LEGISLATIVE SUBCOMMITTEE RECOMMENDATION: OPPOSE

SUMMARY OF BILL:

This bill would change the methodology used to calculate Renewables Portfolio Standard (RPS) procurement requirements for retail sellers and publicly owned electric utilities. Specifically, this bill would set RPS procurement requirements based on "net program retail sales," where "net program retail sales" equals total retail sales minus those retail sales where the load was met by hydroelectric generation facilities that are not eligible for the RPS program (i.e., in general, facilities greater than 30 megawatts in size).

SUMMARY OF SUPPORTING ARGUMENTS FOR RECOMMENDATION:

This bill would reduce the overall statewide level of new renewable capacity needed to meet the 33% by 2020 RPS goal. The 33% RPS goal is a key component of the state's efforts to meet the AB 32 greenhouse gas reduction goals. Reducing the overall renewable energy capacity will mean the state will need to achieve greenhouse gas reductions in other sectors.

Additionally, reducing the goals in this stage of the RPS program would cause market uncertainty regarding the long-term market signal (demand) for new renewable capacity in California and throughout the Western Electricity Coordinating Council (WECC).

In response to the state's long-standing objective to achieve a 33% RPS by 2020 (e.g., Energy Action Plan adopted by the CPUC and California Energy Commission) investor-owned utilities have made significant financial commitments on behalf of California ratepayers to achieve the 33% goal. The reduced RPS requirement caused by this bill could result in unnecessary procurement and transmission costs to ratepayers.

This bill would attribute additional value to hydroelectric generation facilities that are not eligible for the RPS program, which seems to conflict the RPS statute's exclusion of these resources from being RPS-eligible for the purpose of compliance with the state's RPS program.

Because this bill would reduce the overall statewide level of new renewable capacity needed to meet the 33% by 2020 RPS goal, it contravenes legislative objectives of the RPS including its effectiveness to reduce emissions of greenhouse gases associated with electrical generation. Additionally, a reduced RPS requirement would likely result in a reduction in total California jobs created by the RPS program.

This would also have an asymmetric effect on RPS-obligated load serving entities. This bill would benefit only a small subset of California load serving entities (LSEs), specifically those that contract with or own hydroelectric generation facilities that are not eligible for the RPS program. These LSEs are largely located in Northern California. The LSEs in Southern California do not procure as much hydroelectric generation and consequently would be required to procure a disproportionately larger share of renewable generation.

SUMMARY OF SUGGESTED AMENDMENTS:

None.

DIVISION ANALYSIS (Energy Division):

This bill would change the long-standing methodology used to calculate retail sellers' RPS procurement requirements to comply with the state's RPS program. Changing this fundamental aspect of the RPS program would reduce the overall capacity some LSEs must procure to meet RPS mandates. The change may cause market uncertainty regarding the long-term market signal (demand) for new renewable capacity in California and throughout the Western Electricity Coordinating Council (WECC).

This bill would reduce the overall RPS procurement requirement for retail sellers that contract with or own hydroelectric generation facilities that are not eligible for the RPS program (i.e., greater than 30 megawatts in size). As investor-owned utilities have been procuring for a 33% RPS in 2020 goal, the lower RPS procurement requirement from this bill may result in the investor-owned utilities contracting for well over 33% causing ratepayers to incur unnecessary costs. Over-procurement could result in stranded transmission assets also at a significant cost to California ratepayers.

Pacific Gas and Electric Company (PG&E) contracts with or owns approximately 4,300 megawatts of hydroelectric generation facilities that are not eligible for the RPS program. In 2010, PG&E received approximately 12,000,000 megawatt hours (MWh) of generation from these facilities (almost as much RPS-eligible generation that PG&E received in the same year). This bill would reduce PG&E's 2010 total retail sales of 77,485,000 MWh by approximately 16% which would result in PG&E having to procure less RPS-eligible generation to meet the RPS goals. Specifically, PG&E's RPS procurement requirement would be reduced by 2,400,000 MWh and 3,960,000 MWh to meet the state's 20% and 33% RPS goals, respectively (assuming no change in PG&E's total annual retail sales or annual generation from hydroelectric generation facilities that are not eligible for the RPS program). (Currently, each retail seller's RPS procurement percentage is calculated as annual RPS-eligible procurement divided by annual retail sales, in MWh. This bill would divide annual RPS-eligible procurement by total retail sales net of hydroelectric generation facilities that are not eligible for the RPS program, in MWh.)

In 2010, large-hydro generated almost 30,000,000 MWh statewide (including 12,000,000 from PG&E's facilities). Assuming a 25% capacity factor (intermittent solar/wind) and 90% capacity factor (baseload geothermal), 2,400,000 MWh of reduced demand represents approximately 1,100 MW and 300 MW of capacity to meet 20% RPS, or 1,800 MW and 500 MW for 33%. Thus, this bill could reduce statewide demand for new RPS project development to achieve 33% by 4,500 MW of intermittent solar/wind capacity or 1,250 MW of baseload geothermal capacity.

This bill would benefit only a small subset of California load serving entities, specifically those that contract with or own hydroelectric generation facilities that are not eligible for the RPS program. If the intent of this bill is to minimize the cost of complying with the RPS program the legislature should consider more equitable and effective methods to achieve this objective.

