BILL ANALYSIS �
SB 1139
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Date of Hearing: June 26, 2014
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 1139 (Hueso) - As Amended: May 27, 2014
SENATE VOTE : 21-11
SUBJECT : California Renewables Portfolio Standard Program
SUMMARY : Requires investor-owned utilities (IOU) and other
"retail sellers" of electricity, as defined in the Renewables
Portfolio Standard (RPS), to buy 500 megawatts (MW) of
electricity generated by new (i.e., constructed after January 1,
2015) geothermal power plants by 2024, over and above the
existing renewable energy procurement requirements of the RPS.
EXISTING LAW :
1)The RPS requires retail sellers [including IOUs, energy
service providers (ESPs) and community choice aggregators
(CCAs)], as well as publicly-owned utilities (POUs), to
procure eligible renewable energy resources to meet the
following portfolio targets:
a) 20 percent on average from January 1, 2011 to December
31, 2013.
b) 25 percent by December 31, 2016.
c) 33 percent by December 31, 2020 and each year
thereafter.
2)Provides that eligible renewable generation facilities must
use biomass, solar thermal, photovoltaic, wind, geothermal,
renewable fuel cells, small hydroelectric, digester gas,
limited non-combustion municipal solid waste conversion,
landfill gas, ocean wave, ocean thermal or tidal current.
3)Establishes "balanced portfolio" requirements for procurement
based on the following three categories (or "buckets") of
renewable energy products:
a) Bucket 1 - Renewable energy interconnected to the grid
within, scheduled for direct delivery into, or dynamically
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transferred to, a California balancing authority (i.e.,
real renewable energy supplied to the California grid,
located within or directly proximate to the state). Of the
total renewable energy contracts executed after June 1,
2010, the following percentages must fall into this
category:
i) At least 50 percent for the 2011-2013 compliance
period.
ii) At least 65 percent for the 2014-2016 compliance
period.
iii) At least 75 percent thereafter.
b) Bucket 2 - Renewable energy where substitute
non-renewable energy is used to provide a reliable delivery
schedule into a California balancing authority (i.e.,
firmed and shaped energy where substitute energy is used to
compensate for delivery problems due to intermittent
generation or inadequate transmission capacity from a
remote renewable resource).
c) Bucket 3 - Renewable energy products not meeting either
condition above, including unbundled renewable energy
credits (RECs) (i.e., the original source of renewable
energy must be located within the western grid, but
otherwise need not have a physical connection to
California). Of the total renewable energy contracts
executed after June 1, 2010, the following percentages may
fall into this category:
i) Not more than 25 percent for the 2011-2013
compliance period.
ii) Not more than 15 percent for the 2014-2016
compliance period.
iii) Not more than 10 percent thereafter.
4)Excuses retailer sellers and POUs from enforcement for failure
to meet targets if the retail seller or POU demonstrates that
any of the following conditions are beyond its control and
will prevent compliance:
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a) Inadequate transmission capacity for delivery of
sufficient renewable energy.
b) Permitting, interconnection or other delays for
renewable energy projects, or an insufficient supply of
available renewable energy.
c) Unanticipated curtailment of renewable energy necessary
to address the needs of a balancing authority (e.g., the
Independent System Operator).
5)Requires the Public Utilities Commission (PUC) to establish a
cost limit for each IOU according to specified criteria,
requires the PUC to report to the Legislature by 2016
regarding whether IOUs can achieve 33 percent within the
adopted cost limit, authorizes the PUC to revise the cost
limit once after 2016 if necessary, and authorizes IOUs to
stop procuring renewable energy beyond the cost limit, unless
additional renewable energy can be procured without exceeding
a de minimis increase in rates.
THIS BILL :
1)Requires each retail seller, by 2024, to procure its
proportionate share of 500 MW of electricity produced by new
geothermal power plants that meets the Bucket 1 category
established by the RPS.
2)Requires the California Energy Commission (CEC) to determine
the proportionate share for each retail seller based on the
forecast of retail sales for 2018.
