BILL NUMBER: SB 62ENROLLED BILL TEXT PASSED THE SENATE SEPTEMBER 12, 2009 PASSED THE ASSEMBLY SEPTEMBER 12, 2009 AMENDED IN ASSEMBLY SEPTEMBER 12, 2009 AMENDED IN ASSEMBLY JUNE 24, 2009 INTRODUCED BY Senator Simitian JANUARY 20, 2009 An act to repeal and add Section 399.15 of the Public Utilities Code, relating to energy. LEGISLATIVE COUNSEL'S DIGEST SB 62, Simitian. Renewable energy resources. Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including electrical corporations, as defined. The Public Utilities Act imposes various duties and responsibilities on the PUC with respect to the purchase of electricity and requires the PUC to review and approve a renewable energy procurement plan for each electrical corporation pursuant to the California Renewables Portfolio Standard Program (RPS program). The RPS program requires that a retail seller of electricity, including electrical corporations, community choice aggregators, and electric service providers, purchase a specified minimum percentage of electricity generated by eligible renewable energy resources, as defined, in any given year as a specified percentage of total kilowatthours sold to retail end-use customers each calendar year. The RPS program requires the PUC to implement annual procurement targets for each retail seller to increase its total procurement of electricity generated by eligible renewable energy resources by at least an additional 1% of retail sales per year so that 20% of its retail sales of electricity are procured from eligible renewable energy resources no later than December 31, 2010. Existing law requires the PUC to make a determination of the existing market cost for electricity, which PUC decisions call the market price referent, and to limit an electrical corporation's obligation to procure electricity from eligible renewable energy resources, that exceeds the market price referent, by a specified amount. This bill would instead require the PUC to require that a retail seller procure the following percentages of electricity from eligible renewable energy resources by the following dates: (A) Until December 31, 2012, the same percentage as actually achieved by the retail seller during 2009; (B) 20% by December 31, 2013; (C) 25% by December 31, 2016; and (D) 33% by December 31, 2020. The bill would authorize the PUC to permit a retail seller to delay compliance with (B) or (C) procurement levels when specified circumstances are present, but would not authorize the PUC to permit a retail seller to delay compliance with the (D) procurement level. The bill would delete the existing market price referent provisions and instead require the PUC to establish a methodology to determine the market price of electricity for terms corresponding to the length of contracts with eligible renewable energy resources, in consideration of, and reflecting, certain matters. The bill would require the PUC to establish a limitation on the annual expenditures made above the market price, by an electrical corporation, in order to achieve the procurement levels established by the PUC. The bill would require the PUC to permit an electrical corporation to limit its procurement of electricity from eligible renewable energy resources to that quantity that can be procured at or below the market prices established by the PUC, up to the limitation. The bill would delete an existing requirement that the PUC adopt flexible rules for compliance for retail sellers. Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the PUC is a crime. Because the provisions of this bill are within the act and require action by the PUC to implement its requirements, a violation of these provisions would impose a state-mandated local program by expanding the definition of a crime. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 399.15 of the Public Utilities Code is repealed. SEC. 2. Section 399.15 is added to the Public Utilities Code, to read: 399.15. (a) In order to fulfill unmet long-term resource needs, the commission shall establish a renewables portfolio standard requiring all retail sellers to procure a minimum quantity of electricity generated by eligible renewable energy resources as a specified percentage of total kilowatthours sold to their retail end-use customers each compliance period to achieve the targets established under this article. (b) The commission shall implement renewables portfolio standard procurement requirements only as follows: (1) Each retail seller shall procure the following minimum percentages of eligible renewable energy resources in the following years, and continue to procure at least those percentages in subsequent years: (A) Until December 31, 2012, the same percentage as actually achieved by the retail seller during 2009. (B) Twenty percent by December 31, 2013. (C) Twenty-five percent by December 31, 2016. (D) Thirty-three percent by December 31, 2020. (2) A retail seller with 33 percent of its retail sales of electricity procured from eligible renewable energy resources in any year shall not be required to increase its procurement of renewable energy resources, except to the extent required to maintain a 33 percent renewables portfolio standard. A retail seller may voluntarily increase its procurement of eligible renewable energy resources beyond the renewables portfolio standard procurement requirements. (3) Only for purposes of establishing the renewables portfolio standard procurement requirements of paragraph (1), the commission shall include all electricity sold to retail customers by the Department of Water Resources pursuant to Section 80100 of the Water Code in the calculation of retail sales by an electrical corporation. (4) The commission may only allow a retail seller for a maximum of two years per request to delay compliance with a renewables portfolio standard procurement requirement established pursuant to subparagraph (B) or (C) of paragraph (1), if it finds that the retail seller has demonstrated that either of the following conditions will prevent timely compliance: (A) There is inadequate transmission capacity to allow for sufficient electricity to be delivered from proposed eligible renewable energy resource projects using the current operational protocols of the Independent System Operator (ISO). The commission shall consult with the ISO in making its findings relative to the existence of this condition. In making its findings relative to the existence of this condition with respect to a retail seller that owns transmission lines, the commission shall consider both of the following: (i) Whether the retail seller has undertaken all reasonable measures to develop and construct new transmission lines or upgrades to existing lines in a timely fashion. (ii) Whether the retail seller has taken all reasonable operational measures, as verified by the ISO, to maximize deliveries of electricity from eligible renewable energy resources in advance of transmission availability. (B) Unanticipated permitting, interconnection, or other delays for procured eligible renewable energy resource projects, or there is an insufficient supply of delivered electricity from eligible renewable energy resources available to the retail seller. In