This bill would indirectly incentivize hydroelectric generation facilities that are not eligible for the RPS program, in contradiction to the RPS statute's clear prohibition on the use these resources for RPS compliance. (See Public Utilities Code Section 399.12(e))

The RPS program is an important policy mechanism to achieve the state's greenhouse gas (GHG) reduction goals under Assembly Bill 32 (Global Warming Solutions Act of 2006; Núñez, Chapter 488, Statutes of 2006).

PROGRAM BACKGROUND:

The RPS program, as set forth in Public Utilities Code Sections 399.11- 399.31, requires that California retail sellers and publically owned utilities increase the portion of retail sales that comes from RPS-eligible resources so that by 2020 and for each year thereafter 33% of California's retail electricity sales is supplied by RPS-eligible resources.

The RPS program was adopted in SB 1078 (Sher, Stats. 2002, ch. 516), and subsequently modified by SB 107 (Simitian, Stats. 2006, ch. 464), SB 1036 (Perata, Stats. 2007, ch. 685) and SB 2 (1X) (Simitian, Stats. 2011, ch. 1). The CPUC is statutorily responsible for 1) requiring each utility to submit an RPS Procurement Plan, 2) establishing a RPS cost limitation, 3) adopting a process that utilities must use to evaluate renewable energy projects proposed by independent power producers in response to the utilities' RPS solicitations, 4) adopting RPS compliance rules, 5) reviewing and approving or rejecting utilities' RPS contracts, and 6) reporting to the Legislature on various aspects of the RPS program.

The CPUC has adopted over 40 decisions to implement the RPS program and has approved approximately 200 RPS contracts for approximately 17,000 megawatts (2,500 megawatts of which have already begun delivering RPS eligible energy).

The CPUC and the California Energy Commission (CEC) would need to coordinate to implement this bill as the CEC has authority under the RPS statute to determine what resources and facilities are and are not RPS-eligible.

In May 2011, the CPUC initiated Rulemaking (R.) 11-05-005 to implement significant modifications made to the RPS program by SB 2 (1X) (Simitian, Stats. 2011, ch. 1). In December 2011, the CPUC established the methodology for retail sellers to calculate RPS procurement quantitative requirements (See D.11-12-020). If enacted, this bill would require modification D.11-12-020 and any resulting RPS compliance reporting resources.

Comprehensive RPS compliance reporting tools have been developed based on the long-standing law that RPS procurement requirements are based on "total" retail sales. If enacted, this bill would require modification to the RPS compliance reporting resources.

Federal information: The Federal Government pursuant to the Public Utility Regulatory Policy Act (PURPA) limits the total capacity size for hydroelectric generation facilities that may certify as Qualifying Facilities.

LEGISLATIVE HISTORY:

SB 297 (Cannella, Stats. 2011; status: died in the Senate Energy, Utilities and Communications Committee) would have allowed hydroelectric generation facilities of any size to qualify as an RPS-eligible resource, changing the long-standing law that only hydroelectric generation facilities less than 30 megawatts in size may contribute to the RPS. SB 297 would have increased the numerator portion of the RPS percentage calculation (i.e., RPS procurement in megawatt hours), where SB 971 would decrease the denominator; thus, the two bills would have a similar effect.

FISCAL IMPACT:

None.

STATUS:

SB 971 is pending hearing in the Senate Energy, Utilities and Communications Committee.

SUPPORT/OPPOSITION:

None on file.

STAFF CONTACTS:

Lynn Sadler, Director-OGA (916) 327-3277 ls1@cpuc.ca.gov

Nick Zanjani, Legislative Liaison-OGA (916) 327-3277 nkz@cpuc.ca.gov

BILL LANGUAGE:

BILL NUMBER: SB 971 INTRODUCED

BILL TEXT

INTRODUCED BY Senator Cannella

(Principal coauthor: Assembly Member Olsen)

(Coauthors: Senators Berryhill and La Malfa)

JANUARY 18, 2012

An act to amend Section 25740 of the Public Resources Code, and to

amend Sections 399.11, 399.12, 399.13, 399.14, 399.15, and 399.30 of

the Public Utilities Code, relating to energy.

LEGISLATIVE COUNSEL'S DIGEST

SB 971, as introduced, Cannella. Renewable energy resources.

Under existing law, the Public Utilities Commission (PUC) has

regulatory authority over public utilities, including electrical

corporations, as defined, while local publicly owned electric

utilities, as defined, are under the direction of their governing

board. The existing Renewables Portfolio Standard Program (RPS

program) requires a retail seller of electricity, as defined, and

local publicly owned electric utilities to purchase specified minimum

quantities of electricity products from eligible renewable energy

resources, as defined, for specified compliance periods. The

specified minimum quantities of electricity products are based upon a

percentage of the utility's total retail sales of electricity in

California.

This bill would revise the RPS program so that the specified

minimum quantities of electricity products required to be procured

are based upon a percentage of the utility's net program retail sales

of electricity in California. The bill would define "net program

retail sales" of electricity as being the total retail sales of

electricity by the retail seller or local publicly owned electric

utility within California, minus those retail sales where the load

was met by noneligible hydroelectric generation, as defined.

The Renewable Energy Resources Program states the intent of the

Legislature to increase the amount of electricity generated from

eligible renewable energy resources per year so that amount equals at

least 33% of total retail sales of electricity in California per

year by December 31, 2020.

