BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 1269
Author: Peace (D)
Amended: 8/8/02
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
SENATE FLOOR : 24-14, 6/10/02
AYES: Alarcon, Alpert, Bowen, Burton, Chesbro, Costa,
Dunn, Escutia, Figueroa, Karnette, Kuehl, Machado,
Murray, O'Connell, Ortiz, Peace, Perata, Romero, Scott,
Sher, Soto, Speier, Torlakson, Vasconcellos
NOES: Ackerman, Battin, Brulte, Haynes, Johannessen,
Johnson, Knight, Margett, McClintock, McPherson,
Monteith, Morrow, Oller, Poochigian
ASSEMBLY FLOOR : 46-29, 8/19/02 - See last page for vote
SUBJECT : Powerplant site and facility certification
SOURCE : Author
DIGEST : This bill makes changes to statutes relating to
power plant construction and certification by the
CONTINUED
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California Energy Commission.
Assembly amendments make further changes to clarify time
frames and procedures designed to foster the timely
development of power plants.
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).
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.
This bill expands the conditions under which the California
Energy Commission (CEC) may revoke its certification for a
new power plant construction project. Specifically, this
bill:
1. Authorizes the CEC to revoke its certification for any
power plant project that does not start construction
within 12 months after the owner has received final
permits and resolved all administrative and judicial
appeals and if the California Consumer Power and
Conservation Financing Authority notifies the CEC that
it is willing to construct the project.
2. Applies the above to those projects that the CEC deems
have complete permit applications after January 1, 2003.
3. Allows the CEC to extend the 12-month limit by an
additional 24 months if the owner reimburses the
commission's actual cost of licensing the project. The
cost will be based on a certified commission audit and
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any reimbursement will be to the General Fund.
4. Requires project owners, after receiving project
certification, to submit construction and operation
milestones to the CEC and requires the CEC to approve
the milestones. Failure of the owner to meet the
milestones without a finding of good cause by the
commission, based on specified criteria, will be cause
for revocation of the project certification or
imposition of other penalties by the commission.
5. Requires the power authority, after demonstrating that
it is able to construct a permitted power plant and
receiving a permit from the CEC pursuant to (1) above,
to start construction within 24 months and to meet
project milestones established by the CEC.
6. Requires the authority, if it receives a permit per (5)
above, to offer to reimburse the original project owner
for his permitting costs and the costs of any assets,
such as major equipment, already procured for the
project.
7. Increases the maximum civil penalties that the CEC may
impose-for false statements on a permit application, or
failure to comply with the conditions of permit
approval-from $50,000 to $75,000 per violation and from
$1,000 to $1,500 per day (not to exceed a total of
$50,000) when a violation occurs and persists.
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
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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.
Comments
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
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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 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
Corporation 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
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to Assembly Appropriations:
1. Absorbable costs to the CEC.
2. Potential additional General Fund revenues from
increased civil penalties and reimbursement by project
owners for CEC's certification costs.
3. Any additional costs to the power authority will be
borne by the ratepayer beneficiaries of any power
projects constructed by the authority pursuant the
bill's provisions.
SUPPORT : (Verified 8/21/02)
California Energy Commission
Mirant Delta LLC
Mirant Portrero LLC
Mirant Corporation
Utility Consumers' Action Network
Coalition of California Utility Employees
ASSEMBLY FLOOR :
AYES: Alquist, Aroner, Canciamilla, Cardenas, Cardoza,
Cedillo, Chan, Chavez, Chu, Cohn, Corbett, Correa, Dutra,
Firebaugh, Florez, Frommer, Goldberg, Hertzberg, Horton,
Jackson, Keeley, Kehoe, Koretz, Liu, Longville,
Lowenthal, Matthews, Nakano, Nation, Negrete McLeod,
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Oropeza, Papan, Pavley, Reyes, Salinas, Shelley,
Simitian, Steinberg, Strom-Martin, Thomson, Vargas,
Washington, Wayne, Wiggins, Wright, Wesson
NOES: Aanestad, Ashburn, Bates, Bogh, Briggs, Bill
Campbell, John Campbell, Cogdill, Cox, Daucher,
Dickerson, Harman, Hollingsworth, Kelley, La Suer, Leach,
Leonard, Leslie, Maldonado, Mountjoy, Robert Pacheco, Rod
Pacheco, Pescetti, Richman, Runner, Strickland, Wyland,
Wyman, Zettel
NC:sl 8/21/02 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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