BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2196|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 2196
Author: Chesbro (D), et al.
Amended: 8/22/12 in Senate
Vote: 21
SENATE ENERGY, UTILITIES & COMMUNIC. COMM : 11-1, 6/25/12
AYES: Padilla, Fuller, Berryhill, Corbett, De Le�n,
DeSaulnier, Emmerson, Kehoe, Pavley, Rubio, Wright
NOES: Simitian
NO VOTE RECORDED: Strickland
SENATE ENVIRONMENTAL QUALITY COMMITTEE : 6-1, 7/2/12
AYES: Simitian, Blakeslee, Hancock, Kehoe, Lowenthal,
Pavley
NOES: Strickland
SENATE APPROPRIATIONS COMMITTEE : 4-1, 8/16/12
AYES: Kehoe, Alquist, Price, Steinberg
NOES: Lieu
NO VOTE RECORDED: Walters, Dutton
ASSEMBLY FLOOR : 66-1, 5/25/12 - See last page for vote
SUBJECT : Renewable energy resources
SOURCE : Author
DIGEST : This bill clarifies the definition of an
eligible renewable electrical generation facility to
include a facility that generates electricity utilizing
CONTINUED
AB 2196
Page
2
biomethane delivered through a common carrier pipeline if
the source and delivery of the fuel can be verified by the
State Energy Resources Conservation and Development
Commission (Energy Commission). This bill counts in full,
as eligible generation for purpose of complying with the
Renewable Portfolio Standard (RPS), electric generation
that relies on procurement of biomethane from a contract
executed, by a retail seller or local publicly owned
utility and reported to the Public Utilities Commission
(PUC) or the Energy Commission, prior to March 29, 2012.
ANALYSIS : Existing law:
1.Requires investor-owned utilities, community choice
aggregators, and electric service providers (collectively
referred to as retail sellers) and local publicly owned
utilities (POUs), to increase purchases of renewable
energy such that at least 33% of total retail sales are
procured from renewable energy resources by December 31,
2020. In the interim each entity is be required to
procure an average of 20% of renewable energy for the
period of January 1, 2011 through December 31, 2013 and
25% by December 31, 2016. This is known as the RPS.
2.Requires all renewable electricity products to meet the
requirements of a "loading order" that mandates minimum
and maximum quantities of three product categories (or
"buckets") which includes renewable resources directly
connected to a California balancing authority or provided
in real time without substitution from another energy
source, energy not connected or delivered in real time
yet still delivering electricity, and unbundled renewable
energy credits.
3.Requires the CEC to certify generating facilities for
purposes of establishing eligibility under the RPS and to
design and implement an accounting system to verify
compliance with the RPS by retail sellers and POUs.
4.Defines a renewable electrical generation facility and
includes in that definition a facility that uses landfill
gas or digester gas (biomethane).
5.Permits procurement from contracts for renewable
CONTINUED
AB 2196
Page
3
generation executed prior to June 1, 2010 to "count in
full" toward a retail seller's or POU's RPS requirements
and further exempts those contracts from the three
product categories or "bucket" requirements.
This bill clarifies the definition of an eligible renewable
electrical generation facility to include a facility that
generates electricity utilizing biomethane delivered
through a common carrier pipeline if the source and
delivery of the fuel can be verified by the Energy
Commission. This bill counts in full, as eligible
generation for purpose of complying with RPS, electric
generation that relies on procurement of biomethane from a
contract executed, by a retail seller or local publicly
owned utility and reported to the PUC or the Energy
Commission, prior to March 29, 2012, the CEC must certify
that the fuel source:
1.Is injected into a pipeline that physically flows toward
the generating facility that will use the fuel;
2.The source was newly developed after March 29, 2012 or
increased deliveries after March 29, 2012 to meet the new
contract;
3.Renewable and environmental attributes are transferred to
the retail seller or POU that uses the biomethane for
compliance with the RPS to ensure that the electric
generation is carbon neutral;
4.The seller and purchaser comply with a tracking system to
verify deliveries of biomethane; and
5.The source of the biomethane causes a direct reduction of
air or water pollution in the state or alleviates a local
nuisance related to the emission of odors.
Background
Eligible Renewable Generation . Procurement from a
renewable facility cannot be counted for purposes of
complying with the RPS unless that facility has been
certified as RPS-eligible by the CEC. Facilities
interested in obtaining a bilateral contract or competing
CONTINUED
AB 2196
Page
4
in a load-serving entity's RPS solicitation generally
certify the facility with the CEC.
There are two types of certification: (1) RPS
Certification, and, (2) RPS Pre-Certification. Renewable
facilities that are under development may seek
"pre-certification," with the understanding that the CEC
will verify the information submitted in the
pre-certification application once the facility has been
completed and is delivering electricity. All certified and
pre-certified facilities are subject to audit. The Western
Renewable Energy Generation Information System has been
developed to satisfy current RPS tracking requirements.
All RPS-certified facilities must register with the System.
