BILL ANALYSIS
AB 1348
Page 1
Date of Hearing: April 29, 2009
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Nancy Skinner, Chair
AB 1348 (Blakeslee) - As Amended: April 30, 2009
SUBJECT : Greenhouse gas emissions: fossil fuel procurement plan
SUMMARY : Requires the Public Utilities Commission (PUC) to
require investor-owned utilities (IOUs) to prepare a fossil fuel
procurement plan to satisfy its obligations under the Global
Warming Solutions Act of 2006 (AB 32).
EXISTING LAW :
1)Requires the Air Resources Board (ARB), pursuant to AB 32, to
adopt a statewide greenhouse gas (GHG) emissions limit
equivalent to 1990 levels by 2020 and adopt regulations to
achieve maximum technologically feasible and cost-effective
GHG emission reductions.
2)Requires IOUs and certain other retail sellers to achieve a 20
percent renewable portfolio (RPS) by 2010 and establishes a
detailed process and standards for renewable procurement.
3)Requires an electrical corporation to first meet its unmet
resource needs through all available energy efficiency and
demand reduction resources, renewable energy resources, and
clean and efficient fossil fuel generation that are
cost-effective, reliable, and feasible.
THIS BILL :
1)Requires an IOU, in its procurement planning, to meet its
unmet resource needs in a manner consistent with AB 32.
2)Directs the PUC to require IOUs to prepare a fossil fuel
procurement plan, as part of the general procurement plan
process, to satisfy its obligations under AB 32. The
procurement plan must include all fossil fuel generation
resources, including but not limited to, short and long-term
contracts; and base load, peaking, and regulation resources.
3)Requires the PUC to adopt criteria for the rank ordering and
selection of the least emissions, least-cost and best-fit
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eligible fossil fuel resources to comply with AB 32 on a total
cost basis. The criteria must consider estimates of indirect
costs associated with needed transmission investments and
ongoing utility GHG expenses resulting from operating fossil
fuel generation resources.
FISCAL EFFECT : Unknown
COMMENTS : According to the author, the purpose of this bill is
to make sure the PUC provides the right incentives for utilities
to choose low-GHG emitting resources when procuring the
non-renewable portion of their generation portfolio. The author
states that a 20% or 33% RPS does not ensure that GHG emissions
from non-renewable generation will be reduced. Specifically,
the author argues that the RPS program does not address GHG
emissions from fossil fuel peaker plants needed to firm (or
back-up) intermittent, renewable resources.
As heard in the Assembly Utilities and Commerce Committee, this
bill contained provisions designed to reduce barriers and create
incentives for the use of combined heat and power (CHP) systems
20 megawatts and greater. CHP, also referred to as
cogeneration, produces electricity and thermal energy in an
integrated system. The bill as proposed to be amended in this
committee more broadly requires IOUs to reduce GHG emissions
from the natural gas portion of their energy portfolio.
1)Background : The State's energy policy has been transitioning
away from reliance on natural gas toward more diverse, cleaner
and renewable sources of energy. SB 107, Chapter 464,
Statutes of 2006, requires IOUs to purchase at least 20
percent of their electricity from renewable sources by 2010.
SB 1368, Chapter 598, Statutes of 2006, requires all electric
utilities to purchase electricity from sources that meet or
exceed the emission levels of a natural gas-fired
combined-cycle power plant, even if it's imported. SB 1,
Chapter 132, Statutes of 2006, requires $3.3 billion dollars
in solar energy investments over the next 10 years. Also, SB
1037, Chapter 366, Statutes of 2005, requires the utilities to
use energy efficiency measures to meet its load, prior to any
other means of generation.
The later requirement is known as the loading order, which
states a preference for, in declining order: 1) energy
efficiency and demand response resources; 2) renewable energy
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resources; and 3) clean conventional fossil fuel resources in
meeting the state's energy needs. IOUs are required to
develop procurement plans in order to fulfill unmet resource
needs and these plans must reflect this loading order.
Layered on these statutes is AB 32, which focuses on GHG
reductions, including a significant percentage from the
electricity sector. All these programs are new, complex, and
take time to fully implement and it is unclear how this bill
materially adds to their objectives. As such, this bill may
be premature. Instead of creating yet another GHG regulatory
mandate, many observers have been arguing for an opposite
approach: a need to simplify and bring greater clarity to the
multitude of existing GHG and renewable energy laws and
regulations by developing a clear, overarching GHG emissions
reduction framework that brings regulatory certainty, lowers
transaction costs, and is administratively less complex to
implement.
2)Scoping Plan commits electricity sector to significant GHG
reductions. According to the ARB's AB 32 Scoping Plan,
between two-thirds and three-quarters of the electricity
consumed in the state is generated in-state and is relatively
clean; the rest is imported from other western states. Since
a significant share of these imports is coal-generated, they
disproportionately contribute to the state's
electricity-related GHG emissions.
According to the author, the intent of this bill is to
"harmonize AB 32 with the RPS to provide utilities with a
clear direction on how to be compliant with both." However,
the Scoping Plan already proposes various strategies targeted
at reducing the carbon content of the state's electricity,
including a 33% RPS, commercial and residential energy
efficiency and conservation measures, solar hot water heating
targets (1.75 million units installed by 2020), and a goal of
4,000 MW of CHP capacity by 2020. Additionally, the emissions
associated with the electricity sector not addressed by these
measures will be included in a proposed cap-and-trade program.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
AB 1348
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Opposition
None on file
Analysis Prepared by : Dan Chia / NAT. RES. / (916) 319-2092