BILL ANALYSIS
AB 64
Page A
ASSEMBLY THIRD READING
AB 64 (Krekorian)
As Amended May 6, 2009
Majority vote
UTILITIES AND COMMERCE 8-5 NATURAL
RESOURCES 6-3
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|Ayes:|Fuentes, Carter, Fong, |Ayes:|Skinner, Brownley, |
| |Furutani, Huffman, | |Chesbro, |
| |Krekorian, Skinner, | |De Leon, Hill Huffman |
| |Swanson | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Duvall, Tom Berryhill, |Nays:|Gilmore, Knight, Logue |
| |Blakelsee, Fuller, Smyth | | |
| | | | |
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APPROPRIATIONS 12-5
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|Ayes:|De Leon, Ammiano, Charles | | |
| |Calderon, Davis, Fuentes, | | |
| |Hall, John A. Perez, Price, | | |
| |Skinner, Solorio, | | |
| |Torlakson, Krekorian | | |
| | | | |
|-----+----------------------------+--+--------------------------|
|Nays:|Nielsen, Duvall, Harkey, | | |
| |Miller, | | |
| |Audra Strickland | | |
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SUMMARY : Increases California's Renewables Portfolio Standard
(RPS) to require all retail sellers of electricity and all
Publicly Owned Utilities (POUs) to procure at least 33% of
electricity delivered to their retail customers from renewable
resources by 2020. The bill establishes the Energy Planning and
Infrastructure Coordinating (EPIC) committee to develop a
strategic plan to identify and rank renewable energy development
zones along with the needed transmission and distribution
necessary to access those zones. Specifically, this bill:
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1)Requires retail sellers of electricity to procure at least 20%
of electricity delivered to retail customers from renewable
sources by 2010, 25% by 2015, and 33% by 2020.
2)Requires POUs to comply with the same RPS mandates as retail
sellers, requires POUs to meet specified public notice and
reporting requirements, and grants the California Air
Resources Board (CARB) the authority to issue penalties on the
POU if they fail to meet the RPS mandates.
3)Provides that electricity from an out-of-state renewable
facility is not eligible to count toward RPS unless the
electricity is scheduled into California simultaneous to its
seller's retail generation.
4)Requires PUC to establish a cost cap for total above-market
costs (costs that exceed the benchmark price) expended by each
IOU. Provides that the cap shall not exceed an 5% percentage
of retail seller's revenue requirement. If the cost cap is
exceeded the retail seller shall be allowed to limit renewable
procurement to renewable resources that can be procured below
the benchmark price.
5)Permits PUC to waive existing penalty provisions for
non-compliance with the 20% RPS mandate if the PUC finds that
the retail seller has made "commercially reasonable efforts to
procure eligible renewable energy recourses."
6)Eliminates the requirement that PUC create flexible rules of
compliance for renewable procurement requirement beyond 20%.
7)Requires PUC to provide a preference for energy resources that
come from a California supplier when evaluating IOUs'
procurement plans.
8)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.
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9)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.
10)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.
11)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.
12)Grants the CEC the exclusive authority to certify an eligible
renewable resources with a generating capacity of 5 megawatts
(MW) or more.
13)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.
EXISTING LAW :
1)Requires investor-owned utilities (IOUs) and certain other
retail sellers to achieve a 20% RPS by 2010 and establishes a
process and standards for renewable procurement.
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2)Provides that publicly owned utilities (POUs) are not subject
to the same detailed process and standards as IOUs, but are
required to implement and enforce their own RPS programs.
3)Defines eligible renewable technologies to include biomass,
solar thermal, photovoltaic, wind, geothermal, renewable fuel
cells, small hydroelectric (30 MW or less), digester gas,
municipal solid waste conversion, landfill gas, ocean wave,
ocean thermal, and tidal current. Provides that eligible
renewable resources that are located outside of California may
count toward the California RPS if the generator commences
operation after January 1, 2005, and the facility is directly
connected to California's transmission grid or the associated
electricity is delivered to California.
4)Requires PUC to establish a market cost for electricity, the
market-price referent (MPR), in order to determine whether
renewable contracts exceed market costs.
5)Creates a cap on above-market costs of renewable electricity
each IOU is required to spend under RPS. If the cost cap is
reached, IOUs are not required to sign any renewable contract
that exceeds the market cost of electricity.
6)Requires PUC to develop flexible rules for compliance for RPS
that allow a retail seller that cannot not meet its annual
targets to avoid penalties under certain conditions.
7)Requires CEC to certify sufficient sites and related
facilities for the construction and operation of thermal
powerplants of 50 MW and larger.
8)Precludes an electrical corporation from constructing a line,
plant, or system without having first obtained a certificate
from PUC that the present or future public convenience and
necessity require or will require such construction, (a
certificate of public convenience and necessity or CPCN).
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)CEC: the commission's workload for certifying new generating
facilities will increase significantly to accommodate
proposals for renewable facilities exceeding 5MW. Costs would
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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]
2)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.
COMMENTS : According to the authors, the purpose of this bill
is 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.
In 2002, the Legislature approved SB 1078 (Sher), Chapter 516,
Statutes of 2002, which created RPS. Under SB 1078, all retail
sellers of electricity were required to increase their renewable
procurement each year by at least 1% of total sales, so that 20%
of their sales are from renewable energy sources by December 31,
2017. This goal was accelerated to 20% renewable power by 2010
by SB 107 (Simitian), Chapter 464, Statutes of 2006.
