BILL ANALYSIS
AB 1305
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Date of Hearing: April 27, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 1305 (Perez) - As Amended: March 31, 2009
SUBJECT : Air pollution: imported electricity: mitigation fee.
SUMMARY : Imposes an import fee of $0.001 (0.1 cent) 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.
3)Prohibits the California Public Utilities Commission (PUC)
from approving a long-term financial commitment by an
electrical corporation, unless any baseload generation
supplied under the long-term commitment complies with the
CEC's greenhouse gas emission performance standards.
THIS BILL :
1)Requires any person importing electricity from a power plant
generation 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.
COMMENTS : According to the author, the purpose of this bill is
to compensate the California air basins for having to implement
air quality measures to address pollution emitted from power
plants in Mexico that don't have to comply with California
construction and performance standards.
The author agreed to amendments in the Assembly Natural
Resources Committee on April 20, 2009, to be adopted in this
committee. The amendments strike the provisions of the bill and
instead, restrict a load-serving entity or publicly owned
electric utility from entering into a long-term contract with a
facility that doesn't meet California's construction and
greenhouse gas emission standards. In addition, the PUC may not
approve a contract of that nature.
The committee may wish to formally adopt the amendments taken in
Natural Resources committee.
1) Background : Three electricity generation facilities are
located near Mexicali, about 3 miles south of the international
border and about 12 miles southwest of Calexico, California.
The Termoelectrica de Mexicali plant, owned by Sempra Energy, is
a 500-megawatt (MW) facility that produces electricity for
export into the U.S. InterGen owns and operates the La Rosita
750 MW plant and Energia de Baja California, which are located
on a common site and referred to as the InterGen Complex. Half
of the electricity from the InterGen Complex is generated for
use within Mexico and the remaining half is produced for export
into the U.S. InterGen contracted with the Mexican utility to
produce electricity for Mexico for a guaranteed fixed price for
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25 years. The InterGen Complex producing this power meets
Mexican, but not California, clean air requirements.
InterGen's Complex emits about 1,900 tons of nitrous oxide
annually, but the Sempra plant in Mexicali will produce only 190
tons annually. InterGen counters that its bid on a contract to
supply power to Mexico was based on the requirement that bidders
must comply with Mexican air regulations, and now that the
contract has been awarded, no changes are allowed to the
contract except as specifically provided in the contract. Thus,
it would be difficult to shut down its operation to install
BACT, and cost prohibitive given the circumstances under which
the contract was bid. InterGen further contends that its
Mexicali plant is one of the cleanest in Mexico and is cleaner
than more than 50% of the plants currently operating in the U.S.
and California. As such, this bill would exempt the energy
generated from existing plants from the fee and only applies to
facilities where construction was completed after January 1,
2010, and the facility provides incremental generating capacity
that was not in operation prior to January 1, 2010.
2) The North American Free Trade Agreement (NAFTA) : NAFTA is
a regional agreement to implement a free trade area between the
U.S., Canada, and Mexico to: eliminate barriers to trade and
facilitate the cross-border movement of goods and services,
promote conditions of fair competition in the free trade area,
and substantially increase investment opportunities in the
territories of the Parties.
The NAFTA provisions that address energy regulatory measures may
pre-empt the state's ability to imposed trade restrictions.
NAFTA requires that "Each Party shall seek to ensure that in the
application of any energy regulatory measure, energy regulatory
bodies within its territory avoid disruption of contractual
relationships to the maximum extent practicable, and provide for
orderly and equitable implementation appropriate to such
measures." This bill may challenge NAFTA provisions.
4) Previous 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.
As an alternative to the fee proposed by this bill, the author
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agreed in the Assembly Natural Resources Committee to amend this
bill to apply the SB 1368 approach to criteria pollutant
emissions, and prohibit the PUC 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.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083