BILL NUMBER: SB 183	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Sher

                        FEBRUARY 12, 2003

   An act to amend Section 383.5 of the Public Utilities Code,
relating to energy.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 183, as introduced, Sher.  Energy:  renewable technologies.
   Under the Public Utilities Act, the Public Utilities Commission
requires electrical corporations to identify a separate rate
component to fund in-state operation and development of existing and
new and emerging renewable resources technologies.  This rate
component is a nonbypassable element of local distribution and
collected on the basis of usage.  Existing law requires specified
electrical corporations to collect specific amounts to support
in-state operation and development of existing and new and emerging
renewable resources technologies.  Existing law also requires the
State Energy Resources Conservation and Development Commission
(Energy Commission) to transfer funds collected for in-state
operation and development of existing and new and emerging renewable
resources technologies into the Renewable Resource Trust Fund.
Existing law requires that 17.5% of the funds collected to accomplish
the funding of in-state operation and development of existing and
new and emerging renewable resources technologies, after deducting
certain administrative costs, be used for a multiyear, consumer-based
program to foster the development of emerging renewable technologies
in distributed generation applications by providing monetary
rebates, buydowns, or equivalent incentives.  The Emerging Renewable
Resources Account is established within the Renewable Resource Trust
Fund, to accomplish these purposes.
   This bill would require the Energy Commission to make reasonably
available, regularly updated information on funds in the Emerging
Renewable Resources Account that remain available for the above
stated purposes.
   Vote:  majority.  Appropriation:  no.  Fiscal committee:  yes.
State-mandated local program:  no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 383.5 of the Public Utilities Code is amended
to read:
   383.5.  (a) It is the intent of the Legislature in establishing
this program, to increase the amount of renewable electricity
generated per year, so that it equals at least 17 percent of the
total electricity generated for consumption in California.
   (b) As used in this section, the following terms have the
following meaning:
   (1) "In-state renewable electricity generation technology" means a
facility that meets all of the following criteria:
   (A) The facility uses biomass, solar thermal, photovoltaic, wind,
geothermal, fuel cells using renewable fuels, small hydroelectric
generation of 30 megawatts or less, digester gas, municipal solid
waste conversion, landfill gas, ocean wave, ocean thermal, or tidal
current, and any additions or enhancements to the facility using that
technology.
   (B) The facility is located in the state or near the border of the
state with the first point of connection to the Western Electricity
Coordinating Council (WECC) transmission system located within this
state.
   (C) For the purposes of this subdivision, "solid waste conversion"
means a technology that uses a noncombustion thermal process to
convert solid waste to a clean burning fuel for the purpose of
generating electricity, and that meets all of the following criteria:

   (i) The technology does not use air or oxygen in the conversion
process, except ambient air to maintain temperature control.
   (ii) The technology produces no discharges of air contaminants or
emissions, including greenhouse gases as defined in Section 42801 of
the Health and Safety Code.
   (iii) The technology produces no discharges to surface or
groundwaters of the state.
   (iv) The technology produces no hazardous wastes.
   (v) To the maximum extent feasible, the technology removes all
recyclable materials and marketable green waste compostable materials
from the solid waste stream prior to the conversion process and the
owner or operator of the facility certifies that the those materials
will be recycled or composted.
   (vi) The facility at which the technology is used is in compliance
with all applicable laws, regulations, and ordinances.
   (vii) The technology meets any other conditions established by the
State Energy Resources Conservation and Development Commission.
   (viii) The facility certifies that any local agency sending solid
waste to the facility is in compliance with Division 30 (commencing
with Section 40000) of the Public Resources Code, has reduced,
recycled, or composted solid waste to the maximum extent feasible,
and shall have been found by the California Integrated Waste
Management Board to have diverted at least 30 percent of all solid
waste through source reduction, recycling and composting.
   (2) "Report" means the report entitled "Investing in Renewable
Electricity Generation in California" (June 2001, Publication Number
P500-00-022) submitted to the Governor and the Legislature by the
State Energy Resources Conservation and Development Commission.
   (3) "Energy Commission" means the State Energy Resources
Conservation and Development Commission.
   (c) (1) Twenty percent of the funds collected pursuant to
paragraph (6) of subdivision (c) of Section 381 shall be used for
programs that are designed to improve the competitiveness of existing
in-state renewable electricity generation technology facilities, and
to secure for the state the environmental, economic, and reliability
benefits that continued operation of those facilities will provide.