This bill would state the intent of the Legislature to increase

the amount of electricity generated from eligible renewable energy

resources per year so that amount equals at least 33% of net program

retail sales of electricity in California per year by December 31,

2020.

Vote: majority. Appropriation: no. Fiscal committee: yes.

State-mandated local program: no.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 25740 of the Public Resources Code is amended

to read:

25740. It is the intent of the Legislature in establishing this

program, to increase the amount of electricity generated from

eligible renewable energy resources per year, so that it equals at

least 33 percent of total net program

retail sales of electricity in California per year by December 31,

2020. Net program retail sales are total retail sales of

electricity, minus those retail sales where the load was met by

noneligible hydroelectric generation.

SEC. 2. Section 399.11 of the Public Utilities Code is amended to

read:

399.11. The Legislature finds and declares all of the following:

(a) In order to attain a target of generating 20 percent of

total net program retail sales of

electricity in California from eligible renewable energy resources by

December 31, 2013, and 33 percent by December 31, 2020, it is the

intent of the Legislature that the commission and the Energy

Commission implement the California Renewables Portfolio Standard

Program described in this article.

(b) Achieving the renewables portfolio standard through the

procurement of various electricity products from eligible renewable

energy resources is intended to provide unique benefits to

California, including all of the following, each of which

independently justifies the program:

(1) Displacing fossil fuel consumption within the state.

(2) Adding new electrical generating facilities in the

transmission network within the Western Electricity Coordinating

Council service area.

(3) Reducing air pollution in the state.

(4) Meeting the state's climate change goals by reducing emissions

of greenhouse gases associated with electrical generation.

(5) Promoting stable retail rates for electric service.

(6) Meeting the state's need for a diversified and balanced energy

generation portfolio.

(7) Assistance with meeting the state's resource adequacy

requirements.

(8) Contributing to the safe and reliable operation of the

electrical grid, including providing predictable electrical supply,

voltage support, lower line losses, and congestion relief.

(9) Implementing the state's transmission and land use planning

activities related to development of eligible renewable energy

resources.

(c) The California Renewables Portfolio Standard Program is

intended to complement the Renewable Energy Resources Program

administered by the Energy Commission and established pursuant to

Chapter 8.6 (commencing with Section 25740) of Division 15 of the

Public Resources Code.

(d) New and modified electric transmission facilities may be

necessary to facilitate the state achieving its renewables portfolio

standard targets.

(e) (1) Supplying electricity to California end-use customers that

is generated by eligible renewable energy resources is necessary to

improve California's air quality and public health, and the

commission shall ensure rates are just and reasonable, and are not

significantly affected by the procurement requirements of this

article. This electricity may be generated anywhere in the

interconnected grid that includes many states, and areas of both

Canada and Mexico.

(2) This article requires generating resources located outside of

California, but are able to supply that electricity to California

end-use customers, to be treated identically to generating resources

located within the state, without discrimination.

(3) California electrical corporations have already executed, and

the commission has approved, power purchase agreements with eligible

renewable energy resources located outside of California that will

supply electricity to California end-use customers. These resources

will fully count toward meeting the renewables portfolio standard

procurement requirements. In addition, there are nearly 7,000

megawatts of additional proposed renewable energy resources located

outside of California that are awaiting interconnection approval from

the Independent System Operator. All of these resources, if

procured, will count as eligible renewable energy resources that

satisfy the portfolio content requirements of paragraph (1) of

subdivision (c) of Section 399.16.

SEC. 3. Section 399.12 of the Public Utilities Code is amended to

read:

399.12. For purposes of this article, the following terms have

the following meanings:

(a) "Conduit hydroelectric facility" means a facility for the

generation of electricity that uses only the hydroelectric potential

of an existing pipe, ditch, flume, siphon, tunnel, canal, or other

manmade conduit that is operated to distribute water for a beneficial

use.

(b) "Balancing authority" means the responsible entity that

integrates resource plans ahead of time, maintains load-interchange

generation balance within a balancing authority area, and supports

interconnection frequency in real time.

(c) "Balancing authority area" means the collection of generation,

transmission, and loads within the metered boundaries of the area

within which the balancing authority maintains the electrical

load-resource balance.

(d) "California balancing authority" is a balancing authority with

control over a balancing authority area primarily located in this

state and operating for retail sellers and local publicly owned

electric utilities subject to the requirements of this article and

includes the Independent System Operator (ISO) and a local publicly

owned electric utility operating a transmission grid that is not

under the operational control of the ISO. A California balancing

authority is responsible for the operation of the transmission grid

within its metered boundaries which may not be limited by the

political boundaries of the State of California.

(e) "Eligible renewable energy resource" means an electrical

generating facility that meets the definition of an a "renewable

electrical generation facility" in Section 25741 of the Public

Resources Code, subject to the following:

(1) (A) An existing small hydroelectric generation facility of 30

megawatts or less shall be eligible only if a retail seller or local

publicly owned electric utility procured the electricity from the

facility as of December 31, 2005. A small hydroelectric generation

unit with a nameplate capacity not exceeding 40 megawatts that is

operated as part of a water supply or conveyance system is an

eligible renewable energy resource if the retail seller or local

publicly owned electric utility procured the electricity from the

facility as of December 31, 2005. A new hydroelectric facility that

commences generation of electricity after December 31, 2005, is not

an eligible renewable energy resource if it will cause an adverse

impact on instream beneficial uses or cause a change in the volume or

timing of streamflow.

