BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
------------------------------------------------------------
|SB 110 - Peace |Hearing Date:April 13, | S|
| |1999 | |
|------------------------------+--------------------------+--|
|As Amended:April 5, 1999 | | B|
|------------------------------+--------------------------+--|
| | | |
|------------------------------+--------------------------+--|
| | | 1|
|------------------------------+--------------------------+--|
| | | 1|
|------------------------------+--------------------------+--|
| | | 0|
|------------------------------+--------------------------+--|
| | | |
|------------------------------+--------------------------+--|
| | | |
------------------------------------------------------------
DESCRIPTION
This bill amends the California Energy Commission's (CEC)
powerplant siting process to eliminate the "integrated
assessment of need" requirement and expand the exemption of
natural gas powerplants from the site evaluation process.
KEY QUESTIONS
1)If, through the elimination of the integrated assessment
of need, the CEC's statewide planning function is no
longer linked to its siting function, should it retain
its exclusive siting authority or its authority to
override state and local laws in siting a powerplant?
2)Is there a need for an initial site evaluation, known as
a notice of intention (NOI), for proposed natural gas
powerplants in a deregulated generation market?
BACKGROUND
The Warren-Alquist Act established an exclusive process for
siting of thermal powerplants 50 megawatts and larger that
was intended to guard against overbuilding of powerplants
and provide comprehensive environmental review and
predictable, one-stop permitting of applications.
The Act requires the CEC to develop long-term forecasts of
state energy needs, which serve as a basis for planning and
certification of individual powerplant facilities. The Act
grants the CEC exclusive authority to certify powerplants
and authorizes the CEC to override other state, local or
regional decisions and certify a powerplant it determines
is required for "public convenience and necessity."
The first step in the siting process is the requirement
that an applicant file an NOI, which is intended to provide
alternative sites for the CEC to evaluate. An NOI
describes the location, design and operation of the
preferred site and alternative sites. The CEC evaluates
the sites based on environmental impact, connection to
grid, need and compatibility with the existing system.
The NOI process also includes specific requirements for CEC
consultation with other federal, state, regional and local
agencies, including detailed analysis and comment
requirements for the California Coastal Commission and the
San Francisco Bay Conservation and Development Commission
for sites proposed to be located within their
jurisdictions.
The law generally requires that at least two alternative
sites be identified prior to moving to the next step in the
siting process, the application for certification (AFC).
However, since the siting process was established in 1975,
a number of statutory exemptions to the NOI requirement
have been established. Current statutorily exempt projects
include modifications to existing facilities, demonstration
projects, site-specific facilities like geothermal
powerplants, and natural gas powerplants that result from
competitive solicitation or negotiation.
The CEC has interpreted the natural gas powerplant
exemption to apply to any natural gas powerplant that
intends to sell its product into the Power Exchange. As a
result, all recent applications submitted to the CEC have
been granted an exemption from the NOI process.
This bill codifies the CEC's practice by expanding the
existing exemption to include all natural gas powerplants,
regardless of their competitive status. This assumes that
all future applicants would sell their products into the
competitive market and would make the CEC exemption
determination a "no-brainer," thereby easing the burden on
applicants filing for exemptions. The rationale for
allowing a blanket exemption for natural gas powerplants is
that, in a competitive market, the NOI function of
identifying an acceptable site is the obligation of the
applicant, not the CEC.
The more substantive next step in the siting process is
consideration of the AFC, which is a CEQA-equivalent
project evaluation process. In approving an AFC, the CEC
must find that the facility's construction and operation is
consistent with a variety of environmental standards and
that the facility conforms with the CEC's integrated
assessment of need (IAN).
The IAN is determined through the development of the CEC's
Electricity Report, which is a comprehensive planning and
forecasting assessment addressing the supply and demand for
electricity. According to the CEC, in response to
restructuring, the most recent IAN stated that any proposed
project is found to be needed if the total number of
megawatts does not exceed a numerical cap that the CEC
determined could be needed to satisfy statewide peak demand
and maintain system reliability (6737 MW). Because this
cap is sufficiently high that it is not likely to be
exceeded, as a practical matter, the current IAN will have
no effect on individual facility certification.
This bill would eliminate the IAN and contingent siting
considerations. Again, the rationale is that, in a
competitive market, the determination of whether a facility
is needed is the obligation of the applicant, not the CEC.
Theoretically, market consequences will discourage
applicants from building facilities that aren't needed.
COMMENTS
1) Does the CEC still know best? This bill raises a
question about the continuing relevance of the CEC's
planning function as it relates to the IAN. Arguably,
statewide planning of generation resources has no place
in a competitive generation market. However, if the
planning function is dismantled, the justification for
the CEC's exclusive siting authority may be lessened as
well.
The construction of the CEC's siting function in the
Warren-Alquist Act strikes a balance between project
applicants' interest in certainty and the public's
interest in environmental protection and prudent
planning of generation resources. Part of the
justification for vesting exclusive siting authority in
the CEC, and allowing it to override local decisions,
was that the siting process was tied to a statewide
generation planning function. By eliminating that
planning function, this bill reopens the balancing act.
Absent the IAN, the CEC's evaluation of proposed projects
becomes an ordinary CEQA review. As such, some might
argue that the CEC no longer has the comprehensive
mechanism to justify its exclusive siting and override
authority.
2) What is the continuing value of CEC forecasts? CEC
forecasts have served as the basis for planning and
certification of facilities. Under this bill, the
forecasts would no longer serve this purpose. If a
primary reason for the forecasts is eliminated, should
the forecasts themselves be eliminated also?
3) Will there ever be another non-competitive gas plant?
Eliminating the NOI for all natural gas powerplants and
relying on competition to identify appropriate sites
assumes that all natural gas plants will be participants
in the competitive market. What if a municipal utility
proposes to construct a new natural gas powerplant?
Should it then be subject to the NOI requirement?
POSITIONS
Support:
California League of Food Processors
California Municipal Utilities Association
Independent Energy Producers
Oppose:
None reported to Committee.
Lawrence Lingbloom
SB 110 Analysis
Hearing Date: April 13, 1999