making this finding, the commission shall consider whether the retail seller has prudently managed portfolio risks, relied on sufficient viable projects, sought to develop its own eligible renewable energy resources, and procured an appropriate minimum margin of procurement above the minimum procurement level necessary to comply with the renewables portfolio standard to compensate for foreseeable delays or insufficient supply. (5) Prior to granting a delay pursuant to paragraph (4), the commission shall require a retail seller to demonstrate that it has presented evidence that it has made material progress in reducing its compliance deficit and has taken all reasonable measures consistent with this article to procure cost-effective distributed generation and renewable energy credits consistent with the restrictions in paragraph (6) of subdivision (a) of Section 399.21. (6) The commission may not approve any request to delay a compliance obligation for which it has already granted a delay unless a retail seller presents evidence that it has made material progress in reducing its compliance deficiency and has identified and taken all reasonable actions under its control to pursue additional options to comply with the delayed interim procurement obligation and remove impediments that are related to its delay. (7) The commission may not authorize any delay in achieving the 33 percent by December 31, 2020, renewables portfolio standard procurement requirement of subparagraph (D) of paragraph (1). (8) If a retail seller fails to procure sufficient eligible renewable energy resources to comply with a renewables portfolio standard procurement requirement and fails to obtain an order from the commission authorizing a compliance delay pursuant to paragraph (4), the commission shall exercise its authority pursuant to Section 2113. (c) The commission shall establish a methodology to determine the market price of electricity for terms corresponding to the length of contracts with eligible renewable energy resources, in consideration of the long-term ownership, operating, and fixed-price fuel costs associated with fixed-price electricity from new generating facilities. The methodology shall reflect all of the following: (1) The value of different products including baseload, peaking, and as-available electricity. (2) All current and anticipated environmental compliance costs, including mitigation of emissions of greenhouse gases and air pollution offsets associated with the operation of new generating facilities. (d) (1) The commission shall establish a limitation for each electrical corporation on the expenditures above the market costs determined in subdivision (c) for the procurement of all eligible renewable energy resources that are used to comply with the electrical corporation's renewables portfolio standard. The cost limitation shall equal 6 percent of the total bundled electric revenues recorded by the electrical corporation in 2008 multiplied by the number of years remaining until 2020. Total bundled electric revenues shall include revenues collected by the electrical corporation on behalf of the Department of Water Resources for procurement activities conducted pursuant to Division 27 (commencing with Section 80000) of the Water Code. (2) The calculation of the above-market costs shall include all procurement of eligible renewable energy resources that are used to comply with the electrical corporation's renewables portfolio standard that are submitted for approval to the commission after January 1, 2010. (3) The above-market costs of procurement do not include any indirect expenses, including imbalance energy charges, sale of excess energy, decreased generation from existing resources, or transmission upgrades. (4) Calculations of the above-market costs shall include, as a reduction to the total above-market costs, procurement from eligible renewable energy resources that are used to meet the renewables portfolio standard procurement requirements established pursuant to paragraph (1) of subdivision (b) that are below the market prices determined in subdivision (c) for each year. (5) In calculating the limit on above-market costs established in paragraph (1), the commission shall account for the potential that some procured resources may be delayed or canceled. (e) If the cost limitation for an electrical corporation is insufficient to support the projected net above-market costs identified in subdivision (d), the commission shall allow the electrical corporation to refrain from entering into new contracts or to construct facilities for that future year beyond the quantity of eligible renewable energy resources that can be procured at or below the market prices established in subdivision (c). (f) Notwithstanding subdivision (e), if an electrical corporation' s net annual above-market costs for a future year exceed the electrical corporation's cost limitation, the electrical corporation may voluntarily propose to procure eligible renewable energy resources at above-market prices. Any voluntary procurement under this paragraph shall be subject to commission approval prior to the expense being recovered in rates. (g) (1) The commission shall monitor the status of the cost limitation for each electrical corporation in order to ensure compliance with this article. (2) If the commission determines that an electrical corporation may exceed its cost limitation prior to achieving the renewables portfolio standard procurement requirements, the commission shall do all of the following within 60 days of making that determination: (A) Investigate and identify the reasons why the electrical corporation may exceed its annual cost limitation. (B) Identify those actions that can be taken to ensure that the electrical corporation continues to comply with its renewables portfolio standard procurement requirements. (C) Notify the appropriate policy and fiscal committees of the Legislature that the electrical corporation may exceed its cost limitation, the reasons why the electrical corporation may exceed its cost limitation, and those actions that may be taken by the electrical corporation to comply with the renewables portfolio standard procurement requirements. (3) The commission shall examine mechanisms for mitigating the potential impact of low fossil fuel prices on the cost limitation of each electrical corporation and make recommendations to the Legislature on any changes in law it identifies to mitigate those impacts. (h) The commission shall examine and adopt mechanisms to limit the potential influence of the market prices established in subdivision (c) on seller pricing and buyer contract selection. (i) The establishment of a renewables portfolio standard shall not constitute implementation by the commission of the federal Public Utility Regulatory Policies Act of 1978 (Public Law 95-617). (j) The commission shall consult with the Energy Commission in establishing renewables portfolio standard policies. SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution. SEC. 4. This bill shall only become operative if this bill, Assembly Bill 64, and Senate Bill 14 are all enacted and become effective on or before January 1, 2010.