BILL ANALYSIS
SB 67
Page 1
Date of Hearing: July 7, 2003
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Hannah-Beth Jackson, Chair
SB 67 (Bowen) - As Amended: July 3, 2003
SENATE VOTE : 29-11
SUBJECT : Energy: California Renewables Portfolio Standard
Program.
SUMMARY : This bill establishes an alternative credit test which
permits the California Public Utilities Commission (PUC) to
require Renewable Portfolio Standard (RPS) procurement when an
investor-owned utility (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 IOUs credit-worthiness.
EXISTING LAW :
1)Requires the PUC to reserve a portion of future electrical
generating capacity for renewable resources.
2)Requires IOUs to buy renewable resources with the goal of
increasing their existing level of renewable resources by one
percent per year until a 20 percent renewable resources
portfolio is achieved.
3)Under the renewable portfolio standard (RPS) requires IOUs to
meet renewable procurement goals and sets a deadline of 2017
for achieving 20 percent renewable portfolio and establishes a
detailed process and standards for renewable procurement.
4)Under the RPS, prohibits the PUC 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 permits the PUC to require the IOUs to begin meeting
procurement requirements of the RPS when they meet any of the
following:
1)The IOU has obtained an investment grade credit rating as
determined by at least two major credit rating agencies, or
SB 67
Page 2
2)The IOU is able to procure eligible renewable energy resources
on reasonable terms and the procurement will not impair the
restoration of the IOUs creditworthiness with the exception of
any electrical corporation that is under Chapter 11 Bankruptcy
in Federal Court on June 30, 2003, until April 2, 2004.
FISCAL EFFECT : According to the Senate Appropriations Committee
the bill has minimal cost.
SB 67
Page 3
COMMENTS :
Background
Assembly Bill 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
PUC-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, AB 57's requirement to buy
renewable energy is limited by the availability of Public Goods
Charge funds to subsidize above-market costs. AB 57's 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 Section 701.3 of the
Public Utilities Code to require the IOUs to procure renewable
resources. Non-creditworthy IOUs were authorized to enter
contracts in partnership with the Department of Water Resources.
While Pacific Gas and Electric's (PG&E) renewable procurement
relied on DWR credit backing, Southern California Edison's (SCE)
did not.
Senate Bill 1078, which took effect January 1, 2003, prohibits
the PUC 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.
According to the author, 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 PUC.
SB 67
Page 4
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Utilities Commission
California Wind Energy Association
Office of Ratepayer Advocates
Southern California Edison
The Utility Reform Network
Opposition
Pacific, Gas and Electric
Analysis Prepared by : Kyra Emanuels Ross / NAT. RES. / (916)
319-2092