BILL ANALYSIS
SB 28 X1
Page 1
Date of Hearing: April 2, 2001
ASSEMBLY COMMITTEE ON ENERGY AND COST AVAILABILITY
Roderick D. Wright, Chair
SB 28 X1 (Sher) - As Amended: March 19, 2001
SUBJECT : Power plant siting: distributed energy resources.
SUMMARY : This bill contains a number of provisions intended to
accommodate increased construction and operation of power
plants, and provides a 10-year waiver of standby charges for
specified distributed generation facilities. Specifically, this
bill :
Power Plant Siting Provisions :
1)Requires the California Energy Commission (CEC) to limit local
jurisdictions' comment period on power plant applications to
45 days following filing of an application for initial
comments, and 100 days for final comments. Sunsets January 1,
2004.
1)Requires CEC, in its written decision on a power plant
application, to discuss any public benefits from the project
(economic, environmental or reliability).
1)Requires 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.
1)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.)
1)Requires 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
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project.
1)Requires CEC to issue its final decision for 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 and will comply with applicable legal
standards.
a) 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.
a) 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.
a) Has a contract for an adequate supply of skilled
labor to construct, operate and maintain the plant.
a) Complies with CEC regulations regarding
environmental justice.
1)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.
1)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.
1)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 :
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1)Requires the Air Resources Board (ARB) to implement a program
for "expedited retrofit" of power plant pollution controls.
1)Requires ARB to implement an expedited statewide program for
"identification and banking" of emission reduction credits for
power plants and natural gas transmission facilities.
1)Requires each air district to adopt an expedited program for
permitting of standby or distributed generation facilities and
natural gas transmission facilities.
1)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. Mitigation fees are to be used first to
secure emission reductions from comparable stationary sources.
1)Authorizes posting of a bond equivalent to the cost of
required offsets for a new power plant. If all required
offsets have not been obtained by the time the plant starts
operating, a share of the bond sufficient to acquire offsets
not obtained is forfeited to the district.
1)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.
1)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.
1)These provisions sunset on January 1, 2004.
Distributed Generation Provisions
1)Provides a 10-year waiver of "standby charges" for specified
distributed generation (DG) installations.
1)Requires CPUC to require each electrical corporation to charge
customers who install new DG between May 1, 2001 and June 1,
2003 the identical "rates, rules and requirements" as
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customers without DG for a period of 10 years.
1)Establishes exceptions to the waiver of DG charges for
"reasonable" interconnection charges, public purpose program
charges, and obligations resulting from purchasing power from
the Department of Water Resources.
1)Requires CPUC to require each electrical corporation to
consider non-utility-owned DG as an alternative to investments
in its distribution system.
1)Segregates each customer class so that costs associated with
waiver of standby charges for a customer is recoverable only
from that customer's class.
1)Defines eligible DG as follows:
a) Commences operation between May 1, 2001 and June 1,
2003.
b) Located within a single facility.
c) Capacity of five megawatts (MW) or smaller.
d) Serves onsite or adjacent facility load.
e) Powered by fuel other than diesel.
f) Meets specified emissions standards.
1)Requires CPUC to require each electrical corporation to
establish new rates by January 1, 2003 applicable to new DG
installed after June 1, 2003. To the extent practicable,
these rates are to be the same as rates for other, non-DG
customers with similar load profiles.
1)Requires CPUC to report its proposed new DG rates to the
Legislature by June 1, 2002.
1)Requires each municipal utility to review its rates to
identify barriers to DG.
Funding provisions
1)Appropriates $53,250,000 from the General Fund to the CEC
until January 1, 2005 as follows:
1)$50 million to increase rebates for clean, renewable,
grid-connected distributed energy systems including fuel cells
smaller than 10 kilowatts.
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1)$3 million to assist cities and counties with expedited review
of power plant applications.
1)Not more than $250,000 for a study, in consultation with the
Orange County Sanitation District, of the remedies to mitigate
the effects of shoreline water contamination in Huntington
Beach.
EXISTING LAW :
1)Provides for the restructuring of California's electric power
industry so that the price for the generation of electricity
is determined by a competitive market.
1)Requires CEC to certify all sites and related facilities for
thermal powerplants in the state, including a new site and
related facility or a change or addition to an existing
facility. CEC is required to prepare a final report and
written decision after a public hearing on the application for
the powerplant.
