BILL ANALYSIS �
AB 2196
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ASSEMBLY THIRD READING
AB 2196 (Chesbro and Gatto)
As Amended May 15, 2012
Majority vote
UTILITIES & COMMERCE 10-0 NATURAL
RESOURCES 6-1
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|Ayes:|Bradford, Buchanan, Fong, |Ayes:|Chesbro, Brownley, |
| |Furutani, Gorell, | |Dickinson, Huffman, |
| |Huffman, Ma, Skinner, | |Monning, Skinner |
| |Swanson, Valadao | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Grove |
| | | | |
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APPROPRIATIONS 12-0
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|Ayes:|Fuentes, Blumenfield, | | |
| |Bradford, Charles | | |
| |Calderon, Campos, Davis, | | |
| |Gatto, Hall, Hill, Lara, | | |
| |Mitchell, Solorio | | |
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SUMMARY : 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. This bill will qualify for Renewable Portfolio
Standard (RPS) eligibility pipeline biomethane contracts
executed prior to January 1, 2012, and condition enrollment upon
enactment of AB 1900 (Gatto) of this legislative session.
EXISTING LAW :
1)Requires increasing amounts of electricity generated per year
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to be obtained from eligible renewable energy resources.
2)Specifies that California's Renewable Portfolio Standard is
33% by 2020.
3)Requires investor owned utilities (IOUs), publicly owned
utilities (POUs), and retail sellers to meet RPS.
4)Requires all RPS-eligible facilities must be within the
Western Electricity Coordinating Council (WECC) Categories 1,
2 or 3.
5)Establishes procurement category requirements for eligible
generation and deadlines for reaching targets:
a) Category 1: Directly connected or scheduled to a
California Balancing Authority, at least:
i) 50% by 12/2013;
ii) 65% by 12/2016; and,
iii) 75% by 12/2020 and thereafter.
b) Category 2: Must be located within WECC transmission
grid and the electricity must be firmed and shaped with
substitute electricity to provide incremental electricity
that is scheduled into a California Balancing Authority, no
minimum or maximum.
c) Category 3: Unbundled renewable energy certificates, no
more than:
i) 25% by 12/2013;
ii) 15% by 12/2016; and,
iii) 10% by 12/2020 and thereafter.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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 RPS purposes and to consider application of that refined
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eligibility to the state's IOUs (PUC Utilities Reimbursement
Account). (PUC reports it will need the efforts of an
administrative law judge, equivalent to half of a personnel year
(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. PUC's workload claim is reasonable. However, the
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 suspend 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 :
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.
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
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.
RPS statute tasks the California Energy Commission (CEC) with
certifying renewable energy resources as eligible for RPS
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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.
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 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.
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083
FN: 0003668
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