BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 1078 - Jackson Hearing Date:
April 29, 2014 S
As Amended: April 10, 2014 FISCAL B
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DESCRIPTION
Current law charges the California Air Resource Board (ARB) with
monitoring and regulating sources of emissions of greenhouse
gases (GHG) that cause global warming in order to reduce GHG
emissions and requires the ARB to approve a scoping plan for
achieving the maximum technologically feasible and
cost-effective reductions in GHG emissions from sources or
categories of sources of GHG by 2020. The ARB is required to
consult with the California Public Utilities Commission (CPUC)
and the California Energy Commission (CEC) on all elements of
its plan that pertain to energy related matters including, but
not limited to, electrical generation, load based-standards or
requirements, and the provision of reliable and affordable
electrical service. (Health & Safety Code �� 38510, 38561)
Current law requires the ARB to make recommendations to the
Governor and the Legislature on how to continue reductions of
GHG emissions beyond 2020. (Health & Safety Code � 38551 (c))
This bill requires the CPUC and the CEC to calculate and
identify mid-term (2030) GHG reduction targets for the
electrical industry by July 1, 2015 and to develop joint
long-term electrical demand and generational resources portfolio
forecasts to achieve those mid-term GHG reduction goals.
Current law recognizes the California Independent System
Operator (CAISO) and requires it to manage the transmission grid
and related energy markets. (Public Utilities Code � 345.5)
This bill requires CAISO to consider the mid-term goals
identified by the CEC and CPUC in its long-term transmission
planning and identify the operational characteristics,
locations, and combinations of cost-effective and reasonably
achievable energy efficiency, demand response, and generation
resources and transmission improvements needed to reach those
goals. The CPUC would be required to consider those electrical
resources in its long term procurement planning and the CEC
would be required to consider those recommendations in its
integrated energy policy report.
BACKGROUND
GHG Reduction Goals/ARB - In California, the energy sector
contributes about 85% of the GHG emitted on a yearly basis and
roughly 40% comes from the electricity and natural gas sectors.
After the passage of AB 32 in 2006, GHG reduction goals were
established for the electricity and natural gas sectors by ARB
based on recommendations of the CPUC and CEC which were
developed in a joint proceeding in 2008. A mix of direct
mandatory/regulatory requirements for the electricity and
natural gas sectors were adopted along with the cap-and-trade
system for the electricity sector. The 2008 AB 32 Scoping Plan
laid out a pathway to achieve almost 30% of the plan's total GHG
emission reduction by implementing energy efficiency standards
and programs including goals for increasing combined heat and
power, the 33% Renewables Portfolio Standard (RPS), and the
California Solar Initiative.
Last fall ARB released a draft of an updated scoping plan, with
further revisions released in February. The update identifies
policies, actions, and strategies in the energy, transportation,
fuels, agriculture, waste, and natural lands sectors as a means
to continue emissions reductions in each of these sectors. The
draft emphasizes the need for California to establish a mid-term
statewide emission reduction target "informed by climate
science, to frame the additional suite of policy measures,
regulations, planning efforts, and investments in clean
technologies that are needed to continue driving down emissions"
but does not establish specific GHG reduction goals beyond 2020.
For the electricity sector, an overview of state and national
studies is presented all of which suggest that deep GHG emission
reductions would involve "substantial improvements in energy
efficiency, followed by deep decarbonization of electricity
generation, and the electrification of most energy services
(e.g. heating homes and buildings using electricity)." ARB
reports that the studies provide a good framework for
considering how to achieve 2050 GHG reduction goal but
additional considerations need to be addressed.
Instead of establishing GHG reduction goals beyond 2020, the
report recognizes the work already occurring by the CAISO, CPUC
and CEC in the areas of energy efficiency, combined heat and
power deployment, advancement of demand response, renewables,
smart grid, bioenergy, solar space and water heating, as well as
natural gas with carbon capture utilization and storage, and
monitoring of research and waste management in the nuclear power
industry.
Executive Orders - Current law, adopted in 2006, does not
require GHG emissions reductions beyond 2020 levels but does
state that the 2020 reductions "continue in existence and be
used to maintain and continue reductions in emissions of
greenhouse gases beyond 2020." Some recognize goals called for
by then-Governor Schwarzenegger in a 2005 executive order
(S-03-05) addressing climate change causes and impacts which
specifically called for reducing GHG emissions to 80% below 1990
levels by 2050.
Governor Brown also referenced GHG emissions reductions in a
2012 executive order which recognized reducing GHG emissions "by
2020 and beyond." However that order was limited to green
building practices by the state and electricity procurement by
state agencies. It did not concern GHG reduction goals beyond
2020.
COMMENTS
1. Author's Purpose . The state needs a long term
infrastructure planning and procurement strategy for the
electricity sector that promotes reliability, affordability
and flexibility on the grid, as California moves forward in
decarbonizing the electric grid. At present, long term
planning by CAISO, CPUC, and CEC of generation,
transmission, and preferred resources are constrained by a
lack of consideration of GHG reduction targets beyond 2020.
CAISO's current long term transmission and reliability
planning relies on demand forecasts and generation
portfolios prepared jointly by the CEC and CPUC. But these
scenarios don't look beyond 2020, and the existing
statutory provisions of AB 32 and the 33% RPS. As a
result, long term infrastructure needs to achieve the
state's 2030 and 2050 GHG reduction targets are not being
evaluated or considered.
This process must be transparent and incorporate a public
process in the planning and implementation of all GHG
reduction projects. The Long-Term Procurement Plan, the
Integrated Energy Policy Report, and the ARB Scoping Plan
three documents and planning processes that are integral to
the state's energy future, all work on separate timelines
and do not rely on consistent metrics.
