BILL ANALYSIS �
AB 2196
Page 1
Date of Hearing: May 9, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2196 (Chesbro) - As Introduced: February 23, 2012
Policy Committee: Utilities and
Commerce Vote: 10-0
Natural Resources 6-1
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
As proposed to be amended, this bill affirms the eligibility as
a "renewable electricity generating facility" an electricity
generating facility that uses landfill gas, digester gas or
another renewable fuel delivered to the facility through a
common carrier pipeline. The bill conditions this eligibility
upon the transaction meeting eligibility and verification
criteria comparable to those criteria statutorily applicable to
other renewable energy sources. The author has offered
amendments that will qualify for RPS eligibility pipeline
biomethane contracts executed prior to January 1, 2012 and
condition enrollment upon enactment of AB 1900 (Gatto).
FISCAL EFFECT
Minor costs in 2012-13 in the tens of thousands of dollars to
the California Public Utilities Commission (PUC) to consider the
bill's refinement of pipeline biogas eligibility for Renewable
Portfolio Standard (RPS) purposes and to consider application of
that refined eligibility to the state's investor owned
utilities. (PUC Utilities Reimbursement Account.)
(PUC reports it will need the efforts of an administrative law
judge, equivalent to half of a PY, to oversee a formal
proceeding to determine how statutory balanced-portfolio
electricity procurement requirements should be applied to
procurement of biogas delivered via common carrier gas pipeline.
The PUC's workload claim is reasonable. However, the author's
AB 2196
Page 2
office protests, somewhat convincingly, that the pipeline biogas
controversy was not created by this bill, as evidenced by the
California Energy Commission's recent decision to suspended its
RPS certification of pipeline biomethane contracts, and that
PUC, therefore, would still need a proceeding to consider
pipeline biomethane RPS eligibility, absent this bill.)
COMMENTS
1)Rationale . The author intends to ensure that electricity
utilities and certain electricity providers meet their
renewable energy procurement obligations by using fuel sources
that comply with statutory requirement. These requirements,
the author notes, place the highest value on renewable energy
delivered directly into California because, the author
contends, such energy provides the greatest economic,
environmental and energy reliability benefits.
2)Background. Current statute requires the state's electricity
utilities and certain electricity providers to procure at
least 33% of each of their electricity from renewable energy
resources by 2020 and establishes obligatory renewable energy
procurement milestones prior to this date. This requirement
is known as the RPS.
Statute defines, for RPS purposes, eligible renewable energy
sources to include, among other sources, biogas, landfill gas
and digester gas, often collectively referred to as
biomethane, which are methane and other gases produced by the
breakdown of organic substances. Statute also establishes a
"balanced portfolio" requirement, classifying renewable energy
products based upon their location and other characteristics,
eventually requiring that 75% of renewable energy products be
directly connected or scheduled into the California
electricity grid.
The RPS statute tasks the California Energy Commission (CEC)
with certifying renewable energy resources as eligible for RPS
credit. In the past, CEC has certified as RPS eligible
renewable energy contracts between out-of-state facilities
that produce biomethane and California-based electricity
generating facilities that receive the biomethane via pipeline
and burn it, along with natural gas, to produce electricity.
AB 2196
Page 3
Several major electric utilities, including the Los Angeles
Department of Water and Power and the Sacramento Municipal
Utilities District, among others, have signed contracts with
pipeline biomethane suppliers.
There has been growing concern with the RPS eligibility of
some pipeline biomethane contracts. This is because, in many
instances, the pipeline biomethane for which an electricity
generating facility receives RPS credit never physically
receives the biomethane. Rather, the facility receives gas
from a pipeline interconnected to the biomethane facility. But
the pipeline interconnection may be very indirect, cover a
distance of thousands of miles, and carry gas that flows away
from California, west to east. CEC has assumed the biomethane
displaces an equivalent amount of natural gas in the pipeline
so that gas removed by the electricity facility from the other
end of the pipeline, regardless of it physical composition or
source, may be considered biomethane for RPS compliance
purposes.
Earlier this year, in response to these concerns, CEC
suspended its RPS certification of pipeline biomethane
contracts to allow time to consider the appropriateness of
pipeline biomethane's RPS eligibility. CEC, however, granted
RPS eligibility to previously certified biomethane pipeline
contracts.
Some electric utilities and other interested parties express
concern over CEC's action and the effect disqualification of
pipeline biomethane from RPS eligibility will have on electric
utilities' ability to meet RPS obligations and the cost to
Californians of doing so.
3)Support. This bill is supported by several labor groups whose
members would benefit from more projects located in
California, the Utility Reform Network (TURN) and others.
4)Opposition. There is no opposition listed in the policy
committee analysis, and, at the time this analysis was
prepared, no parties had contacted this committee to formally
register their opposition to the bill. However, some
utilities that have entered into pipeline biomethane
contracts, or that plan to do so, may contend the bill would
AB 2196
Page 4
make compliance with the RPS requirements more costly and more
difficult. In addition, utilities with preexisting pipeline
biomethane contracts may complain the bill unfairly
invalidates contacts that were entered into according to
existing law and regulation.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081