BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 67|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 445-6614 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 67
Author: Bowen (D)
Amended: 9/8/03
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
SENATE FLOOR : 29-11, 6/2/03
AYES: Alarcon, Alpert, Ashburn, Battin, Bowen, Burton,
Cedillo, Chesbro, Ducheny, Dunn, Escutia, Figueroa,
Florez, Karnette, Kuehl, Machado, Margett, McPherson,
Murray, Ortiz, Perata, Romero, Scott, Sher, Soto, Speier,
Torlakson, Vasconcellos, Vincent
NOES: Aanestad, Ackerman, Brulte, Denham, Hollingsworth,
Johnson, Knight, McClintock, Morrow, Oller, Poochigian
ASSEMBLY FLOOR : 48-28, 9/8/03 - See last page for vote
SUBJECT : Energy: California Renewables Portfolio
Standard Program
SOURCE : Author
DIGEST : This bill establishes, for the State Public
Utilities Commission, an alternative credit test when
requiring procurement to fulfill the renewable portfolio
CONTINUED
SB 67
Page
2
standard (RPS) requirements.
Assembly Amendments (1) add a provision to prohibit Pacific
Gas and Electric (PG&E) from commencing RPS procurement
activities until 4/1/04, and (2) expand the definition of
"eligible renewable energy resource" to include facilities
located outside the state, as specified.
ANALYSIS : Existing law, Section 701.3 of the Public
Utilities Code, requires the State Public Utilities
Commission (PUC) 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
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 PUC 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:
1. Permits the PUC to require the IOUs to begin meeting the
procurement requirements of the RPS when either (a) IOU
has obtained an investment grade credit rating as
determined by at least two major rating agencies, or (b)
IOU is able to procure eligible renewable energy
resources on reasonable terms and the procurement will
not impair the restoration IOU's creditworthiness.
Applicability of this second provision is delayed until
after 4/1/04, for any IOU that, as of 6/30/03, was in
federal bankruptcy court. [This provision applies to
SB 67
Page
3
PG&E.]
2. Allows the PUC to consider renewable energy purchased by
an IOU from a facility located outside the state and
meeting specified requirements as meeting RPS.
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
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, 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
PUC issued an interim procurement order requiring each IOU
to buy renewable energy to achieve the one percent annual
increase contemplated in the legislation. The PUC relied
on its general authority and the direction provided by
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
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, which may
result in a delay of its implementation of the RPS.
SB 67
Page
4
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 PUC.
SB 1078 limits the renewable resources that could be
counted toward RPS to in-state renewable resources. This
prohibition against out-of-state production may violate the
Commerce Clause in the United States Constitution and may
act to limit competition to provide low cost renewable
power. SB 67 addresses these concerns by allowing
out-of-state renewable resources to count toward RPS if
they meet specified requirements.
PG&E's Bankruptcy Status . A settlement agreement in PG&E's
bankruptcy proceeding was recently announced, which still
must be approved by the PUC, PG&E's Board of 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
Minor, absorbable special fund costs to PUC.
SUPPORT : (Verified 9/4/03)
California Wind Energy Association
County of Santa Cruz
Office of Ratepayer Advocates
Southern California Edison
State Public Utilities Commission
The Utility Reform Network
ASSEMBLY FLOOR :
AYES: Benoit, Berg, Bermudez, Calderon, Canciamilla, Chan,
Chavez, Chu, Cohn, Corbett, Correa, Diaz, Dutra, Dymally,
Frommer, Goldberg, Hancock, Jerome Horton, Jackson,
Kehoe, Koretz, Laird, Leno, Levine, Lieber, Liu,
SB 67
Page
5
Longville, Lowenthal, Matthews, Montanez, Mullin, Nakano,
Nation, Negrete McLeod, Nunez, Oropeza, Parra, Pavley,
Reyes, Ridley-Thomas, Salinas, Simitian, Steinberg,
Vargas, Wiggins, Wolk, Yee, Wesson
NOES: Aghazarian, Bates, Bogh, Cox, Daucher, Dutton,
Garcia, Harman, Haynes, Shirley Horton, Houston, Keene,
La Malfa, La Suer, Leslie, Maddox, Maze, McCarthy,
Mountjoy, Nakanishi, Pacheco, Plescia, Richman, Runner,
Samuelian, Spitzer, Strickland, Wyland
NC:mel 9/10/03 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****