BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 28X - Sher Hearing Date: March 6, 2001
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As Amended: March 5, 2001 FISCAL B
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DESCRIPTION
This bill contains a series of provisions intended to
accommodate increased construction and operation of power
plants. Specifically, this bill:
Siting provisions (Sections 6 and 8 through 12)
1.With respect to the California Energy Commission's (CEC)
ordinary certification process for thermal power plants
50 megawatts and larger, limits the comment period for
local jurisdictions to 45 days following filing of an
application for initial comments, and 90 days for final
comments.
2.Requires the CEC, in its written decision on a power
plant application, to discuss any public benefits from
the project (economic, environmental or reliability).
3.Requires the CEC to adopt a regulation governing ex parte
contacts, which allows substantive contacts between
parties and CEC officials, but requires prompt disclosure
and a written summary of the contact.
4.Provides that CEC siting decisions are subject to Supreme
Court review. (Currently, CEC decisions track the appeal
process of California Public Utilities Commission (CPUC)
decisions, which used to go directly to the Supreme
Court. The process applicable to the CPUC was changed to
provide for lower appellate court review of adjudicatory
decisions by SB 1322 (Calderon), Chapter 855, Statutes of
1996. This bill changes the CEC's process back to the
way it was prior to the enactment of SB 1322.)
5.Requires the CEC to issue final certification for
"re-powering" projects within 180 days (Decisions on
modifications to existing power plants are currently
subject to a 12-month deadline). For purposes of this
section, "re-powering" means a project that:
A) Initial evidence suggests will not cause a
significant adverse impact on the environment or the
electrical system, will comply with applicable legal
standards, and will make its output available to
California.
B) Is located within the boundaries of an existing power
plant and will not require significant additional
rights-of-way for transmission or fueling, but does not
necessarily replace the existing plant.
C) Will significantly and substantially increase the
efficiency of the project, on a per kilowatt-hour basis,
with respect to gas consumption, water use and discharge,
and air pollution.
D) Has a contract for an adequate supply of skilled
labor to construct, operate and maintain the plant.
E) Complies with CEC regulations regarding environmental
justice.
With respect to re-powering projects, limits the comment
period for local, regional and state jurisdictions to 100
days.
These provisions sunset on January 1, 2004.
6.Extends the application of the four-month siting process
for temporary "peaker" power plants. As established by
AB 970 (Ducheny), Chapter 329, Statutes of 2000, plants
had to be in service by August 1, 2001 to qualify. This
bill extends the date 17 months, to December 31, 2002.
7.Expands the application of the "peaker" process to allow
re-certification or replacement by a co-generation
facility within three years. Under AB 970, simple-cycle
peakers were required to be replaced by combined-cycle
plants.
Air quality provisions (Sections 3, 4 and 5)
1.Requires the Air Resources Board (ARB) to implement a
program for "expedited retrofit" of power plant pollution
controls.
2.Requires ARB to implement an expedited statewide program
for "identification and banking" of emission reduction
credits for power plants and natural gas transmission
facilities.
3.Requires each air district to adopt an expedited program
for permitting of standby or distributed generation
facilities and natural gas transmission facilities.
4.A) Authorizes payment to air districts of mitigation
fees for a new power plant in lieu of obtaining actual
emissions offsets, when the owner or operator of the
plant has shown that offsets are not available. The
mitigation fees are to be used for the Carl Moyer
program, which provides grants to reduce NOx emissions
from vehicles, or a similar program.
B) Authorizes posting of a bond or letter of credit
equivalent to the cost of required offsets for a new
power plant in lieu of obtaining actual offsets, whether
or not offsets are available. If all required offsets
have not been obtained by the time the plant starts
operating, a share of the bond equal to the portion of
offsets not obtained is forfeited. The use of forfeited
bonds is not specified.
C) Requires the air district to hold a public hearing to
determine the appropriate amount of fees or bonds to be
paid in lieu of offsets. The amount shall be sufficient
to obtain equivalent emission reductions.
D) Authorizes the air district to suspend or limit these
provisions if it determines their application would
interfere with attainment or maintenance of air quality
standards, or if it determines adequate offsets are
available at a "reasonable" price.
E) These provisions sunset on January 1, 2004.
Tax provisions (Sections 1, 2, 7 and 13)
1.Allocates 100% of property tax revenues associated with
new generation projects to applicable local jurisdictions
by requiring property taxes from any new power plant,
co-generation, transmission or distribution facility that
would be locally assessed (i.e., non-utility) to be
allocated entirely to the county or city in which the
plant is located. Also requires that tax rates be the
same as they would have been absent the addition of this
provision.
2.Requires the CEC, in its final report on a power plant
application, to address whether increased property taxes
due to construction of the project are sufficient to
support local improvements and public services necessary
to serve the project.
