the Pacific Northwest and Rocky
Mountain regions. However, PacifiCorp serves approximately
45,000 customers in Northern California. Thus, PacifiCorp is
the only IOU that qualifies for the alternative compliance
provisions. 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.
3)Suggested Amendments: The author may wish to consider
amendments: a) to place this language in a code section
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related to procurement and instead require Pacificorp to file
a plan by December 2017 to eliminate coal-fired generation
from the energy portfolio it provides to its California
customers; b) to authorize the CPUC to establish a schedule
for phasing out coal-fired generation deliveries by 2030; only
allow recovery of costs in rates for capital costs for each
coal-fired generation resource in rates on a pro rata basis
over the estimated operational life of each asset; and if the
estimated operational life extends beyond the date when the
coal-fired generation resource will no longer serve California
customers under the schedule adopted direct the CPUC to allow
recovery of the portion of capital costs associated with the
period of time the plant serves California customers; and if
the coal-fired generation resource ceases operations prior to
its removal from service to California customers under the
adopted schedule any unrecovered reasonable and prudently
incurred costs associated with that coal-fired generation
resource will be determined by the CPUC for rate recovery.
SECTION 1. Section 8341 of the Public Utilities Code is
amended to read:
8341. (a) No load-serving entity or local publicly owned
electric utility may enter into a long-term financial
commitment unless any baseload generation supplied under the
long-term financial commitment complies with the greenhouse
gases emission performance standard established by the
commission, pursuant to subdivision (d), for a load-serving
entity, or by the Energy Commission, pursuant to subdivision
(e), for a local publicly owned electric utility.
(b) (1) The commission shall not approve a long-term financial
commitment by an electrical corporation unless any baseload
generation supplied under the long-term financial commitment
complies with the greenhouse gases emission performance
standard established by the commission pursuant to subdivision
(d).
(2) The commission shall review any capital expenditure
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proposed by an electrical corporation for baseload generation
that does not comply with the greenhouse gases emission
performance standard established by the commission pursuant to
subdivision (d). The commission shall not permit those costs
to be recovered in rates if it finds any of the following to
be 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 electrical corporation would provide
superior long-term value to customers and satisfy the
greenhouse gases emission performance standard.
(C) The accelerated retirement of the baseload generation unit
would promote state and regional goals for the reduction of
emissions of greenhouse gases.
(3) The commission may, in order to enforce this section,
review any long-term financial commitment proposed to be
entered into by an electric service provider or a community
choice aggregator.
(4) The commission shall adopt rules to enforce the
requirements of this section, for load-serving entities. The
commission shall adopt procedures, for all load-serving
entities, to verify the emissions of greenhouse gases from any
baseload generation supplied under a contract subject to the
greenhouse gases emission performance standard to ensure
compliance with the standard.
(5) In determining whether a long-term financial commitment
is for baseload generation, the commission shall consider the
design of the powerplant and the intended use of the
powerplant, as determined by the commission based upon the
electricity purchase contract, any certification received from
the Energy Commission, any other permit or certificate
necessary for the operation of the powerplant, including a
certificate of public convenience and necessity, any
procurement approval decision for the load-serving entity, and
any other matter the commission determines is relevant under
the circumstances.
(6) Costs incurred by an electrical corporation to comply
with this section, including those costs incurred for
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electricity purchase agreements that are approved by the
commission that comply with the greenhouse gases emission
performance standard, are to be treated as procurement costs
incurred pursuant to an approved procurement plan and the
commission shall ensure timely cost recovery of those costs
pursuant to paragraph (3) of subdivision (d) of Section 454.5.
(7) A long-term financial commitment entered into through a
contract approved by the commission, for electricity generated
by a zero- or low-carbon generating resource that is
contracted for, on behalf of consumers of this state on a
cost-of-service basis, shall be recoverable in rates, in a
manner determined by the commission consistent with Section
380. The commission may, after a hearing, approve an increase
from one-half to 1 percent in the return on investment by the
third party entering into the contract with an electrical
corporation with respect to investment in zero- or low-carbon
generation resources authorized pursuant to this subdivision.
(c) (1) The Energy Commission shall adopt regulations for the
enforcement of this chapter with respect to a local publicly
owned electric utility.
(2) The Energy Commission may, in order to ensure compliance
with the greenhouse gases emission performance standard by
local publicly owned electric utilities, apply the procedures
adopted by the commission to verify the emissions of
greenhouse gases from baseload generation pursuant to
subdivision (b).