(B) Notwithstanding subparagraph (A), a conduit hydroelectric

facility of 30 megawatts or less that commenced operation before

January 1, 2006, is an eligible renewable energy resource. A conduit

hydroelectric facility of 30 megawatts or less that commences

operation after December 31, 2005, is an eligible renewable energy

resource so long as it does not cause an adverse impact on instream

beneficial uses or cause a change in the volume or timing of

streamflow.

(C) A facility approved by the governing board of a local publicly

owned electric utility prior to June 1, 2010, for procurement to

satisfy renewable energy procurement obligations adopted pursuant to

former Section 387, shall be certified as an eligible renewable

energy resource by the Energy Commission pursuant to this article, if

the facility is a "renewable electrical generation facility" as

defined in Section 25741 of the Public Resources Code.

(2) A facility engaged in the combustion of municipal solid waste

shall not be considered an eligible renewable energy resource unless

it is located in Stanislaus County and was operational prior to

September 26, 1996.

(f) "Net program retail sales" of electricity means the total

retail sales of electricity by the retail seller or local publicly

owned electric utility within California, minus those retail sales

where the load was met by noneligible hydroelectric generation. For

these purposes, "noneligible hydroelectric generation" means

electricity that is generated by a hydroelectric generation facility

that does not meet the requirements of this section or Section

399.12.5 to be an eligible renewable energy resource.

(f)

(g) "Procure" means to acquire through ownership or

contract.

(g)

(h) "Procurement entity" means any person or

corporation authorized by the commission to enter into contracts to

procure eligible renewable energy resources on behalf of customers of

a retail seller pursuant to subdivision (f) of Section 399.13.

(h)

(i) (1) "Renewable energy credit" means a certificate

of proof associated with the generation of electricity from an

eligible renewable energy resource, issued through the accounting

system established by the Energy Commission pursuant to Section

399.25, that one unit of electricity was generated and delivered by

an eligible renewable energy resource.

(2) "Renewable energy credit" includes all renewable and

environmental attributes associated with the production of

electricity from the eligible renewable energy resource, except for

an emissions reduction credit issued pursuant to Section 40709 of the

Health and Safety Code and any credits or payments associated with

the reduction of solid waste and treatment benefits created by the

utilization of biomass or biogas fuels.

(3) (A) An electricity generated by an eligible renewable energy

resource attributable to the use of nonrenewable fuels, beyond a de

minimis quantity used to generate electricity in the same process

through which the facility converts renewable fuel to electricity,

shall not result in the creation of a renewable energy credit. The

Energy Commission shall set the de minimis quantity of nonrenewable

fuels for each renewable energy technology at a level of no more than

2 percent of the total quantity of fuel used by the technology to

generate electricity. The Energy Commission may adjust the de minimis

quantity for an individual facility, up to a maximum of 5 percent,

if it finds that all of the following conditions are met:

(i) The facility demonstrates that the higher quantity of

nonrenewable fuel will lead to an increase in generation from the

eligible renewable energy facility that is significantly greater than

generation from the nonrenewable fuel alone.

(ii) The facility demonstrates that the higher quantity of

nonrenewable fuels will reduce the variability of its electrical

output in a manner that results in net environmental benefits to the

state.

(iii) The higher quantity of nonrenewable fuel is limited to

either natural gas or hydrogen derived by reformation of a fossil

fuel.

(B) Electricity generated by a small hydroelectric generation

facility shall not result in the creation of a renewable energy

credit unless the facility meets the requirements of subparagraph (A)

of paragraph (1) of subdivision (e).

(C) Electricity generated by a conduit hydroelectric generation

facility shall not result in the creation of a renewable energy

credit unless the facility meets the requirements of subparagraph (B)

of paragraph (1) of subdivision (e).

(D) Electricity generated by a facility engaged in the combustion

of municipal solid waste shall not result in the creation of a

renewable energy credit unless the facility meets the requirements of

paragraph (2) of subdivision (e).

(i)

(j) "Renewables portfolio standard" means the specified

percentage of electricity generated by eligible renewable energy

resources that a retail seller or a local publicly owned electric

utility is required to procure pursuant to this article.

(j)

(k) "Retail seller" means an entity engaged in the

retail sale of electricity to end-use customers located within the

state, including any of the following:

(1) An electrical corporation , as defined in Section 218

.

(2) A community choice aggregator. The commission shall institute

a rulemaking to determine the manner in which a community choice

aggregator will participate in the renewables portfolio standard

program subject to the same terms and conditions applicable to an

electrical corporation.

(3) An electric service provider , as defined in Section

218.3, for all sales of electricity to customers beginning

January 1, 2006. The commission shall institute a rulemaking to

determine the manner in which electric service providers will

participate in the renewables portfolio standard program. The

electric service provider shall be subject to the same terms and

conditions applicable to an electrical corporation pursuant to this

article. This paragraph does not impair a contract entered into

between an electric service provider and a retail customer prior to

the suspension of direct access by the commission pursuant to Section

80110 of the Water Code.

