BILL ANALYSIS
SB 107
Page A
Date of Hearing: July 6, 2005
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Loni Hancock, Chair
SB 107 (Simitian) - As Amended: June 21, 2005
SENATE VOTE : 25-14
SUBJECT : Renewable energy.
SUMMARY : Accelerates California Renewables Portfolio Standard
(RPS) to require retail sellers of electricity to procure at
least 20% of their retail sales from renewable power by 2010
instead of 2017. Clarifies existing rules to allow renewable
power to count toward a retail seller's RPS even if the
associated electricity is not delivered to the retail seller.
EXISTING LAW :
1)Requires retail sellers of electricity, except munis, to
increase their existing level of renewable resources by 1% of
sales per year such that 20% of their retail sales are
procured from eligible renewable resources by 2017.
2)Defines eligible renewable resources to include all generation
from a renewable electricity generation 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, and any additions or enhancements to the facility
using that technology. Requires the renewable resource to be
located in California or be directly connected with the
California transmission system.
3)Exempts munis from the statutory requirements of RPS and
instead requires munis to implement and enforce their own RPS
program that recognizes the intent of the Legislature to
encourage renewable resources.
4)Allows the California Energy Commission (CEC) to award
Supplemental Energy Payments (SEPs) to generators of eligible
SB 107
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renewable resources to cover above market costs of renewable
energy, but SEPs may not be paid to one project for more than
10 years.
THIS BILL :
1)Requires that all retail sellers of electricity, excluding
local publicly owned electric utilities (munis), to procure at
least 20% of the total electricity sold from eligible
renewable resources by 2010.
2)Requires the CEC to review the feasibility of increasing the
20% renewable resources target to 33% by 2020 and to make
recommendations on how to induce municipal utilities to comply
with the RPS requirements.
3)Changes the definition of eligible renewable resource to allow
renewable power that is produced outside of California to
count toward a retail seller's RPS if the associated
electricity is delivered to an in-state location, and it
complies with California environmental quality standards.
4)Allows eligible renewable generation facilities located
outside of California to receive SEPs.
5)Allows renewable energy projects to receive SEPs for the above
market cost of the renewable electricity for the value of the
life of the contract instead of just for the first 10 years of
the contract.
6)Allows an Investor Owned Utility (IOU) to receive supplemental
energy payments for renewable generation facilities which it
owns.
7)Requires munis to annually prepare a report to the CEC on the
mix of eligible renewable resources used in their portfolio
and on their progress toward meeting the muni's RPS.
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8)Defines Renewable Energy Credit (REC) to mean a certificate
that one unit of electricity was generated by an eligible
renewable energy resource and includes all renewable and
environmental attributes associated with the production of
electricity, except for emission reduction credits.
9)Provides that RECs that are unbundled from the electricity
cannot be used to satisfy the RPS requirements.
10)Requires the CEC to develop a system to certify, track and
verify RECs produced by renewable energy resources.
11)Specifies that a renewable energy project selected by an
Energy Service Provider (ESP) may only receive SEPs only if
the ESP selects the project through a "least-costs best-fit
process" and the SEPs are reasonable in comparison to other
projects.
12)Provides that renewable power generated under terms of a
contract executed before January 1, 2002, shall count toward a
retail seller's RPS obligations.
13)Provides renewable power generated under terms of contracts
awarded to Qualifying Facilities (QFs) under the Public
Utility Regulatory Policies Act (PURPA) of 1978, shall count
toward a retail seller's RPS obligations.
14)Provides that the goal to increase California's renewable
energy production so that 20 % of all retail sales of
electricity come from renewable resources by 2010, is subject
to rules of flexible compliance that would allow a retail
seller to shift their procurement requirements forward three
years.
15)Allows electric corporations with fewer than 60,000 customers
in California that also services customers in other states, to
meet the RPS under different rules than other retail sellers.
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16)Provides that the cost of a new transmission facility that is
built to deliver electricity from areas with high
concentrations of renewable power shall be paid for by all
electricity customers in California.
17)Requires all long term procurement plans entered into by an
electrical corporation or a muni to adopt a strategy to
achieve efficiency in the use of fossil fuel and to address
carbon emissions.
FISCAL EFFECT : Unknown.
COMMENTS :
1)Background
According to the author's office, the purpose of this bill is to
accelerate the state's existing RPS requirements so that 20% of
retail sales of electricity in California come from renewable
resources by the year 2010 and to address issues that may make
compliance with the RPS difficult.