Eligibility for incentives under this subdivision shall be limited
to those technologies found eligible for funds by the Energy
Commission pursuant to paragraphs (5), (6), and (8) of subdivision
(c) of Section 399.6.
   (2) Any funds used to support in-state renewable electricity
generation technology facilities pursuant to this subdivision shall
be expended in accordance with the provisions of the report, subject
to all of the following requirements:
   (A) Of the funding for existing renewable electricity generation
technology facilities available pursuant to this subdivision, 75
percent shall be used to fund first tier technologies, including
biomass and solar electric technologies and 25 percent shall be used
to fund second tier wind technologies.
   (B) The Energy Commission shall reexamine the tier structure as
proposed in the report and adjust the structure to reflect market and
contractual conditions. The Energy Commission shall also consider
inflation when adjusting the structure.
   (C) The Energy Commission shall establish a cents per kilowatthour
production incentive, not to exceed the payment caps per
kilowatthour established in the report, as those payment caps are
revised in guidelines adopted by the commission, representing the
difference between target prices and the market clearing price for
electricity, if sufficient funds are available.  If there are
insufficient funds in any payment period to pay either the difference
between the target and market clearing price or the payment caps,
production incentives shall be based on the amount determined by
dividing available funds by eligible generation.  The market clearing
price for electricity shall be determined by the Energy Commission
based on the energy prices paid to nonutility power generators as
authorized by the commission, or on otherwise available measures of
market price.  For the first tier biomass technologies, the Energy
Commission shall establish a time-differentiated incentive structure
that encourages plants to run the maximum feasible amount of time and
that provides a higher incentive when the plants are receiving the
lowest price.  The Energy Commission may establish a different
incentive rate within the same technology tier to account for
discounted contracts.
   (D) Facilities that are eligible to receive funding pursuant to
this subdivision shall be registered in accordance with criteria
developed by the Energy Commission and those facilities may not
receive payments for any electricity produced that has any of the
following characteristics:
   (i) Is sold at monthly average rates equal to or greater than the
applicable target price, as determined by the Energy Commission.
   (ii)  Is that portion of electricity generation attributable to
the use of qualified agricultural biomass fuel, for a facility that
is receiving fuel-based incentives through the Agricultural
Biomass-to-Energy Incentive Grant Program established pursuant to
Part 3 (commencing with Section 1101) of Division 1 of the Food and
Agricultural Code.  Notwithstanding subdivision (f) of Section 1104
of the Food and Agricultural Code, facilities that receive funding
from the Agricultural Biomass-to-Energy Incentive Grant Program are
eligible to receive funding pursuant to this subdivision.
   (iii) Is used onsite or is sold to customers in a manner that
excludes competitive transition charge payments, or is otherwise
excluded from competitive transition charge payments.
   (d) (1) Fifty-one and one-half percent of the funds collected
pursuant to paragraph (6) of subdivision (c) of Section 381, shall be
used for programs designed to foster the development of new in-state
renewable electricity generation technology facilities, and to
secure for the state the environmental, economic, and reliability
benefits that continued operation of those facilities will provide.
   (2) Any funds used for new in-state renewable electricity
generation technology facilities pursuant to this subdivision shall
be expended in accordance with the report, subject to all of the
following requirements:
   (A) In order to cover the above market costs of renewable
resources as approved by the commission and selected by retail
sellers to fulfill their obligations under Article 16 (commencing
with Section 399.11), the Energy Commission shall award funds in the
form of supplemental energy payments, subject to the following
criteria:
   (i) The Energy Commission may establish caps on supplemental
energy payments.  The caps shall be designed to provide for a viable
energy market capable of achieving the goals of Article 16
(commencing with Section 399.11). The Energy Commission may waive
application of the caps to accommodate a facility, if it is
demonstrated to the satisfaction of the Energy Commission, that
operation of the facility would provide substantial economic and
environmental benefits to end use customers subject to the funding
requirements of Section 381.
   (ii) Supplemental energy payments shall be awarded only to
facilities that are eligible for funding under this subdivision.
   (iii) Supplemental energy payments awarded to facilities selected
by an electrical corporation pursuant to Article 16 (commencing with
Section 399.11) shall be paid for the lesser of 10 years, or the
duration of the contract with the electrical corporation.
   (iv) The Energy Commission shall reduce or terminate supplemental
energy payments for projects that fail either to commence and
maintain operations consistent with the contractual obligations to an
electrical corporation, or that fail to meet eligibility
requirements.
