BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 64|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 64
Author: Krekorian (D) and Bass (D)
Amended: 9/11/09 in Senate
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 6-3, 9/10/09
AYES: Padilla, Corbett, Kehoe, Lowenthal, Simitian,
Wiggins
NOES: Benoit, Cox, Wright
NO VOTE RECORDED: Calderon, Strickland
ASSEMBLY FLOOR : Not relevant
SUBJECT : Energy: renewable energy resources
SOURCE : Author
DIGEST : This bill makes programmatic changes necessary
to implement SB 14 (Simitian) which mandates that all
electricity providers increase purchases of renewable
energy such that at least 20 percent of electricity
delivered to retail customers is from a renewable energy
resource by 2013, 26 percent by 2016, and 33 percent by
2020.
ANALYSIS : 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
CONTINUED
AB 64
Page
2
procured from eligible renewable resources by December 31,
2010. This is known as the Renewable 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.
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 (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 IOUs of
contracting for additional renewable generation at costs
above the MPR (also known as cost cap).
This bill:
1. Requires the Department of Fish and Game (DFG) to
establish an internal division to perform comprehensive
planning, streamlined environmental compliance services,
and ensure timely completion of Natural Community
Conservation Plans related to development of renewable
energy projects.
2. Restates current law that a permit for the taking of any
bird, mammal, fish, reptile, or amphibian which is
necessary for the construction of a facility permitted
by the California Energy Commission (CEC), must be
issued by the DFG.
3. Ensures that rates necessary to support transmission
services for renewable energy will be authorized by the
PUC if denied by the Federal Energy Regulatory
Commission.
4. Broadens renewable energy procurement planning of the
IOUs to include the viability of planned projects and
AB 64
Page
3
milestones for completion and to consider the margins of
additional procurement that may be necessary to mitigate
the impact of delayed or canceled projects.
5. Sets aside up to one-quarter of the 33 percent renewable
portfolio for IOU-owned generation, by requiring the PUC
to approve an IOU's application to construct, own and
operate a renewable energy facility until IOU-owned
renewable facilities equal 8.25 percent of IOUs
anticipated 2020 retail sales.
6. Requires the PUC to approve an application to construct
a transmission line within 18 months under specified
circumstances.
7. Directs the Independent System Operator (ISO) and
municipal utilities to work cooperatively to integrate
and interconnect eligible renewable resources.
8. Revises the methodology used by the PUC upon which
resource adequacy requirements are determined for the
IOUs in consideration of intermittent renewable
resources.
9. Requires that the PUC and CEC implement the RPS program
in a way that accommodates the combined heat and power
objectives of the Air Resources Board (ARB).
10.Makes technical and conforming changes to current law.
Background
The Senate Energy, Utilities and Communications Committee
states that they have held several hearings this year on
legislation affecting the RPS and efforts to increase that
standard from 20 percent by 2010, to 33 percent by 2020.
Comments
Collective Impact of SB 14 and AB 64 . The two-bill package
will result in the following RPS program structure:
33% RPS - The IOUs and ESPs are currently required to meet
an RPS goal of 20 percent by 2020. The standard for POUs
AB 64
Page
4
is very vague. This bill package will relax the current
requirement of 20 percent by 2010, to 20 percent by 2013,
which is a much more realistic mandate given the
technology, siting and transmission challenges of greening
the grid. Subsequent requirements are 26 percent by 2016,
and 33 percent by 2020.
Cost Containment - The use of the market price reference
(MPR) would continue. This is a benchmark price 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 would
continue to relieve the IOUs of contracting for additional
renewable generation at costs above the MPR. A new
programmatic cost cap would be established which would be
equal to six percent of the IOU's 2008 electric revenues
for each year through 2020.
Delivery
The definition of "deliver" in current law was implemented
by the CEC in a manner that allows intermittent resources
such as solar and wind to be generated at one time,
delivered to another state, the renewable energy credit
(REC) retained by the utility, and later attached to a
baseload generation resource such as gas, coal or hydro for
delivery into California.
This bill package specifically requires out of state
renewable generation to be delivered into California
directly to the grid when it is generated thereby
prohibiting an intervening third party from diverting the
green generation to another source and switching it out for
non-renewable generation to be delivered at another time
with an REC.
