BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 64|
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THIRD READING
Bill No: AB 64
Author: Krekorian (D) and Bass (D), et al
Amended: 6/23/09 in Senate
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 6-5, 7/7/09
AYES: Padilla, Corbett, Kehoe, Lowenthal, Simitian,
Wiggins
NOES: Benoit, Calderon, Cox, Strickland, Wright
SENATE APPROPRIATIONS COMMITTEE : 8-5, 8/27/09
AYES: Kehoe, Corbett, Hancock, Leno, Oropeza, Price, Wolk,
Yee
NOES: Cox, Denham, Runner, Walters, Wyland
ASSEMBLY FLOOR : 44-31, 6/3/09 - See last page for vote
SUBJECT : Energy: renewable energy resources
SOURCE : Author
DIGEST : This bill increases Californias Renewables
Portfolio Standard to require all retail sellers of
electricity and all publicly-owned utilities to procure at
least 33 percent of electricity delivered to their retail
customers from renewable resources by 2020. The bill
establishes the Energy Planning and Infrastructure
Coordinating Committee to develop a strategic plan to
identify and rank renewable energy development zones along
with the needed transmission and distribution necessary to
CONTINUED
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access those zones.
ANALYSIS :
I. 33 Percent Renewables Portfolio Standard (RPS)
Current law requires investor-owned utilities (IOUs) and
energy service providers (ESPs) (also defined as retail
sellers) to increase their existing purchases of
renewable energy by one percent of sales per year such
that 20 percent of their retail sales, as measured by
usage, are procured from eligible renewable resources by
December 31, 2010. This is known as the Renewables
Portfolio Standard (RPS).
Current law exempts publicly owned utilities (POUs) from
the RPS program and instead requires these utilities to
implement and enforce their own renewable energy
purchase programs that recognize the intent of the
Legislature to encourage increasing use of renewable
resources.
This bill requires IOUs, POUs and ESPs to increase
purchases of renewable energy such that at least 23
percent of electricity delivered to retail customers is
from a renewable energy resource by 2014, 27 percent by
2017, and 33 percent by 2020. IOUs and ESPs would still
be required to meet the 20 percent by 2010 mandate. A
new firm requirement of 20 percent by 2010 would be
required of the POUs.
This bill generally requires that the IOUs follow
existing planning, procurement, and cost containment
laws (Section 399.11 et seq. of the Public Utilities
Code) until each IOU reaches its 20 percent RPS goal, at
which time new provisions would trigger (proposed
Section 950 et seq. of the Public Utilities Code).
II. Cost Containment
Current law requires the Public Utilities Commission
(PUC) to develop, by rulemaking, a procurement process
for renewable resources by IOUs which includes the
determination of a benchmark for the market price
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(market price referent or MPR) of electric generation
against which renewable contracts are evaluated for
reasonableness in price. If the generation costs of
those contracts exceed the MPR those costs are
collectively measured against specified thresholds which
if exceeded relieve the IOU's of contracting for
additional renewable generation at costs above the MPR
(also known as cost cap).
This bill modifies the calculation of the MPR, now cast
as the "benchmark price," to also include the value of
reducing emissions of greenhouses gases and the value of
increasing the diversity of electricity generation.
This bill prohibits the PUC from presuming an RPS
contract is reasonable if its cost is less than the
benchmark price and is the sole basis for determining
whether a contract is just and reasonable.
This bill suspends a retail seller's obligation to
procure renewable resources if the costs of contracts
above the benchmark price collectively exceed five
percent of the retail sellers "total system annual
revenue requirements." Procurement above benchmark
prices could continue at the option the retail seller
subject to PUC approval.
III. Delivery/Renewable Energy Credits (RECs)
Current law requires renewable resources to be generated
in, or delivered to, the California grid.
This bill defines delivery and delivered to mean that
electricity from a renewable resource is used to serve
California customers or is simultaneously scheduled to
meet anticipated in-state load.
Current law defines electric generation resources that
are eligible to be counted toward the 20 percent RPS
mandate.
