BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 971 - Cannella Hearing Date:
April 17, 2012 S
As Introduced: January 18, 2012 FISCAL B
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DESCRIPTION
Current law 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 total 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 and 25% by December 31, 2016. This is
known as the Renewables Portfolio Standard (RPS).
Current law defines as RPS eligible, electric generation
resources from biomass, solar thermal, photovoltaic, wind,
geothermal, fuel cells using renewable fuels, small hydroelectric
generation of 30 megawatts (MWs) or less, digester gas, landfill
gas, ocean wave, ocean thermal, tidal current, and municipal
solid waste conversion that uses a noncombustion thermal process
to convert solid waste to a clean-burning fuel. Hydroelectric
generation units sized below 40 MW, if operated as part of a
water supply or conveyance system and operative prior to 2005,
are also eligible.
Current law defines as RPS eligible any incremental generation
gained from efficiency improvements in hydroelectric facilities
of any size under specified conditions.
This bill excludes generation from hydroelectric facilities that
are not eligible renewable resources, from the calculation of
total retail sales which would result in a "net retail sales"
factor to serve as the denominator in calculating compliance with
the RPS.
BACKGROUND
RPS Purpose & Program - In 2002 the California State Legislature
adopted groundbreaking legislation (SB 1078, Sher) to require the
state's investor-owned utilities (e.g. Pacific Gas & Electric,
Southern California Edison, San Diego Gas and Electric Company,
collectively referred to as IOUs) and the private companies that
compete with the utilities (ESPs) to increase their annual
purchases of electricity from renewable resources by at least 1%
per year so that 20% of their sales would come from renewable
sources by 2017. In 2006 legislation accelerated the deadline
for utilities to reach 20% to the end of 2010 (SB 107, Simitian).
Flexible compliance provisions of the program could have
extended the deadline to 2013. Publicly owned utilities (POUs)
were called upon in those bills to implement and enforce an RPS
program that "recognizes the intent of the Legislature to
encourage renewable resources, while taking into consideration
the effect of the standard on rates, reliability, and financial
resources and the goal of environmental improvement." In 2011
the Legislature expanded the RPS program to 33% by 2020 and more
clearly delineated the RPS requirements for the POUs.
IOU Progress - Since the RPS statute took effect in 2003,
renewable capacity has steadily increased each year with a total
of 2,541 MW of new renewable capacity coming online through 2011.
California's three largest IOUs collectively served 17% of 2010
retail electricity sales with renewable power. Earlier this year
these same IOUs, which provide service to about two-thirds of
California utility customers, reported the following individual
RPS percentages through 2011:
Pacific Gas and Electric (PG&E) 19.4%;
Southern California Edison (SCE) 21%; and
San Diego Gas & Electric (SDG&E) 20.8%.
POU Progress - California has 46 local publicly-owned-utilities
(POUs) which include municipal utilities, irrigation districts,
co-ops, and joint powers authorities. They collectively serve
approximately 23% of California's retail electrical load.
The POUs are required to annually report to the California Energy
Commission (CEC) the progress made in establishing and meeting
RPS goals and the resource mix used to serve customers.
Compliance data through 2010, and reported by the CEC in the fall
of 2011, show that the POU's RPS deliveries range from zero to
67%. A list of each POU and the data reported through 2010 for
compliance with the RPS is attached as "Appendix A."
Hydroelectric Power - For purposes of the RPS hydroelectric
facilities are broken down into two categories. Those facilities
that are larger than 30 MWs are called "large hydro" and are not
eligible renewable resources under the RPS program.
Hydroelectric facilities smaller than 30 MWs are considered
"small hydro" and can be RPS eligible. This standard has been in
the RPS program since its adoption in 2002.
Beginning in 2006 the Legislature passed a series of bills that
allow utilities to implement efficiency improvements at
hydroelectric facilities of any size and count the gain in power
toward the utility's RPS requirements. A typical improvement
would be the installation of new turbines that would increase
output but not impact the timing or volume of streamflow. In
2011 an additional category of eligibility was added for small
hydroelectric generation units sized below 40 MWs that are part
of a watersupply or conveyance system.