2. Tail Wagging the Dog, Part 1 . The ARB has the ultimate
responsibility to determine the appropriate design and mix
of mandatory and market-based programs to reduce GHG
emissions by 2020, as was prescribed in AB 32. As part of
that effort the Legislature also called for GHG reduction
goals to be considered beyond 2020 and asked for the ARB to
"make recommendations to the Governor and the Legislature
on how to continue reductions of GHG emissions beyond
2020." The ARB has issued a draft scoping plan that
considers myriad programs to continue and expand GHG
reduction efforts beyond 2020 but does not set specific GHG
reduction goals which arguably the ARB lacks the statutory
authority to establish. This bill steps into that vacuum
and transfers GHG reduction goal setting for a portion of
the electricity sector to the CEC and CPUC. It excludes
policies concerning natural gas and other sectors that
contribute to GHG.
The bill requires the CEC and CPUC to "anticipate" what
some portion of the 2030 GHG targets might be for some
portion of the electricity sector. Although most studies
considering GHG reduction goals commonly express a need to
achieve an 80% reduction in GHG by 2050, that does not
necessarily mean that each sector would be called upon to
deliver its proportional share of those reductions. In
fact the ARB reports that some "studies suggest that
reductions outside the energy sector?could be accomplished
at lower costs, potentially decreasing the need for deeper
cuts in the energy sector." Until the ARB considers how
much work remains to be done beyond 2020 and fully assess
the impacts for each sector, this bill seems premature and
could set the electricity sector on a course inconsistent
with the ultimate plan of the ARB.
3. Tail Wagging the Dog, Part 2 . Under this bill once the
CPUC and CEC develop GHG reduction goals and related demand
forecasts, the CAISO would be required to consider those
calculations in its long-term transmission planning and
assess the achievable energy efficiency and demand response
and generational resources, coupled with transmission grid
improvements needed to meet the forecasts and achieve the
GHG reduction goals. The direction to the CAISO relative
to energy efficiency, demand response and generation
resources usurps the long term planning procurement process
of the CPUC which establishes procurement goals for those
resources. The role of the CAISO is to plan for
transmission; it was never intended that the CAISO set
goals for procurement.
4. Planning Gaps . The CPUC only has jurisdiction over load
serving entities including six investor-owned utilities,
one community choice aggregator, and electric service
providers. The CEC's jurisdiction over local
publicly-owned utilities (POUs which also include city
departments, irrigation districts, and rural cooperatives),
which comprise approximately 25% of electricity sales, is
limited primarily to reporting requirements. The CEC has
no authority to direct the procurement activities of the
POUs. The CAISO does transmission planning for all load
serving entities and some POUs based on the generation
forecasts it is provided. The two largest POUs in the
state - SMUD and LADWP - are not part of the CAISO.
Calling on the CEC, CPUC, and CAISO to set GHG reduction
goals for the electricity sector would leave gaps since not
any one of the energy agencies has regulatory authority
over all retail sellers in the state. Requiring the energy
agencies to establish limited goals for the electricity
sectors over which they do have jurisdiction, or broader
goals that include sectors over which they have no
jurisdiction, is not sound.
5. Alternate Planning Path . After the ARB set the initial
GHG reduction targets for the gas and electric sectors in
2008, the CEC and CPUC initiated a joint, public proceeding
and recommended compliance actions to achieve those goals
as well as a structure for the cap and trade program for
the electric sector. The committee may wish to consider
striking the content of this bill and instead direct that a
similar implementation process be followed by the CEC and
CPUC if and when the Legislature authorizes and the ARB
sets post-2020 GHG reduction targets, require the CPUC and
CEC to initiate a joint proceeding to recommend actions to
the ARB to achieve those goals, and transmit the
recommended compliance actions to the CAISO for its
consideration in its transmission planning.
6. Related Legislation .
SB 1125 (Pavley and Lara) - Requires ARB, on or before
January 1, 2016, and in consultation with specified
entities, to develop and submit to the Governor and the
Legislature a report containing recommendations on a
timetable of reduction targets of GHG emissions and
short-lived climate pollutants with high global warming
potentials beyond 2020. Status: Set for hearing in the
Senate Environmental Quality Committee April 30th.
AB 2050 (Quirk) - Requires ARB to update the scoping plan
and include a proposal for further reducing GHG by 2050,
including intermediate goals, no later than January 1,
2019. Status: Set for hearing in the Assembly Natural
Resources Committee April 28th.
AB 1763 (Perea) - Requires the CEC to prepare a report to
the Governor and Legislature by January 1, 2016, in
consultation with the CAISO, other relevant state and local
agencies, and interested stakeholders, in an open and
public process, containing a state energy plan for 2030 and
2050 that promotes economic growth, ensures reliable and
affordable energy supplies, and positions the state as a
leader in the United States and world energy markets.
Status: Passed Assembly Utilities & Commerce Committee
April 21st; pending consideration by Assembly Natural
Resources Committee.
7. Double Referral . Should this bill be approved by this
committee, it will be re-referred to the Senate Committee
on Rules for its consideration.
POSITIONS
Sponsor:
Clean Power Campaign
Support:
Coalition for Clean Air
Environment California
Sierra Club California
Oppose:
California League of Food Processors
California Manufacturers & Technology Association
Independent Energy Producers Association
PacifiCorp
Southern California Edison
Kellie Smith
SB 1078 Analysis
Hearing Date: April 29, 2014