PUC reports that, for 2007, IOUs have achieved varying levels of
progress toward the 20% goal: PG&E = 11.4%; SCE =15.7%; SDG&E =
5.2%. While each IOU added renewable resources in 2007, the
percentage of renewables compared to the rest of the portfolio
declined from 2006 due to total load growth. All agencies and
stakeholders agree that IOUs will not meet the 2010 deadline.
However, PUC reported in October 2008 that IOUs should be in
compliance in or around 2013.
Eligible Resources: Current law provides that to count toward
the RPS the renewable electricity must be produced by renewable
the facility that meets several specified requirements including
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that the facility be located in California or deliver its
electricity to California.
The definition of "delivered" in current law was written to
allow an out-of-state renewable generator that wants to serve
California load to comply with CAISO rules that require
out-of-state electricity to be scheduled into California at
specific times and amounts. Since renewable resources like wind
and solar are intermittent, they cannot be scheduled at specific
times and amounts. The intent of the language was for the
renewable energy to come to California at some point and then
offset the need for fossil fuel generation within California.
However, CEC, which sets the eligibility rules, interpreted the
statutory language to allow for transactions where the renewable
electricity never comes to California to count toward RPS.
AB 64 changes the current definition of "delivered" so that the
renewable energy from an out-of-state facility must be scheduled
into California at the same time it was produced by the
out-of-state facility. Additionally, AB 64 changes specific
restrictions on the use of municipal solid waste so that
electricity from new solid waste conversion facilities may count
toward RPS if the facility meets specific environmental
standards.
Cost containment: Current law limits the amount of renewable
electricity an IOU is required to acquire under RPS if the above
market costs of renewable electricity exceeds specified caps.
PUC determines the forecasted market price of electricity on an
annual basis. The market price is referred to as the
market-price referent (MPR).
An IOU must purchase renewable electricity even when the
contract cost exceeds MPR. However, an IOU is required to
acquire this higher-cost renewable electricity only to the
extent that the above-market costs are less than the cost cap.
If the above-market costs exceed the cost cap, then IOUs are not
required to sign any additional contracts that exceed MPR.
However, if there are suitable contracts with costs less than
MPR, IOU would still be required to procure power under those
contracts.
The cost cap itself was not established based on a determination
of the perceived reasonable cost of renewables, ratepayer
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benefits, or tolerable ratepayer impacts. Instead, it was based
on the amount of funds that were to be collected for prior
renewable electricity grant program. Consequently, it is
possible that the cap was set at a level that makes achieving a
20% RPS or a 33% RPS impossible. While the current cost cap has
not been reached, PUC testified at a hearing of the Select
Committee on Renewable Resources that is likely that a
determination will be made in the next month that the cap has
been reached.
AB 64 modifies cost cap process so that it takes into account
more factors and will not be based solely on natural gas. The
bill also sets the cost cap at an 5% of the retail sellers'
gross revenue. The intent of this provision is to determine how
much impact renewable electricity should have on a retail
sellers' overall cost structure and then set the cost cap at
that level by basing it on a percentage of overall revenue.
Publicly Owned Utilities: Current law does not require POUs to
meet the same RPS that other electricity providers are required
to meet. Rather, current law directs each publicly owned
utility to put in place and enforce its own RPS and allows each
publicly owned utility to define the electricity sources that it
counts as renewable. No state agency enforces POU compliance or
places penalties on a publicly owned utility that fails to meet
the renewable energy goals it has set for itself.
AB 64 requires POUs to meet the 33% RPS by 2020 requirement.
The bill also increases public accountability for POUs by
requiring that RPS be established in a public meeting and by
requiring POUs to report some additional information on their
renewable procurement to their customers and to CEC.
Most of POUs do not object to creating a specific POU RPS
mandate. They have argued that requiring a state agency to
impose penalties is both unfair and unnecessary. The POUs argue
that all penalty costs would simply result in a rate increase
for their customers and would not result in helping that POU
actually procure renewable resources. Additionally, the POUs
believe that since their boards are directly accountable to
voters, their voters would remove the board members from office
if the POU were not in compliance with the RPS.
Siting transmission and generation: Current law provides the
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CEC authority to site theremal electric generation facilities
with a capacity of greater than 50 MW. This bill would transfer
the responsibility for siting the less-than-50 MW but more-than
5 MW renewable energy generation facilities from local
governments to the state. Some developers who have had a
relatively easy time getting permitted at the local level do not
like this transfer. Others, however, who have been stifled by
local agencies that lack the experience or resources to
effectively and expeditiously site a renewable generation
facility, appreciate transferring siting to the CEC, which uses
an established and predictable process.
AB 64 establishes the EPIC committee to coalesce the fragmented
generation and transmission siting authorities and to coordinate
often conflicting goals and objectives. By requiring
secretaries of various agencies and the CAISO, it is assumed
that an overarching strategic plan from the EPIC committee might
override the attempt of a lower state office or department to
thwart needed generation or transmission.
To attempt to address a concern that the PUC takes too long to
issue a CPCN for a transmission line, AB 64 requires the PUC to
establish a schedule to review of the application and employ
staffing and other resources sufficient to produce a decision on
whether to issue the certificate or refuse to issue it within 12
months of receiving the completed application.
This provision should be clarified that any resources needed to
implement this section shall be requested during the annual
budget cycle.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083
FN: 0001129