BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1122 (Rubio) - Energy: renewable biomass and biogas projects.
Amended: April 16, 2012 Policy Vote: EU&C 12-0
Urgency: No Mandate: No
Hearing Date: May 7, 2012 Consultant: Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1122 would direct the California Public
Utilities Commission (PUC) to require the state's three largest
investor-owned utilities (IOUs) to collectively procure at least
250 megawatts of renewable generating capacity from small
renewable biomass or biogas projects unless and until the PUC
develops a methodology to account for environmental and rate
payer benefits of using biogas and biomass for electrical
generation.
Fiscal Impact:
One-time costs of $270,000 from the Public Utilities
Commission Utilities Reimbursement Account (special fund) in
2013 for the development of a methodology calculating
benefits from generating electricity from biogas and
biomass.
Ongoing costs of $134,000 from the Public Utilities
Commission Utilities Reimbursement Account (special fund) in
2013 for the implementation of a biogas and biomass
procurement program.
Background: The three largest investor-owned utilities (IOUs)
are statutorily required to offer small renewable generators
sized up to 1.5 megawatts (MW) a fixed-price, non-negotiable
contract known as a Feed-in-Tariff (FiT). The PUC currently has
a rulemaking open to implement a statutory requirement that the
IOU FiT be expanded to generators up to 3 MWs for a total
allocation of 500 MW. As issue in this rulemaking, as with past
discussions about the FiT program, is whether the pricing for a
FiT reflects all the potential benefits and characteristics of
renewables such as time-of-delivery,
location/interconnectedness, reduced grid transmission costs,
reduced emissions, and promotion of new technologies.
SB 1122 (Rubio)
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Proposed Law: This bill would require the PUC to develop a
methodology to account for the benefits to the ratepayers and
the environment from reducing air pollution and greenhouse gas
emissions by generating electricity from landfills and organic
waste diversion, waste water treatment plants, food and
agricultural pricing, animal waste facilities, and farms (i.e.
biogas and biomass). While such a methodology is being
developed, the PUC would be required to direct large electrical
corporations to collectively procure at least 250 MW of
electrical generating capacity from small renewable biomass or
biogas projects by June 1, 2013. Each electrical corporation
would be required to procure this electricity with a standard
unilateral offer and must choose the least-cost, best-fit
resource.
Staff Comments: This bill would require the creation a purchase
program for biomass and biogas. Such a requirement could be
satisfied with a program similar to the FiT in the PUC's PD. The
PD divides the FiT contracts into groups according to generation
characteristics of the power- baseload (e.g. bioenergy and
geothermal), leaking (e.g. solar), and as-available energy (e.g.
wind and hydro). These categories were created in recognition of
the fact that renewables have different generation
characteristics and benefits. This PD could be the basis for a
purchase program required by the bill, with several adjustments
(which would need to be made in a new proceeding), to create a
technology-specific program for biogas and biomass. The PUC has
rejected technology-specific programs in the past because rates
must be in the public interest, be "just and reasonable," and
not exceed the purchaser's incremental avoided costs.
Technology-specific programs conflict with the PUC's past
reliance on a competitive market approach for the procurement of
electricity. Also, such a purchase program would have to be
crafted to stay within the boundaries of federal law that allows
the PUC to differentiate renewable pricing, but prohibits
establishing technology-specific pricing. The PUC estimates that
creating such a purchase program would require a new proceeding
and ongoing contract review and approval for an annual cost of
$134,000.
This bill would also require the PUC to adopt a methodology that
accounts for ratepayer and environmental benefits of electricity
generated from biomass and biogas, for example, a pricing
mechanism that would discount the bid-price of electricity
SB 1122 (Rubio)
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generated from biomass and biogas for the purposes of comparing
bids to other renewables. Arguably, the methodology required in
this bill would in essence make a "societal benefit" (i.e. the
reduction of methane emissions) also a "ratepayer benefit." Such
a methodology would require a new proceeding that would likely
take much longer than the June 1, 2013 deadline in the bill. The
PUC estimates that such a proceeding would require 2.5 PYs for
legal counsel, an administrative law judge, and resource
analysts at a cost of $270,000.
Recommended Amendments: The bill is somewhat unclear on whether
the author's intent is for the PUC to ultimately create both a
biogas methodology and a biogas purchase requirement or just one
or the other. As written, this bill may ultimately require the
PUC to create both a methodology and a purchase requirement.
However, if the author's intent is for only one of these actions
to be required, staff recommends that this intent be clarified.