(3) In determining whether a long-term financial commitment is
for baseload generation, the Energy Commission shall consider
the design of the powerplant and the intended use of the
powerplant, as determined by the Energy Commission based upon
the electricity purchase contract, any certification received
from the Energy Commission, any other permit for the operation
of the powerplant, any procurement approval decision for the
load-serving entity, and any other matter the Energy
Commission determines is relevant under the circumstances.
(d) (1) On or before February 1, 2007, the commission, through
a rulemaking proceeding, and in consultation with the Energy
Commission and the State Air Resources Board, shall establish
a greenhouse gases emission performance standard for all
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baseload generation of load-serving entities, at a rate of
emissions of greenhouse gases that is no higher than the rate
of emissions of greenhouse gases for combined-cycle natural
gas baseload generation. Enforcement of the greenhouse gases
emission performance standard shall begin immediately upon the
establishment of the standard. All combined-cycle natural gas
powerplants that are in operation, or that have an Energy
Commission final permit decision to operate as of June 30,
2007, shall be deemed to be in compliance with the greenhouse
gases emission performance standard.
(2) In determining the rate of emissions of greenhouse gases
for baseload generation, the commission shall include the net
emissions resulting from the production of electricity by the
baseload generation.
(3) The commission shall establish an output-based methodology
to ensure that the calculation of emissions of greenhouse
gases for cogeneration recognizes the total usable energy
output of the process, and includes all greenhouse gases
emitted by the facility in the production of both electrical
and thermal energy.
(4) In calculating the emissions of greenhouse gases by
facilities generating electricity from biomass, biogas, or
landfill gas energy, the commission shall consider net
emissions from the process of growing, processing, and
generating the electricity from the fuel source.
(5) Carbon dioxide that is injected in geological formations,
so as to prevent releases into the atmosphere, in compliance
with applicable laws and regulations shall not be counted as
emissions of the powerplant in determining compliance with the
greenhouse gases emissions performance standard.
(6) In adopting and implementing the greenhouse gases emission
performance standard, the commission, in consultation with the
Independent System Operator shall consider the effects of the
standard on system reliability and overall costs to
electricity customers.
(7) In developing and implementing the greenhouse gases
emission performance standard, the commission shall address
long-term purchases of electricity from unspecified sources in
a manner consistent with this chapter.
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(8) In developing and implementing the greenhouse gases
emission performance standard, the commission shall consider
and act in a manner consistent with any rules adopted pursuant
to Section 824a-3 of Title 16 of the United States Code.
(e) (1) On or before June 30, 2007, the Energy Commission, at
a duly noticed public hearing and in consultation with the
commission and the State Air Resources Board, shall establish
a greenhouse gases emission performance standard for all
baseload generation of local publicly owned electric utilities
at a rate of emissions of greenhouse gases that is no higher
than the rate of emissions of greenhouse gases for
combined-cycle natural gas baseload generation. The greenhouse
gases emission performance standard established by the Energy
Commission for local publicly owned electric utilities shall
be consistent with the standard adopted by the commission for
load-serving entities. Enforcement of the greenhouse gases
emission performance standard shall begin immediately upon the
establishment of the standard. All combined-cycle natural gas
powerplants that are in operation, or that have an Energy
Commission final permit decision to operate as of June 30,
2007, shall be deemed to be in compliance with the greenhouse
gases emission performance standard.
(2) The greenhouse gases emission performance standard shall
be adopted by regulation pursuant to the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code).
(3) In determining the rate of emissions of greenhouse gases
for baseload generation, the Energy Commission shall include
the net emissions resulting from the production of electricity
by the baseload generation.
(4) The Energy Commission shall establish an output-based
methodology to ensure that the calculation of emissions of
greenhouse gases for cogeneration recognizes the total usable
energy output of the process, and includes all greenhouse
gases emitted by the facility in the production of both
electrical and thermal energy.
(5) In calculating the emissions of greenhouse gases by
facilities generating electricity from biomass, biogas, or
landfill gas energy, the Energy Commission shall consider net
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emissions from the process of growing, processing, and
generating the electricity from the fuel source.
(6) Carbon dioxide that is captured from the emissions of a
powerplant and that is permanently disposed of in geological
formations in compliance with applicable laws and regulations,
shall not be counted as emissions from the powerplant.
