BILL ANALYSIS
SB 86 X2
Page 1
Date of Hearing: September 10, 2001
ASSEMBLY COMMITTEE ON ENERGY COSTS AND AVAILABILITY
Roderick D. Wright, Chair
SB 86 X2 (Peace) - As Amended: September 6, 2001
SENATE VOTE : 22-14
SUBJECT : Powerplant facility and site certification.
SUMMARY : This bill authorizes California Energy Commission
(CEC) to administratively impose a penalty of up to $75,000 or
to revoke certification, or both, if a project owner fails to
commence construction of a generating facility project within 12
months after the project has been certified by CEC. This bill
also authorizes California Consumer Power and Conservation
Financing Authority (Power Authority) to evaluate whether to
pursue such revoked projects within 90 days.
EXISTING LAW :
1)Requires CEC to certify sufficient sites and related
facilities required to provide an adequate supply of electric
power to meet projected demand for power statewide.
2)Authorizes CEC, after hearings, to amend conditions of, or
revoke, certification and to impose a civil penalty of up to
$50,000 for specified violations of a certification, as
prescribed.
3)Establishes the Power Authority to issue bonds for the purpose
of augmenting electric generating facilities and ensure a
sufficient, reliable supply of electricity.
FISCAL EFFECT : Unknown
COMMENTS :
The effects of this bill are two-pronged as California attempts
to move out of its current energy crisis. The first effect is
to put pressure on merchant generators to complete planned
facilities in a timely fashion to ensure that certificated
generation facilities come on line to meet California's energy
demand. The second effect is to open a window for the newly
formed Power Authority to ease itself into pursuing such
SB 86 X2
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generation projects to meet is charter of ensuring adequate
electric power supply in the state.
Gaming the Certification Process
It has been asserted that some merchant generators, in further
attempts to increase wholesale prices for electricity in
California, obtain certificates to construct generation
facilities and then do not go forward with construction in a
timely manner, holding up other projects and preventing other
potential suppliers from entering the market and providing
additional supply. This measure attempts to forestall such
gaming in two ways, first by authorizing CEC to assess
administrative penalties in excess of the current limit on civil
penalties the agency can impose on generators that fail to
commence construction on generation facilities within 12 months
of certification. The second measure taken is to allow the
Power Authority to step in at that stage and potentially pursue
the project independently or through any other public or private
entity, including the original certificate holder.
The essence of this bill is that it attempts to ensure that all
applications for certification of proposed generation facilities
are made in good faith and are followed through in good faith in
a timely fashion. The author believes this is consistent with
CEC's charter to ensure that adequate generation facility
certification is effected to meet forecasted demand, and with
the Power Authority's charter with regard to financing and
construction of adequate generation supply and cost-effective
energy efficiency measures.
Is the 12 Month Requirement Reasonable?
The major questions for the committee to consider are:
1)Whether 12 months is a reasonable period of time to allow to
pass before construction of a generation facility has commenced
subsequent to certification, taking all factors into
consideration; and 2) Whether immediately allowing the Power
Authority to step up in line to pursue the certificate is the
best public policy move.
This bill presumes that some generators will deliberately fail
to construct facilities in a timely fashion or may apply for
certification without intending to construct a facility within a
reasonable time frame. This bill also presumes that the Power
SB 86 X2
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Authority is in the best position, all factors considered, to
overtake revoked certificates and to pursue construction either
on its own or through some other public or private entity. As
long as both of these presumptions are correct then this bill
presents the best remedial proposal to ensure adequate
generation supply for the state going forward.
Regarding failure to construct facilities, the author points out
that Mirant recently threatened to delay operation of its 530
megawatt (mW) Contra Costa plant due to what it termed to be
uncertainties in California's generation market. The author
also points out that this bill mirrors language in the
Governor's February 9, 2001 Executive Order D-25-01 regarding a
"use it or lose it" provision for generation facilities.
Staff recommends
If the author demonstrates that in the years since California's
initial electricity deregulation law went into effect generators
have stalled construction on facilities and thwarted CEC's
attempt to certify and allow to be constructed adequate
generation facilities, then this measure presents a solution to
this problem. If the problem isn't demonstrated to actually
exist today, then the committee needs to consider whether the
steps outlined in the measure are necessary; whether they may
cause unnecessary disruption to construction of generation
facilities; or whether some modification to what the author
proposes may be a better assurance of adequate supply without
undue business disruption.
REGISTERED SUPPORT / OPPOSITION :
Support
Southern California Edison
Coalition of California Utility Employees
Opposition
Sempra Energy
Analysis Prepared by : Kelly Boyd / E. C. & A. / (916)
319-2083