BILL ANALYSIS
AB 64
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Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 64 (Krekorian) - As Amended: May 6, 2009
Policy Committee: UtilitiesVote:8-5
Natural Resources 6-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill increases the state's Renewable Portfolio Standards
(RPS) goal to 33% by 2020 and generally recasts the existing RPS
statute. Specifically, this bill:
1)Maintains the existing 20% by 2010 RPS target and adds the
following targets: 25% by 2015 and 33% by 2020. These
targets apply to the investor-owned utilities (IOUs),
publicly-owned utilities (POUs), energy service providers, and
community choice aggregators.
2)Eliminates the eligibility of out-of-state resources that are
not "simultaneously scheduled to meet anticipated in-state
load.
3)Modifies the Public Utility Commission's (PUC's) penalty
authority to authorize the PUC to waive penalties for failure
to meet the 20 % by 2010 target, if the PUC determines that a
"commercially reasonable" effort has been made to comply.
4)Revises the criteria and renames the benchmark price used to
gauge the reasonableness of renewable energy contracts.
Comparison to new generating facilities is deleted and value
of carbon and other emission reductions is added.
5)Repeals existing above-market fund and cost cap provisions and
establishes a new and significantly higher cap on above-market
costs-5% of each IOU's revenue requirement.
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6)Requires POUs to file specified information regarding
renewable contracts with the California Energy Commission
(CEC), and authorizes the Air Resources Board (ARB) to impose
penalties pursuant to AB 32 upon a determination by the CEC
that a POU has failed to comply with the RPS targets.
7)Establishes the Energy Planning and Infrastructure
Coordinating (EPIC) committee, to be co-chaired by the
President of the PUC and the Chair of the CEC or their
designees, and to include the Secretaries of Resources and of
Environmental Protection, the Chair of the Independent System
Operator (ISO), and non-voting members designated by the
Assembly Speaker and the Senate Rules Committee, and other
ex-officio representatives of local and federal agencies as
designated by the committee.
8)Requires the EPIC Committee to develop a strategic plan to
achieve the RPS targets, including:
a) Evaluating the state's renewable energy resources and
the transmission and distribution needs to integrate those
resources.
b) Designating and ranking renewable energy development
(RED) zones with high concentrations of high-quality
renewable resources.
c) Designating and ranking transmission corridors to
deliver electricity from the RED zones.
9)Requires the EPIC Committee to also: identify regulatory
challenges, suggest statutory changes to achieving RPS
targets, identify duplicative steps in the siting and
environmental review process, facilitate coordinated permit
and certification review agreements among state agencies, and
direct the CEC to prepare a program environmental impact
report (EIR) for each RED zone.
10)Requires the CEC to update its strategic plan for
transmission infrastructure to incorporate achieving the
state's RPS targets, consistent with the EPIC Committee's
strategic plan.
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11)Grants the CEC the exclusive authority to certify an eligible
renewable resource with a generating capacity of 5 megawatts
(MW) or more.
12)Requires the PUC, for an application to construct or modify a
transmission line intended mainly for generation from eligible
renewable energy resources, to employ resources sufficient to
produce a decision within 12 months of receiving a complete
application.
FISCAL EFFECT
CEC : The commission's workload for certifying new generating
facilities will increase significantly to accommodate proposals
for renewable facilities exceeding 5MW. Costs would depend on
the number of proposals submitted for certification. The CEC
estimates three positions per project and 25 projects annually,
or a total of 75 positions at a special fund cost of $10
million. [Energy Resources Programs Account]
The CEC also anticipates contract costs of $3.5 million to
prepare program EIRs for each RED zone and for related planning
activities. [Energy Resources Programs Account]
PUC : The commission states that meeting the 33% by 2020 goal
"will require an infrastructure build-out on a scale and
timeline perhaps unparalleled anywhere in the world." Ongoing
special fund costs [Public Utilities Reimbursement Account] of
$1.2 million for 10 positions as follows:
Three additional regulatory analyst positions to implement the
new RPS goal design and implement the appropriate policies,
review a significant increase in power purchase agreements,
revamp the state's procurement and transmission planning
process, and calculate program costs for purposes of applying
the cost cap.
Up to seven additional positions associated with an anticipated
four to six major new transmission projects and with reducing
project permitting time to 12 months (from the current average
of 18 months).
Other costs, such as providing support to the EPIC Committee,
are absorbable.
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COMMENTS
1)Purpose . According to the authors, this bill is intended to
increase the amount of electricity procured from renewable
generation sources to reduce greenhouse gas emissions, improve
public health and air quality, stimulate economic development
by encouraging innovation in energy technologies and creating
new employment opportunities in California, and increase fuel
diversity to promote greater stability and predictability in
electricity process for consumers.
2)Background . The RPS requires IOUs and certain other retail
energy providers, collectively referred to as "retail
sellers," to buy renewable electricity to the extent funds are
available to pay for any costs exceeding a market price set by
the PUC. Each IOU is required to increase its renewable
procurement each year by at least one percent of total sales,
so that 20% of its sales are from renewable energy sources by
December 31, 2010. The PUC is required to adopt comparable
requirements for direct access energy service providers and
community choice aggregators.
The RPS requires the PUC to adopt processes for determining
market prices, ranking renewable bids according to cost and
fit, flexible compliance rules and standard contract terms.
The RPS requires investor-owned utilities to offer contracts
of at least 10 years, unless the PUC approves shorter
contracts. This is intended to support the development of new
renewable resources.
The original RPS bill, SB 1078 (Sher)/Chapter 516 of 2002, set
a goal of 20% by 2017. SB 107 (Simitian)/Chapter 464 of 2006,
accelerated the deadline for 20% to 2010. Nearly seven years
after the RPS was enacted, the IOUs have not advanced very far
beyond their 2002 average starting point of 12% renewable
energy generation, are not on pace to achieve 20% by 2010, and
are planning to use flexible compliance rules to delay
attainment of 20% until 2013.
According to the PUC, as of 2007, the IOUs have achieved the
following levels of progress to the statutory goal: PG&E -
11.4%; SCE -15.7%; SDG&E - 5.2%. While each IOU added
renewable resources in 2007, the percentage of renewable
energy compared to the rest of the portfolio declined from
2006 due to total load growth. Recent renewable solicitations
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by IOUs indicate that increasing prices for renewable energy
may exhaust the funds set aside to pay above-market costs
before the 20% target is achieved.
3)Cost cap . This bill establishes a new limitation for
above-market costs for IOU renewable procurement - 5% of the
IOU's revenue requirement. Based on PUC data, for the three
largest IOUs, 5% of the 2008 revenue requirement equals
approximately: PG&E - $548 million; SCE - $582 million; SDG&E
- $149 million. Thus, a rough estimate of the total cost cap
for all three IOUs is $1.28 billion at 2008 revenues, between
four and eight times the amount set aside for above-market
costs under current law, depending on the accounting method.
4)Opposition . Sempra Energy is opposed unless amended to
address the following concerns: (a) the lack of comparable,
(b) stringent compliance rules for POUs; the creation of a
specific, arbitrary cost cap in statute rather than through a
PUC proceeding; (c) the apparent lack of flexible compliance
rules for the 2015 and 2020 targets; and (d) inadequate
provisions for procuring out-of-state renewable resources in
order to meet the targets. At the time this analysis was
written, the committee had not heard from other parties, but
notes that for the prior committee's hearing, several other
parties were seeking amendments.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081