(4) "Retail seller" does not include any of the following:

(A) A corporation or person employing cogeneration technology or

producing electricity consistent with subdivision (b) of Section 218.

(B) The Department of Water Resources acting in its capacity

pursuant to Division 27 (commencing with Section 80000) of the Water

Code.

(C) A local publicly owned electric utility.

(k)

(l) "WECC" means the Western Electricity Coordinating

Council of the North American Electric Reliability Corporation, or a

successor to either corporation.

SEC. 4. Section 399.13 of the Public Utilities Code is amended to

read:

399.13. (a) (1) The commission shall direct each electrical

corporation to annually prepare a renewable energy procurement plan

that includes the matter in paragraph (5), to satisfy its obligations

under the renewables portfolio standard. To the extent feasible,

this procurement plan shall be proposed, reviewed, and adopted by the

commission as part of, and pursuant to, a general procurement plan

process. The commission shall require each electrical corporation to

review and update its renewable energy procurement plan as it

determines to be necessary.

(2) Every electrical corporation that owns electrical transmission

facilities shall annually prepare, as part of the Federal Energy

Regulatory Commission Order 890 process, and submit to the

commission, a report identifying any electrical transmission

facility, upgrade, or enhancement that is reasonably necessary to

achieve the renewables portfolio standard procurement requirements of

this article. Each report shall look forward at least five years

and, to ensure that adequate investments are made in a timely manner,

shall include a preliminary schedule when an application for a

certificate of public convenience and necessity will be made,

pursuant to Chapter 5 (commencing with Section 1001), for any

electrical transmission facility identified as being reasonably

necessary to achieve the renewable energy resources procurement

requirements of this article. Each electrical corporation that owns

electrical transmission facilities shall ensure that project-specific

interconnection studies are completed in a timely manner.

(3) The commission shall direct each retail seller to prepare and

submit an annual compliance report that includes all of the

following:

(A) The current status and progress made during the prior year

toward procurement of eligible renewable energy resources as a

percentage of net program retail sales, including, if

applicable, the status of any necessary siting and permitting

approvals from federal, state, and local agencies for those eligible

renewable energy resources procured by the retail seller, and the

current status of compliance with the portfolio content requirements

of subdivision (c) of Section 399.16, including procurement of

eligible renewable energy resources located outside the state and

within the WECC and unbundled renewable energy credits.

(B) If the retail seller is an electrical corporation, the current

status and progress made during the prior year toward construction

of, and upgrades to, transmission and distribution facilities and

other electrical system components it owns to interconnect eligible

renewable energy resources and to supply the electricity generated by

those resources to load, including the status of planning, siting,

and permitting transmission facilities by federal, state, and local

agencies.

(C) Recommendations to remove impediments to making progress

toward achieving the renewable energy resources procurement

requirements established pursuant to this article.

(4) The commission shall adopt, by rulemaking, all of the

following:

(A) A process that provides criteria for the rank ordering and

selection of least-cost and best-fit eligible renewable energy

resources to comply with the California Renewables Portfolio Standard

Program obligations on a total cost basis. This process shall take

into account all of the following:

(i) Estimates of indirect costs associated with needed

transmission investments and ongoing electrical corporation expenses

resulting from integrating and operating eligible renewable energy

resources.

(ii) The cost impact of procuring the eligible renewable energy

resources on the electrical corporation's electricity portfolio.

(iii) The viability of the project to construct and reliably

operate the eligible renewable energy resource, including the

developer's experience, the feasibility of the technology used to

generate electricity, and the risk that the facility will not be

built, or that construction will be delayed, with the result that

electricity will not be supplied as required by the contract.

(iv) Workforce recruitment, training, and retention efforts,

including the employment growth associated with the construction and

operation of eligible renewable energy resources and goals for

recruitment and training of women, minorities, and disabled veterans.

(B) Rules permitting retail sellers to accumulate, beginning

January 1, 2011, excess procurement in one compliance period to be

applied to any subsequent compliance period. The rules shall apply

equally to all retail sellers. In determining the quantity of excess

procurement for the applicable compliance period, the commission

shall deduct from actual procurement quantities, the total amount of

procurement associated with contracts of less than 10 years in

duration. In no event shall electricity products meeting the

portfolio content of paragraph (3) of subdivision (b) of Section

399.16 be counted as excess procurement.

(C) Standard terms and conditions to be used by all electrical

corporations in contracting for eligible renewable energy resources,

including performance requirements for renewable generators. A

contract for the purchase of electricity generated by an eligible

renewable energy resource, at a minimum, shall include the renewable

energy credits associated with all electricity generation specified

under the contract. The standard terms and conditions shall include

the requirement that, no later than six months after the commission's

approval of an electricity purchase agreement entered into pursuant

to this article, the following information about the agreement shall

be disclosed by the commission: party names, resource type, project

location, and project capacity.

(D) An appropriate minimum margin of procurement above the minimum

procurement level necessary to comply with the renewables portfolio

standard to mitigate the risk that renewable projects planned or

under contract are delayed or canceled. This paragraph does not

preclude an electrical corporation from voluntarily proposing a

margin of procurement above the appropriate minimum margin

established by the commission.

