BILL ANALYSIS
SB 110
Page 1
Date of Hearing: July 12, 1999
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Howard Wayne, Chair
SB 110 (Peace) - As Amended: July 7, 1999
SENATE VOTE : 39-0 (not relevant to amended version)
SUBJECT : Energy conservation: power facility siting.
SUMMARY : Abolishes the California State Energy Conservation and
Development Commission (commonly referred to as the California
Energy Commission, or CEC) and creates the California Energy
Infrastructure and Oversight Commission (CEIOC). Amends the
CEC's powerplant siting process to eliminate the "integrated
assessment of need" requirement and to expand the exemption of
natural gas powerplants from the site evaluation process.
Requires the creation of a five-year statewide electricity
transmission plan.
EXISTING LAW :
1)Under the Warren-Alquist State Energy Resources Conservation
and Development Act (Pub. Res. Code sec. 25000 et seq.):
a) Requires the CEC to develop a comprehensive report,
called the Energy Report (ER), designed to identify
emerging trends related to energy supply, demand, and
conservation and public health and safety factors, and to
provide the basis for state energy policy and actions,
including, but not limited to, approval of sites for new
power generation facilities.
b) Grants the CEC exclusive authority to certify the siting
of 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."
c) Requires any applicant for a powerplant siting
certification to file a Notice of Intent (NOI) to apply for
certification. The NOI process primarily serves to
determine the suitability of the proposed site to
accommodate the facility and to determine the general
conformity of the proposed site with the standards of the
SB 110
Page 2
commission and assessments of the need for additional
power.
d) Requires the CEC to request the appropriate local,
regional, state, and federal agencies to make comments and
recommendations regarding the design, operation, and
location of the facilities designated in the NOI, in
relation to environmental quality, public health and
safety, and other factors on which they may have expertise.
e) Exempts certain projects from the NOI requirements,
including modifications to existing facilities,
demonstration projects, site-specific facilities like
geothermal powerplants, and natural gas powerplants that
result from competitive solicitation or negotiation.
f) Requires the CEC to conduct public hearings on the NOI
and to prepare and publicly release a summary and hearing
order on the NOI. The summary must include any comments
from agencies and any significant issues that were raised
in the public hearings. A final report must be
distributed, and a public hearing on the final report must
be held. A final decision on the NOI must be publicly
released based upon findings made during the review of the
NOI.
g) Requires any applicant to file an application for
certification of the proposed project following the
approval of the NOI. The CEC is required to issue a
written decision on the application within 18 months of the
filing of an application for certification, or within 12
months if the application is filed within one year of the
commission's approval of the NOI.
h) Creates the CEC and requires the Governor to appoint the
following members to the CEC: one member with a background
in the field of engineering or physical science with
knowledge of energy supply or conversion systems; one
member who is a licensed attorney with administrative law
experience; one member with background and experience in
the field of environmental protection or the study of
ecosystems; one member who is an economist with background
and experience in the field of natural resource management;
and one member from the public at large.
SB 110
Page 3
1)Under the California Environmental Quality Act (CEQA),
authorizes the Secretary of the Resources Agency to certify a
state agency's environmental regulatory program as the
functional equivalent of CEQA. The CEC has obtained such a
certification for its powerplant siting process.
1)Under legislation deregulating the electric utility industry
(AB 1890 (Brulte), Chapter 854, Statutes of 1996), directs the
creation of a new market structure featuring two state
chartered, nonprofit institutions, the Independent Systems
Operator (ISO) and the Public Exchange (PE). The ISO is
charged with centralized control of the statewide transmission
grid and ensuring the efficient use and reliable operation of
the transmission system. The PE is charged with providing an
efficient, competitive auction to meet electricity loads open
to all electricity providers. A five-member Energy Oversight
Board (EOB) is created to oversee the two new institutions.
THIS BILL:
1)Deletes the provisions that require the CEC's integrated
assessment of need to be used as a basis of planning and
approval of new power plant additions. Under existing law,
need assessments include a forecast of the level of statewide
and service area electrical energy demand for the forthcoming
5 and 12 year forecasts or assessment period, which, in the
judgment of the CEC, will reasonably balance the requirements
of state and service area growth and development, the
protection of public health and safety, the preservation of
environmental quality, the maintenance of a sound economy, and
the conservation of resources.
1)Makes various changes to the information required to be
provided in an application to the CEC for powerplant facility
certification.
1)Abolishes the CEC and creates the California Energy
Infrastructure and Oversight Commission (CEIOC) in its place.
1)Adds the following members to the CEIOC, in addition to the
members currently required: one member of the Assembly
appointed by the Speaker of the Assembly and one member of the
Senate. These new members are non-voting members. Further
requires the Governor to designate one of the other voting
members as a chairperson and one as a vice-chairperson.
