BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SJR 13 - Vargas Hearing
Date: August 25, 2011 S
As Introduced: August 16, 2011 NON-FISCAL J
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DESCRIPTION
Current Federal law requires that a Presidential permit be
issued by the U.S. Department of Energy (DOE) before electric
transmission facilities may be constructed, operated,
maintained, or connected at the U.S. international border.
Current State law , effective upon the adjournment of the first
extraordinary session, requires investor-owned utilities (IOUs),
publicly owned utilities (POUs), community choice aggregators
(CCAs), and energy service providers (ESPs) to increase
purchases of renewable energy such that at least 33% of retail
sales are procured from renewable energy resources by December
31, 2020. In the interim each entity would be required to
procure an average of 20% of renewable energy for the period of
January 1, 2011 through December 31, 2013; 25% by December 31,
2016, and 33% by 2020. This is known as the Renewable Portfolio
Standard (RPS).
This resolution calls upon the DOE to reject an application for
a cross-border Presidential permit authorizing Energ�a Sierra
Ju�rez U.S. Transmission LLC to construct, operate, and maintain
electric transmission facilities at the U.S.-Mexico border.
BACKGROUND
Energ�a Sierra Ju�rez - Energ�a Sierra Ju�rez U.S., LLC is a
limited liability company, wholly owned by Energ�a Sierra
Ju�rez, S. de R.L. de C.V., a Sociedad de Responsibilidad
Limitada de Capital Variable (a Mexican Limited Liability
Company), a prospective joint venture of Sempra Generation and
BP Wind Energy (collectively referred to as Sempra).
The project has three parts. First, Sempra has land holdings 70
miles east of San Diego and just a few miles south of the
U.S.-Mexico border located in the vicinity of La Rumorosa, Baja
California, Mexico. The land can support as much as 1,250 MW of
wind generation. Sempra currently has one contract with San
Diego Gas & Electric (SDG&E) for 156 MW of wind generation which
is pending review and approval by the CPUC.
The second part of this project is for transmission, commonly
referred to as a "gen-tie" which connects the generation source
with major transmission links. This gen-tie would begin two
miles south of the border at the site of the wind turbines and
extend across the border, one mile into San Diego County. This
gen-tie would also be owned and constructed by Sempra.
Part 3 of the project is construction of a new substation in
eastern San Diego County by SDG&E. This project would require
approval of the CPUC and is also pending its review.
Presidential Permits - Any entity which seeks to construct,
operate, and maintain electric transmission facilities across
the U.S. international border must apply to the DOE for a
cross-border Presidential permit. In order for a permit to be
issued, a finding that the proposed project is consistent with
the public interest and favorable recommendations from the U.S.
Departments of State and Defense are required. In determining
consistency with the public interest, DOE considers the
environmental impacts of the proposed project, determines the
project's impact on electric reliability (including whether the
proposed project would adversely affect the operation of the
U.S. electric power supply system under normal and contingency
conditions), and considers any other factors that DOE may find
relevant to the public interest. DOE's issuance of a
Presidential permit indicates that there is no federal objection
to the project, but does not mandate that the project be
undertaken.
Sempra has applied to the DOE's Office of Electricity Delivery
and Energy Reliability for a Presidential permit to construct
either a double-circuit 230 kV or a single-circuit 500-kV
transmission line. Sempra's proposed transmission line would
connect wind turbines to be located in the vicinity of La
Rumorosa, Baja California, Mexico, to the existing Southwest
Powerlink 500-kV transmission line (SWPL). A decision on the
permit is expected by December.
One portion of the proposed transmission project would consist
of two miles of transmission located in Mexico that would be
constructed, owned, operated, and maintained by a subsidiary of
Sempra Energy Mexico and would be subject to the permitting
requirements of the Mexican Government. The remaining portion
of the proposed transmission project would consist of a one-mile
transmission line constructed by Sempra within the U.S. on
private land. The entire electrical output of the La Rumorosa
Project (1250 megawatts) would be dedicated to the U.S. market
and delivered using the proposed international transmission
line. Sempra's proposed transmission line would connect to a
substation to be constructed by SDG&E in response to requests by
power suppliers to connect to the SWPL. The substation, to be
known as the East County Substation, would be located just south
of the SWPL right-of-way near the community of Jacumba,
California, and would contain equipment for accepting
interconnections at both the 230-kV and the 500-kV level.
COMMENTS
1. Author's Purpose . The author reports that "Sempra, the
parent company of (SDG&E), is proposing to outsource 1250
MW of green electrical generating capacity to Mexico by
connecting a one-mile cross-border tieline from Mexico to
the Southwest Powerlink electrical transmission line close
to the San Diego County and Imperial County border. Sempra
has applied for a Presidential Permit from the U.S.
