BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1954 (Skinner)
Hearing Date: 08/02/2010 Amended: 07/15/2010
Consultant: Brendan McCarthy Policy Vote: EU&C 9-0
AB 1954 (Skinner), Page 2
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BILL SUMMARY: AB 1954 authorizes the Public Utilities Commission
to approve in advance the recovery through electricity rates of
the costs of a transmission proposed to meet the state's
Renewable Portfolio Standard goals. The bill sets the "de
minimus" amount of non-renewable energy that may be used by a
renewable energy facility at two percent, and authorizes the
Energy Commission to adjust that level up to five percent on a
case by case basis.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
PUC transmission oversight Minor and absorbable
costsSpecial *
Energy Commission $110 Special
**
renewable energy oversight
* Public Utilities Commission Utility Reimbursement Account.
** Renewable Resources Trust Fund.
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STAFF COMMENTS:
Current law requires the state's investor owned electricity
utilities and load serving entities to increase their
procurement of renewable energy by one percent per year, such
that twenty percent of their total electricity load comes from
renewable resources by December 31, 2010. This requirement is
referred to as the Renewable Portfolio Standard. All three of
the state's investor owned utilities are behind in their
procurement of renewable resources, in part because of a lack of
transmission infrastructure from areas with potential renewable
resources.
Also under current state and federal law, utilities are allowed
to recover the costs of permitting and constructing transmission
lines through electricity rates. The Federal Energy Regulatory
Commission generally sets the cost recovery rates for
transmission. If the federal government does not authorize cost
AB 1954 (Skinner), Page 2
recovery for a project, the Public Utilities Commission is
authorized in statute to allow cost recovery. Determinations
about cost recovery are done once the project has been
completed.
AB 1954 authorizes the Public Utilities Commission to approve an
advice letter from an investor owned utility seeking
pre-approval of cost recovery through electricity rates for a
transmission project that will facilitate achievement of the
Renewable Portfolio Standard. The bill provides that ultimate
rate recovery is still subject to review by the Public Utilities
Commission to ensure that the utility incurred the costs
reasonably and prudently.
The Public Utilities Commission indicates that the costs to
review advice letters under the bill can be absorbed within
existing resources dedicated to transmission planning and rate
design. Staff does not anticipate any significant costs to rate
payers under the bill, as the Public Utilities Commission is
only authorized to pre-approve costs recovery for projects
designed to meet the existing Renewable Portfolio Standard
requirements in law.
Some renewable energy providers use small amounts of
non-renewable fuels as part of their renewable energy
production. Current law allows a "de minimus" amount of
non-renewable energy production to be included with renewable
energy sources for purposes of meeting the state's Renewable
Portfolio Standard. The Energy Commission is required to
determine the "de minimus" amount. (The Energy Commission has
defined the "de minimus" amount as less than two percent of
total fuel use.)
AB 1954 directs the Energy Commission to set the "de minimus"
amount of non-renewable energy that may be included with
renewable energy at no more than two percent of total fuel use.
The bill also authorizes the Energy Commission to allow up to
five percent to come from non-renewable fuels, on a case-by-case
basis, if the Energy Commission finds that the additional use of
non-renewable fuels will lead to an increase in overall
renewable energy generation and reduce variability in
generation.
The Energy Commission indicates that it will need one additional
position to review existing renewable generation facilities to
ensure that they comply with the new "de minimus" standard.
AB 1954 (Skinner), Page 2
(Some facilities may have been authorized a higher level of
fossil fuel use.) The additional position will also be
responsibly for establishing criteria to determine whether
additional non-renewable fuel use will lead to additional
renewable energy and reduce variability.
AB 1954 will only become operative if SB 722 (Simitian) is
enacted. SB 722 increases the state's Renewable Portfolio
Standard to 33 percent by 2020 and makes several other changes
to the program. SB 722 is in the Assembly Appropriations
Committee.
Staff recommends the bill be amended to adopt an amendment
inadvertently left out when the bill was amended in the Senate
Energy, Utilities & Communications Committee. The proposed
amendment specifies that in order to qualify for more than two
percent non-renewable fuel use, the non-renewable fuel must come
from either natural gas or hydrogen derived by reformation of a
fossil fuel.