Funding provisions (Section 14)
Appropriates $54 million from the General Fund to the CEC
as follows:
1.$50 million to increase rebates for clean, renewable
distributed energy systems smaller than 10 kilowatts.
2.$3 million to assist cities and counties with expedited
review of power plant applications.
3.$1 million for a study of shoreline water contamination
in Huntington Beach.
BACKGROUND
In 1974, in response to a previous energy crisis, the
Warren-Alquist Act established an exclusive process for
siting of thermal power plants 50 megawatts and larger.
The siting process was intended to provide comprehensive
environmental review and predictable, one-stop permitting
of applications. It was also integrated with a planning
process that was intended to guard against under or
overbuilding of power plants.
The Act required the CEC to develop long-term forecasts of
state energy needs, which served as the basis for planning
and certification of individual power plants. Since the
advent of electrical restructuring, the planning and siting
functions have been de-coupled, but the Act still grants
the CEC exclusive authority to certify power plants and
authorizes the CEC to override other state, local or
regional decisions and certify a power plant it determines
is required for "public convenience and necessity."
The construction of the CEC's siting review function in the
Warren-Alquist Act strikes a balance between project
applicants' interest in certainty and the public's interest
in environmental protection and prudent planning of
generation resources. The CEC's siting process is a
CEQA-equivalent project evaluation process and was intended
to be rigorous and comprehensive. In approving a proposed
power plant, the CEC must find that the facility's
construction and operation is consistent with a variety of
environmental standards.
This bill proposes a series of changes to air quality, CEC
siting, and property tax laws designed to encourage the
expedited siting of clean new generation in the state. The
author notes that the package of proposals contained in
this measure are similar to many such proposals identified
by generators, the Governor's office, and other parties to
address the need for clean new generation in the state.
COMMENTS
1.Talkin' 'bout My Generation. In order to shorten the
review period for power plant applications, this bill
limits the comment period for local jurisdictions to 45
days following filing of an application for an initial
list, and 90 days for a final list. This is the primary
"streamlining" provision for the ordinary certification
process for new, permanent power plants.
Currently, there is no uniform statutory local comment
period, although AB 970 included a 100-day comment period
for the six-month siting process it established for
"environmentally benign" projects. Representatives of
local governments have commented that the 45/90 day
timeframe is not adequate to provide appropriate review.
They have suggested that review periods allotted to the
CEC and other agencies also should be reduced, and that
time limits be somehow linked to the size and complexity
of the project.
At a minimum, the author and the committee may wish to
consider adopting a uniform standard for local review
(45/90, 100-day, or some compromise) that would apply to
each siting process.
2.Tune-In, Turn-On, Re-Power. Intuitively, it seems a
"re-power" project would be a conversion of an existing
unit to a newer, more efficient unit. However, it is not
clear that this bill's re-power process is limited to
projects which convert existing generation units.
Arguably, an applicant could use this process to site a
new unit adjacent to an existing unit, with the intent of
operating both. The author and the committee may wish to
consider whether the definition of a re-power project
should be limited to prevent such a circumstance.
In addition, the provision which requires the output of a
re-power project to "be made available to serve
electrical customers located within the state" is
probably ineffective in accomplishing its intent and
possibly counterproductive to a solution to the current
energy crisis. An applicant could comply with the letter
of this provision by offering one percent of a plant's
output to in-state customers, even if that power was not
actually delivered.
In addition, "California First" policies run the risk of
inviting similar defensive measures from other states.
California has long benefited, both in economic and
environmental terms, from seasonal exchanges of power
with neighboring states whose demand for electricity
peaks at different times than ours. The electricity
generating infrastructure throughout the West has
developed with a recognition of the efficiencies of
mutually beneficial exchanges. Balkanization of power
supplies would require each state to dramatically
increase its generating capacity.
The author and the committee may wish to consider whether
a more effective way to address frustrations with the
downsides of deregulation would be to require, as a
condition of accelerated regulatory treatment, that the
output of power plants be "dedicated to operation for the
benefit of California ratepayers."
3.I'll Gladly Pay You Tuesday... This bill proposes to
allow the payment of mitigation fees for power plant
emissions in lieu of obtaining actual offsets, as well as
the banking of emission reductions, on a statewide basis.
These instruments will facilitate off-site mitigation of
on-site project impacts.
This bill provides limited guidance as to the proximity
or comparability of "in lieu" mitigation measures.
Mitigation fees collected by air districts are to be used
for the Carl Moyer program, which provides grants to
reduce NOx emissions from vehicles, or a similar program.
The provision which authorizes posting of a bond in lieu
of obtaining actual offsets provides for the forfeiture
of the bond if all required offsets have not been
obtained by the time the plant starts operating, but does
not specify what any bond proceeds may be used for.
The author and the committee may wish to consider whether
the use of mitigation fees should be constrained with
respect to time, distance, pollutant, and/or source. For
example, should nearby stationary sources emitting a
similar array of pollutants be the first priority?
