BILL ANALYSIS
SB 722
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Date of Hearing: June 30, 2010
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 722 (Simitian) - As Amended: June 22, 2010
SENATE VOTE : Not relevant
SUBJECT : Utilities: renewable energy resources
SUMMARY : Increases California's Renewables Portfolio Standard
(RPS) goal from 20 percent by 2010 to 33 percent by 2020 and
revises specified provisions of the existing RPS statutes.
EXISTING LAW :
1)The RPS requires investor-owned utilities (IOUs) and certain
other retail sellers of electricity to achieve a 20 percent
renewable energy portfolio by 2010 and establishes a detailed
process and standards for renewable energy procurement.
a) Requires local publicly-owned utilities (POUs) to
implement and enforce their own RPS programs. POUs are not
subject to the same detailed process and standards as IOUs
and other retail sellers subject to the jurisdiction of the
Public Utilities Commission (PUC).
b) Provides that eligible renewable technologies are
biomass, solar thermal, photovoltaic, wind, geothermal,
renewable fuel cells, small hydroelectric (30 megawatts or
less), digester gas, limited non-combustion municipal solid
waste conversion, landfill gas, ocean wave, ocean thermal,
and tidal current.
c) Provides that renewable resources located outside the
state are eligible if the facility commences operation
after January 1, 2005 and is connected to California's
transmission grid or delivers energy to California.
d) Defines and permits the use of unbundled/tradable
renewable energy credits (RECs) for RPS compliance, subject
to PUC approval, and authorizes the PUC to limit the amount
of RECs a retail seller may use for RPS compliance.
e) Requires IOUs to submit annual RPS procurements plans
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and meet a one percent per year annual procurement target.
f) Requires the PUC to adopt a market price referent (MPR)
as a benchmark for reasonable prices for RPS procurement by
IOUs.
g) Designates funds (approximately $165 million per year)
available to cover IOUs' RPS procurement costs which exceed
the MPR. Once these funds are exhausted, IOUs are relieved
of their obligation to buy additional renewable energy
through the RPS procurement process, but may build or
continue to buy renewable energy through bilateral
contracts, notwithstanding this RPS "cost cap."
h) Permits specified small, multi-jurisdictional IOUs to
count renewable energy delivered in other states under
specified conditions.
2)Requires the PUC to certify the public convenience and
necessity require a transmission line before an IOU may begin
construction (Certificate of Public Convenience and Necessity,
or CPCN). The CPCN process includes environmental review of
the proposed project under the California Environmental
Quality Act (CEQA).
3)The California Global Warming Solutions Act (AB 32) requires
the Air Resources Board (ARB) 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. Pursuant
to AB 32, ARB has adopted a Scoping Plan which includes
achieving a 33 percent RPS by 2020 as a key measure to achieve
the 2020 GHG emissions limit and, pursuant to Governor's
Executive Order S-21-09, initiated a rulemaking to adopt the
standard.
THIS BILL :
Targets
1)Replaces the existing 20 percent by 2010 RPS target and one
percent annual procurement targets applicable to "retail
sellers", which include IOUs, energy service providers and
community choice aggregators, with the following targets:
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a) 20 percent by December 31, 2012.
b) 25 percent by December 31, 2016.
c) 33 percent by December 31, 2020 and each year
thereafter.
Instead of regular annual procurement targets, each of these
targets is preceded by a compliance period where the quantity
of renewable energy procured must reflect reasonable progress
in the intervening years sufficient to meet the next target.
2)Revises existing provisions requiring POUs to implement and
enforce their own RPS programs and instead requires POUs to
achieve the following specific targets:
a) 20 percent by December 31, 2013.
b) 25 percent by December 31, 2016.
c) 33 percent by December 31, 2020.
Compliance Delays
3)Authorizes the PUC to allow retail sellers to delay compliance
with any renewable procurement requirement if the retail
seller demonstrates that any of the following conditions are
beyond its control and will prevent timely compliance:
a) Inadequate transmission capacity for delivery of
sufficient renewable energy.
b) Unanticipated permitting, interconnection or "other"
delays for renewable energy projects, or an insufficient
available renewable energy.
c) Unanticipated curtailment of renewable energy necessary
to address the needs of a balancing authority (e.g. the
Independent System Operator) or a transmission owner (e.g.
a utility).
