BILL ANALYSIS
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THIRD READING
Bill No: SB 1269
Author: Peace (D)
Amended: 5/24/02
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 5-1, 5/21/02
AYES: Bowen, Alarcon, Dunn, Sher, Speier
NOES: Battin
SENATE APPROPRIATIONS COMMITTEE : 7-3, 6/3/02
AYES: Alpert, Bowen, Escutia, Karnette, Murray, Perata,
Speier
NOES: Johnson, McPherson, Poochigian
SUBJECT : Powerplant site and facility certification
SOURCE : Author
DIGEST : This bill makes changes to statutes relating to
power plant construction and certification by the
California Energy Commission.
ANALYSIS : 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).
CONTINUED
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SB 6X (Burton, Chapter 10, Statutes of 2001) authorized the
creation of the California Consumer Power and Conservation
Financing Authority (Power Authority) to ensure an adequate
and reliable electricity supply. The Power Authority is
authorized to, among other things, acquire, finance,
construct, and operate power plants.
Under existing law, 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.
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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, 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
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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 had been
pending in the Assembly Energy Costs and Availability
Committee, and has now died due to the adjournment of the
Second Extraordinary Session.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
There are unknown, but potentially significant cost
pressures to the Power Authority. The costs of evaluating
a project where the CEC has revoked the certification could
be $50,000+. If the Power Authority elects to pursue the
project, costs could be in the range of $2 million to $250
million+, depending on the project and whether the takeover
involves construction only, construction and operation, or
operation only. The cost of constructing a 500-megawatt
power plant is about $250 million+. Presumably, these
costs would be recovered through rates, sale of the plant,
or bond proceeds.
SUPPORT : (Verified 6/4/02)
Mirant Delta LLC
Mirant Portrero LLC
Mirant Corporation
Utility Consumers' Action Network
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OPPOSITION : (Verified 6/4/02)
Independent Energy Producers Association
Calpine
Sempra Energy
NC:sl 6/5/02 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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