BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 67|
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THIRD READING
Bill No: SB 67
Author: Bowen (D)
Amended: As introduced
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 7-2, 4/8/03
AYES: Bowen, Alarcon, Battin, Dunn, Murray, Sher,
Vasconcellos
NOES: Morrow, McClintock
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Energy: California Renewables Portfolio
Standard Program
SOURCE : Author
DIGEST : This bill establishes, for the California Public
Utilities Commission, an alternative credit test when
requiring procurement to fulfill the renewable portfolio
standard requirements.
ANALYSIS : Existing law, Section 701.3 of the Public
Utilities Code, requires the California Public Utilities
Commission (CPUC) to reserve a portion of future electrical
generating capacity for renewable resources.
Existing law, Section 454.5 of the Public Utilities Code,
requires investor-owned utilities (IOUs) to buy renewable
resources with the goal of increasing their existing level
of renewable resources by one percent per year until a 20
CONTINUED
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percent renewable resources portfolio is achieved.
Existing law, SB 1078 (Sher), Chapter 516, Statutes of
2002, the "Renewable Portfolio Standard" or RPS, requires
IOUs to meet essentially the same renewable procurement
goals as Section 454.5, but sets a deadline of 2017 for
achieving a 20 percent renewable portfolio and establishes
a detailed process and standards for renewable procurement.
Under the RPS, the CPUC is prohibited from requiring an IOU
to buy renewable resources to fulfill the RPS until the IOU
has attained an investment grade credit rating as
determined by at least two major rating agencies.
This bill establishes an alternative credit test which
permits the CPUC to require RPS procurement when an IOU is
able to buy renewable resources on reasonable terms, those
resources can be financed if necessary, and the procurement
will not impair the restoration of the IOU's
creditworthiness.
Background
AB 57 (Wright), Chapter 835, Statutes of 2002, established
a process under which an IOU may be assured its electricity
procurement expenses will be recoverable in customer rates,
if the procurement is conducted consistent with a
CPUC-approved procurement plan. AB 57 included a
requirement that IOUs buy renewable resources with the goal
of increasing their existing level of renewable resources
by one percent per year of electricity sold until a 20
percent renewable resources portfolio is achieved. Like
the RPS, the AB 57 requirement to buy renewable energy is
limited by the availability of Public Goods Charge funds to
subsidize above-market costs. The AB 57 renewable
procurement requirements are not explicitly contingent on
rating agency decisions.
In August 2002, in anticipation of AB 57 and the RPS, the
CPUC issued an interim procurement order requiring each IOU
to buy renewable energy to achieve the one percent annual
increase contemplated in the legislation. The CPUC relied
on its general authority and the direction provided by
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Section 701.3 to require the IOUs to procure renewable
resources. Non-creditworthy IOUs were authorized to enter
contracts in partnership with the State Department of Water
Resources (DWR). While Pacific Gas and Electric's (PG&E)
renewable procurement relied on DWR credit backing,
Southern California Edison's (SCE) did not.
SB 1078, which took effect January 1, 2003, prohibits the
CPUC from requiring an IOU to conduct procurement to
fulfill the renewable portfolio standard until at least two
"major rating agencies" give it an investment grade credit
rating. PG&E and SCE don't meet this condition currently.
It is unlikely PG&E will meet this condition until some
time after its bankruptcy reorganization is resolved, which
may result in a delay of its implementation of the RPS.
According to the author's office, the purpose of the RPS is
undermined by making its implementation contingent on the
decisions of credit rating agencies. This bill corrects
that problem and allows renewable procurement to proceed on
terms which are reasonable and acceptable to the buyer, the
seller and the CPUC.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/29/03)
Office of Ratepayer Advocates
Southern California Edison
The Utility Reform Network
NC:mel 04/30/03 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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