Eligibility
4)Revises eligibility conditions to establish "balanced
portfolio" requirements for future procurement based on the
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following three categories of renewable energy products:
a) Renewable energy interconnected to the grid within,
scheduled not less than hourly for direct delivery into, or
dynamically transferred by, a California balancing
authority (i.e., real renewable energy supplied to the
California grid, located within or directly proximate to
the state). At least 75 percent of the portfolio must fall
into this category.
b) Renewable energy where substitute non-renewable energy
is used to provide a reliable delivery schedule into a
California balancing authority, provided the substitute
energy meets California's greenhouse gas emission
performance standard (i.e., firmed and shaped energy where
substitute energy is used to compensate for delivery
problems due to intermittent generation or inadequate
transmission capacity from a remote renewable resource).
c) Renewable energy products not meeting either condition
above, including unbundled RECs (i.e., the original source
of renewable energy must be located within the western
grid, but otherwise need not have a physical connection to
California). Not more than 10 percent of the portfolio may
fall into this category.
5)Provides that renewable resources located outside the state
are eligible if the facility commences operation after January
1, 2010, unless electricity generated by the facility was
procured by a retail seller or POU as of May 31, 2009.
6)Requires the PUC to authorize the use of RECs, subject to
limits described above, and limits the use of RECs to 18
months from the initial date of generation of the associated
electricity.
Cost Containment
7)Repeals existing MPR, above-market funds and cost cap
provisions and instead authorizes the PUC to establish a cost
limit for each IOU according to specified criteria. (Revised
by amendments agreed to in Utilities and Commerce Committee,
noted in comments below.)
Other
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8)Sets aside 25 percent of the 33 percent renewable market for
IOU-owned generation by requiring the PUC to approve an
application by an IOU to construct, own and operate a
renewable energy facility until IOU-owned renewable facilities
equal 8.25 percent of the IOU's anticipated 2020 retail sales.
9)Requires the CEC, in consultation with ARB, to adopt
regulations for enforcement of the RPS on POUs, including
providing for the imposition of penalties by ARB pursuant to
AB 32, upon referral by the CEC, for failure to comply with
the RPS.
10)Provides additional assurance of recovery by IOUs of costs
incurred for transmission facilities the PUC finds are
reasonably necessary or appropriate to facilitate achievement
of the RPS.
11)Requires the PUC to approve an application to construct a
transmission line within 18 months under specified conditions.
12)Appropriates $322,000 from the PUC Utilities Reimbursement
Account to the PUC for additional staffing related to
transmission lines.
13)Requires the Department of Fish and Game to establish an
internal division to perform comprehensive planning,
streamlined environmental compliance services, and ensure
timely completion of Natural Community Conservation Plans
related to development of renewable energy projects.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. The RPS requires IOUs and certain other retail
energy providers, collectively referred to as "retail
sellers," to buy renewable electricity to the extent funds are
available to pay for any costs exceeding a market price set by
the PUC. Each IOU is required to increase its renewable
procurement each year by at least one percent of total sales,
so that 20 percent of its sales are renewable energy sources
by December 31, 2010. Once a 20 percent portfolio is
achieved, no further increase is required. The PUC is
required to adopt comparable requirements for direct access
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energy service providers and community choice aggregators.
The RPS requires the PUC to adopt processes for determining
market prices, ranking renewable bids according to cost and
fit, flexible compliance rules and standard contract terms.
The RPS requires IOUs to offer contracts of at least 10 years,
unless the PUC approves shorter contracts. This is intended
to support the development of new renewable resources.
