SB 350
Page 1
Date of Hearing: July 6, 2015
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Anthony Rendon, Chair
SBPCA Bill Id:SB 350
Author:(De León) – As Introduced Ver:February 24, 2015
SENATE VOTE: 24-14
SUBJECT: Clean Energy and Pollution Reduction Act of 2015.
SUMMARY: This bill expands three related clean-energy goals to be achieved by 2030: (1) reduce petroleum use in motor vehicles by 50 percent; (2) double energy efficiency in existing buildings; and (3) generate 50 percent of total retail sales of electricity from specified renewable resources. Specifically, this bill:
1) Requires the California Air Resources Board (CARB) to adopt and implement motor vehicle emission standards to achieve a reduction in petroleum use in motor vehicles by 50% by January 1, 2030.
2) Requires the California Energy Commission (CEC) to evaluate the economic and environmental costs of transportation fuels and further reduce petroleum use in the transportation sector by 50% by January 1, 2030.
3) Requires, triennially beginning on or before January 1, 2017, the CEC to adopt and update the CEC's program to achieve greater energy savings in California's existing residential and nonresidential buildings toward achieving a doubling of the energy efficiency of buildings by January 1, 2030.
4) Increases the current Renewable Energy Portfolio Standard (RPS) from 33% by 2020 to 50% by 2030 with respect to the amount of renewable energy that retail electricity sellers and publicly owned utilities (POUs) must include in their electricity portfolios and specifies compliance milestones.
5) Amends existing law related to a municipal solid waste facility located in Stanislaus County.
6) Requires Community Choice Aggregators to participate in the RPS program subject to the same terms and conditions applicable to electrical corporations.
7) Replaces "electrical corporation" with the phrase "retail sellers" within the existing requirement for RPS plans to be submitted to the CPUC.
8) Makes revisions to the California Public Utilities Commission’s (CPUC) RPS penalty authority requiring the CPUC to adopt a schedule of penalties for electrical corporations and other retail sellers, specifies penalties for noncompliance cannot be collected in rates for electrical corporations, and specifies that penalties collected be deposited in the Electric Program Investment Charge Fund.
9) Specifies RPS compliance periods for retail sellers and POUs of 40% by 2024, 45% by 2027, and 50% by 2030, and retains existing 33% by 2020 requirement.
10) Revises cost limitation statute to retain a provision that the CPUC set the RPS cost limitation at a level that prevents disproportionate rate impacts and strikes that the CPUC not include indirect expenses, including imbalance energy charges, sale of excess energy, decreased generation from existing resources, transmission upgrades, or the costs associated with relicensing utility-owned hydroelectric facilities.
11) Strikes a requirement that the CPUC provide a report no later than January 1, 2016 that would assess whether electrical corporations can achieve a 33% RPS.
12) Strikes a requirement that the CPUC can propose a revised RPS cost limitation that takes effect no earlier than January 1, 2017.
13) Revises an existing exemption from product content category limits for an electrical corporation with 30,000 or fewer customer accounts or had l,000 or fewer customer accounts and was not connected to any transmission system or to the California Independent System Operator (CAISO). These electrical corporations must comply with the CEC accounting system. The revision states the conditions must continue in order to exercise this exemption.
14) Revises current statute authorizing CARB to assess penalties on POUs for noncompliance if the CEC makes a referral to the CARB and instead authorizes the CEC to assess penalties and to place funds collected from penalties into the Electric Program Investment Charge fund.
15) Specifies the CPUC and the CEC to further the meeting of the state's clean energy and pollution reduction objectives and shall:
a) Take into account the benefits of and promote the use of distributed generation, particularly in disadvantaged communities,
b) Allow for consideration of costs and benefits of grid integration,
c) Adopt rules, where feasible, for integrating renewable energy that minimize system power and fossil fuel purchases and increase the use of energy storage, demand response, and other low-emission or zero-technologies to protect system reliability, and
d) To the extent feasible, give priority to clean energy and pollution reduction technologies that create employment opportunities and increased investment in the state.
16) Requires the CPUC to direct electrical corporations to include a strategy for procuring a diverse portfolio of resources that provide reliability electricity supplies using zero carbon-emitting resources to the maximum extent reasonable, and allows capacity and resource adequacy costs of these resources to be allocated on a nonbypassable basis to:
a) Bundled service customers of the electrical corporation,
b) Customers that purchase electricity through a direct transaction with other providers, and
c) Customers of community choice aggregators.