(5) Consistent with the goal of increasing California's reliance

on eligible renewable energy resources, the renewable energy

procurement plan submitted by an electrical corporation shall include

all of the following:

(A) An assessment of annual or multiyear portfolio supplies and

demand to determine the optimal mix of eligible renewable energy

resources with deliverability characteristics that may include

peaking, dispatchable, baseload, firm, and as-available capacity.

(B) Potential compliance delays related to the conditions

described in paragraph (4) of subdivision (b) of Section 399.15.

(C) A bid solicitation setting forth the need for eligible

renewable energy resources of each deliverability characteristic,

required online dates, and locational preferences, if any.

(D) A status update on the development schedule of all eligible

renewable energy resources currently under contract.

(E) Consideration of mechanisms for price adjustments associated

with the costs of key components for eligible renewable energy

resource projects with online dates more than 24 months after the

date of contract execution.

(F) An assessment of the risk that an eligible renewable energy

resource will not be built, or that construction will be delayed,

with the result that electricity will not be delivered as required by

the contract.

(6) In soliciting and procuring eligible renewable energy

resources, each electrical corporation shall offer contracts of no

less than 10 years duration, unless the commission approves of a

contract of shorter duration.

(7) In soliciting and procuring eligible renewable energy

resources for California-based projects, each electrical corporation

shall give preference to renewable energy projects that provide

environmental and economic benefits to communities afflicted with

poverty or high unemployment, or that suffer from high emission

levels of toxic air contaminants, criteria air pollutants, and

greenhouse gases.

(b) A retail seller may enter into a combination of long- and

short-term contracts for electricity and associated renewable energy

credits. The commission may authorize a retail seller to enter into a

contract of less than 10 years' duration with an eligible renewable

energy resource, if the commission has established, for each retail

seller, minimum quantities of eligible renewable energy resources to

be procured through contracts of at least 10 years' duration.

(c) The commission shall review and accept, modify, or reject each

electrical corporation's renewable energy resource procurement plan

prior to the commencement of renewable energy procurement pursuant to

this article by an electrical corporation.

(d) Unless previously preapproved by the commission, an electrical

corporation shall submit a contract for the generation of an

eligible renewable energy resource to the commission for review and

approval consistent with an approved renewable energy resource

procurement plan. If the commission determines that the bid prices

are elevated due to a lack of effective competition among the

bidders, the commission shall direct the electrical corporation to

renegotiate the contracts or conduct a new solicitation.

(e) If an electrical corporation fails to comply with a commission

order adopting a renewable energy resource procurement plan, the

commission shall exercise its authority pursuant to Section 2113 to

require compliance. The commission shall enforce comparable penalties

on any retail seller that is not an electrical corporation that

fails to meet the procurement targets established pursuant to Section

399.15.

(f) (1) The commission may authorize a procurement entity to enter

into contracts on behalf of customers of a retail seller for

electricity products from eligible renewable energy resources to

satisfy the retail seller's renewables portfolio standard procurement

requirements. The commission shall not require any person or

corporation to act as a procurement entity or require any party to

purchase eligible renewable energy resources from a procurement

entity.

(2) Subject to review and approval by the commission, the

procurement entity shall be permitted to recover reasonable

administrative and procurement costs through the retail rates of

end-use customers that are served by the procurement entity and are

directly benefiting from the procurement of eligible renewable energy

resources.

(g) Procurement and administrative costs associated with contracts

entered into by an electrical corporation for eligible renewable

energy resources pursuant to this article and approved by the

commission are reasonable and prudent and shall be recoverable in

rates.

(h) Construction, alteration, demolition, installation, and repair

work on an eligible renewable energy resource that receives

production incentives pursuant to Section 25742 of the Public

Resources Code, including work performed to qualify, receive, or

maintain production incentives, are "public works" for the purposes

of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2

of the Labor Code.

SEC. 5. Section 399.14 of the Public Utilities Code is amended to

read:

399.14. (a) (1) An electrical corporation, pursuant to Chapter 5

(commencing with Section 1001), and in order to meet its unmet

renewables portfolio standard procurement requirements, may apply to

the commission for approval to construct, own, and operate an

eligible renewable energy resource.

(2) If the proposed eligible renewable energy resource complies

with the requirements of subdivision (b), the commission shall

approve an application filed pursuant to paragraph (1), until the

commission has approved applications for eligible renewable energy

resources for the electrical corporation that, when constructed and

operating, will provide 8.25 percent of the electrical corporation's

anticipated net program retail sales by December 31, 2020,

and thereafter.

(3) The commission may approve additional applications for

eligible renewable energy resources once the commission has approved

sufficient applications for eligible renewable energy resources for

the electrical corporation that, when constructed and operating, will

provide 8.25 percent of the electrical corporation's anticipated

net program retail sales by December 31, 2020, and

thereafter.

(b) The commission shall not approve any application by an

electrical corporation pursuant to subdivision (a) unless both of the

following conditions are met:

(1) The eligible renewable energy resource utilizes a viable

technology at a reasonable cost.

(2) The eligible renewable energy resource provides comparable or

superior value to ratepayers when compared to then recent contracts

for generation provided by eligible renewable

energy resources.