This bill defines an eligible renewable resource to
include an unlimited number of renewable energy credits
for resources if procured prior to January 1, 2010, and
were previously determined as eligible by the California
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Energy Commission (CEC).
IV. Enforcement
Current law requires the PUC to assess penalties on a
retail seller which fails to reach its RPS obligations
but allows waiver of the penalties under certain
conditions.
This bill permits the PUC to waive compliance penalties
if it determines that the retail seller has made a
reasonable effort to meets its RPS obligations or has
made investments in energy efficiency that have resulted
in significantly less demand for electricity.
V. Miscellaneous
This bill directs the PUC to provide a preference to
contracts for eligible renewable resources for
California suppliers.
This bill requires the PUC to report to the Legislature
every two years on the status and progress of achieving
the 33 percent RPS.
This bill directs the CEC to implement the RPS law so
that it is compatible with and does not preclude the
installation of 4,000 megawatt electrical generation
from combined heat and power systems.
VI. POUs
This bill requires POUs to adopt a program to procure 33
percent of retail electric sales from renewable
resources and to disclose to the public and the CEC when
it will deliberate its RPS procurement plan, its status
and further plans under specified timelines and with
specified details. An additional annual report is
required to its customers and the CEC on the
expenditures, resource mix and progress toward meeting
the RPS.
This bill suspends the requirement of a POU to procure
additional renewable resources in any three-year period
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that the POU's costs exceed its total system annual
revenue requirements.
This bill exempts the Trinity Public Utility District
from compliance with the RPS and makes specific
accommodations for the Truckee Donner Public Utility
District.
This bill directs the CEC, if it determines that a POU
has failed to comply with the RPS, to refer a POU to the
Air Resources Board (ARB) so that it may impose
penalties for failure to comply.
VII. Transmission/Siting
This bill creates the Energy Planning and Infrastructure
Coordinating Committee (EPIC) comprised of the President
of the PUC, Chair of the CEC, Secretaries of the
Environmental Protection Agency and the Resources
Agency, and Chair of the Independent System Operator
(ISO) as voting members and other specified nonvoting
members. Its charge would be to develop a strategic
plan to meet the RPS goals of the bill.
Current law charges the CEC with siting authority for
all thermal power plants with a capacity of 50 megawatts
or more.
This bill expands the authority of the CEC to site
renewable energy resource plants of five megawatts or
more which would include wind, solar technologies,
geothermal, biomass, and others.
Current law requires a certificate of public convenience
and necessity (CPCN) from the PUC to construct a
transmission line.
This bill requires the PUC to approve an application for
a CPCN for a line that will facilitate the transmission
of renewable generation within one year of the filing of
a completed CPCN. The PUC could also accept a
determination of need from the ISO as a rebuttable
presumption with concurrence by the Division of
Ratepayer Advocates.
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Background
In 2002, legislation was enacted to require the IOUs (e.g.
Pacific Gas & Electric, Southern California Edison, San
Diego Gas & Electric Company) and the private companies
that compete with the utilities to increase their annual
purchases of electricity from renewable resources by at
least one percent so that 20 percent of their sales would
come from renewable sources by 2017. In 2006, legislation
was enacted to accelerate the 20 percent requirement to the
end of 2010 (SB 107, Simitian).
The RPS program does not require renewable energy purchases
irrespective of cost. Each contract for the development
and purchase of renewable energy is submitted to the PUC
for review. Any contract below the market price is deemed
per se reasonable. Any contract above the market price is
submitted to a procurement review group to consider the
reasonableness of costs. To address the overall costs of
the RPS, an above-market cost cap was determined for each
IOU. If the IOUs costs reach that cap in any given year,
then the requirement for additional renewable energy
purchases at above-market costs is waived. However, an IOU
can still, voluntarily, propose to procure renewable
resources at above-market prices outside of the cost cap
(referred to as bi-lateral contracts) which calls into
question whether a cost cap really exists. The cost cap
has not been triggered and the IOUs continue to pursue
renewable contracts to meet the 2010 goal.