3)Requires each retail seller to file with the PUC a plan for
procuring its share of new geothermal, at least one half of
which must be procured by 2019. Permits retail sellers to
aggregate their procurement in order to minimize
administrative and contracting costs. Requires the PUC to
review and approve, modify or reject the plans.
4)Prohibits the new geothermal electricity procured pursuant to
this bill from counting toward the procurement targets
established by the RPS.
5)Requires the new geothermal electricity procured pursuant to
this bill to be procured to reasonably minimize costs, but
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prohibits the application of the cost limits required by the
RPS for each IOU.
6)Makes related finding and declarations.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)Ongoing costs of $155,000 annually from the Public Utilities
Reimbursement Account to the PUC for staff to review and
approve geothermal procurement plants for retail sellers and
to oversee compliance.
2)Onetime costs of $272,000 annually from the General Fund to
the CEC for at least one year for the development of
regulations to determine proportionate shares of the
procurement requirement.
3)Ongoing costs in the low millions of dollars from the General
Fund and various special funds for increased electricity costs
for electricity used by the state.
COMMENTS :
1)Author's statement :
California and the Western United States have uniquely high
quality solar and geothermal resources. California
utilities are dramatically increasing their utilization of
solar resources, but not effectively increasing utilization
of geothermal resources. In fact, only a fraction of the
geothermal resources that could be supplying California
consumers are currently being tapped, and there has been
very little increase in geothermal generation capacity
during the past decade. For example, the Salton Sea Known
Geothermal Resource Area (SSKGRA), which provides one of
the greatest opportunities for geothermal energy
development in the United States, is currently producing
less than 500 megawatts of power. The remaining untapped
generation capacity at this resource is estimated to be at
1,700 megawatts. This is a wasted opportunity of such a
valuable resource. The long term electric supply portfolio
serving California consumers should include much greater
reliance on geothermal resources so that we have a balanced
portfolio has we move toward a carbon-free generation
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supply.
2)State of geothermal . By the end of 2013, an estimated 17,400
MW of RPS-eligible renewable energy capacity were operating in
California of which approximately 15,500 MW were sold to a
utility or the market (wholesale) and an additional 1,900 MW
was self-generation. Of the 15,500 MW of wholesale
generation, 46 projects are geothermal resources and represent
2,782 MW of capacity which is 4.4% of generation capacity.
However, geothermal produces approximately 25% of the
renewable electricity supplied to California retail customers
(due to its relatively high capacity factor compared to other
renewable resources).
The distribution of the 46 online projects which serve
California load is:
Imperial County, 20 projects; 705 MW;
Inyo County, 3 projects; 302 MW;
Lake County, 6 projects; 418 MW;
Mono County, 4 projects; 54 MW;
Sonoma County, 12 projects; 1,238 MW; and
Churchill County, Nevada, 1 project; 65 MW.
Additionally, eight projects for a total of 618 MW have
received environmental permits but are not yet operational.
Five projects for a total of 465 MW have been permitted in
Imperial County; one 55 MW project has been permitted in Lake
County; and 2 projects for a total of 98 MW have been
permitted in Sonoma County.
1)No assurance that contracts will go to projects in the Salton
Sea region, or even within California . While the Salton Sea,
Geysers and other geothermal resource areas have the potential
for new power plants, there are also geothermal resource areas
in Nevada and Oregon that may well meet this bill's Bucket 1
delivery condition. While both existing and permitted
projects at the Salton Sea and Geysers have failed to win
contracts, a contract with a geothermal power plant in Nevada
was recently extended for 20 years by Southern California
Edison. This bill may not produce the intended benefits for
the Salton Sea region. However, to better assure that
California ratepayers receive the greatest benefit from this
mandated investment in new geothermal projects, the bill could
be amended to require projects to demonstrate an environmental
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benefit to California, such as reducing air pollution from
fugitive dust, recycling treated wastewater, or supplying
lithium for electric vehicle batteries.