EXISTING LAW:
1) Provides CARB with primary responsibility for control of mobile source air pollution, including adoption of rules for reducing vehicle emissions and the specification of vehicular fuel composition. (Health and Safety Code Section 39000, et seq., and Section 39500, et seq.)
2) Directs CARB to implement motor vehicle emission standards, in-use performance standards, and motor vehicle fuel specifications for the control of air contaminants and sources of air pollution that CARB finds to be necessary, cost effective, and technologically feasible, unless preempted by federal law. (Health and Safety Code Section 43013, et seq.)
3) Directs the CEC to continually assess energy consumption trends and to analyze the social, economic, and environmental consequences of these trends; carry out, energy conservation measures; and recommend to the Governor and the Legislature new and expanded energy conservation measures. (Public Resources Code Section 25200, et seq.)
4) Requires the CEC to develop and implement a comprehensive program to achieve greater energy savings in California’s existing residential and nonresidential building stock. (Public Resources Code Section 25943, et seq.)
5) Establishes the Electric Program Investment Charge Fund to fund projects that benefit electricity ratepayers and lead to technological advancement and breakthroughs to overcome the barriers that prevent the achievement of the state’s statutory energy goals. (Public Utilities Code Section 25710, et seq.)
6) Requires retail sellers of electricity – investor-owned utilities (IOU), community choice aggregators, energy service providers, and POUs - to increase purchases of renewable energy such that at least 33 percent of retail sales are procured from renewable energy resources by December 31, 2020. This is known as the RPS. The CPUC establishes the RPS for retail sellers and ensures they progress in achieving it, and levies penalties for failure. The governing board of each POU establishes its own RPS. The CEC may issue a notice of violation against a POU for failure to adequately progress in meeting RPS targets and refer the POU to the CARB, which may assess penalties against it. The RPS provides numerous cost containment provisions and exceptions to compliance obligations. (Public Utilities Code Section 99.11, et seq.)
7) Requires all renewable electricity products to meet the requirements of a "loading order" that mandates minimum and maximum quantities of three product categories (or "buckets"), which includes renewable resources directly connected to a California balancing authority or provided in real time without substitution from another energy source, energy not connected or delivered in real time yet still delivering electricity, and unbundled renewable energy credits (RECs). (Public Utilities Code Section 399.16.)
FISCAL EFFECT:
According to Senate Appropriations:
1) First year costs of $440,000 and $400,000 ongoing from various special funds to the CARB to create a petroleum use baseline and to implement necessary measures to reduce use.
2) Unknown cost pressures to current programs from various special funds to achieve a 50% petroleum reduction.
3) Annual costs of $7.24 million from the General Fund for the CEC for ongoing updates of its energy efficiency plans for existing buildings and to implement the plans.
4) Annual costs of $900,000 from the Energy Resources Program Account for the CEC for new responsibilities ensuring compliance with RPS standards by the POUs.
5) Annual costs of $2.3 million for five years to the Public Utilities Reimbursement Account for CPUC contract needs.
6) Annual costs of $471,000 for two years and $157,000 in the third year. the Public Utilities Reimbursement Account for CPUC proceedings to adjust existing RPS and Long Term Procurement Plan programs.
7) Ongoing staffing needs of $350,000 annually to the Public Utilities Reimbursement Account for CPUC staffing needs for ongoing enforcement of the higher RPS standards.
8) Unknown ratepayer costs to the General Fund and various special funds to the state as a ratepayer of electricity to the extent that electricity prices may be affected by increasing the RPS standard.
9) Unknown cost pressures to the Public Utilities Reimbursement Account and the Energy Resources Program Account to the CPUC and the CEC to review renewable integration needs and to consider grid integration in proceedings implementing RPS requirements.
COMMENTS:
1) Author's Statement: "SB 350 enacts policies that build on our economic growth by strengthening incentives for energy efficiency and clean energy technology. The Golden State Standards:
· 50% less petroleum use;
· 50% of electricity coming from renewable sources;
· and 50% better efficiency in our buildings.”
