BILL ANALYSIS 1 1 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 1 7 7 6 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