BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1478
                                                                  Page  1

          Date of Hearing:   August 4, 2004

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                   Judy Chu, Chair

                     SB 1478 (Sher) - As Amended:  June 30, 2004 

          Policy Committee:                              Utilities     
          Vote:        10-0
                        Natural Resources                       7-1    

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill makes several changes to the Renewable Portfolio  
          Standards (RPS) Program. Specifically, this bill:

          1)Advances, from 2017 to 2010, the deadline for the  
            investor-owned utilities (IOUs), direct access providers, and  
            community choice aggregators to achieve a 20% renewable energy  
            portfolio. 

          2)Authorizes a renewable energy credit (REC) trading program to  
            allow the sale of the renewable attribute of renewable  
            electricity as a commodity unbundled from the physical  
            production and delivery of renewable electricity. The program  
            is to include specified rules, to be adopted by the Public  
            Utilities Commission (PUC). 

          3)Requires the California Energy Commission (CEC) to establish a  
            system to certify the use of renewable energy credits produced  
            by eligible renewable resources. 

          4)Allows an IOU serving less than 60,000 customers in California  
            that also serves customers in another state (i.e. PacifiCorp  
            and Sierra Pacific Power) to count out-of-state renewable  
            resources toward its RPS compliance.

          5)Requires the CEC to report by January 1, 2006 with  
            recommendations on how to encourage local publicly-owned  
            utilities to implement renewable portfolio standard programs  
            meeting the same requirements as that for the IOUs.









                                                                  SB 1478
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           FISCAL EFFECT  

          1)The PUC will incur costs for the energy trading program of  
            about $110,000 in the first year and $65,000 ongoing. [Public  
            Utilities Reimbursement Account] 

          2)Absorbable reporting costs to the CEC, which, along with other  
            western states, is already establishing a tracking system for  
            renewable energy sales, and can include the recommendations  
            regarding local public utilities in its Integrated Energy  
            Policy Report.

           


          COMMENTS  

           Background and Purpose  . In 2002, SB 1078 (Sher), SB 1038 (Sher),  
          and AB 57 (Wright) together created the RPS program. Under RPS,  
          the IOUs are required to increase their renewable procurement  
          each year by at least 1% of total sales, so that 20% of their  
          sales are from renewable energy sources by December 31, 2017.  
          The PUC is required to adopt comparable requirements for direct  
          access providers and community choice aggregators. 

          The "Energy Action Plan" adopted by the PUC, CEC and the  
          California Power Authority pledges that the agencies will  
          accelerate RPS implementation to meet the 20% goal by 2010,  
          which is consistent with SB 1478. (The governor has also  
          endorsed "20% by 2010" and proposed an additional goal of 33% by  
          2020.)

          Two of the three major IOUs appear able to meet the 20% by 2010  
          goal. Pacific Gas & Electric's current baseline portfolio of  
          renewable power is 12%, while Southern California Edison's  
          baseline is 17%. However, San Diego Gas & Electric (SDG&E)  
          currently receives only 1.8% of its electricity from renewable  
          resources. Due to its small baseline and transmission  
          constraints that limit its ability to procure new renewable  
          power from outside its service territory, SDG&E believes it will  
          not be able to meet a 20% by 2010 goal without a renewable  
          energy credit (REC) program. 

          The REC program established in SB 1478 is intended to help IOUs  
          and other retail electric providers meet the accelerated RPS  








                                                                  SB 1478
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          goals by allowing them to purchase the attributes of renewable  
          power without having to purchase unneeded or undeliverable  
          generation. Under such a program, SDG&E could, for example,  
          purchase RECs from a wind farm in Northern California while the  
          wind farm sells its electricity output to another retail  
          electricity provider that does not need the environmental  
          attributes. SDG&E would not need to rely on congested  
          transmission lines for delivery of the actual electricity and  
          instead could produce the needed energy from non-renewable  
          sources within its service territory. Similar trading programs  
          are already in place in Texas and Massachusetts. 

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081