Since the initial adoption of the RPS program, the
necessity of bringing more renewable resources to the grid
has been heightened as a result of the mandate that the
state reduce its greenhouse gas (GHG) emissions to 1990
levels by 2020. In fact, the ARB scoping plan adopts a
statewide 33 percent by 2020 renewable energy mix in order
to achieve the GHG goals.
Progress toward 2010 goal . The PUC reports that, for 2007,
the IOUs have achieved varying levels of progress toward
the 20 percent goal: Pacific Gas & Electric - 11.4
percent, Southern California Edison - 15.7 percent, and San
Diego Gas & Electric - 5.2 percent. The numbers actually
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declined from 2006 due primarily to load growth. All
agencies and stakeholders agree that the IOUs will not meet
the 2010 deadline. However, the PUC reported in October
2008, that an evaluation of the IOUs progress, including
generation developed and contracted for, would result in
compliance in or around 2013.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
PUC workload estimated annual costs of up to
$1,664Special*
CEC workload estimated annual costs of up to
$9,750Special**
Contract cost of $3,500
State energy costs unknown cumulative increase
potentially General/
$558,000 annually statewide
beginningSpecial***
2010 to 2013 to meet new RPS threshold
State mandate on POUs unknown major costs
ongoingGeneral
* Utilities Reimbursement Account
** Energy Resources and Programs Account (one-tenth of a
mill ($0.0001) surcharge per kilowatt hour)
*** Service Revolving Fund, other special funds (total
estimated on IOU usage)
SUPPORT : (Verified 8/31/09)
BP America Inc. (if amended)
City of Los Angeles Department of Water and Power (if
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amended)
Natural Resources Defense Council (if substantially
amended)
Planning and Conservation League (if amended)
Union of Concerned Scientists (if amended)
OPPOSITION : (Verified 8/31/09)
Alliance for Retail Energy Markets (unless amended)
California Farm Bureau Federation
California Large Energy Consumers Association (unless
amended)
California Manufacturers and Technology Association
California Municipal Utilities Association (unless amended)
California Wind Energy Association (unless amended)
County of Santa Barbara
Direct Energy (unless amended)
Imperial Irrigation District (unless amended)
Independent Energy Producers Association
Modesto Irrigation District (unless amended)
Public Utilities Commission (unless amended)
Regional Council of Rural Counties
Sanitation Districts of Los Angeles County
Sempra Energy
Solid Waste Association of North America
The Utility Reform Network (unless amended)
Western States Petroleum Association (unless amended)
ARGUMENTS IN SUPPORT : According to the author's office,
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.
ARGUMENTS IN OPPOSITION : The Modesto Irrigation District
(MID) and the Imperial Irrigation District are "very
concerned with the provisions in the bill that would, in
effect, preclude utilities from meeting the 33% RPS
objective by disqualifying many of the out-of-state
renewable resources that are in existence or under
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contract. Adopting such an artificial limitation on
current and future sources would place additional,
anti-competitive burdens on the overall economy and
wholesale markets resulting in increased prices for
renewables, and reduced reliability of the electric grid.
MID supports a renewable portfolio standard that encourages
new in-state renewable resources while at the same time
allowing access to out of state resources when insufficient
cost-effective in-state renewables are available. Out of
state renewable resources that are in existence or under
contract prior to December 31, 2009 should be included as
eligible resources."
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Blumenfield, Brownley,
Buchanan, Charles Calderon, Carter, Chesbro, Coto, Davis,
De La Torre, De Leon, Eng, Evans, Feuer, Fong, Fuentes,
Furutani, Hall, Hayashi, Hill, Huffman, Jones, Krekorian,
Lieu, Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, John
A. Perez, V. Manuel Perez, Price, Ruskin, Salas, Saldana,
Skinner, Solorio, Swanson, Torlakson, Torres, Torrico,
Bass
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Duvall, Emmerson,
Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman,
Harkey, Hernandez, Huber, Jeffries, Knight, Logue,
Miller, Nestande, Niello, Nielsen, Silva, Smyth, Audra
Strickland, Tran, Villines
NO VOTE RECORDED: Block, Caballero, Galgiani, Portantino,
Yamada
DLW:mw 8/31/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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