The fourth edition of the CEC's RPS eligibility guidebook,
released in January 2011, introduced a number of changes to
the treatment of biomethane injected into the natural gas
pipeline system. Some of the more noteworthy changes were
the creation of the biogas section as a stand-alone
section, the introduction of the term "pipeline
biomethane," and clarifying the delivery requirements for
delivering biogas (now called pipeline biomethane, or
biomethane) for use in an RPS-eligible electric generating
facility.
The CEC certifies an "eligible renewable facility." In the
case of pipeline biomethane, the CEC will certify a natural
gas plant that will receive pipeline biomethane. The CEC
does not and has not considered the execution date of a
contract in its certification process.
Pipeline biomethane stands out in the portfolio of eligible
RPS resources because it is transported to a natural gas
facility and it is the natural gas facility that gets
certified as RPS-eligible because some portion of the
generation from the facility is considered renewable based
on the fuel source. Other RPS-eligible facilities have the
fuel source and generating facility at the same site.
Consequently, in trying to define as eligible pipeline
biomethane, the CEC had to try and fit a square peg into a
round hole and in so doing may have not acted consistent
with the purposes of the RPS program particularly as it was
CONTINUED
AB 2196
Page
5
amended by SB x1 2 (Simitian), Chapter 1, Statutes of
2011-12 First Extraordinary Session
Pipeline Biomethane Suspension . After the release of the
2011 eligibility guidebook by the CEC, controversy ensued
over the new classification of "pipeline biomethane." The
adoption of SB x1 2 with its product categories, delivery
requirements, and environmental objectives raised further
question as to whether pipeline biomethane as defined as
eligible in the guidebook was consistent with the RPS
program. The guidelines for pipeline landfill and digester
gas do not require displacement of fossil fuel consumption,
the reduction of air pollution, or other environmental
benefits to California. Additionally the contracts being
signed by some California retail sellers and POUs were with
landfills from as far away as Pennsylvania, Ohio and
Tennessee, locales which make it physically impossible to
verify delivery of the fuel to California particularly
because the flow of those pipelines passes through
pipelines flowing in the opposite direction of California.
The RPS also intends that the program achieve
"additionality," that new development of renewables occurs,
but in the case of many of the contracts, the biomethane
had been flowing for quite some time so that there appears
to be no new capture or incremental capture occurring.
Additionally, the current guidebook lacks vigorous
requirements to verify that the claimed quantity of
biomethane was actually used by the designated power plant
or that the necessary biomethane attributes were
transferred to the power plant operator for purposes of the
RPS and not double-counted for other purposes.
The CEC recognized that its guidebook was inconsistent with
the requirements of SB x1 2 and on March 28, 2012, voted to
suspend the RPS eligibility guidelines relative to
biomethane with specified conditions. The resolution
adopted by the CEC provided that it would not accept
applications for pre-certification of facilities after 5:00
p.m. on that date. The existence or execution of a
contract was irrelevant to that action. Power plants that
were pre-certified for the RPS by the CEC will remain
pre-certified. Complete applications for RPS certification
and RPS pre-certification for power plants seeking to use
biomethane that were received by the CEC prior to the
CONTINUED
AB 2196
Page
6
deadline "will be processed in accordance with the
eligibility guidelines in effect on that date."
Contract Eligibility under Suspension . As a result of the
suspension, some POUs and retail sellers have executed
contracts for which they are not certain that they will be
able to obtain certification of the generating facility.
The CEC did not and does not consider the execution of
contracts in their certification process and the suspension
did not consider contract execution either. As a result,
if there is a contract for the purchase of biomethane and
the facility has been certified as eligible then the
generation will be RPS eligible. If a facility that
planned to receive biomethane filed for final or
pre-certification with the CEC by March 28 at 5:00 p.m. the
CEC indicates that those applications will be processed in
accordance 2011 RPS guidebook. If a facility did not file
a pre-certification with the CEC before the deadline,
regardless of a contract, that generation and contract has
no legal status before the CEC at this time.
Grandfathered Contracts . To finesse the transition from
the 20% by 2010 RPS program to the 33% by 2020 program, SB
x1 2 grandfathered all RPS contracts entered into prior to
June 1, 2010 and provided that those contracts will "count
in full" under the new program requirements. Under rules
adopted by the California Public Utilities Commission, this
means that generation from contracts executed prior to June
1, 2010 will be netted out from the total RPS obligation;
the remaining retail sales requirement under the RPS will
be required to meet the new product content categories,
commonly referred to as buckets, under the new program.
Buckets are a critical new feature required for compliance
in the RPS program. Retail sellers and POUs have interim
procurement obligations leading up to 33% by 2020. The
program defines three product categories, the "buckets",
and sets limitations on the quantity of electricity
products for each of the three buckets in each compliance
period with an emphasis on electric generation delivered
directly to a California balancing authority. Because the
biomethane and the generating facility are geographically
separate, usually by thousands of miles, it is not clear
under the law or CEC or the Public Utilities Commission
policy into which bucket the resulting generation would be
CONTINUED
AB 2196
Page
7
eligible.
