BILL ANALYSIS                                                                                                                                                                                                              1
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                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                               DEBRA BOWEN, CHAIRWOMAN
          

          SB 1776 -  Bowen                                  Hearing Date:   
          April 27, 2004             S
          As Introduced:  February 20, 2004       FISCAL           B

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                                      DESCRIPTION
           
           Current law  establishes a one-stop permitting process for large  
          thermal powerplants at the California Energy Commission (CEC).

           This bill  reinstates an expedited six month siting process for  
          environmentally benign powerplants and repowering of existing  
          powerplants that expired at the end of 2003.

                                      BACKGROUND
           
          In the summer of 2000, San Diego's electric ratepayers found  
          themselves on the leading edge of California's electricity  
          crisis when they were subjected to bill increases of 50% or  
          more.  Some of the blame for the crisis was placed on  
          California's process for siting powerplants, administered  
          through the CEC, which was characterized as cumbersome and slow.  
           

          In response, the Legislature required the CEC to develop an  
          expedited siting process for environmentally benign powerplants  
          to cut the siting timeline from one year to six months.  Where  
          there is substantial evidence that a project won't cause a  
          significant impact on the environment or the electrical system  
          and will comply with all applicable standards, ordinances, or  
          laws, the six month process can be used.  The statute creating  
          this expedited processing expired at the end of 2003.  

          As the electricity crisis spread throughout the state in 2001,  
          this expedited process was expanded to include the repowering of  
          existing powerplants.  This provision also expired at the end of  
          2003.

          This bill reauthorizes those expedited processes through 2006.









                                       COMMENTS
           
           1.Power Supply Forecast  .  Recent power emergencies in Southern  
            California, while unusual and perhaps resulting from human  
            error, are nevertheless ominous, and both the CEC and the  
            California Independent System Operator (ISO) have forecast  
            potential supply problems by 2006.  As most Californians know  
            from 2000 and 2001 (and from looking at their power bills  
            today), the consequences of electric shortages are severe.   
            That knowledge should encourage the establishment of efficient  
            siting processes which give full attention to the  
            environmental issues associated with building or repowering a  
            powerplant.

           2.Did The Expedited Siting Process Work?   The track record for  
            the six month siting processes reauthorized by this  
            legislation is mixed.  Twelve applications were submitted  
            under this expedited process, two of which were successfully  
            completed through that process.  Five of the remaining  
            projects were discontinued; the other five were sited using  
            the traditional 12 month process. The CEC was considering  
            revising its regulations to make the process more useful, but  
            suspended that work when the requirement for a six month  
            process sunset in January.

           3.Expedited Siting Or Not, Plants Are Being Approved, If Not  
            Built  .  It's difficult to blame the energy crisis on  
            California's powerplant siting process.  The CEC has permitted  
            36 major powerplants that are either operational or under  
            construction.  Also approved are 12 additional major  
            powerplants, capable of producing almost 6,000 megawatts (MW)  
            of electricity, where construction is either on hold or the  
            applicant cancelled the project.  Investigations by the  
            Federal Energy Regulatory Commission, the federal Governmental  
            Accounting Office, and the California Attorney General have  
            concluded that much of California's energy crisis was due to  
            gaming and other actions taken by electricity sellers and  
            marketers.

            A lack of financing is deterring powerplant construction, not  
            the CEC's siting process.  This is illustrated in the letter  
            to shareholders by the Chief Executive Officer of a major  
            California powerplant developer contained in the 2002 annual  
            shareholders report:









               "The year's challenges included a weak economic  
               climate, low electricity prices, widespread distrust  
               of corporations and the power industry in particular,  
               credit downgrades, and the virtual drying-up of  
               capital markets and bank financings."

                                       POSITIONS
           
           Sponsor:
           
          Author

           Support:
           
          Duke Energy

           Oppose:
           
          State Building & Construction Trades Council

          





          Randy Chinn 
          SB 1776 Analysis
          Hearing Date:  April 27, 2004