The amount of hydroelectricity delivered to California users from
in-state and out-of-state sources vary each year and is largely
dependent on rainfall and snowpack. California has nearly 400
hydroelectric plants, which are mostly located in the eastern
mountain ranges and have a total dependable capacity of about
14,000 MW. The state also imports hydro-generated electricity
from the Pacific Northwest and Southwest. According to the CEC
small hydro generation from in-state sources as a percentage of
California's resource mix was 2.2% in 2010 and 14.6% for large
hydro. Out-of-state generation data was not available.
Two types of conventional hydroelectric facilities are dams and
run-of-river. Dams raise the water level of a stream or river to
an elevation necessary to create a sufficient elevation
difference (water pressure or head). Dams can be constructed of
earth, concrete, steel or a combination of such materials.
Run-of-river, or water diversion, facilities typically divert
water from its natural channel to run it through a turbine, and
then usually return the water to the channel downstream of the
turbine. Although hydroelectric generation is emissions-free, it
was excluded from RPS eligibility because of other adverse
environmental impacts associated with conventional hydroelectric
power generation and typical on-stream pumped hydroelectric
storage facilities:
Water resources impacts such as a change in stream flows,
reservoir surface area, the amount of groundwater recharge,
and water temperature, turbidity (the amount of sediment in
the water) and oxygen content;
Biological impacts such as the possible displacement of
terrestrial habitat with a new lake environment, alteration
of fish migration patterns, and other impacts on aquatic
life due to changes in water quality and quantity;
Possible damage to, or inundation of, archaeological,
cultural or historic sites (primarily if a reservoir is
created);
Changes in visual quality;
Possible loss of scenic or wilderness resources; and
Increase in potential for land-slides and erosion.
Hydroelectric Generation Numbers - Generally Northern California
IOUs and POUs have long-term contracts for or own large
hydroelectric generation sources. The three largest IOUs report
the following generation from large hydro:
Pacific Gas & Electric16.6%
San Diego Gas & Electric 0%
Southern California Edison 6.0%
Data filings with the CEC on hydroelectric generation for POUs
were spotty with only about a third of those utilities complying
with the Power Content Label Disclosure. The following data was
available for 2010:
Alameda 22%
Anaheim 4%
Banning 1%
Burbank 2%
Corona 17%
Glendale 5%
LADWP 3%
Plumas 33%
Redding 0%
Riverside 2%
Roseville 15%
SMUD 28%
COMMENTS
1. Author's Purpose . According to the author:
SB 971 removes the penalty the RPS program inherently levies
on hydro-heavy utilities by recognizing the renewable
properties of hydroelectric generation. This bill will
reduce the anticipated rate hikes associated with the new
33% RPS program. In Merced County that can be a savings of
up to $500 a year per customer?Hydroelectric power is
inherently a renewable resource, no matter the size of the
facility from which it is derived. There are no carbon
emissions released as a byproduct and the process is very
efficient. The amount of hydroelectricity generated can also
be controlled and adjusted depending on demand, unlike wind
and solar generation?By only including small hydroelectric
facilities, the RPS program penalizes utilities who count on
large hydroelectric facilities for electricity. Many times
these are small publicly-owned utilities (POUs) that only
need one large hydroelectric facility to serve their small
customer base. Changing how RPS is calculated will help
utilities keep rates low for their ratepayers and eliminate
the bias towards hydroelectric generation inherent in the
program."
2. New Denominator . Generally, RPS requirements are
calculated by taking the total retail electric sales for a
utility on a megawatt hour basis (the denominator), and
multiplying that number by 33% (the numerator). This bill
would affect that calculation by subtracting generation
produced by large hydroelectric facilities from the total
retail electric sales before the total is multiplied by 33%.
In this way large hydro would not be "RPS eligible" but it
would directly reduce the amount of renewable electricity
required to be procured by the utility.
Excluding large hydro from the denominator would redefine
success (RPS compliance) for some utilities but not others.