Comments
According to the author's office, the RPS is the
centerpiece of the state's effort to develop a clean energy
system and reduce pollution and greenhouse gas emissions
associated with electricity consumption. Over the past ten
years, the RPS statutes have evolved to include very
specific eligibility conditions and limits for various
renewable electricity technologies and products. Under the
RPS, renewable fuels must be "used" to generate electricity
to be eligible for the RPS. The 2011 legislation which
codified the current 33 percent by 2020 RPS goal (SB x1 2)
also established very carefully negotiated product content
categories (or "buckets"), which place the highest value on
renewable energy that is directly delivered into California
because it has the greatest economic, environmental and
reliability benefits.
Related Legislation
AB 1900 (Gatto), 2012, would require the Office of Health
Hazard Assessment, the California Energy Commission and the
Public Utilities Commission to take actions related to the
delivery of biomethane gas within the state for the
purposes of electricity generation.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
$75,000 from the Public Utilities Reimbursement Account
in 2012-12 and 2013-14 for the partial cost of a
proceeding to modify existing Public Utilities Commission
rules related to RPS eligibility.
Up to $75,000 from the Energy Resources Programs Account
(General Fund) annually to verify source and delivery of
biomethane.
SUPPORT : (Verified 8/22/12)
CONTINUED
AB 2196
Page
8
California State Association of Electrical Workers
California State Pipe Trades Council
California Wind Energy Association
Californians Against Waste
Clean Power Campaign
Coalition of California Utility Employees
Large-Scale Solar Association
Natural Resources Defense Council
The Utility Reform Network
Union of Concerned Scientists
Western States Council of Sheet Metal Workers
OPPOSITION : (Verified 8/22/12)
Coalition For Renewable Natural Gas (unless amended)
Shell Energy North America
Waste Management (unless amended)
ARGUMENTS IN SUPPORT : Natural Resources Defense Council
states in support that, "This legislation would resolve
many of the issues surrounding the use of biomethane to
comply with the RPS. By doing so, AB 2196 will ensure that
future investment in RPS-eligible biomethane will result in
new projects that provide tangible local air quality
benefits and greenhouse gas emission reductions. Resolution
of these issues will facilitate the development of an
environmentally and socially beneficial biomethane
industry.
"The adoption of appropriate RPS eligibility criteria
requires thoughtful judgement, particularly given the
nascent state of many renewable technologies. NRDC
believes that the author has found a reasonable balance
between the competing interests and objectives. We urge
you to support AB 2196.
"AB 2196 also provides guidance to ensure that biomethane
used for RPS compliance can be counted as a carbon neutral
resource. We support this objective, but are concerned
that the current language would require biomethane projects
to credit to purchasers more reductions than are needed to
offset all of the greenhouse gas emissions. We look
forward to working with the author to ensure that the
language fairly apportions emission reductions between
CONTINUED
AB 2196
Page
9
buyers and sellers."
ARGUMENTS IN OPPOSITION : Waste Management states in
opposition, "For months Waste Management has supported AB
2196, provided it could be amended to protect the essential
elements of the contracts it entered into more than a year
ago with the cities of Burbank and Pasadena. Those
contracts were entered into with the full expectation by
both parties that the delivered gas would be counted by the
CA Energy Commission under the procurement content
requirements (the 'bucket system') in the new RPS law that
was enacted in early 2011. The contracts fully comply with
guidelines promulgated by the CEC, which describe in detail
the conditions that must be met by providers of biomethane
from out-of-state sources. There has been no dispute that
the WM contracts meet all guideline requirements. Our
contracts were executed last August, more than seven months
before the CEC imposed a moratorium on certifying new
projects, and our projects began delivering gas in early
October, almost six months before the moratorium.
"The language in AB 2196, which allows biomethane contracts
only to 'count in full' toward RPS procurement
requirements, consigns all biomethane contracts to an
accounting system that predates the current RPS law and
reduces the value of the gas significantly below its
contracted value. But for Waste Management the outcome is
even worse, because our contracts require the biomethane to
be recognized by the state as qualifying for 'bucket one'
under the current RPS law. If AB 2196 is enacted in its
current form, the biomethane we are under contract to
deliver will not even receive the reduced 'count in full'
value."
ASSEMBLY FLOOR : 66-1, 5/25/12
AYES: Achadjian, Alejo, Allen, Ammiano, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
Chesbro, Cook, Davis, Dickinson, Eng, Feuer, Fong,
Fuentes, Furutani, Beth Gaines, Galgiani, Garrick, Gatto,
Gordon, Gorell, Hagman, Hayashi, Hill, Huber, Hueso,
Huffman, Jeffries, Jones, Lara, Logue, Bonnie Lowenthal,
Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell,
CONTINUED
AB 2196
Page
10
Nestande, Nielsen, Norby, Olsen, Pan, V. Manuel P�rez,
Portantino, Skinner, Smyth, Solorio, Swanson, Torres,
Valadao, Wagner, Wieckowski, Williams, Yamada, John A.
P�rez
NOES: Donnelly
NO VOTE RECORDED: Atkins, Bill Berryhill, Conway,
Fletcher, Grove, Halderman, Hall, Harkey, Roger
Hern�ndez, Knight, Ma, Perea, Silva
RM:n 8/22/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED