BILL ANALYSIS
SB 581
Page 1
Date of Hearing: June 22, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
SB 581 (Leno) - As Amended: June 17, 2009
SENATE VOTE : 25-14
SUBJECT : Hetch Hetchy Water and Power: renewable generation.
SUMMARY : Allows the San Francisco Public Utilities Commission
(SFPUC) to designate all renewable electric generation
facilities to be eligible for a unique arrangement where Pacific
Gas and Electric Company (PG&E) is required to take electricity
from the generator and offset the City of San Francisco's
(City's) municipal load.
EXISTING LAW :
1)Requires PG&E to credit the City and County of San Francisco
(City) for any excess electricity exported to the PG&E grid
from City-owned solar generation facilities that serve its
municipal facilities.
2)Restricts the size of eligible solar generating facilities to
15 megawatts (MW).
3)Requires the SFPUC-owned municipal facility to be located
within the City and County of San Francisco, or for sites
outside of the City, within 20 miles of the City or within 20
miles of a City-owned remote solar generation facility.
4)Requires the SFPUC to pay the reasonable costs of any
improvements required to facilitate interconnection between
the solar facility and PG&E.
5)Allows a city, county, city and county, special district,
school district, political subdivision, or other local public
agency to designate accounts controlled by the governmental
entity to receive bill credits for the electricity generated
by a renewable generating facility located within the
boundaries of the governmental entity and is on land owned or
controlled by the governmental entity.
THIS BILL :
SB 581
Page 2
1)Expands the type of generation the SFPUC can use to offset the
City's municipal load; from only solar to all forms of
renewable energy.
2)Deletes the restriction that the designated generation
facility be HHWP-generated and owned by the City, and allows
the facility to be owned or under lease or contract to the
City for at least a five-year term and for the full output of
electricity from the facility.
3)Deletes the restriction that the load served must be within 20
miles of the City or within 20 miles of a Hetch Hetchy Water
and Power (HHWP) owned remote solar generation facility and
expands eligibility to PG&E's electric service territory.
4)Provides that the City shall own the environmental attributes
associated with the electricity delivered to the electric grid
by City-owned renewable generation facilities.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to allow SFPUC to expand its renewable program to add a variety
of renewable energy projects including in-line hydro, ocean wave
power, and small wind which are not included in current law.
1) Background : The City owns HHWP, which provides water from
the Tuolumne River to the City and its residents. The federal
Raker Act (1913) permitted the City to dam the Tuolumne River
and flood the breathtaking Hetch Hetchy Valley, build a 167-mile
aqueduct, and construct powerhouses and transmission lines below
Hetch Hetchy Reservoir for the generation, sale, and
distribution of electric energy. The Act also established
priorities for the use of Hetch Hetchy hydropower: first to
drive the system's waterworks, next to supply the City's
municipal government agencies, and then to farmers and municipal
governments within the Modesto and Turlock irrigation districts.
Any remaining hydropower could be sold to the City's residential
and business users but never to a corporation, such as PG&E.
At that time, PG&E was the sole provider of gas and electricity
in the City. Although the City built a transmission line from
the Hetch Hetchy hydroelectric plant to Newark (across the bay,
SB 581
Page 3
south of Oakland), it was unable to obtain funding for the last
stretch into the City.
The City has a unique arrangement. PG&E continues to procure
generation, and provide transmission and distribution services
to all bundled-service ratepayers such as residential,
commercial, and industrial customers within the City's
boundaries. However, the City owns the Hetch Hetchy power which
requires the City to use it for its municipal load first. As
such, PG&E does not procure electricity for the City's municipal
load. The City needs PG&E to provide the transmission across
the bay and into the City, and it needs PG&E for the local
distribution of the power to the municipal facilities. Over the
years, the City and PG&E negotiated a federally approved
Interconnection Agreement that identifies the terms and
conditions under which PG&E will transport and distribute the
City's Hetch Hetchy power to the City's municipal locations.
2) One size does not necessarily fit all : Over the past few
years, many bills have addressed a municipality's desire to
generate its own electricity to serve its load. AB 1969 (Yee),
Chapter 731, Statutes of 2006, requires an electrical
corporation to purchase electricity from renewable electricity
generation facilities that are owned and operated by public
wastewater agencies. AB 1969 provides that the electricity
purchased by the utility shall count toward the utility's
Renewable Portfolio Standard (RPS).
