BILL ANALYSIS
SB 1478
Page 1
SENATE THIRD READING
SB 1478 (Sher)
As Amended August 26, 2004
Majority vote
SENATE VOTE :26-8
UTILITIES AND COMMERCE NATURAL RESOURCES
(vote not relevant) (vote not relevant)
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APPROPRIATIONS UTILITIES AND COMMERCE 7-3
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| | |Ayes:|Reyes, Campbell, |
| | | |Calderon,, Diaz, Levine, |
| | | |Ridley-Thomas, Wesson |
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| | |Nays:|Bogh, Canciamilla, La |
| | | |Malfa |
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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).
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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
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
SB 1478
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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 electrical corporations and municipal utilities to
adopt strategies in their long term procurement plans to
achieve efficiency in the use of fossil fuels and to address
carbon emissions.
EXISTING LAW :
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
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. CPUC is
required to adopt comparable requirements for direct access
providers and community choice aggregators.
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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 CPUC.
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
CPUC, 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
sources within its service territory. Alternatively, a small
retail seller, such as an energy service provider (ESP), who may
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not be able to sign the long-term contracts necessary to develop
new renewable resources, can buy RECs instead.
Since SB 1478 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 SB 1478 leaves much of the task of developing a REC
program to CEC and CPUC, 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.
Carbon emissions: Amendments taken in policy committee on
August 25, 2004, add a new section to this bill that will
require electrical corporations and municipal utilities to adopt
strategies in their long term procurement plans to achieve
efficiency in the use of fossil fuels and to address carbon
emissions.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083
FN: 0008959