In addition, the intent of the bill is unclear regarding
the circumstances under which in lieu mitigation measures
are appropriate. In proposed Health and Safety Code
Section 42314.3 (page 9), subdivision (a) says mitigation
fees should be paid when offsets are not available,
subdivision (b) allows a bond in lieu of offsets without
regard to the availability of offsets, and subdivision
(e) allows an air district to suspend or limit the in
lieu provisions when offsets are available at a
"reasonable" price. The author and the committee may wish
to consider adopting a uniform standard to govern when in
lieu measures may be substituted for obtaining offsets,
and clarifying that these in lieu provisions apply to new
power plants only. Also, it is unclear whether
subdivisions (a) and (b) are intended to be alternatives
to one another, or whether subdivision (b) is intended to
be governed by subdivision (a).
4.The Payoff Pitch. This bill incorporates tax allocation
provisions similar to those contained in SB 30X (Brulte),
which provide for allocation of property tax revenues
associated with new generation projects entirely to the
county or city in which the plant is located. SB 30X has
been referred to the Revenue and Taxation and Local
Government Committees.
This provision applies to projects placed in service on
or after January 1, 2001, so it would apply to at least
nine projects which have already won approval from local
agencies and received final certification from the CEC,
but haven't been placed in service yet. Presumably,
these projects adopted mitigation measures and won
approval relying on the existing tax allocation scheme.
If this provision is intended to reward communities that
don't obstruct a proposed power plant, the author and the
committee may wish to consider whether projects already
approved should qualify for the new tax allocation rules.
In addition, to the extent this provision is intended to
serve as an incentive or a reward for local cooperation,
it may be overly broad. For example, it would apply to
the proposed Metcalf Energy Center, even though necessary
zoning changes for Metcalf were unanimously rejected by
the San Jose City Council, if the CEC elects to override
the city's decision and the project is ultimately built.
Also, the bill does not tie the expenditure of any
additional tax dollars to the specific location of the
power plant. This may be necessary to ensure that
unincorporated areas of counties or neighborhoods of some
larger cities would actually benefit from any property
tax funds accruing to a county or city as a result of a
new power plant.
Finally, under Section 16 of Article XVI of the
California Constitution, a redevelopment agency is
entitled to keep all property tax growth inside a project
area. This bill says that the underlying city or county
would keep all property taxes associated with a new power
plant. To avoid a clear conflict with the Constitution,
the author and the committee may wish to consider adding
an exception to this bill for power plants within a
redevelopment project area.
5.Generation First! - On February 8, the Governor issued
the following Executive Orders related to construction
and operation of power plants:
D-22-01 exempted from CEC review an increase in
production of less than 50 megawatts above existing
authorized levels between June and October, ordered the
CEC and other jurisdictions to expedite consideration of
power plant projects, ordered the State Water Resources
Control Board to take action to ensure that power plants
are not shut down as a result of thermal discharge
violations, and ordered the Department of Water Resources
(DWR) to contract, at reasonable rates, with power plants
that may have no other market. D-22-01 expires on
December 31, 2001.
D-24-01 ordered air districts to modify air permits for
power plants that provide power under contract to DWR to
ensure may operate without restriction. Districts were
further ordered to require a mitigation fee for excess
emissions. The ARB was required to modify the permits if
the districts failed to do so and to make its remaining
funding available for the purchase of "emissions offset
credits." D-24-01 expires on December 31, 2001.
D-25-01 ordered the CEC to expedite review of amendments
to existing power plants, ordered the CEC to impose
conditions to revoke a power plant's certification if
construction is not initiated within one year, authorized
the CEC to suspend applicable statutes and regulations to
accomplish these. D-25-01 expires on December 31, 2001.
D-26-01 ordered local jurisdictions to shorten the EIR
review period to seven days for power plants not subject
to CEC review (i.e., under 50 MW) if they are proposed to
be on-line by this summer. The CEC was ordered to
expedite review of emergency power plants that can be
on-line by July. AB 970's four-month process for siting
of peakers was extended to August 31, 2002 and statutory
restrictions on the process were suspended. Finally,
investor-owned utilities were required to complete
transmission interconnection studies for emergency power
plants within seven days. D-26-01 expires on December
31, 2001.
D-27-01 ordered the Department of Parks and Recreation to
make its remaining appropriated funds available to the
CEC for the payment of bonuses for power plants brought
on-line prior to July 1, 2001.
6.Sunsets. To the extent provisions of this bill are
intended to address a near-term need for additional
generation, it may be appropriate to sunset them.
Currently, the fee in lieu and re-power sections of this
bill sunset on January 1, 2004. The author and the
committee may wish to consider whether any other sections
should be subject to a sunset.
POSITIONS
Sponsor:
Author
Support:
California Chamber of Commerce
Oppose:
None on file
Lawrence Lingbloom
SB 28X Analysis
Hearing Date: March 6, 2001