(c) In approving any application by an electrical corporation for

approval to construct, own, and operate an eligible renewable energy

resource, the commission shall apply traditional cost-of-service

ratemaking. When applying traditional cost-of-service ratemaking, the

commission, in the certificate authorizing the new construction,

shall specify the maximum cost determined to be reasonable and

prudent for the construction of the facility and the cost of initial

operation of the facility. Upon a filing by the electrical

corporation, the commission may authorize an increase in the maximum

cost of construction if it determines that the cost has in fact

increased, that the cost increase is determined to be reasonable and

prudent, and that the present or future public convenience or

necessity require construction of the project at the increased cost.

SEC. 6. Section 399.15 of the Public Utilities Code is amended 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 products from 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. For any retail seller procuring at

least 14 percent of total retail sales from eligible

renewable energy resources in 2010, the deficits associated with any

previous renewables portfolio standard shall not be added to any

procurement requirement pursuant to this article.

(b) The commission shall implement renewables portfolio standard

procurement requirements only as follows:

(1) Each retail seller shall procure a minimum quantity of

eligible renewable energy resources for each of the following

compliance periods:

(A) January 1, 2011, to December 31, 2013, inclusive.

(B) January 1, 2014, to December 31, 2016, inclusive.

(C) January 1, 2017, to December 31, 2020, inclusive.

(2) (A) No later than January 1, 2012, the commission shall

establish the quantity of electricity products from eligible

renewable energy resources to be procured by the retail seller for

each compliance period. These quantities shall be established in the

same manner for all retail sellers and result in the same percentages

used to establish compliance period quantities for all retail

sellers.

(B) In establishing quantities for the compliance period from

January 1, 2011, to December 31, 2013, inclusive, the commission

shall require procurement for each retail seller equal to an average

of 20 percent of net program retail sales. For the

following compliance periods, the quantities shall reflect reasonable

progress in each of the intervening years sufficient to ensure that

the procurement of electricity products from eligible renewable

energy resources achieves 25 percent of net program retail

sales by December 31, 2016, and 33 percent of net program

retail sales by December 31, 2020. The commission shall require

retail sellers to procure not less than 33 percent of net

program retail sales of electricity products from eligible

renewable energy resources in all subsequent years.

(C) Retail sellers shall be obligated to procure no less than the

quantities associated with all intervening years by the end of each

compliance period. Retail sellers shall not be required to

demonstrate a specific quantity of procurement for any individual

intervening year.

(3) The commission shall not require the procurement of eligible

renewable energy resources in excess of the quantities identified in

paragraph (2). A retail seller may voluntarily increase its

procurement of eligible renewable energy resources beyond the

renewables portfolio standard procurement requirements.

(4) Only for purposes of establishing the renewables portfolio

standard procurement requirements of paragraph (1) and determining

the quantities pursuant to paragraph (2), the commission shall

include all electricity sold to retail customers by the Department of

Water Resources pursuant to Division 27 (commencing with Section

80000) of the Water Code in the calculation of total and net

program retail sales by an electrical corporation.

(5) The commission shall waive enforcement of this section if it

finds that the retail seller has demonstrated any of the following

conditions are beyond the control of the retail seller and will

prevent 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. 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, in a timely fashion,

reasonable measures under its control and consistent with its

obligations under local, state, and federal laws and regulations, to

develop and construct new transmission lines or upgrades to existing

lines intended to transmit electricity generated by eligible

renewable energy resources. In determining the reasonableness of a

retail seller's actions, the commission shall consider the retail

seller's expectations for full-cost recovery for these transmission

lines and upgrades.

(ii) Whether the retail seller has taken all reasonable

operational measures to maximize cost-effective deliveries of

electricity from eligible renewable energy resources in advance of

transmission availability.

(B) Permitting, interconnection, or other circumstances that delay

procured eligible renewable energy resource projects, or there is an

insufficient supply of eligible renewable energy resources available

to the retail seller. In making a finding that this condition

prevents timely compliance, the commission shall consider whether the

retail seller has done all of the following:

(i) Prudently managed portfolio risks, including relying on a

sufficient number of viable projects.

(ii) Sought to develop one of the following: its own eligible

renewable energy resources, transmission to interconnect to eligible

renewable energy resources, or energy storage used to integrate

eligible renewable energy resources. This clause shall not require an

electrical corporation to pursue development of eligible renewable

energy resources pursuant to Section 399.14.

(iii) 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.

(iv) Taken reasonable measures, under the control of the retail

seller, to procure cost-effective distributed generation and

allowable unbundled renewable energy credits.

(C) Unanticipated curtailment of eligible renewable energy

resources necessary to address the needs of a balancing authority.

(6) If the commission waives the compliance requirements of this

section, the commission shall establish additional reporting

requirements on the retail seller to demonstrate that all reasonable

actions under the control of the retail seller are taken in each of

the intervening years sufficient to satisfy future procurement

requirements.

(7) The commission shall not waive enforcement pursuant to this

section, unless the retail seller demonstrates that it has taken all

reasonable actions under its control, as set forth in paragraph (5),

to achieve full compliance.

(8) If a retail seller fails to procure sufficient eligible

renewable energy resources to comply with a procurement requirement

pursuant to paragraphs (1) and (2) and fails to obtain an order from

the commission waiving enforcement pursuant to paragraph (5), the

commission shall exercise its authority pursuant to Section 2113.

(9) Deficits associated with the compliance period shall not be

added to a future compliance period.

