BILL ANALYSIS
SB 1269
Page A
Date of Hearing: June 24, 2002
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick D. Wright, Chair
SB 1269 (Peace) - As Amended: June 20, 2002
SENATE VOTE 24-14
SUBJECT : Powerplant site and facility certification.
SUMMARY : Modifies power plant construction and certification
policies of the California Energy Commission (CEC).
Specifically, this bill :
1)Allows CEC to revoke a power plant certification if, in the
absence of good cause, a project owner does not commence
construction of the project within 12 months of certification
by CEC.
2)Requires a project owner to submit construction and operation
milestones to CEC within 30 days after project certification,
and failure without good cause to meet those milestones is
grounds for revocation of the certification or imposition of
civil penalties.
3)Specifies that "good cause" includes:
a) Circumstances beyond the control of project owner,
including administrative and legal appeals.
b) Good faith, albeit unsuccessful efforts to meet project
deadlines or milestones.
c) Missing of deadlines or milestones for reasons deemed
reasonable by CEC.
4)Increases the maximum civil penalties per violation by
$25,000<1> that can be imposed for false statements on a
permit application, or failure to comply with the conditions
of its approval.
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<1> This bill also increases the per-day civil penalty from
$1000 to $1500 per day, which penalty may also be imposed in
addition to the civil penalty imposed per violation.
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5)Requires a project owner to begin construction of a project
within 12 months after the project is certified by CEC, the
clock beginning to run after all accompanying project permits
are final and administrative and judicial appeals have been
completed.
6)Requires CEC to extend the start of construction an additional
24 months if the project owner reimburses CEC for its costs of
licensing the project.
7)Authorizes CEC to transfer the certification to the Consumer
Power and Conservation Financing Authority (CPA) if CPA
demonstrates to CEC that it is willing and able to construct
the project itself or in conjunction with another public or
private entity.
8)Requires CPA to reimburse the original certificate holder for
its actual costs<2> if CEC issues a new certificate to CPA and
the original party does not participate in the new project.
9)Allows a project owner to sell its license, which would
restart the 12-month clock<3> for the new project owner.
10)Specifies that power plant certification applications filed,
and deemed complete after January 1, 2003 are subject to the
certification process changes embodied in this bill.
11)States legislative findings and declarations that it is
critical to condition the issuance of power plant
certification on prompt, continuous, good faith efforts to
construct the certified project within its original
construction schedule. Further states the policy of the state
that, in the event a certificate holder fails to demonstrate
prompt, continuous, good faith efforts to construct new power
plants, CEC may revoke the certification of the original
project owner and issue a new certification to CPA.
EXISTING LAW :
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<2> Costs reimbursable include major equipment and emission
offsets.
<3> Unless the new project owner is an affiliate of the original
certificate holder.
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1)Requires CEC to certify sites and related facilities that are
required to provide a supply of electric power sufficient to
accommodate projected demand for power statewide.
2)Authorizes CEC to amend the conditions of or revoke the
certification for any facility and to administratively impose
a civil penalty for a material false statement in the
application, or failure to comply with the terms of a
certification. Civil fines of up to $50,000 per violation may
be imposed.
3)Permits CPA to issue revenue bonds to augment electric
generating facilities and to ensure a sufficient and reliable
supply of electricity, offer financing incentives for
investment in cost-effective, energy-efficient appliances and
energy demand reduction, among other powers.
FISCAL EFFECT : Unknown.
COMMENTS :
CEC licenses power plants 50 megawatts or larger. Under the
existing regulatory scheme, a license issued by CEC to construct
and operate a power plant expires by operation of law five years
after its issuance. In February 2001, the Governor issued
Executive Order D-25-01, which directed CEC to establish
"specific performance milestones for both initiation of
construction within one year of certification, and for the
construction phase of the project. 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 shall constitute a forfeiture of the
certification."
