BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chairman
� x1 2 (Simitian)
�
Hearing Date: �02/23/2011 Amended: As Introduced�
Consultant: �McCarthy, Brendan Policy Vote: EU&C 8-2�
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BILL SUMMARY:� SBx1 2 requires all retail electricity suppliers �
in the state (including publicly owned utilities) to procure 33 �
percent of their total electricity supplies from renewable �
energy sources by 2020. The bill specifies a "loading order" of �
renewable energy supplies, based on where the energy supplies �
are generated. The bill requires the Department of Fish and Game �
to create a division for the planning and permitting needed for �
renewable energy projects.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
�
Public Utilities Commission $1,500 $2,500 �
$2,500Special *
oversight
Energy Commission $1,450 $1,350 $1,350 General �
**
oversight
Air Resources Board Up to $300 per year Special �
***
enforcement
Department of Fish and Between $300 and $650 per year General �
/
Game planning and Special �
****
permitting
State agency energy costs Between $23,000 and $42,000 by �
2020 Various
Public Utility implementation Unknown, not reimbursableLocal
costs
SBx1 2 (Simitian), Page 1
* Public Utilities Commission Utilities Reimbursement Account.
** Energy Resources Program Account.
*** Air Pollution Control Fund.
**** Fish and Game Preservation Fund.
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STAFF COMMENTS: This bill meets the criteria for referral to the �
Suspense File.
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Background. �Under current law (SB 1078, Sher, 2002 and SB 107 �
Simitian, 2006), investor owned utilities and energy service �
providers are required to procure 20 percent of their �
electricity supplies from renewable energy sources by 2010. �
(Commonly referred to as the "Renewables Portfolio Standard".) �
Provisions of existing law allow investor owned utilities to �
extend compliance until 2013, provided certain conditions are �
met. Existing law also requires publicly owned utilities to �
adopt their own Renewables Portfolio Standard.
When final information from 2010 becomes available in March, it �
is expected that the investor owned utilities collectively will �
have 18 percent of their electricity supplies coming from �
renewable energy sources, with 20 percent of supplies to come �
online sometime in 2011 or 2012.
The state's publicly owned utilities (which collectively serve �
about 25 percent of the state's electricity market) vary �
considerably in their procurement of renewable energy. The Los �
Angeles Department of Water and Power receives 14 percent from �
renewable sources, the Sacramento Municipal Utility district �
receives 21 percent, members of the Northern California Power �
Authority collectively receive 20 percent, and members of the �
Southern California Power authority receive between 2 percent �
and 20 percent from renewable sources.
In May of 2010, Governor Schwarzenegger issued an executive �
order to the Air Resources Board directing it to adopt a 33 �
percent renewable energy standard under authority granted to the �
Air Resources Board by AB 32 (Nunez, 2006). The Air Resources �
Board has developed the regulation, but has not yet formally �
adopted it. Staff notes that Legislative Counsel has opined that �
the Air Resources Board would exceed its existing statutory �
authority if it implements a renewable energy standard that goes �
beyond the statutorily required 20 percent Renewables Portfolio �
SBx1 2 (Simitian), Page 2
Standard.
SBx1 2 Provisions. �This bill increases the state's Renewables �
Portfolio Standard requirement to 33 percent of electricity �
supply by 2020 and broadens the Renewables Portfolio Standard �
mandate to include publicly owned utilities. To that end, the �
bill requires all electricity suppliers to provide an average of �
20 percent renewable energy for the period between January 1, �
2011 through December 31, 2013; 25 percent by December 31, 2016; �
and 33 percent by December 31, 2020.
Under the bill, all existing renewable energy contracts signed �
by June 1, 2010 would be "grandfathered" into the program. Going �
forward, new renewable energy contracts must meet a "loading �
order" that categorizes renewable resources.
The first category is renewable electricity that is �
delivered directly to California "balancing authorities" �
(entities such as the Independent System Operator that �
manage electricity transmission systems) or that can be �
dynamically transferred to a California balancing authority �
on an hourly basis. Electricity from this category must be �
at least 50 percent of an electricity provider's total �
renewable energy supplies through 2013, rising to 65 �
percent by December 31, 2016, and 75 percent by 2010 and �
thereafter.
The second category of renewable electricity is �
unbundled renewable energy credits that have been separated �
from the actual electricity generated from the renewable �
energy source. Electricity from this category can be no �
more than 25 percent of an electricity provider's total �
renewable energy supplies through 2013, declining to 15 �
percent by December 31, 2016, and 10 percent by 2020 and �
thereafter.
The third category is renewable electricity that is not �
delivered directly to a California balancing authority in �
real time, but does provide electricity to the state. This �
category would make up any remaining renewable energy �
sources for the electricity supplier.
The bill authorizes investor owned utilities to construct, �
operate, and own electricity generation facilities up to 8.25 �
percent of a utility's retail sales projected for 2020.
Public Utilities Commission Costs. �The bill requires the Public �
Utilities Commission to adopt a process for the selection of �
Renewables Portfolio Standard projects, based on cost and other �
SBx1 2 (Simitian), Page 3
factors. The Public Utilities Commission is also required to �
develop a "cost cap" to ensure that the Renewable Portfolio �
Standard does not impose disproportionate impacts on electricity �
ratepayers. If the cost of new renewables exceeds the cost cap, �
an investor owned utility may defer additional procurement of �
renewable energy resources. Publicly owned utilities are �
authorized to set their own cost cap consistent with the cost �
cap determined by the Public Utilities Commission. The bill also �
allows electricity providers to bank excess renewable generation �
between compliance periods for future years, under certain �
circumstances.