In 2002, the Legislature approved SB 1078 (Sher), Chapter 516,
Statutes of 2002, which created California's RPS. Under the
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. Once a 20% portfolio is achieved, no further increase is
required. The PUC is required to adopt comparable requirements
for direct access providers and community choice aggregators.
Munis are not required to meet the same RPS as the IOUs, but
instead must implement and enforce their own RPS program that
recognizes the intent of the Legislature to encourage renewable
resources.
The RPS also allows new renewable energy providers to apply to
the CEC for SEPs. 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 the
PUC. The RPS requires IOUs, and certain other retail energy
providers, to buy renewable electricity to the extent Public
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Goods Charges (PGC) funds<1> are available to pay for SEPs. If
no PGC funds are available, the retail energy providers are not
required to purchase additional renewable power.
The RPS requires the PUC to adopt a rulemaking within six months
of its enactment (January 2003), to implement the RPS and to
determine market prices from which SEPs can be determined. On
June 9, 2004, the PUC approved two decisions that established
standard market terms for renewable contracts and a method for
calculating market prices for renewable resources. Since then,
the IOUs have issued Requests for Proposals for renewable energy
contracts that would comply with the RPS and potentially be
eligible to receive SEPs.
The PUC has also approved a number of renewable contracts
through an ad hoc process. These contracts have resulted in the
IOUs agreeing to purchase renewable power that will count toward
their RPS obligations but that will not be eligible to receive
SEPs.
2)Accelerated RPS Compliance
The "Energy Action Plan"(EAP) adopted by the PUC, the 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. The PUC believes
this accelerated goal can be mandated without additional
legislation.
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 13%, while Southern California
Edison (SCE) already has 18% of eligible renewable power in its
portfolio. San Diego Gas & Electric (SDG&E) currently only
receives 5.5% of its electricity from renewable resources.
---------------------------
<1> Existing law requires electric utilities to identify and
collect a separate rate component to fund energy efficiency,
public interest renewable energy research, and related "public
goods" programs.
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3)Making 20% an Achievable Goal
Currently, provisions in the RPS statute may prevent some retail
sellers from meeting any mandate to procure 20% of their
electricity from renewable resources by 2010. Transmission
constraints will limit SDG&E's ability to buy new renewable
electricity and have that electricity delivered to its service
territory. The current RPS statute requires that ESPs procure
their renewable resources through contracts that are at least 10
years in length, but because of the long term uncertainty of
direct access markets in California, ESPs may not be able to
sign enforceable contracts of that length.
This bill attempts to address the problems with transmission
constraints by clarifying that electricity from eligible
renewable resources does not have to be delivered to the service
territory of the retail seller and instead only requires that
the electricity be provided to the retail seller at a location
within California. This provision would maintain the RPS's
objective of reducing consumption of fossil fuels within
California, but would allow for more flexibility in the delivery
of electricity. If the renewable electricity were actually
provided to the retail seller in another IOU's service
territory, the retail seller and the IOU would merely arrange to
swap other electricity. This type of swapping had been a common
practice in the past.
The PUC has recently issued a draft decision that would, if
approved, allow for renewable power that is delivered anywhere
in the state to count toward an IOU's RPS obligations.
4)Related Legislation
AB 1362 (Levine), which was approved by this committee earlier
this year, mandates the acceleration of the RPS to 20% by 2010.
AB 1585 (Blakeslee), which passed this committee earlier this
year, requires the CEC to study the feasibility of attaining a
33% RPS standard. Both these bills passed the Senate Energy,
Utilities and Communications Committee on June 30, 2005. Both
bills were amended in committee to make their enactment
contingent on the enactment of SB 107.
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SB 1478 (Sher) from the 2003-2004 session contained the
provision in this bill to accelerate the RPS targets to 20% by
2010, but also contained provisions allowing RECs to be eligible
for RPS compliance.
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Utilities Commission (CPUC) (Support in
concept)
Clean Power Campaign
East Bay Municipal Utility District (EBMUD)
Independent Energy Produces (support if amended)
Sierra Club California
Union of Concerned Scientists
Opposition
Sempra Energy (Oppose unless amended)
Southern California Edison (SCE) (Oppose unless amended)
Calpine (Oppose unless amended)
Pacific Gas and Electric (PG&E) (Oppose unless amended)
Analysis Prepared by : Kyra Emanuels Ross / NAT. RES. / (916)
319-2092