As indicated in the preceding comments, the hydroelectric
generation of California electric utilities ranges from zero
to 33% based on the data available to the committee. (There
are anecdotal reports that some POUs rely on hydro for 100%
of their electricity portfolio.) Consequently, this bill
would have a disproportionate impact on utilities throughout
the state immediately defining RPS compliance for some and
leaving others behind.
3. Stranded Assets ? For the last ten years the RPS program
has excluded large hydro from eligibility. Consequently
procurement efforts of diligent utilities have excluded that
source from their procurement plans and contracting. The
CPUC estimates that this bill, for the IOUs, "could reduce
statewide demand for new RPS project development to achieve
33% by 4,500 MW of intermittent solar/wind capacity or 1,250
MW of baseload geothermal capacity." Should this bill pass
an unknown number of current RPS projects currently under
development could also be in jeopardy since the bill.
4. Unmet Need . Current law requires the utilities to
procure renewable resources "in order to fulfill unmet
long-term resource needs." This provision is intended to
ensure that a utility is not obligated to procure renewable
resources beyond its retail electricity needs and generation
contracted for or owned by a utility. In application this
would mean if a utility has no load growth or expiring
contracts in its portfolio, compliance with the RPS would
not be required or would be reduced. For example, if a
utility has large hydro in its electric portfolio that it
owns and that hydro provides 100% of the electricity needed
for the utility, there would be no RPS procurement required.
5. Contract Cost Impacts Suspect . Some utilities writing in
support of this bill argue that the RPS program requirements
will result in a cost burden to their ratepayers. Several
recent reports do not support this view. The three largest
IOUs recently reported that solicitations for small RPS
contracts in their Reverse Auction Mechanism (RAM) program
came in below that of natural gas generation. Additionally,
the CPUC reported in their 2011 4th Quarter RPS report that
the "average bid price in the 2011 RPS Solicitation was
approximately 30% lower than the average bid price in the
2009 RPS Solicitation."
A recent study, Renewable Energy Standards Deliver
Affordable, Clean Power, published by the Center for
American Progress, found that electric pricing data among
the states found no differences in prices as a result of
renewable energy mandates. Specifically the study found
that RPS mandates had "no predictable impact on electricity
rates" in the 28 states with those laws. Moreover, the
report specifically noted that in seven states, including
California, the RPS program helped arrest rising electricity
costs by forcing states to diversify their electricity
sources.
POSITIONS
Sponsor:
Author
Support:
Association of California Water Agencies
California Chamber of Commerce
California League of Food Processors
California Manufacturers and Technology Association
Merced County Board of Supervisors
Merced Irrigation District
Modesto Irrigation District
Northern California Power Agency
Pacific Gas and Electric Company
Power and Water Resources Pooling Authority
Oppose:
California Hydropower Reform Coalition
California Public Utilities Commission
Large-Scale Solar Association
Natural Resources Defense Council
Sierra Club California
Union of Concerned Scientists
Kellie Smith
SB 971 Analysis
Hearing Date: April 17, 2012
APPENDIX A
2010 RPS DELIVERIES
PUBLICLY OWNED UTILITIES
-----------------------------------------------------------------
| |CEC-Eligible |
| Utility Name | RPS |
| | Deliveries |
| |(% of Retail |
| |Sales- 2010) |
-----------------------------------------------------------------
|-----------------------------------------------------+------------|
|Large POUs (retail sales greater than 10 million MWh | |
|per year) | |
|-----------------------------------------------------+------------|
|Los Angeles Department of Water & Power (LADWP) | 17.6% |
|-----------------------------------------------------+------------|
|Sacramento Municipal Utility District (SMUD) | 20.9% |
|-----------------------------------------------------+------------|
|Medium POUs (retail sales of 750,000 to 10 million | |
|MWh per year) | |
|-----------------------------------------------------+------------|
|Anaheim, City of | 10.8% |
|-----------------------------------------------------+------------|
|Burbank, City of | 7.0% |
|-----------------------------------------------------+------------|
|Glendale, City of | 15.6% |
|-----------------------------------------------------+------------|
|Imperial Irrigation District | 8.3% |
|-----------------------------------------------------+------------|
|Modesto Irrigation District | 13.3% |
|-----------------------------------------------------+------------|