CEC issued guidelines<4> to carry out the emergency executive
order, establishing pre-construction milestones to allow for the
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<4> The order authorized CEC to suspend statutory requirements
and regulations that normally control its review and approval of
post-certification amendments to the extent that they would
prevent, hinder, or delay the prompt mitigation of the effects
of the emergency declared in the order. The order further
provided that CEC may "take such action by order on a case by
case basis or by any other means, and is not required to adopt
regulations under the Administrative Procedures Act to implement
this order."
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start of construction within one year of certification. The
guidelines require that the milestones be established and agreed
upon no later than 30 days after approval of the project. The
executive order expired December 31, 2001.
Author's statement
The grant of a license to build a power plant in California is a
determination that the wider public benefit associated with a
reliable supply of electricity for the community more than
offsets the mitigated impacts of the plant on the community. In
making such determinations, the state invests considerable
public resources in investigating and processing every
application to license a power plant, without discrimination.
To the extent, however, that the licensee can choose not to
exercise the privilege to construct, the state will have
invested public resources to further only a private speculative
purpose with no corresponding public benefit.
Recent power plant project developments
Since March 1998, CEC has approved more than 30 power plant
projects, although not all plants approved will be built. Three
large power plants, totaling 1,400 megawatts, came on line in
2001 and are producing electricity. Another 684 MW from
"peaking" power plants were on line by early 2002. In 2002, one
plant rated at 880 MW has come on line. A total of 13 power
plants totaling 2,979 MW has come on line since 1998.
Last year, eight power plant projects that would have produced
an aggregate of 1590 megawatts were withdrawn. Two projects
have been withdrawn this year that would have combined to
produce 680 megawatts.
It is unclear how many of these withdrawn projects and how many
previously contemplated power plant projects will not be
completed in the future due to the various factors affecting
development. Most importantly, commercial and institutional
lenders have tightened lending practices in the energy sector
over the last several months. As a practical matter, it is no
longer possible to obtain financing for a power plant unless the
project owner can produce contracts for the power output from
the new facility.
Power plant development issues
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Last Monday, a coalition of environmentalists and Indian tribes
sued several federal government agencies in an attempt to stop
Calpine Corp. from building a 49-megawatt geothermal power plant
in a remote corner of Northern California. The Fourmile Hill
project would desecrate a spiritual site important to several
tribes, according to the lawsuit filed by the Pit River Nation,
one of the tribes suing to overturn the Bureau of Land
Management's approval of the power plant.
Sixteen big power-generating stations are under construction,
being expanded or planned on both sides of the border from
California to Texas -- the majority of them located in Mexico.
Air quality agencies and some environmental organizations are on
record in opposition to these plants, contending that companies
are saving millions of dollars by evading stringent emissions
controls and other regulations that would apply if the plants
were being built north of the border.
A deputy director of Mexico's Federal Electricity Commission was
recently quoted as saying, "Construction costs are low in
Mexico; at the border there is more availability of fuel than in
the rest of the country; and a company can receive a permit in
six to eight months. That is why they are building here."
Earlier this year, the Federal Energy Regulatory Commission
approved construction of a 215-mile gas pipeline extension from
Arizona to Tijuana to deliver the fuel from Canada and the
United States to power plants along the border. The pipeline is
expected to be completed this summer.
In the last several weeks, U.S. Senators Barbara Boxer and Diane
Feinstein have attempted to reverse these trends by introducing
legislation to prohibit U.S.-produced natural gas from being
used in power plants in Baja until the plants comply with
California emissions standards.
Technical amendment
The applicability of the revocation authority for failure to
construct in 25534(a)(4) of this bill applies only to projects
not "deemed complete" until after January 1, 2003. But other
subdivisions creating deadlines and procedures do not expressly
associate the requirements with permit applications in that
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status when this bill becomes effective.<5> The author or the
committee may wish to consider amending this bill to make this
reference where clarification is needed.
REGISTERED SUPPORT / OPPOSITION :
Support
Coalition of California Utility Employees
Mirant Americas Development Inc.
Utility Consumers Action Network
Opposition
None on file.
Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083
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<5> See, e.g., Section 25534 (c),(d),(g), (h), (i) and (j) in
this bill