"These standards send a strong signal to California’s businesses and leave no doubt in the direction we’re heading in.”
"These policies will drive innovation here, bring investment here, bring jobs here, and bring revenue here."
2) Codifies the Governor's Goals: In the Governor's January 5, 2015 Inaugural Address, he stated the following with respect to reducing carbon pollution and limiting the emissions of heat-trapping gases to 431 million tons by 2020:
"Toward that end, I propose three ambitious goals to be accomplished within the next 15 years:
· Increase from one-third to 50 percent our electricity derived from renewable sources;
· Reduce today’s petroleum use in cars and trucks by up to 50 percent;
· Double the efficiency of existing buildings and make heating fuels cleaner.
I envision a wide range of initiatives: more distributed power, expanded rooftop solar, micro-grids, an energy imbalance market, battery storage, the full integration of information technology and electrical distribution and millions of electric and low-carbon vehicles. How we achieve these goals and at what pace will take great thought and imagination mixed with pragmatic caution. It will require enormous innovation, research and investment. And we will need active collaboration at every stage with our scientists, engineers, entrepreneurs, businesses and officials at all levels."
3) History of RPS: Established in 2002 under SB 1078 (Sher, Chapter 516, Statutes of 2002), California's RPS was accelerated in 2006 under SB 107 (Simitian, Chapter 464, Statutes of 2006) by requiring that 20% of electricity retail sales be served by renewable energy resources by 2010. Finally, SB X1-2 (Simitian, Chapter 1, Stadtutes of 2011) established a 33% by 2020 goal and was signed by Governor Brown in 2011.
4) RPS Product Compliance Categories (a.k.a. "Buckets): The RPS requires electricity from renewable resources be procured by retail electricity sellers. The RPS includes three renewable product categories that allow flexibility in meeting the RPS requirements:
a) Product Compliance Category 1: Products must be interconnected with a California balancing authority, have a first point of interconnection with distribution facilities used to serve end users within a balancing authority area, or are scheduled from the eligible renewable energy resource into a California balancing authority without substituting electricity from another source. Alternatively, the product can have an agreement to dynamically transfer electricity to a California balancing authority.
b) Product Compliance Category 2: A product that is a firmed and shaped eligible renewable energy resource providing incremental electricity and scheduled into a California balancing authority.
c) Product Compliance Category 3: Products, including "unbundled" RECs that do not qualify under Categories 1 or 2. An unbundled REC refers to the renewable energy attribute sold separately from the electricity generated by the renewable energy facility. Unbundled RECs can be bought and sold. Buyers are typically parties who are short on meeting their renewable energy goals or who would like to demonstrate a commitment to clean energy. Note that purchases of unbundled RECs do not include delivery of the electricity from the renewable resource. Statute also specifies that Category 3 products cannot be counted as excess procurement under the provision that allows banking of excess procurement for future compliance years.
Entities required to meet the RPS are limited in the amount of Category 2 and 3 procurement. This ensures that the RPS is driving procurement of actual delivered renewable generation. The proportions required for procurement under the current RPS for Category 1 increases over time until it reaches 75% of procurement beginning in January 2017. Category 3 drops to no more than 10% beginning in January 2017.
The RPS also requires that the REC can be counted only once and that the REC is registered so that ownership can be tracked for compliance purposes. REC certificates are created for each whole megawatt-hour generated. These certificates can be bought and sold.
5) RPS: Distributed Energy Resources: For the most part, the utility RPS procurement process has resulted in utility procurement of large scale renewable projects. This may be because of the economies of scale in negotiating contracts with the utilities (smaller projects may not have the revenue potential to offset the costs of contract development). The CPUC recognized the RPS presented barriers to smaller renewable projects and authorized a program called the "Renewable Auction Mechanism" to facilitate an increase in projects sized below 20 megawatts (MWs). In addition, the Legislature enacted a small generator feed in tariff for projects sized below 3 MWs. Many of these smaller projects are located in the Central Valley (Kern County) and sell power to retail sellers of electricity throughout the state.
Other programs, such as the California Solar Initiative, the Self-Generation Incentive Program, the Feed in Tariff for Small Renewable Generators, and the Combined Heat and Power Tariff have focused on increasing the use of distributed power, expanding the market for rooftop solar, microgrids, and battery storage located at or near a customer's site.