2)Exemption of municipal utilities creates arbitrary and
inconsistent application of mandate . This bill applies to all
"retail sellers," including all IOUs, ESPs and CCAs regardless
of size, but does not apply to any POU. The result is that
the bill applies to the first, second and fourth largest
utilities in the state, but does not apply to the third
largest (City of Los Angeles), nor the fifth through tenth
largest, including the electric utility that serves the Salton
Sea region (Imperial Irrigation District). However, it does
apply to several small IOUs, ESPs and CCAs with relatively few
customers and small RPS procurement obligations. The policy
justification for the exemption of POUs is unclear and it
flies in the face of many years of work in the RPS and other
energy policies to apply consistent standards to all
load-serving entities.
3)Requiring procurement of new geothermal could jeopardize the
continued operation of existing geothermal and other competing
renewable resources . The procurement mandate proposed by this
bill stands apart from the detailed standards and process that
applies to wholesale procurement of both renewable and
conventional energy sources by the IOUs. The bill requires
IOUs to procure a specified amount of new geothermal without
regard to need, alternatives, and with no clear mechanism to
assure the costs are just and reasonable. While there are a
variety of existing procurement mandates for specific,
smaller-scale resources, such as feed-in tariffs and net
energy metering, they all seem to share the feature that the
PUC sets the price paid for the energy.
Nearly all of the 500 MW procurement mandate created by this
bill will fall on PG&E, SCE and SDG&E. These three IOUs also
hold contracts with existing geothermal and biomass facilities
that will expire between this year and the 2024 deadline in
this bill. This may put the existing facilities in a
competition they cannot win because the three IOUs will have
no choice but to buy new geothermal and, once they do, may not
have the need for additional baseload power.
The author and the committee may wish to consider amending the
bill to balance the priority the bill places on procurement of
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new resources with the objective of continuing operation of
existing resources. One alternative would be to permit an IOU
which holds an existing contract to count a long-term contract
extension toward some share of its geothermal procurement
obligation. Another approach would be to direct the PUC to
investigate the particular circumstances of existing
geothermal facilities with expiring contracts and revise its
procurement review to assure the value of those facilities is
properly accounted for when compared to alternative renewable
and conventional resources.
1)Double referral. This bill was approved by the Utilities and
Commerce Committee by a vote of 8-5 on June 23, 2014. The
Utilities and Commerce Committee's action recommended adoption
of the following amendments in this committee:
a) Strike the bill's prohibition on the application of the
RPS cost limits and instead add a statement in the findings
that the "Legislature encourages the (PUC) to consider
imposing (RPS) cost containment?for geothermal procurement
pursuant to this statute."
b) Create an exception to the bill's prohibition of new
geothermal procurement counting toward the RPS if the
"(PUC) determines that the electricity procured by this
section shall count toward meeting the (RPS procurement
targets)."
REGISTERED SUPPORT / OPPOSITION :
Support
Calexico Chamber of Commerce
California Labor Federation
California Coalition of Utility Employees
California State Association of Electrical Workers
California State Pipe Trades Council
Calipatria Chamber of Commerce
City of Holtville
Coachella Valley Water District
Enel Green Power North America
EnergySource
Geothermal Energy Association
Geothermal Now
Geothermal Resources Council
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GreenFire Energy
Imperial County Board of Supervisors
Imperial County Workforce Development Office
Imperial Irrigation District
Imperial Valley Building Construction Trades Council
Imperial Valley Economic Development Corporation
Imperial Valley Small Business Development Center
LightSource Renewables
MidAmerican Geothermal
MidAmerican Renewables
National Electrical Contractors Association
Nature Conservancy
Ormat Technologies
Palm Springs Regional Association of Realtors
Salton Sea Action Committee
Salton Sea Authority
Western States Council of Sheet Metal Workers
Opposition
California Biomass Energy Alliance (unless amended)
California Chamber of Commerce
California Manufacturers & Technology Association
California Wind Energy Association
Calpine Corporation (unless amended)
Independent Energy Producers Association
Large-scale Solar Association
Office of Ratepayer Advocates
Pacific Gas and Electric Company
PacificCorp (unless amended)
Public Utilities Commission (unless amended)
San Diego Gas & Electric
Southern California Edison
The Utility Reform Network (TURN)
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092