BILL ANALYSIS
SB 1269
Page A
SENATE THIRD READING
SB 1269 (Peace)
As Amended August 8, 2002
Majority vote.
SENATE VOTE :24-14
UTILITIES AND COMMERCE 10-3 APPROPRIATIONS 15-7
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|Ayes:|Wright, Canciamilla, |Ayes:|Steinberg, Alquist, |
| |Diaz, Horton, Kelley, | |Aroner, Cohn, Corbett, |
| |Maddox, Nation, Papan, | |Correa, Firebaugh, |
| |Reyes, Simitian | |Goldberg, Negrete McLeod, |
| | | |Papan, Pavley, Simitian, |
| | | |Keeley, Wiggins Wright |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Pescetti, Bill Campbell, |Nays:|Bates, Ashburn, Daucher, |
| |John Campbell | |Maldonado, Robert |
| | | |Pacheco, Runner, Zettel |
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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; and,
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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.
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.
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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.
<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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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 :
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 (MW) 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 [CEC] based on a showing of good cause shall constitute a
forfeiture of the certification."
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CEC issued guidelines<4> to carry out the emergency executive
order, establishing pre-construction milestones to allow for the
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.
According to the author, 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 MW, 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 MW were withdrawn. Two projects have been
withdrawn this year that would have combined to produce 680 MW.
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
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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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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 : Recently, a coalition of
environmentalists and Indian tribes sued several federal
government agencies in an attempt to stop Calpine Corp. from
building a 49 MW 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.
Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083
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