AB 2466 (Laird) Chapter 540, Statutes of 2008, allows a local
government to receive a bill credit against electricity it has
consumed at one or more sites for electricity it has generated
and supplied to the grid at one or more renewable generating
facilities. The offset price is the wholesale cost of the
generation, which is less than the retail rate that the
municipality pays the utility for the electricity it consumes.
The SFPUC cannot participate in this program because it is not a
customer of the utility and therefore, does not receive a
utility bill to apply the bill credit.
3) When the lights go down in the City : The City, as its own
municipal utility, is different than a typical municipality and
does not have to buy its electricity from an IOU. Five years
ago, the Legislature passed AB 594 (Leno) Chapter 790, Statutes
of 2004, which enabled the City to install on-site photovoltaic
solar generation at its municipal sites and get credit for
SB 581
Page 4
excess electricity. Two years later, AB 2573 (Leno), Chapter
786, Statutes of 2006, allowed the City to offset its power
generated by HHWP at one location, with power consumed by the
City municipal meters at a different location. This bill
expands the AB 2573 arrangement by applying to all renewable
generation and removes the statutory requirement that the
qualifying remote load be within 20 miles of the City or not to
exceed 20 miles distance between remote generation and
qualifying remote load.
4) No freewheeling : The California Public Utilities Commission
(PUC) regulates PG&E and requires that PG&E be compensated for
any system impact costs. To allow an entity to generate
electricity at one location to be consumed at another, PG&E may
incur costs to "wheel" that power. AB 2573 appropriately
ensured that there are no cost shifts and that HHWP pays all
nonbypassable charges that are assessed to PG&E's other electric
customers.
In response to AB 2573, PG&E renegotiated the Interconnection
Agreement between the utility and SFPUC. Because the bill
restricted the distance between the generator and the load
center to 20 miles and restricted the qualifying remote
generator to be within 20 miles of the City, PG&E provided a
$0.008/kWh discount on the "wheeled" electricity. After all
provisions of the Interconnection Agreement were renegotiated to
accommodate AB 2573, the Federal Energy Regulatory Commission
(FERC) approved it.
This bill eliminates the 20-mile restriction. The author states
that, "If CCSF (the City) is paying for T&D (transmission and
distribution), the distance between generation and load should
not matter." According to PG&E, the distance matters a lot.
PG&E states that the Interconnection Agreement is a balance of
benefits and burdens for both parties and these changes would be
detrimental to PG&E's electric customers.
AB 2573 appropriately requires the City to pay applicable
distribution rates and/or transmission rates at rate levels
determined by the Interconnection Agreement, for all energy
delivered to qualifying remote load that comes from a HHWP solar
generation facility. In addition, AB 2573 requires the
appropriate regulatory agency to ensure that this arrangement of
HHWP generation providing electricity to qualifying remote sites
does not result in a shifting of costs to bundled service
SB 581
Page 5
customers. By removing the 20-mile restriction, this bill may
result in a shifting of costs to bundled-service customers for
the time between the enactment of this bill and the date FERC
approves a subsequent Interconnection Agreement.
The SFPUC states that it is not their intent to interfere with
or try to have state law supersede the federally-approved
Interconnection Agreement. As such, this committee may wish to
include clarifying language that the current 20-mile restriction
applies during the term of the Interconnection Agreement and
identify the Agreement and date of expiration. The bill should
remain silent after the expiration of the agreement to allow the
City and PG&E explore and renegotiate all alternative options
available at that time.
5) Renewable Energy Credits : A REC represents the environmental
and renewable attributes of renewable electricity as a separate
commodity from the energy itself. A REC can be sold either
"bundled" with the underlying energy or "unbundled" into a
separate REC trading market.
RECs can be traded in voluntary markets or compliance markets.
In the voluntary market, any company (e.g. a grocery store
chain) that wishes to claim that it is powered by clean energy
may buy non-renewable power from its local energy provider and
also buy an equivalent amount of RECs that have been "unbundled"
from renewable energy produced elsewhere. The PUC is also
considering allowing electric utilities to use unbundled RECs to
comply with their renewable portfolio requirements.
Current law requires the PUC to determine whether the City or
PG&E owns the RECs associated with HHWP generation. This bill
would designate that the City owns the RECs associated with
electricity delivered to the grid by HHWP electric generation
plants.
REGISTERED SUPPORT / OPPOSITION :
Support
San Francisco Public Utilities Commission (sponsor)
Opposition
SB 581
Page 6
Pacific Gas & Electric Company (PG&E)
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083