BILL ANALYSIS
SB 107
Page A
SENATE THIRD READING
SB 107 (Simitian)
As Amended August 30, 2005
Majority vote
SENATE VOTE :25-14
UTILITIES AND COMMERCE 7-3
APPROPRIATIONS 12-5
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|Ayes:|Levine, Baca, Blakeslee, |Ayes:|Chu, Bass, Berg, |
| |Pavley, Jerome Horton, | |Karnette, Klehs, Leno, |
| |Montanez, Jones | |Nation, Oropeza, Laird, |
| | | |Saldana, Yee, Mullin |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Bogh, Keene, Wyland |Nays:|Sharon Runner, Calderon, |
| | | |Emmerson, Nakanishi, |
| | | |Walters |
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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.
Specifically, 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)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.
3)Allows renewable energy projects to receive Supplemental
Energy Payments (SEPs) for the above market cost of the
renewable electricity for the value of the life of the
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contract instead of just for the first 10 years of the
contract.
4)Requires munis to annually prepare a report to the California
Energy Commission (CEC) on the mix of eligible renewable
resources used in their portfolio and on their progress toward
meeting the muni's RPS.
5)Provides that Renewable Energy Credits (RECs) that are
unbundled from the electricity cannot be used to satisfy the
RPS requirements.
6)Requires CEC to develop a system to certify, track and verify
RECs produced by renewable energy resources.
7)Specifies that a renewable energy project selected by an
Energy Service Provider (ESP) may only receive SEPs only if
ESP selects the project through a "least-costs best-fit
process" and the SEPs are reasonable in comparison to other
projects.
8)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.
9)Provides that the California Public Utilities Commission (PUC)
shall allow an electrical corporation to reduce its RPS
obligation if the PUC determines that there is insufficient
transmission to ensure deliverability of the renewable energy.
10)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.
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.
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2)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.
3)Allows CEC to award SEPs to generators of eligible renewable
resources to cover above market costs of renewable energy, but
SEPs may not be paid to one project for more than 10 years.
FISCAL EFFECT : PUC indicates an ongoing need for four positions
at a cost of $380,000 for increased compliance workload related
to the accelerated RPS and to implement the REC program. CEC
indicated absorbable costs to CEC.
COMMENTS : 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 creates California's RPS. Under RPS,
all retail sellers of electricity 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. Munis are not required to meet the same
RPS, but instead must implement and enforce their own RPS
program that recognizes the intent of the Legislature to
encourage renewable resources.
RPS also allows new renewable energy providers to apply to 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. RPS requires investor owned utilities (IOUs), and certain
other retail energy providers, to buy renewable electricity to
the extent Public Goods Charges (PGC) funds 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 "Energy Action Plan"(EAP) adopted by PUC, CEC and the Power
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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. 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.
Complying with the new standard: 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.
This bill also allows PUC to reduce an electric corporation's
RPS obligation if there is insufficient transmission to ensure
the delivery required under the RPS.
This bill does not address the problems ESPs have in signing
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long term contracts.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083
FN: 0012694