BILL ANALYSIS
AB 2037
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Date of Hearing: April 5, 2010
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 2037 (V. Manuel Perez) - As Introduced: February 17, 2010
SUBJECT : Electricity: air pollution.
SUMMARY : Prohibits utilities from entering into a long-term
financial commitment with a new electric generating facility
that is not sited by the California Energy Commission (CEC),
does not meet best available technology standards, and will
cause air pollution in an in-state air basin. Specifically,
this bill :
1)Prohibits a load-serving entity or local publicly owned
electric utility from entering into, and prohibits the
California Public Utilities Commission (CPUC) from approving,
a long-term financial commitment with or for a new electrical
generating facility that meets all of the following criteria:
a) The new electrical generating facility is to be or was
constructed without receiving certification from the CEC.
b) The facility is to be or was constructed without meeting
California air pollution regulations including best
available control technology (BACT) and any offsets
required to mitigate additional pollution.
c) The facility will cause or contribute to nonattainment
with state or federal ambient air quality standards due to
emissions of air pollution within, or transported to, an
air basin within this state.
2)Requires the local air pollution control district or air
quality management district with jurisdiction over the air
basin to make the determination on whether the facility meets
the criteria.
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.
AB 2037
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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 CPUC 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.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to deter the building of powerplants that do not comply with
California's air pollution standards, when the powerplant shares
an air basin with Californians. Mexico has more lenient
building and air-emission standards than California. There is
concern that California's growing demand for electricity will
encourage more powerplants to be built in Mexico, where the
regulations are less stringent.
Some power plants located in Mexico reside in the same air basin
as California's border region. As a result, the adverse air
emissions generated from the Mexico-based power plants affect
California residents. By disallowing a California utility from
engaging in a long-term contract with dirty-burning power
plants, it might provide an incentive for any new powerplants on
the Mexico side of the border to comply with California's BACT
and air pollution control standards.
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
25 years. The InterGen Complex producing this power meets
Mexican, but not California, clean air requirements.
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InterGen's Complex emits about 1,900 tons of nitrous oxide
annually, but the Sempra plant in Mexicali produces 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,
the company claims that it would be difficult to shut down its
operation to install BACT, and it would be 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 does not apply to existing power plants and only to
new plants constructed after January 1, 2011, or plants that add
incremental capacity after January 1, 2011.
2) The CEC siting process: Current law requires the CEC to
certify sufficient sites and related facilities for the
construction and operation of thermal powerplants of 50 MW and
larger. Most renewable power plants, such as solar
photovoltaic, wind, and biomass, are certified by the local
agency, not the CEC. This bill might inadvertently disallow a
utility to engage in a long-term contract with a renewable
energy facility.
The author has worked with the utilities and interested parties
and has agreed to clarify that these provisions will not apply
to contracts with certain renewable energy generation
facilities; however, they have not ironed out final language
yet.
3) 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 impose trade restrictions.
NAFTA requires that "Each party shall seek to ensure that in the
application of any energy regulatory measure, energy regulatory
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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." It is unclear whether this bill will challenge NAFTA
provisions.
RELATED LEGISLATION
AB 1305 (V. Manuel Perez) 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 the 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. AB 1305 was not
heard and died in this committee.
REGISTERED SUPPORT / OPPOSITION :
Support
American Lung Association in California
Breathe California
California Air Pollution Control Officers Association (CAPCOA)
San Diego Gas & Electric (SDG&E) (if amended)
Sempra Energy (if amended)
Union of Concerned Scientist
Opposition
California Municipal Utilities Association (CMUA) (unless
amended)
Southern California Edison (SCE)
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083