SB 110
Page 4
Appoints the Secretary of the Resources Agency and the
President of the Public Utilities Commission as ex officio,
nonvoting members of the CEIOC, whose presence is not be
counted for a quorum or for vote requirements. Each voting
member of the CEIOC shall have one vote. Three affirmative
votes are required for the transaction of any business of the
commission.
1)Continues, from January 1, 2000 through December 31, 2000, the
appointment of any commissioner assigned to a siting case
until a new commissioner is appointed, for the purpose of
ensuring that no position is left vacant.
1)Specifies various rules regarding the powers of commissioners
and requires the CEIOC to adopt rules and regulations to carry
out this section in conformance with state law.
1)Reorganizes and rephrases the duties of the CEC to be
conducted under the CEIOC. New responsibilities will include
the design and administration of energy efficient projects
currently administered by the Public Utilities Commission
(PUC).
1)Places the Electricity Oversight Board (EOB), which oversees
the Independent System Operator (ISO) and the Power Exchange
(PE), within the CEIOC.
1)Mandates the creation of a five-year statewide electricity
transmission plan, to be prepared and annually updated by the
ISO.
1)States the intent of the Legislature to provide for the
evolution of the ISO and PE into regional organizations to
promote the development of regional electricity transmission
markets in the western states and to improve the access of
consumers served by the ISO and PE. States that the preferred
means by which that voluntary evolution should occur is
through the adoption of a regional compact or other comparable
agreements.
FISCAL EFFECT : Unknown due to recent amendments.
COMMENTS :
1)Background and Purpose of Eliminating the NOI Process
SB 110
Page 5
The Warren-Alquist Act established an exclusive process for
siting of thermal powerplants 50 megawatts and larger that was
intended to protect against overbuilding of powerplants and
provide comprehensive environmental review and predictable,
one-stop permitting of applications.
The first step in the siting process is the requirement that an
applicant file a Notice of Intent (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 enacted.
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. 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.
SB 110
Page 6
The second, more substantive, step in the siting process is
consideration of the application for certification (AFC). The
AFC process has been approved by the Secretary of Resources as a
functional-equivalent to CEQA. 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 to 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 are not needed.
2) Environmental Review of Siting Proposals
This bill eliminates the needs assessment requirement of the ER,
including the part of the ER that addresses preservation of
environmental quality and conservation of resources. Under
existing law, the ER is used as a basis for making the
determinations required in the NOI, which is also eliminated in
this bill.
Although the AFC, and not the NOI, has been approved as the
functional equivalent of CEQA, the information generated during
the NOI process is used as a basis for decisions made regarding
the AFC. The determination of functional equivalency was made
years ago, before significant exemptions to the NOI process were
enacted. If the environmental and public safety concerns are
not addressed in the NOI process, the concerns may not
SB 110
Page 7
necessarily be addressed in the AFC. It is unclear whether the
changes made to the power plant siting process in this bill
would result in the process no longer qualifying as a functional
equivalent of CEQA. The author's office has agreed to take an
amendment to address this issue.
1)Restructuring of the CEC
Some of the issues in this bill concerning the ISO, the EOB, and
PE are not within the jurisdiction of this committee.
Accordingly, the Assembly Utilities and Commerce Committee has
requested to hear this bill However, the environmental review
functions of the new CEIOC, and whether the EOB may take over
some of this responsibility are unclear. Also, the
responsibilities of the CPUC in environmental review may change.
Furthermore, the bill, in its current form has various
technical problems that need to be addressed. The author's
office has committed to working with involved parties to find a
solution to various organizational and technical problems.
1)Transmission Line Planning
This bill requires energy transmission line owners to develop
annually updated five-year statewide transmission plans for the
transmission systems they own and have committed to the ISO.
The bill specifies that the plans must provide cost-effective
solution to identified reliability problems, and must review
methods for reducing the cost of electricity for consumers. The
plans must be developed using grid planning criteria specified
by the ISO and must reflect anticipated load growth, congestion
mitigation, reliability requirements, and new generation and
transmission projects who future development is reasonably
assured.
It is not clear whether the EOB or the CEIOC will be reviewing
the plans, and it is unclear what type of environmental review
will be performed in association with the transmission planning.
The author's office has committed to working on this issue with
involved parties.
REGISTERED SUPPORT / OPPOSITION :
SB 110
Page 8
Support
American Federation of State, County and Municipal Employees,
AFL-CIO
Independent Energy Producers
Opposition
None on file
Analysis Prepared by : Maureen Rose / NAT. RES. / (916)
319-2092