Department of Energy. The line would undercut the
ratepayer investment that has already been made on the
Southwest Powerlink Transmission Line and the Sunrise
Powerlink. It would also deprive customers of the economic
benefits of building the renewable generation in southern
California. These lost benefits have been estimated at
15,000 lost U.S. jobs and nearly $300 million in lost
local, state and federal tax revenue."
2. RPS Eligible . Last spring the Legislature adopted, and
the Governor signed, legislation increasing the state's RPS
goals for utilities to 33% of retail sales by 2020.
Eligible resources are apportioned based on the location of
the generation's interconnection to California's grid. The
generation proposed in the Sempra project is eligible under
all scenarios since the Baja grid is included in the
Western Electric Coordinating Council (WECC) which includes
14 western states, western Canada and Baja.
Because the Sempra project will directly connect to a
balancing authority of the California Independent System
Operator (ISO) it will be eligible to meet the RPS
requirements of what is commonly referred to as "bucket 1."
This category includes energy from generators directly
connected to a California balancing authority. Compliance
targets require at least 50% of the generation to meet this
category through 2013; 65% through 2016, and 75%
thereafter. Bucket #1 is not a mandate that all generation
come from within the state's borders. It can originate
outside the boundaries as long as the interconnection point
is under the control of the ISO or another balancing
authority (e.g. LADWP).
Resolution proponents argue that there is a fixed RPS
obligation for California's utilities and that the Sempra
wind project which would assist SDG&E in meeting its RPS
requirements will displace energy that instead could come
from renewable energy projects built here in the state.
More critically the proponents note that development of the
Mojave and Colorado desert regions of Southern California,
including Imperial County, has been a top priority for the
state and the Baja projects would reduce the projects
developed in that region.
3. Economic Impacts . Proponents of this resolution
commissioned a study<1> of the potential economic impacts
associated with fully developing Sempra's Baja holdings to
its capacity of 1,250 MW. The reported impacts include
3,000 lost construction job-years, 15,000 lost job-years in
the U.S. including California, $550 million in lost wages
over 5 years, and a $300 million loss of state, local and
federal tax revenue.
Sempra opines that the project will not affect job
development in Imperial County and that they expect the
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<1> Should Green Jobs Be Outsourced? A Case Study of Lost jobs
and Lost Opportunities, Peter Philips, Ph.D. Professor of
Economics, University of Utah, July 10, 2011.
immediate 156 MW project to "create approximately 300
direct jobs on both sides of the U.S.-Mexico border to
construct and operate the facilities. U.S. jobs will be
created to construct the portion of the transmission
tie-line located in San Diego County."
4. Ratepayer Impact . Sempra's wind project has a contract
for 156 MW of generation with SDG&E. This contract was a
result of the utility's 2009 request for offers (RFO) for
renewable generation. At the time the project was selected
by the utility because it opined that it met the general
test of "least-cost, best-fit" for RPS generation
contracts.
Details of the power purchase agreement (PPA) entered into
by SDG&E are protected by confidentially rules of the CPUC.
However, the detail that is available indicates that the
PPA has total costs that are above the MPR (the market
price referent, a calculation of the costs of generation
from a natural gas plant against which renewable contracts
were previously evaluated for reasonableness in price<2>).
For RPS projects to go outside of the country, one would
expect that the pricing of the contract would be
advantageous for ratepayers in comparison to RPS-eligible
generation otherwise available. The committee is aware of
a general downward cost trend for RPS contracts many of
which are now coming in below the MPR. SDG&E confirms that
the pricing from their 2009 RFOs came in higher than their
2011 RFOs are and that the PUC has yet to approve this 2009
wind contract. The PUC could determine that this contract
is not in the best interest of ratepayers and deny
approval. That would require SDG&E to either renegotiate
the price or seek other sources of generation to meet their
RPS goals.
The ISO reports no shortage of RPS-eligible generation in
their queue requesting interconnection approval for
generation which would be eligible under Bucket #1. The
current list exceeds 66,000 MW.
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<2> The use of the MPR was repealed with the passage of SBx1
(Simitian) which mandated that retail sellers secure 33% of
retail sources from renewable sources.
POSITIONS
Sponsor:
California State Association of Electrical Workers
Support:
California Labor Federation
Center on Policy Initiatives
Clean Air Initiative
Comit� Civico del Valle, Inc.
Environmental Health Coalition
Imperial County Building and Construction Trades Council,
AFL-CIO
San Diego County Building and Construction Trades Council,
AFL-CIO
State Building and Construction Trades Council, AFL-CIO
Oppose:
Sempra Generation
Kellie Smith
SJR 13 Analysis
Hearing Date: August 25, 2011