BILL ANALYSIS
SB 1478
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Date of Hearing: August 25, 2004
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
SB 1478 (Sher) - As Amended: August 23, 2004
AS PROPOSED TO BE AMENDED
SENATE VOTE : 24-5
SUBJECT : Renewable energy.
SUMMARY : Makes numerous changes to the Renewable Portfolio
Standards Program (RPS) and the Renewable Energy Program (REP).
Specifically, this bill :
1)Advances the deadline for achieving a 20% renewable portfolio
from 2017 to 2010.
2)Provides that a renewable energy project may only receive an
award of Supplement Energy Payments (SEP) if the project is
selected by an investor owned utility (IOU) pursuant to a
competitive solicitation or by other retail electricity
providers through a solicitation process approved by
California Public Utilities Commission (PUC).
3)Provides that electricity generation from hydroelectric
facilities of 30 megawatts or less shall count toward a retail
seller's renewable portfolio only if the retail seller
procured power from that source prior to December 31, 2003.
4)Repeals the requirement that the California Energy Commission
(CEC) direct 10% ($13.5 million/year) of renewable funds
collected via the Public Goods Charge (PGC) for credits to
existing renewable direct access customers (CEC has suspended
the customer credit program and redirected the funds to other
renewable programs).
5)Allows a renewable energy facility to qualify for SEPs based
on the total length of the contract instead of limiting the
payment to the value of the contract over the first ten years.
6)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
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production and delivery of renewable electricity.
7)Provides that CEC may not award SEPs for the sale or purchase
or RECs.
8)Provides that a contract for the purchase of electricity
generated by an eligible renewable resource shall include REC
associated with all electricity generation specified in the
contract.
9)Provides that there are no RECs associated with renewable
power generated under terms of a contract executed before
January 1, 2005, that did not contain explicit terms
specifying ownership of energy credits.
10)Provides that there are no RECs associated with contracts
awarded to Qualifying Facilities (QFs) under the Public
Utility Regulatory Policies Act (PURPA) of 1978, but
deliveries under these contracts shall count toward RPS
obligations.
11)Provides that no REC shall be eligible to count toward RPS if
it has been sold more than once separately from the associated
electricity.
12)Prohibits an electrical corporation from selling RECs
associated with electricity included in the electrical
corporations baseline quantity on January 1, 2004.
13)Prohibits an electrical corporation from selling RECs in any
year in which it has procured inadequate renewable resources.
14)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.
15)Requires PUC to adopt rules applicable to both generation
facilities and facilities owned by the electric corporations
that ensure that electrical corporation's procurement plans
adopted after 2006 achieve efficiency in the use of fossil
fuels and reduces carbon emissions.
EXISTING LAW :
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1)Creates RPS which requires IOUs and certain other retail
sellers to meet to increase renewable electricity procurement
by 1% of sales per year until a 20% renewable resources
portfolio is reached, but sets a deadline of 2017 for
achieving a 20% renewable portfolio. Municipal utilities are
exempt from the statutory requirements of RPS and instead
required to implement and enforce their own RPS programs.
2)Defines renewable electricity to include electricity from a
facility that 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.
FISCAL EFFECT : Unknown.
Bill History and Amendments : SB 1478 was originally heard in
approved by this committee on June 24, 2004. On August 23rd,
this bill was amended on Assembly Third Reading. Those
amendments contained two amendments that made substantive policy
changes to this bill that had not been discussed in this
committee and resulted in this bill being referred to this
committee under Assembly Rule 77.2.
The author has now agreed to offer amendments that delete the
two sections that resulted in this bill being referred to
committee. The amendments also make additional non-substantive
changes to this bill to correct prior drafting errors.
The proposed amendments make one major change that has not been
previously discussed in committee. The amendment adds a new
section to this bill that will require PUC to adopt rules that
ensure that the electrical corporations' future procurement
plans adopted after 2006 achieve efficiency in the use of fossil
fuels and reduced carbon emissions.
COMMENTS : In 2002, the Legislature passed SB 1078, Chapter 516;
SB 1038, Chapter 515; and AB 57, Chapter 835. These bills taken
together created a RPS in California. Under RPS, 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. Once a 20%
portfolio is achieved, no further increase is required. PUC is
required to adopt comparable requirements for direct access
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providers and community choice aggregators.
RPS also allows new renewable energy providers to apply to CEC
for SEP. SEPs will be awarded to renewable energy providers to
cover the difference between the prices they bid in a
competitive solicitation and a market price established by PUC.
RPS requires IOUs, and certain other retail energy providers, to
buy renewable electricity to the extent PGC funds are available
to pay for SEP. If no PGC funds are available, the retail
energy providers are not required to purchase additional
renewable power.
Accelerated RPS compliance: The "Energy Action Plan" adopted by
PUC, CEC and the Power Authority (PA) pledges that the agencies
will accelerate RPS implementation to meet the 20% goal by 2010,
instead of 2017. The Governor has also endorsed "20% by 2010"
and proposed an additional goal of 33% by 2020.
Currently, two of the three major IOUs appear to be able to meet
the 20% by 2010 goal. Pacific Gas & Electric's (PG&E) current
baseline of renewable power is at 12%, while Southern California
Edison (SCE) already has 17% of eligible renewable power in its
portfolio. However, San Diego Gas & Electric (SDG&E) currently
only receives 1.8% of its electricity from renewable resources.
Due to SDG&E's miniscule renewable electricity baseline and
transmission constraints that will limit its ability to procure
new renewable power from outside its service territory, SDG&E
believes they will not be able to meet a 20% by 2010 goal
without the addition of a REC program.
Renewable Energy Credits: REC program established in this bill
may help IOUs and other retail electric providers meet the
accelerated RPS goals by allowing them to purchase the
attributes of renewable power without having to purchase
unneeded or undeliverable generation. A REC program will allow
the environmental attributes of renewable energy to be unbundled
from the energy itself and allow the energy and the attributes
to be trade as separate commodities. A REC program would allow
SDG&E to 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
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sources within its service territory. Alternatively, a small
retail seller, such as an energy service provider (ESP), who may
not be able to sign the long-term contracts necessary to develop
new renewable resources, can buy RECs instead.
Since this bill contains explicate provisions against double
counting of RECs, the same amount of new renewable power would
need to be built to meet RPS as would be needed without a REC
program. However, REC program will allow the retail providers
to more efficiently meet their renewable obligations.
Similar trading programs are already in place in Texas and
Massachusetts. Additionally, programs have been in place for
some time that allow for the trading of the environmental
benefits of reduced SO2 and NOx emissions.
While this bill leaves much of the task of developing a REC
program to CEC and PUC, this bill establishes a narrow
definition of RECs and further limits how RECs can be traded.
The limits are an effort to prevent a wide open REC market,
which might undermine RPS goal of promoting investment in new
renewable resources in California and could create the potential
for market gaming.
Even with these limitations, opponents of this bill are
concerned that a poorly structured REC program will be a target
for market manipulation.
REGISTERED SUPPORT / OPPOSITION :
Support
Cannot be verified at this time.
Opposition
Cannot be verified at this time.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083