(7) In adopting and implementing the greenhouse gases emission
performance standard, the Energy Commission, in consultation
with the Independent System Operator, shall consider the
effects of the standard on system reliability and overall
costs to electricity customers.
(8) In developing and implementing the greenhouse gases
emission performance standard, the Energy Commission shall
address long-term purchases of electricity from unspecified
sources in a manner consistent with this chapter.
(9) In developing and implementing the greenhouse gases
emission performance standard, the Energy Commission shall
consider and act in a manner consistent with any rules adopted
pursuant to Section 824a-3 of Title 16 of the United States
Code.
(f) The Energy Commission, in a duly noticed public hearing
and in consultation with the commission and the State Air
Resources Board, shall reevaluate and continue, modify, or
replace the greenhouse gases emission performance standard
when an enforceable greenhouse gases emissions limit is
established and in operation, that is applicable to local
publicly owned electric utilities.
(g) The commission, through a rulemaking proceeding and in
consultation with the Energy Commission and the State Air
Resources Board, shall reevaluate and continue, modify, or
replace the greenhouse gases emission performance standard
when an enforceable greenhouse gases emissions limit is
established and in operation, that is applicable to
load-serving entities.
SECTION 1. Section 454.53 is added to the Public Utilities
Code, to read:
454.53. (a) The requirements of the section apply to an
electrical corporation with a majority of retail customers
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located outside of California and providing electric service
to 75,000 or fewer retail end-use customers in California.
(b) (1) The electrical corporation shall propose, by no later
than December 31, 2017, a schedule for no longer serving its
retail customers located in California with electricity
sourced from any coal-fired generation resources.
(2) The commission shall establish a schedule for removing
each specified coal-fired generation resource from the
portfolio serving California customers. The schedule shall
commence on January 1, 2020, and be completed no later than
December 31, 2030. In determining the schedule, the commission
shall balance environmental goals with rate impacts on
California customers.
(3) The electrical corporation shall submit a procurement plan
consistent with the requirements of Section 454.52 to serve
its California retail customers with a balanced portfolio of
environmentally preferred generation to replace the coal-fired
generation resources that will be phased out pursuant to the
schedule adopted pursuant to paragraph (2).
(4) The electrical corporation shall identify the estimated
remaining operational life for its coal-fired generation
resource capacity used to supply California retail customers.
(c) The commission shall permit the recovery of reasonable and
prudently incurred capital costs for each coal-fired
generation resource in rates on a pro rata basis over the
estimated operational life of each asset. If the estimated
operational life extends beyond the date when the coal-fired
generation resource will no longer serve California customers
under the schedule adopted pursuant to paragraph (2) of
subdivision (b), the commission shall only permit recovery of
the portion of capital costs associated with the period of
time the plant serves California customers. If the coal-fired
generation resource ceases operations prior to its removal
from service to California customers under the schedule
adopted pursuant to paragraph (2) of subdivision (b), any
unrecovered reasonable and prudently incurred costs associated
with that coal-fired generation resource shall be considered
abandoned plant for purposes of any recovery permitted in
retail rates.
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4)Support and Opposition:
Supporters state that this bill is consistent with the state's
evolving climate and energy policy goals and will ensure that
all utilities serving California customers shift to a cleaner
energy mix as rapidly as practicable.
Pacificorp has no position but stated a concern that it should
be allowed to recover costs for safety, environmental or
otherwise required investments in such facilities only to the
extent that those investments would not extend the otherwise
depreciable life of the asset.
5)Prior Legislation:
SB 1368 (Perata), Chapter 598, Statutes of 2006: Requires the
CPUC and CEC, respectively, to establish a GHG EPS applicable
to new long-term financial commitments for baseload
electricity generation of load-serving entities and POUs.
SB 180 (Jackson) of 2015: Defined "peaking" and "nonpeaking"
electricity generation; required establishment of GHG EPSs for
each type of generation; and prohibited long-term financial
commitments with generating sources that do not meet the
emission standards. Died in the Senate Appropriations
Committee.
REGISTERED SUPPORT / OPPOSITION:
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Support
Asian Pacific Environmental Network
California Coastal Protection Network
California League of Conservation Voters
Coalition for Clean Air
Sierra Club California
Vote Solar
Opposition
None on file.
Analysis Prepared by:Sue Kateley / U. & C. / (916)
319-2083
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