The original RPS bill, SB 1078 (Sher), Chapter 516, Statute of
2002, set a goal of 20 percent by 2017. SB 107 (Simitian),
Chapter 464, Statutes of 2006, accelerated the deadline for 20
percent to 2010. Nearly eight years after the RPS was
enacted, IOUs have advanced beyond their 2002 average starting
point of 12 percent RPS, but are not on pace to achieve 20
percent by the end of this year, and intend to rely on
flexible compliance rules to delay attainment of 20 percent
until 2013. According to the PUC, in 2009, the IOUs served
15.4 percent of their load with renewable energy, up from 13
percent in 2008. PG&E achieved 14.4 percent, SCE 17.4
percent and SDG&E 10.5 percent.
Last year, the Governor vetoed two bills passed by the
Legislature to establish a 33 percent RPS - SB 14 (Simitian)
and AB 64 (Krekorian). Following the vetoes, the Governor
issued an executive order directing ARB to implement a 33
percent RPS as a GHG reduction measure pursuant to its
authority under AB 32. ARB has initiated a rulemaking to
establish a "renewable electricity standard" (RES), with
adoption by the board scheduled for July 2010. However,
questions have been raised regarding the permanence and
legality of an RES regulation based on an executive order.
2)Excuses, excuses?have this bill's renewable targets taken a
back seat to compliance off-ramps? This bill attempts to
strike a balance between establishing ambitious renewable
targets, facilitating the necessary renewable procurement and
infrastructure development, and tempering the targets by
providing utilities flexibility if they encounter compliance
challenges. The bill recognizes situations where a utility's
good faith efforts to achieve renewable targets might be
frustrated by circumstances beyond its control, such as
inadequate transmission infrastructure or unanticipated
permitting delays. However, the bill seems to give utilities
too little credit for the helpful role that they can and
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should play in developing the infrastructure necessary to
achieve a 33 percent RPS. In general, the excuses for
compliance delays in the bill should be subject to review and
approval of the PUC in a transparent process, clearly limited
to circumstances beyond a utility's control, and limited to
the time necessary to remedy the problem or find an
alternative. In particular, a utility should not be eligible
for a compliance delay where the utility has a potential
conflict or incentive to stall, such as curtailing delivery of
renewable energy on its own transmission lines.
3)Suggested amendments:
a) On page 18, line 19, strike out "2013" and insert
"2012".
b) On page 20, line 1, strike out "The definition of
'delivered' and 'delivery'" and insert "This Article".
c) On page 20, line 3, strike out "deliver" and insert
"supply".
d) On page 20, line 9, strike out "deliver" and insert
"supply".
e) On page 20, line 13, strike out "the delivered" and
insert "these".
f) On page 25, line 38, strike out "in-state".
g) On page 32, line 4, strike out strike out "assume" and
insert "require".
h) On page 33, line 15, after "other" insert "related".
i) On page 34, strike out lines 8-11 and insert a period.
j) Conform amendments to Section 399.2.5 (Section 10) and
Section 399.12(g)(3) to amendments to those sections made
by AB 1954 (Skinner).
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4)Amendments recommended by Utilities and Commerce Committee.
When this bill was approved by the Utilities and Commerce
Committee June 24, the author and committee agreed to
amendments, with adoption deferred to this committee. In
summary, the U&C amendments:
a) Amend findings to require the PUC to ensure that rates
are just and reasonable and not significantly affected by
the RPS.
b) Require the PUC to establish a cost limit.
c) Require the PUC to report to the Legislature by 2016
regarding whether IOUs can achieve 33 percent within the
adopted cost limit.
d) Authorize the PUC to revise the cost limit once after
2016 if necessary.
e) Authorize IOUs to stop procuring renewable energy beyond
the cost limit.
f) Require the PUC to report annually regarding the efforts
the utilities are taking in recruiting and training
employees to ensure an adequately trained and available
workforce.
g) Require the PUC, in its process for ranking renewable
energy resources according to "least-cost and best-fit," to
take into account the workforce recruitment, training, and
retention efforts associated with the construction and
operation of the eligible renewable energy project.
REGISTERED SUPPORT / OPPOSITION :
Support
California Biomass Energy Alliance (if amended)
Independent Energy Producers (if amended)
Large-scale Solar Association
Solar Alliance
Opposition
Alliance for Retail Energy Markets (unless amended)
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California Manufacturers & Technology Association
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092