BILL ANALYSIS �
SB 1139
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Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1139 (Hueso) - As Amended: July 2, 2014
Policy Committee: Utilities and
Commerce Vote: 8-5
Natural Resources 6-2
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires investor-owned utilities and retail sellers
of electricity as defined in the Renewable Portfolio Standard
(RPS) to purchase 500 megawatts (MW) of electricity generated by
new geothermal power plants by 2024. Specifically, 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. The geothermal projects must
demonstrate an environmental benefit.
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 for approval
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.
4)Authorizes the PUC to determine if the new geothermal
electricity procured pursuant to this bill will count toward
the procurement targets established by the RPS.
5)Requires the new geothermal electricity to be procured to
reasonably minimize costs, but prohibits the application of
the cost limits required by the RPS for each IOU.
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6)Requires the PUC to issue an order instituting an
investigation to examine expiring geothermal contracts by July
1, 2015.
FISCAL EFFECT
1)One-time costs of $390,000 for two years from the Public
Utilities Reimbursement Account to the PUC to establish
proceedings and investigations necessary to implement the
procurement plan.
2)Ongoing costs of $125,000 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.
3)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.
4)Potential 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)Purpose. According to the author, geothermal is a renewable,
abundant, affordable source of clean energy. However, only a
fraction of the geothermal resources that could be supplying
California consumers are currently being tapped.
The author further states, the Salton Sea Known Geothermal
Resource Area provides one of the greatest opportunities for
geothermal development in the country but is currently
producing less than 500 MW of power. According to the author,
this is a wasted opportunity to develop a resource, produce
hundreds of new skilled construction and operation jobs, hedge
against fuel price increases and reduce greenhouse gas and
fossil fuel emissions.
2)Background. Geothermal energy is thermal energy generated and
stored in the earth. It is a clean, renewable resource that
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provides energy through a variety of applications and types of
resources. California has 25 Known Geothermal Resource Areas
(KGRAs).
Electricity can be generated from high temperature geothermal
resources by using the thermal (heated) water and steam to
move turbines that in turn run electrical generators and
produce electricity. There are several types of geothermal
power plants that can be used to generate electricity,
including dry steam, flash or double flash, and binary cycle
power plants.
The most developed of the high-temperature geothermal resource
areas in the state is the Geysers. Located north of San
Francisco, the Geysers project was first tapped as a
geothermal resource to generate electricity in 1960. It is one
of only two locations in the world where a high-temperature,
dry steam resource is found that can be directly used to move
turbines and generate electricity.
Other major geothermal electrical production locations in the
state include the Salton Sea area in Imperial County, the Coso
Hot Springs area in Inyo County, and the Mammoth Lakes area in
Mono County.
3)Renewable Portfolio Standard. The RPS requires retail sellers
of electricity as well as publicly-owned utilities (POUs) to
procure eligible renewable energy resources to meet the
following portfolio targets: a) 20% on average by December 31,
2013; b) 25% by December 31, 2016; and 33% by December 31,
2020 and each year thereafter. 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, and ocean thermal or
tidal current.
The RPS establishes balanced portfolio requirements for
procurement based on three categories (or "buckets") of
renewable energy products, essentially categorized as
baseload, intermittent, and unbundled renewable energy
credits (RECs) for with the original source of energy must be
located within the western grid, but is not required to have a
physical connection to Calfiornia. Unlike solar and other
intermittent resources, geothermal is a baseload or Bucket 1
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resource, i.e. one that does not require the additional of
nonrenewable energy for reliability.
Earlier versions of this bill expressly prohibited the
counting of the 500 MW of geothermal towards the RPS
requirements. The bill now authorizes the PUC to make the
determination. In general, IOUs would prefer this requirement
to count towards RPS but other renewables, including existing
geothermal contracts would prefer it did not.
4)Support. This bill is supported by a broad coalition of labor
organizations, environmental groups, and Imperial County
interests. Supporters state the development of 500 MW of
geothermal power will deliver numerous benefits to California,
including a reduction in greenhouse gas emissions without
negatively impacting system reliability.
Supporters further state the expansion of geothermal will
create tens of thousands of high-paying construction jobs in
area of the state suffering from some of the highest rates of
employment. Other supporters claim this bill will provide
greater balance to the state's energy portfolio by increasing
renewable base load generation.
5)Opposition. This bill is opposed consumer groups, the Public
Utilities Commission, the IOUs, and numerous businesses and
renewable energy companies who contend this bill will burden
ratepayers with high energy costs relative to the market,.
Opponents further argue this bill disregards current renewable
energy policy, ignores a competitive solicitation process, and
unevenly applies a statewide policy. Others claim it would
allow new geothermal developers to bypass market competition,
and thus adversely impact the ability for California to meet
its renewable energy goals while ensuring just and reasonable
rates. Yet others state that requirements in the bill would be
costly and almost impossible to implement.
Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081
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