BILL ANALYSIS
AB 1305
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Date of Hearing: April 20, 2009
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Nancy Skinner, Chair
AB 1305 (V. Perez) - As Amended: March 31, 2009
SUBJECT : Air pollution: imported electricity: mitigation fee
SUMMARY : Imposes an import fee of $0.001 per kilowatt hour on
electricity from new power plants in Mexico to fund air
pollution control in adjacent California air districts.
EXISTING LAW :
1)Requires the state Air Resources Board (ARB) to adopt and
enforce state ambient air standards for the control and
reduction of air pollution, and to enforce federal ambient air
standards for reduction of air pollution.
2)Requires air districts to adopt and implement local and
regional programs to reduce air pollution and to achieve state
and federal ambient air standards. These responsibilities
include the adoption and enforcement of requirements for new
and modified power plants to ensure that emissions from such
facilities are mitigated and are in compliance with federal
and state law and regulations. Air district standards may
include requiring power plants to install "best available
control technology" (BACT) to control emissions and to obtain
emission reduction credits, or "offsets," to mitigate
emissions.
THIS BILL :
1)Requires any person importing electricity from a power plant
generating unit located in Mexico, within 100 kilometers of
the U.S. border, that is constructed after January 1, 2010,
and that does not meet California air pollution standards, to
pay to ARB a mitigation fee of $0.001 per kilowatt hour of
imported electricity, not to exceed the amount ARB determines
necessary to mitigate the environmental or health impacts of
the power plant and any associated administrative costs.
2)Permits the ARB to impose a lower fee if it determines a lower
fee would further enhance reductions in air contaminant
emissions.
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3)Requires the fees collected to be deposited in the Imported
Electricity Air Pollution Mitigation Subaccount in the Air
Pollution Control Fund and made available upon appropriation
by the Legislature.
4)Requires the ARB to distribute the fee revenues
proportionately to air districts impacted by emissions of air
contaminants from the Mexican power plants.
5)Requires air districts to use fee revenues for in-district
projects the district determines will mitigate the
environmental or health impacts of the Mexican power plants.
FISCAL EFFECT : Unknown
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COMMENTS :
1)Background. The electric grid is interconnected between
California and Baja California so electricity generated in
Mexico can be delivered to California, and vice-versa. New
power plants in California are subject to stringent permitting
requirements, including requirements to install BACT, such as
selective catalytic reduction (SCR), to reduce air emissions
and to obtain offsets to mitigate emissions. New power plants
in Mexico are subject to less stringent environmental
standards, are not required to meet BACT standards or install
SCR, and are not required to offset new emissions. At least
two new power plants have been built near Mexicali in recent
years and deliver some of their electricity across the border
to California utilities. Imperial County, immediately north
of these plants, is classified as a moderate non-attainment
area and is the recipient of transported pollution from these
plants.
2)Fee amount translated. The fee amount in this bill, $0.001
per kilowatt hour or $1 per megawatt hour, represents about
three percent of current cost of electricity on the spot
market. According to the California Independent System
Operator (ISO), a 500 megawatt power plant, operating at 75
percent capacity and exporting all of its power to California,
would incur fees of approximately $3.3 million a year.
3)Is collection of the fee legal? Fees of the kind proposed by
this bill, uniquely applied to a particular area, raise
complex issues of international commerce. While many products
imported from other states or nations do not meet the same
standards that apply to products produced in California, the
Committee was unable to identify a workable precedent of a
state imposing a similar mitigation fee on a particular
imported product.
4)Is collection of the fee feasible? This bill requires the fee
to be paid by the person who imports, or causes the import of,
electricity. This suggests that the fee would be paid by the
buyer, rather than the generator. It could also be read to
apply to the transmission owner or operator. Aside from the
generator itself, the only entity who may have access to the
meter data necessary to calculate the fee is the ISO. The ISO
has access to metering data for plants within its control
area, which includes the two existing plants near Mexicali.
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However, the data is proprietary under Federal Energy
Regulatory Commission rules, so it's not clear ARB could gain
access to the necessary data for the purpose of assessing a
fee.
5)Do circumstances justify application to just one geographic
area? Naturally, plants constructed in Mexico will not meet
all California standards. The same is true for plants that
may be located in other states through the western grid which
supply electricity to California utilities. Be definition,
BACT is a moving target, which changes with time, location and
circumstances. Offset requirements vary by air district and
are not applicable at all in Mexico or other states.
To make this bill more equitable, the author and committee may
wish to consider whether a mitigation fee for existing power
plants that do not meet current BACT requirements should also
be applied to power plants in adjacent states, if they share
an air basin with California, and/or whether such a fee should
apply to the many existing in-state plants which do not meet
current BACT standards and emit significantly more air
pollution than the two plants recently built near Mexicali.
6)A more workable alternative? There may be a more practical
mechanism to prevent California utilities from relying on
imported electricity from power plants that don't meet
California standards. For example, SB 1368 (Perata), Chapter
598, Statutes of 2006, prohibits the approval of utility
long-term financial commitments (contracts or ownership)
unless the power plant meets a greenhouse gas emission
performance standard. The author and committee may wish to
consider , as an alternative to the fee proposed by this bill,
applying the SB 1368 approach to criteria pollutant emissions
and prohibiting the Public Utilities Commission and
publicly-owned utilities from approving long-term financial
commitments to any new power plant outside California unless
it meets emission standards equivalent to a power plant within
California.
7)Prior legislation. This bill is similar to AB 2388 (Vargas),
introduced in 2006, and AB 151 (Vargas), introduced in 2003.
Both AB 2388 and AB 151 were approved by this Committee and
the Assembly. Both bills failed passage in the Senate Energy,
Utilities and Communications Committee.
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REGISTERED SUPPORT / OPPOSITION :
Support
California Air Pollution Control Officers Association
Imperial County Board of Supervisors
Sempra Energy
Opposition
None on file
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092