BILL ANALYSIS
SB 67
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Date of Hearing: June 30, 2003
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
SB 67 (Bowen) - As Amended: June 26, 2003
SENATE VOTE : 29-11
SUBJECT : Energy: California Renewables Portfolio Standard
Program.
SUMMARY : Permits the California Public Utilities Commission
(PUC) to require the investor owned utilities (IOUs) to begin
meeting the procurement requirements of the Renewable Portfolio
Standard (RPS) when either:
1)IOU has obtained an investment grade credit rating as
determined by at least two major rating agencies, or
2)IOU is able to procure eligible renewable energy resources on
reasonable terms and the procurement will not impair the
restoration IOU's creditworthiness.
Makes technical non-substantive changes to provision relating to
definitions of eligible renewable energy resources.
EXISTING LAW :
1)Requires IOUs to buy renewable resources to increase their
existing level of renewable power by one percent per year with
twenty percent of their total portfolio coming from renewable
resources by 2017.
2)Exempts IOUs from RPS renewable resources procurement
requirements until IOU obtains an investment grade credit
rating as determined by at least two major rating agencies.
FISCAL EFFECT : Unknown.
COMMENTS : SB 1078 (Sher), Chapter 516, Statutes of 2002 created
the RPS, requiring IOUs to buy renewable resources with the goal
of increasing their existing level of renewable resources by one
percent per year until a twenty percent renewable resources
portfolio is achieved.
SB 67
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Under provision of SB 1078, PUC is prohibited from requiring an
IOU to buy renewable resources to fulfill RPS until IOU has
attained an investment grade credit rating as determined by at
least two major rating agencies. Pacific Gas & Electric (PG&E)
and Southern California Edison (SCE) do not meet this condition
currently. This bill establishes an alternative credit test
that permits PUC to require RPS procurement when an IOU is able
to buy renewable resources on reasonable terms and the
procurement will not impair the restoration of IOU's
creditworthiness.
In August 2002, in anticipation of RPS, PUC issued an interim
procurement order requiring each IOU to buy renewable energy to
achieve the one percent annual increase contemplated in the
legislation. PUC relied on its general authority and the
direction provided by Section 701.3 to require IOUs to procure
renewable resources. Non-creditworthy IOUs were authorized to
enter contracts in partnership with the Department of Water
Resources (DWR). While PG&E renewable procurement relied on DWR
credit backing, SCE did not.
According to the author's office, renewable procurement should
not hinge on the unrelated decision of credit rating agencies.
Instead, IOUs should be able to buy renewable power even when
their credit ratings are not investment grade. Because, IOUs
portfolio costs are guaranteed to be recovered in rates, and
because IOU will have to procure power no matter what, their
credit worthiness should not be an obstacle to RPS. In fact,
SCE has already begun purchasing power under RPS despite its low
credit rating
PG&E argues that repealing the objective investment grade
standard for credit worthiness established in SB 1083 is a shift
in policy that could force them to buy renewable power at high
costs that will be passed on to ratepayers. Currently PG&E is
purchasing renewable power, but under one year contracts. RPS
requires contacts to be no less than ten years in duration.
PG&E argues that these longer term contracts will be more
expensive until they obtain investment grade credit rating.
Thus, allowing them the flexibility not to meet RPS standard
reduces ratepayer costs while the utility still purchase
renewable power.
PG&E's Bankruptcy Statutes
SB 67
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A settlement agreement in PG&E bankruptcy proceeding was
recently announced, which still must be approved by PUC, PG&E's
Board or Directors and the Bankruptcy Court. If the process
goes according to plan the agreement should be approved by
January 2004, with investment grade credit ratings following
shortly thereafter.
Conflicts With SB 168 (Sher)
This bill also makes non-substantive changes to Public Utilities
Code Sec. 399.12 which are intended to correct drafting errors
when this section was enacted as part of SB 1078. SB 168 (Sher)
which is pending before this committee, amends this same
section. To avoid conflicts, the committee and the author may
wish to amend this bill to delete these changes and instead
incorporate the non-substantive changes into SB 168 .
REGISTERED SUPPORT / OPPOSITION :
Support
Office of Rate Payer Advocates
Southern California Edison
The Utility Reform Network (TURN)
County of Santa Cruz
California Public Utilities Commission
Opposition
Pacific Gas & Electric
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083