The bill authorizes the Public Utilities Commission to impose �
penalties on investor owned utilities or energy service �
providers for failure to meet the bill's requirements
The bill requires the Public Utilities Commission to issue a �
decision on applications for new electricity transmission �
projects within 18 months.
Staff estimates the cost to the Public Utilities Commission to �
oversee investor owned utility compliance with the 33 percent �
Renewable Portfolio Standard and expedite approval of proposed �
electricity transmission projects to be about $2.5 million per �
year.
�The bill appropriates $322,000 from the Public Utilities �
Commission Utilities Reimbursement Account to the Public �
Utilities Commission for the review of proposed electricity �
transmission infrastructure needed to meet the 33 percent �
Renewables Portfolio Standard.
Energy Commission Costs. �The bill requires the Energy Commission �
to monitor compliance by publicly owned utilities and refer �
non-compliant publicly owned utilities to the Air Resources �
Board, which is authorized to impose penalties for �
non-compliance. Fines imposed by the Air Resources Board would �
be available, upon appropriation of the Legislature, for �
projects to reduce air pollution emissions in the region of the �
violation.
The bill directs the Energy Commission to study whether certain �
hydroelectric facilities in British Columbia should be eligible �
for inclusion in the Renewables Energy Portfolio.
The Energy Commission indicates that it will cost about $1.4 �
SBx1 2 (Simitian), Page 4
million per year to oversee compliance by publicly owned �
utilities.
The Energy Resources Program Account is primarily supported by a �
surcharge on electricity use in the state. Due to the economic �
recession, energy use in the state has declined, reducing �
revenues into the Account. In the fall of 2010, the Energy �
Commission raised the surcharge to near its statutory maximum. �
Based on the increased surcharge, the Account has a projected �
fund balance of about $10 million at the end of the 2011-12 �
budget year. However, the Energy Commission also projects �
expenditures to be larger than revenues in 2011-12 and �
thereafter.
SBx1 1(Steinberg) includes legislative intent to appropriate $8 �
million per year for five years from the Energy Resources �
Program Account. If both this bill and SBx1 1 are enacted, the �
administration will likely have to reduce other program �
expenditures by the Energy Commission by up to $8 million per �
year to keep the Energy Resources Program Account in balance. �
(As the state's economy recovers, revenues into the Account �
should recover, ultimately mitigating the need for program �
reductions.)
Air Resources Board Costs. �Staff estimates that the Air �
Resources Board will incur costs up to $300,000 per year, �
depending on the number of violations referred to the Board from �
the Energy Commission.
Department of Fish and Game Costs. �The bill requires the �
Department of Fish and Game to create an internal division for �
comprehensive planning and permitting for renewable energy �
projects. (Many proposed and potential renewable energy projects �
will need permits from the Department of Fish and Game, �
specifically Endangered Species Act permits.) The bill requires �
the Department of Fish and Game to ensure the timely completion �
of plans under the Natural Communities Conservation Planning Act �
(a tool used to plan for habitat and protected species �
conservation, which provides regulatory assurances under the �
Endangered Species Act).
Staff estimates the Department of Fish and Game will incur �
expenses between $300,000 and $650,000 per year to conduct �
planning and permitting related to additional development of �
renewable resources. These activities would likely be funded �
from the Fish and Game Preservation Fund or the General Fund.
SBx1 2 (Simitian), Page 5
State Mandate. �The bill imposes a state mandate on publicly �
owned utilities, which are local government agencies. However, �
because publicly owned utilities are able to pass any �
implementation costs along to their customers, the bill does not �
impose a reimbursable state mandate.
Energy Costs for State Agencies. �In addition to direct costs to �
state agencies, the bill imposes indirect costs on state �
agencies through higher electricity bills. Both the Public �
Utilities Commission and the Air Resources Board have conducted �
studies on the ratepayer impacts of various 33 percent �
Renewables Portfolio Standard scenarios. According to those �
studies, in 2020, average retail electricity rates (in current �
dollars) are projected to be between $0.006 and $0.011 per �
kilowatt-hour higher than they otherwise would be under current �
law (including the existing 20 percent Renewables Portfolio �
Standard). Based on current electricity use by state agencies, �
the state would face projected electricity costs in 2020 that �
would likely be between $23 million and $42 million higher than �
they would be under current law.
Deadlines in the Bill. �Staff notes that some of the timelines �
included by the bill will be difficult for state agencies to �
achieve. For example, the bill requires the Energy Commission to �
conduct a study on certain hydroelectric facilities in British �
Columbia by June 30, 2011. Also, the bill requires the Energy �
Commission to adopt regulations implementing the bill's mandates �
on publicly owned utilities by July 1, 2011. Similarly, the bill �
requires the Public Utilities Commission to determine the amount �
of renewable energy every retail electricity supplier will need �
to procure to meet the bill's renewable energy mandate by �
January 1, 2012.
Staff recommends� these timelines be delayed to more accurately �
reflect the time it will take to accomplish these tasks.
Prior Legislation. �SB 722 (2010, Simitian) was substantively �
similar to this bill. SB 722 died on the Senate Floor.
SB 14 (2009, Simitian) also imposed a 33 percent Renewables �
Portfolio Standard. Some details regarding what types of �
renewable energy sources would have counted under SB 14 differ �
from this bill. Governor Schwarzenegger vetoed SB 14, citing �
constraints on including out-of-state renewable energy sources �
SBx1 2 (Simitian), Page 6
under that bill.