   (v) Funds shall be managed in an equitable manner in order for
retail sellers to meet their obligation under Article 16 (commencing
with Section 399.11).
   (B) The Energy Commission may determine as part of a solicitation,
that a facility that does not meet the definition of "in-state
renewable electricity generation technology" facility solely because
it is located outside the state, is eligible for funding under this
subdivision if it meets both of the following requirements:
   (i) It is located so that it is or will be connected to the
Western Electricity Coordinating Council (WECC) transmission system.

   (ii) It is developed with guaranteed contracts to sell its
generation to end use customers subject to the funding requirements
of Section 381, or to marketers that provide this guarantee for
resale of the generation, for a period of time at least equal to the
amount of time it receives incentive payments under this subdivision.

   (C) Facilities that are eligible to receive funding pursuant to
this subdivision shall be registered in accordance with criteria
developed by the Energy Commission and those facilities may not
receive payments for any electricity produced that has any of the
following characteristics:
   (i) Is sold under an existing long-term contract with an existing
in-state electrical corporation if the contract includes fixed energy
or capacity payments, except for that electricity that satisfies the
provisions of subparagraph (C) of paragraph (1) of subdivision (c)
of Section 399.6.
   (ii) Is used onsite or is sold to customers in a manner that
excludes competitive transition charge payments, or is otherwise
excluded from competitive transition charge payments.
   (iii) Is produced by a facility that is owned by an electrical
corporation or a local publicly owned electric utility as defined in
subdivision (d) of Section 9604.
   (iv) Is a hydroelectric generation project that will require a new
or increased appropriation of water under Part 2 (commencing with
Section 1200) of Division 2 of the Water Code.
   (D) Eligibility to compete for funds or to receive funds shall be
contingent upon having to sell the output of the renewable
electricity generation facility to customers subject to the funding
requirements of Section 381.
   (E) The Energy Commission may require applicants competing for
funding to post a forfeitable bid bond or other financial guaranty as
an assurance of the applicant's intent to move forward expeditiously
with the project proposed. The amount of any bid bond or financial
guaranty may not exceed 10 percent of the total amount of the funding
requested by the applicant.
   (F) In awarding funding, the Energy Commission may provide
preference to projects that provide tangible demonstrable benefits to
communities with a plurality of minority or low-income populations.

   (3) Repowered existing facilities shall be eligible for funding
under this subdivision if the capital investment to repower the
existing facility equals at least 80 percent of the value of the
repowered facility.
   (4) Facilities engaging in the combustion of municipal solid waste
or tires are not eligible for funding under this subdivision.
   (5) Production incentives awarded under this subdivision prior to
January 1, 2002, shall commence on the date that a project begins
electricity production, provided that the project was operational
prior to January 1, 2002, unless the Energy Commission finds that the
project will not be operational prior to January 1, 2002, due to
circumstances beyond the control of the developer.  Upon making a
finding that the project will not be operational due to circumstances
beyond the control of the developer, the Energy Commission shall pay
production incentives over a five-year period, commencing on the
date of operation, provided that the date that a project begins
electricity production may not extend beyond January 1, 2007.
   (6) Facilities generating electricity from biomass energy shall be
considered an in-state renewable electricity generation technology
facility to the extent that they certify to the satisfaction of the
Energy Commission that fuel utilization is limited to the following:

   (A) Agricultural crops and agricultural wastes and residues.
   (B) Solid waste materials such as waste pallets, crates, dunnage,
manufacturing, and construction wood wastes, landscape or
right-of-way tree trimmings, mill residues that are directly the
result of the milling of lumber, and rangeland maintenance residues.

   (C) Wood and wood wastes that meet all of the following
requirements:
   (i) Have been harvested pursuant to an approved timber harvest
plan prepared in accordance with the Z'berg-Nejedly Forest Practice
Act of 1973 (Ch. 8 (commencing with Sec. 4511), Pt. 2, Div. 4,
P.R.C.).
   (ii) Have been harvested for the purpose of forest fire fuel
reduction or forest stand improvement.
   (iii) Do not transport or cause the transportation of species
known to harbor insect or disease nests outside zones of infestation
or current quarantine zones, as identified by the Department of Food
and Agriculture or the Department of Forestry and Fire Protection,
unless approved by the Department of Food and Agriculture and the
Department of Forestry and Fire Protection.
   (e) (1) Seventeen and one-half percent of the funds collected
pursuant to paragraph (6) of subdivision (c) of Section 381 shall be
used for a multiyear, consumer-based program to foster the
development of emerging renewable technologies in distributed
generation applications.