1)Requires CEC to request the appropriate local, regional,
state, and federal agencies to make comments and
recommendations about the design, operation, and location of
facilities.
1)Authorizes CEC to establish a process for the expedited review
of applications to construct and operate powerplants and
thermal powerplants and related facilities.
1)Provides that CPUC has regulatory authority over public
utilities, including electrical corporations and other
specified entities.
1)Contains various provisions relative to air pollution control.
FISCAL EFFECT : Unknown.
COMMENTS :
Power Plant Siting Process . 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,
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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 Warren-Alquist 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 restructuring of
California's electric industry (AB 1890, Chapter 854, Statutes
of 1996), the planning and siting functions have been
de-coupled, but the Act still grants CEC exclusive authority to
certify power plants and authorizes CEC to override other state,
local or regional decisions and certify a power plant it
determines is required for "public convenience and necessity."
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, CEC must find that the facility's
construction and operation is consistent with a variety of
environmental standards.
Purpose of the Bill . This bill proposes a series of changes to
air quality and CEC siting 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.
Distributed Generation . DG is typically considered to be a
site-specific generation resource which is owned by the customer
and used to meet some or all of that customer's energy needs,
including electricity and, in many applications, heating.
Examples of DG units range from a residential rooftop solar
array to a collection of large combustion turbines at a
commercial office building or industrial facility. DG can be
used for reliability back-up (standby or emergency generation),
to meet base load requirements, to meet peaking requirements, or
to meet all on-site requirements, and sell power to adjacent
sites ("over the fence" transactions). For a customer that owns
a DG unit that is connected to the utility distribution system,
on-site generation is complemented by power purchased through,
and delivered by, the utility. Depending on the reliability,
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capacity and purpose of the DG unit, the customer may, at
various times, buy some or all of its power from the utility, or
"sell" power back to the utility through a net-metering
arrangement.
Standby Charges . Under current law, grid-connected DG customers
pay a standby charge to the utility to reserve the capacity need
to serve that customer. The standby charges are based on the
installed capacity of the DG unit. These provisions effectively
prevent PG&E, Edison and SDG&E from assessing these charges for
customers installing generation up to five megawatts that serves
onsite electric load. These provisions would allow DG in any of
the applications described above, or any combination of the
applications, to be eligible for the standby charge waiver.
This Bill's Waiver of Standby Charges for DG Facilities Will
Shift Costs to Other Ratepayers . This bill provides a 10-year
waiver of standby charges for specified distributed generation
facilities. This would result in a significant reallocation of
costs to other ratepayers . The author may wish to consider
amending this bill to make it consistent with the standby
charges provisions in ABX 27 (Koretz) and ABX 75 (Calderon),
which require CPUC to establish reasonable standby rates for
on-site generation within 60 days. Specifically, the amendments
provide:
"Within 60 days of the effective date of this bill, the
California Public Utilities Commission shall establish for
customers that install an on-site power generating system
as defined in Section 17053.84 of the Revenue and Taxation
Code, reasonable standby rates that accurately reflect the
net costs and benefits provided by on-site generation."
Property Tax Provisions : Current law requires that the
property tax be allocated to the county, city, and redevelopment
in which the property is located as well as to the school(s),
community college, and special district(s) which serve the
property area. On average, cities receive about 11% of the
property tax, counties 20%, redevelopment agencies 8%, special
districts 8%, community colleges 5%, and K-12 (including ERAF)
48%. Any reductions in property taxes to K-12 schools are
offset by increased state General Fund support. This bill
establishes a different system of allocating the property tax
revenues from new electrical generation property approved after
the bill's effective date. The county auditor would be required
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to allocate to the city in which a power plant is sited - or the
county, if the plant is sited in an unincorporated area - 100%
of the property tax revenues generated from the plant. The
county auditor would then reimburse other local agencies - e.g.
the county, special districts, community colleges, -- for their
property tax losses by allocating equivalent amounts of
property tax from ERAF to the agencies. As under current law,
any shortfalls in the schools' share of property tax, including
ERAF, would be made up by the state General Fund. In effect,
the General Fund would backfill the schools and local agencies
for any property tax loss caused by this allocation change.
This new allocation process would not apply to power plants
sited in redevelopment areas due to constitutional restrictions.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Joseph Lyons / U. & C. / (916)319-2083