Because many utilities have contracted for generation which
may not meet this delivery requirement, those contracts
have been grandfathered and all will be eligible and
counted toward the RPS requirement. Those contracts will
have had to be executed by a retail seller by September 18
or, for a POU, approved by the governing board by that
date.
AB 64
Page
5
Renewable Energy Credits - Current law authorizes the PUC
to permit the use of RECs to comply with the RPS. Although
the PUC held extensive hearings on the implementation of
this authority, rules were not finalized. This bill
authorizes IOUs and POUs to meet the RPS mandate with up to
25 percent RECs. The 25 percent threshold could be
exceeded if the utility has out-of-state renewable
contracts executed by September 18 or, for a POU, approved
by the governing board by September 18.
A retail seller or POU could also add up to five percent
additional RECs for a total of up to 30 percent equal to
the capacity of generation newly developed and owned.
Enforcement/Offramps - Current law requires the PUC to
enforce a retail seller's compliance with the RPS. The PUC
may fine a retail seller that fails to meet its
year-to-year RPS target. The PUC has set the penalties at
five cents for each kilowatt hour a retail seller falls
short of its RPS target. Under this bill package, the PUC
could allow a retail seller to delay compliance with the
RPS procurement requirement if the retail seller
demonstrates that there is inadequate transmission capacity
or unanticipated permitting, interconnection, or other
delays.
Publicly Owned Utilities - For the first time there will be
a firm requirement that POUs establish and meet an RPS
mandate of 20 percent by 2013, 26 percent by 2016, and 33
percent by 2020, exactly like that required of other retail
sellers.
This requirement extends to all POUs which include
traditional providers such as Sacramento Municipal Utility
District and the Los Angeles Department of Water and Power
and irrigation districts.
The use of RECs will be permitted under the same terms as
those for other retail sellers. The POUs will annually
report plans and progress to the CEC but it will not be
permitted to enforce the RPS against a POU. Enforcement
will be left strictly to ARB.
AB 64
Page
6
Transmission/Siting
Transmission and the siting of new generation has been a
tremendous challenge for renewable energy developers and
the utilities. However, progress is being made.
Sufficient transmission has been approved by the PUC to
reach the 20 percent goal. Several new transmission lines
are in the pre-application phase of development. This bill
tightens the PUC review process for new transmission lines
by requiring a decision on a transmission application
within 18 months under specified circumstances.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 9/10/09)
BP America Inc. (if amended)
California State Association of Electrical Workers
California State Pipe Trades Council
California Wind Energy Association
City of Los Angeles
Coalition of California Utility Employees
Pacific Gas and Electric Company
Sempra Energy
Sierra Club California
State Building and Construction Trades Council
The Utility Reform Network
Western States Council of Sheet Metal Workers
OPPOSITION : (Verified 9/10/09)
California Biomass Energy Alliance (unless amended)
Direct Energy
Imperial Irrigation District (unless amended)
Independent Energy Producers Association
LS Power (unless amended)
Modesto Irrigation District (unless amended)
Sacramento Municipal Utility District
ARGUMENTS IN SUPPORT : Sierra Club California states:
"Moving to adopt a 33% or higher Renewable Portfolio
Standard (RPS) goal this year should be an urgent priority.
There is broad consensus within the California Legislature
AB 64
Page
7
and the Administration that expanding RPS is necessary for
meeting AB 32 climate protection goals, for improving air
quality, and for reducing reliance on depleting fossil fuel
resources. California once led the world in renewable
energy and we need to regain our leadership. The
electricity sector's only current target is to achieve a
20% RPS by the end of 2010. This date will soon be upon
us, and as yet there is no required course of action for
2011 and beyond. Utility companies are regulated and work
on a 10-year planning horizon, meaning that commitments to
long-term power supply agreements-lasting as long as 20
years - are already in the works. At this point, it is
obvious that California's renewable energy portfolio
standard law needs to upgrade both the targets and the
rules under which it operates. Other states have adopted
RPS laws and made significant strides in building renewable
energy. Doing so will require significant reforms in the
RPS law to remove current regulations that have a built-in
bias against renewable energy, and replace these burdensome
rules with a regulatory structure that supports the state's
goals for clean energy."
ARGUMENTS IN OPPOSITION : The Modesto Irrigation District
(MID) and the Imperial Irrigation District indicated that
with the prior version of the bill, they were "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 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."
DLW:mw 9/11/09 Senate Floor Analyses
AB 64
Page
8
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****