   (2) Any funds used for emerging technologies pursuant to this
subdivision shall be expended in accordance with the report, subject
to all of the following requirements:
   (A) Funding for emerging technologies shall be provided through a
competitive, market-based process that shall be in place for a period
of not less than five years, and shall be structured so as to allow
eligible emerging technology manufacturers and suppliers to
anticipate and plan for increased sale and installation volumes over
the life of the program.
   (B) The program shall provide monetary rebates, buydowns, or
equivalent incentives, subject to subparagraph (C), to purchasers,
lessees, lessors, or sellers of eligible electricity generating
systems.  Incentives shall benefit the end-use consumer of renewable
generation by directly and exclusively reducing the purchase or lease
cost of the eligible system, or the cost of electricity produced by
the eligible system.  Incentives shall be issued on the basis of the
rated electrical capacity of the system measured in watts, or in the
amount of electricity production of the system, measured in
kilowatthours, determined by the Energy Commission.
   (C) Eligible distributed emerging technologies are photovoltaic,
solar thermal electric, fuel cell technologies that utilize renewable
fuels, and wind turbines of not more than 50 kilowatts rated
electrical generating capacity per customer site, and other
distributed renewable emerging technologies that meet the emerging
technology eligibility criteria established by the Energy Commission.
  Eligible electricity generating systems are intended primarily to
offset part or all of the consumer's own electricity demand, and
shall not be owned by local publicly owned electric utilities, nor be
located at a customer site that is not receiving distribution
service from an electrical corporation that is subject to Section 381
and contributing funds to support programs under this section.   All
eligible electricity generating system components shall be new and
unused, and shall not have been previously placed in service in any
other location or for any other application, and shall have a
warranty of not less than five years to protect against defects and
undue degradation of electrical generation output. Systems and their
fuel resource shall be located on the same premises of the end-use
consumer  where the consumer's own electricity demand is located, and
all eligible electricity generating systems shall be connected to
the utility grid in California.  The Energy Commission may require
eligible electricity generating systems to have meters in place to
monitor and measure a system's performance and generation.  Only
systems that will be operated in compliance with applicable law and
the rules of the commission shall be eligible for funding.
   (D) The Energy Commission shall limit the amount of funds
available for any system or project of multiple systems and reduce
the level of funding for any system or project of multiple systems
that has received, or may be eligible to receive, any government or
utility funds, incentives, or credit.
   (E) In awarding funding, the Energy Commission may provide
preference to systems that provide tangible demonstrable benefits to
communities with a plurality of minority or low-income populations.
   (F) In awarding funding, the Energy Commission shall develop and
implement eligibility criteria and a system that provides preference
to systems based upon system performance, taking into account
factors, including, but not limited to, shading, insolation levels,
and installation orientation. 
   (G) The Energy Commission shall make reasonably available,
regularly updated information on funds in the Emerging Renewable
Resources Account that remain available for monetary rebates,
buydowns, or equivalent incentives pursuant to this subdivision,
broken down by those program categories established by the Energy
Commission. 
   (f) (1) Ten percent of the funds collected pursuant to paragraph
(6) of subdivision (c) of Section 381 shall be used to provide
customer credits to customers that entered into a direct transaction
on or before September 20, 2001, for purchases of electricity
produced by registered in-state renewable electricity generating
facilities.
   (2) Any funds used for customer credits pursuant to this
subdivision shall be expended, as provided in the report, subject to
the following requirements:
   (A) Customer credits shall be awarded to California retail
customers located in the service territory of an electrical
corporation that is subject to Section 381 that is contributing funds
to support programs under this section, and that is purchasing
qualifying electricity from renewable electricity generating
facilities, through transactions traceable to specific generation
sources by any auditable contract trail or equivalent that provides
commercial verification that the electricity from the claimed
renewable electricity generating facilities has been sold once and
only once to a retail customer.
   (B) Credits awarded pursuant to this paragraph may be paid
directly to electric service providers, energy marketers,
aggregators, or generators if those persons or entities account for
the credits on the recipient customer's utility bills.  Credits may
not exceed one and one-half cents ($0.015) per kilowatthour.  Credits
awarded to members of the combined class of customers, other than
residential and small commercial customers, may not exceed one
thousand dollars ($1,000) per customer per calendar year. In no event
may more than 20 percent of the total customer incentive funds be
awarded to members of the combined class of customers other than
residential and small commercial customers.
