BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 1269 - Peace Hearing Date: May
21, 2002 S
As Amended: May 9, 2002 FISCAL B
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DESCRIPTION
Under existing law , the California Energy Commission (CEC) may amend
the conditions or revoke certification of a power plant for a
material false statement in the application, significant failure to
comply with the terms or condition of approval, or a violation of
the Warren-Alquist Act. The CEC may impose civil penalties for
false statements or failure to comply of $50,000 per violation, plus
$1,000 per day up to $25,000 ($75,000 total).
This bill :
1.Increases penalties for false statements or failure to comply to
$75,000 per violation plus $1,500 per day up to $50,000 ($125,000
total).
2.Requires a project owner to commence power plant construction
within 12 months of CEC certification.
3.Authorizes the CEC to revoke its certification or impose penalties
if a project owner fails to meet construction milestones without
demonstrating good cause.
4.Authorizes the CEC to extend the start of construction an
additional 12 months if the project owner reimburses the CEC for
its costs of licensing the project.
5.Authorizes the CEC to transfer the certification to the California
Consumer Power and Conservation Financing Authority (Power
Authority) if the Power Authority elects to pursue the project
itself. In this case, the Power authority is required to
reimburse the original certificate holder for its costs associated
with permitting the project.
6.Allows a project owner to sell its license, which would reset the
12-month deadline for the new project owner.
7.Authorizes the CEC and the Power Authority to adopt emergency
regulations to implement the bill.
8.Modifications to, or replacement of, existing power plants, as
well qualifying facilities and self-generation projects, are
exempt from the bill.
BACKGROUND
Under the Warren-Alquist Act, the California Energy Commission (CEC)
has exclusive authority to permit thermal power plants 50 megawatts
and larger. The Act provides for comprehensive review 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 CEC's power plant siting process is designed to strike a balance
between project applicants' interest in certainty and the public's
interest in environmental protection and prudent planning of
generation resources. In approving a proposed power plant, the CEC
must find that the facility's construction and operation is
consistent with a variety of environmental and electrical standards.
CEC review of a proposed power plant relates mostly to project
design and the impact of a proposed project. Once a project is
approved, the CEC generally doesn't have continuing regulatory
authority over its construction or operation. The CEC is authorized
to revoke the certification of an approved power plant under certain
conditions, although it has not previously done this.
Executive Order D-25-01, issued by the Governor on February 8, 2001,
requires the CEC to establish specific performance milestones for
both initiation of construction within one year of certification,
and for the construction phase of the project. Under D-25-01,
failure to begin construction by the deadline or failure to perform
in accordance with the milestones without prior approval by the CEC
based on a showing of good cause constitutes a forfeiture of the
certification. D-25-01 expired December 21, 2001.
This bill generally requires the CEC to revoke its certification, or
impose other unspecified penalties, if a project owner fails to
begin construction within 12 months, without a demonstration of good
cause. This requirement is subject to numerous exceptions and
exemptions.
According to the author, an issued license both permits and
obligates the licensee to construct the plant as proposed. However,
to the extent that the licensee can choose not to exercise the
privilege to construct that's embedded in the license, the state
will have invested public resources to further only a private
speculative purpose with no corresponding public benefit. Thus,
it's important that the state ensure the process through which it
licenses power plants isn't vulnerable to private speculative
objectives that have no corresponding public benefit.
COMMENTS
This bill is similar to SB 86XX (Peace), which was approved by this
committee on July 10, 2001, had been pending in the Assembly Energy
Costs and Availability Committee, and has now died due to the
adjournment of the Second Extraordinary Session.
This bill differs from SB 86XX in the following respects:
1.The deadline for commencement of construction has been extended
from six months to 12 months.
2.Project owners may "buy" an additional 12 months by reimbursing
the CEC for its costs of licensing the project.
3.Sale of a license prior to its "expiration" would trigger a new
12-month deadline for the new project owner.
4.Modifications to, or replacement of, existing power plants, as
well qualifying facilities and self-generation projects, are
exempt from the bill.
These changes likely would make enforcement of a 12-month "use it or
lose it" deadline the exception, rather than the rule, and would
seem to diminish the original bill's objective of preventing the
CEC's siting process from being used for speculative purposes.
For example, a project owner could earn an additional 12 months by
selling its license to an affiliate, who in turn could earn another
12 months by selling it back. Or an applicant seeking to construct
a 500 megawatt power plant could qualify the project for exemption
from the bill as a "replacement" by decommissioning an existing 50
megawatt power plant. Given that the bill grants the CEC broad
discretion to issue extensions upon a showing of good cause, or
impose penalties short of license revocation, the author and the
committee may wish to consider whether these additional specific
exceptions are necessary or desirable.
This bill authorizes the CEC and the Power Authority to adopt
emergency regulations to implement the bill. The author and the
committee may wish to consider whether this approach, which exempts
the regulations from Office of Administrative Law review, is
justified.
POSITIONS
Sponsor:
Author
Support:
Mirant Delta LLC
Mirant Portrero LLC
Mirant Corporation
Utility Consumers' Action Network
Oppose:
Independent Energy Producers Association
Calpine
Sempra Energy
Lawrence Lingbloom
SB 1269 Analysis
Hearing Date: May 21, 2002