|Palo Alto, City of | 20.6% |
|-----------------------------------------------------+------------|
|Pasadena, City of | 14.5% |
|-----------------------------------------------------+------------|
|Redding Electric Utility | 2.0% |
|-----------------------------------------------------+------------|
|Riverside, City of | 18.4% |
|-----------------------------------------------------+------------|
|Roseville Electric | 17.9% |
|-----------------------------------------------------+------------|
|San Francisco, City and County of | 0.9% |
|-----------------------------------------------------+------------|
|Silicon Valley Power (SVP) | 25.2% |
|-----------------------------------------------------+------------|
|Turlock Irrigation District | 21.3% |
|-----------------------------------------------------+------------|
|Vernon, City of | 0.0% |
|-----------------------------------------------------+------------|
|Small POUs (retail sales less than 750,000 MWh per | |
|year) | |
|-----------------------------------------------------+------------|
|Alameda Municipal Power | 67.0% |
|-----------------------------------------------------+------------|
|Azusa Light & Power | 17.6% |
|-----------------------------------------------------+------------|
|Banning, City of | 25.1% |
|-----------------------------------------------------+------------|
|Biggs Municipal Utilities | 12.1% |
|-----------------------------------------------------+------------|
|Cerritos, City of* | 0.0% |
|-----------------------------------------------------+------------|
|Colton Electric Utility* | 0.0% |
|-----------------------------------------------------+------------|
|Corona, City of (direct access) | 0.0% |
|-----------------------------------------------------+------------|
|Corona, City of (bundled) | 0.2% |
|-----------------------------------------------------+------------|
|Eastside Power Authority | 1.4% |
|-----------------------------------------------------+------------|
|Gridley Electric Utility | 8.7% |
|-----------------------------------------------------+------------|
|Healdsburg, City of | 40.2% |
|-----------------------------------------------------+------------|
|Hercules Municipal Utility | 0.0% |
|-----------------------------------------------------+------------|
|Industry, City of | 0.0% |
|-----------------------------------------------------+------------|
|Lassen Municipal Utility District* | 0.0% |
|-----------------------------------------------------+------------|
|Lodi Electric Utility | 20.1% |
|-----------------------------------------------------+------------|
|Lompoc, City of | 23.8% |
|-----------------------------------------------------+------------|
|Merced Irrigation District | 2.8% |
|-----------------------------------------------------+------------|
|Moreno Valley Electrical Utility | 0.0% |
|-----------------------------------------------------+------------|
|Needles, City of | 0.0% |
|-----------------------------------------------------+------------|
|Pittsburg, City of | 1.0% |
|-----------------------------------------------------+------------|
|Plumas-Sierra Rural Electric Cooperative | 4.4% |
|-----------------------------------------------------+------------|
|Port of Oakland | 2.0% |
|-----------------------------------------------------+------------|
|Port of Stockton | 0.0% |
|-----------------------------------------------------+------------|
|Power & Water Resources Pooling Authority (PWRPA) | 14.2% |
|-----------------------------------------------------+------------|
|Rancho Cucamonga Municipal Utility | 0.0% |
|-----------------------------------------------------+------------|
|Shasta Lake, City of | 10.7% |
|-----------------------------------------------------+------------|
|Shelter Cove Resort Improvement District* | n/d |
|-----------------------------------------------------+------------|
|Trinity Public Utilities District? | n/a |
|-----------------------------------------------------+------------|
|Truckee Donner Public Utilities District | 22.3% |
|-----------------------------------------------------+------------|
|Ukiah, City of | 51.7% |
|-----------------------------------------------------+------------|
|Victorville Municipal Utilities Services |0.0% |
------------------------------------------------------------------
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|* Pending verification from | | | | | | |
|POU | | | | | | |
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|? Trinity PUD receives all of its electricity pursuant to a preference right |
|adopted and authorized by the United States |
|Congress pursuant to Section 4 of the Trinity River Division Act of August 12, 1955 |
|(Public Law 84-386), and therefore |
|is in compliance with California's renewable portfolio standard law without |
|additional renewable energy procurement. |
| |
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