   (C) The Energy Commission shall develop criteria and procedures
for the identification of energy purchasers and providers that are
eligible to receive funds pursuant to this paragraph through a
process consistent with this paragraph. These criteria and procedures
shall apply only to funding eligibility and may not extend to other
renewable marketing claims.
   (D) The commission shall notify the Energy Commission in writing
within 10 days of revoking or suspending the registration of any
electric service provider pursuant to paragraph (4) of subdivision
(b) of Section 394.25.
   (E) By March 31, 2003, the Energy Commission shall report to the
Governor and the Legislature on how to most effectively utilize the
funds for customer credits, including whether, and under what
conditions, the program should be continued.  The report shall
include an examination of trends in markets for renewable energy,
including the trading of nonenergy attributes, and the role of
customer credits in these markets.  The report will recommend an
appropriate funding allocation for the customer credits and how
implementation of the customer credits should be structured, if
appropriate.
   (F) Customer credits may not be awarded for the purchase of
electricity that is used to meet the obligations of a renewable
portfolio standard.
   (g) One percent of the funds collected pursuant to paragraph (6)
of subdivision (c) of Section 381 shall be used in accordance with
the report to promote renewable energy and to disseminate information
on renewable energy technologies, including emerging renewable
technologies, and to help develop a consumer market for renewable
energy and for small-scale emerging renewable energy technologies.
   (h) (1) The Energy Commission shall adopt guidelines governing the
funding programs authorized under this section and Section 399.13,
at a publicly noticed meeting offering all interested parties an
opportunity to comment.  Substantive changes to the guidelines may
not be adopted without at least 10 days' written notice to the
public.  The public notice of meetings required by this paragraph may
not be less than 30 days.  Notwithstanding any other provision of
law, any guidelines adopted pursuant to this section shall be exempt
from the requirements of Chapter 3.5 (commencing with Section 11340)
of Division 3 of Title 2 of the Government Code.  The Legislature
declares that the changes made to this paragraph by the act amending
this section during the 2002 portion of the 2001-02 Regular Session
are declaratory of, and not a change in existing law.
   (2) Funds to further the purposes of this section may be committed
for multiple years.
   (3) Awards made pursuant to this section are grants, subject to
appeal to the Energy Commission upon a showing that factors other
than those described in the guidelines adopted by the Energy
Commission were applied in making the awards and payments.  Any
actions taken by an applicant to apply for, or become or remain
eligible and registered to receive, payments or awards, including
satisfying conditions specified by the Energy Commission, shall not
constitute the rendering of goods, services, or a direct benefit to
the Energy Commission.
   (i) The Energy Commission shall report to the Legislature on or
before May 31, 2000, and on or before May 31 of every second year
thereafter, regarding the results of the mechanisms funded pursuant
to this section.  Reports prepared pursuant to this subdivision shall
include a description of the allocation of funds among existing, new
and emerging technologies; the allocation of funds among programs,
including consumer-side incentives; and the need for the reallocation
of money among those technologies.  The reports shall discuss the
progress being made toward achieving the 17 percent target provided
in subdivision (a) by each funding category authorized pursuant to
subdivisions (c), (d), (e), (f), and (g) of this section.  The
reports shall also address the allocation of funds from interest on
the accounts described in this section, and money in the accounts
described in subdivision (e) of Section 381.  Notwithstanding
subdivisions (c), (d), (e), (f), and (g) of this section, money may
be reallocated without further legislative action among existing,
new, and emerging technologies and consumer-side programs in a manner
consistent with the report and with the latest report provided to
the Legislature pursuant to this subdivision, except that
reallocations may not reduce the allocation established in
subdivision (d) nor increase the allocation established in
subdivision (c).
   (j) The Energy Commission shall, by December 1, 2003, prepare and
submit to the Legislature a comprehensive renewable electricity
generation resource plan that describes the renewable resource
potential available in California, and recommendations for a plan for
development to achieve the target of increasing the amount of
electricity generated from renewable sources per year, so that it
equals 17 percent of the total electricity generated for consumption
in California by 2006.  The Energy Commission shall consult with the
commission, electrical corporations, and the Independent System
Operator, in the development and preparation of the plan.
   (k) The Energy Commission shall participate in proceedings at the
commission that relate to or affect efforts to stimulate the
development of electricity generated from renewable sources, in order
to obtain coordination of the state's efforts to achieve the target
of increasing the amount of electricity generated from renewable
sources per year, so that it equals 17 percent of the total
electricity generated for consumption in California by 2006.