(c) The commission shall establish a limitation for each

electrical corporation on the procurement expenditures for all

eligible renewable energy resources used to comply with the

renewables portfolio standard. In establishing this limitation, the

commission shall rely on the following:

(1) The most recent renewable energy procurement plan.

(2) Procurement expenditures that approximate the expected cost of

building, owning, and operating eligible renewable energy resources.

(3) The potential that some planned resource additions may be

delayed or canceled.

(d) In developing the limitation pursuant to subdivision (c), the

commission shall ensure all of the following:

(1) The limitation is set at a level that prevents

disproportionate rate impacts.

(2) The costs of all procurement credited toward achieving the

renewables portfolio standard are counted towards the limitation.

(3) Procurement expenditures do not include any indirect expenses,

including imbalance energy charges, sale of excess energy, decreased

generation from existing resources, transmission upgrades, or the

costs associated with relicensing any utility-owned hydroelectric

facilities.

(e) (1) No later than January 1, 2016, the commission shall

prepare a report to the Legislature assessing whether each electrical

corporation can achieve a 33-percent renewables portfolio standard

by December 31, 2020, and maintain that level thereafter, within the

adopted cost limitations. If the commission determines that it is

necessary to change the limitation for procurement costs incurred by

any electrical corporation after that date, it may propose a revised

cap consistent with the criteria in subdivisions (c) and (d). The

proposed modifications shall take effect no earlier than January 1,

2017.

(2) Notwithstanding Section 10231.5 of the Government Code, the

requirement for submitting a report imposed under paragraph (1) is

inoperative on January 1, 2021.

(3) A report to be submitted pursuant to paragraph (1) shall be

submitted in compliance with Section 9795 of the Government Code.

(f) If the cost limitation for an electrical corporation is

insufficient to support the projected costs of meeting the renewables

portfolio standard procurement requirements, the electrical

corporation may refrain from entering into new contracts or

constructing facilities beyond the quantity that can be procured

within the limitation, unless eligible renewable energy resources can

be procured without exceeding a de minimis increase in rates,

consistent with the long-term procurement plan established for the

electrical corporation pursuant to Section 454.5.

(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

both 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) Notify the appropriate policy and fiscal committees of the

Legislature that the electrical corporation may exceed its cost

limitation, and include the reasons why the electrical corporation

may exceed its cost limitation.

(h) 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).

SEC. 7. Section 399.30 of the Public Utilities Code is amended to

read:

399.30. (a) In order to fulfill unmet long-term generation

resource needs, each local publicly owned electric utility shall

adopt and implement a renewable energy resources procurement plan

that requires the utility to procure a minimum quantity of

electricity products from eligible renewable energy resources,

including renewable energy credits, as a specified percentage of

total kilowatthours sold to the utility's retail end-use customers,

each compliance period, to achieve the targets of subdivision (c).

(b) The governing board shall implement procurement targets for a

local publicly owned electric utility that require the utility to

procure a minimum quantity of eligible renewable energy resources for

each of the following compliance periods:

(1) January 1, 2011, to December 31, 2013, inclusive.

(2) January 1, 2014, to December 31, 2016, inclusive.

(3) January 1, 2017, to December 31, 2020, inclusive.

(c) The governing board of a local publicly owned electric utility

shall ensure all of the following:

(1) The quantities of eligible renewable energy resources to be

procured for the compliance period from January 1, 2011, to December

31, 2013, inclusive, are equal to an average of 20 percent of

net program retail sales.

(2) The quantities of eligible renewable energy resources to be

procured for all other compliance periods reflect reasonable progress

in each of the intervening years sufficient to ensure that the

procurement of electricity products from eligible renewable energy

resources achieves 25 percent of net program retail sales

by December 31, 2016, and 33 percent of net program retail

sales by December 31, 2020. The local governing board shall require

the local publicly owned utilities to procure not less than 33

percent of net program retail sales of electricity

products from eligible renewable energy resources in all subsequent

years.

(3) A local publicly owned electric utility shall adopt

procurement requirements consistent with Section 399.16.

(d) The governing board of a local publicly owned electric utility

may adopt the following measures:

(1) Rules permitting the utility to apply excess procurement in

one compliance period to subsequent compliance periods in the same

manner as allowed for retail sellers pursuant to Section 399.13.

(2) Conditions that allow for delaying timely compliance

consistent with subdivision (b) of Section 399.15.

(3) Cost limitations for procurement expenditures consistent with

subdivision (c) of Section 399.15.

(e) The governing board of the local publicly owned electric

utility shall adopt a program for the enforcement of this article on

or before January 1, 2012. The program shall be adopted at a publicly

noticed meeting offering all interested parties an opportunity to

comment. Not less than 30 days' notice shall be given to the public

of any meeting held for purposes of adopting the program. Not less

than 10 days' notice shall be given to the public before any meeting

is held to make a substantive change to the program.

(f) (1) Each local publicly owned electric utility shall annually

post notice, in accordance with Chapter 9 (commencing with Section

54950) of Part 1 of Division 2 of Title 5 of the Government Code,

whenever its governing body will deliberate in public on its

renewable energy resources procurement plan.

(2) Contemporaneous with the posting of the notice of a public

meeting to consider the renewable energy resources procurement plan,

the local publicly owned electric utility shall notify the Energy

Commission of the date, time, and location of the meeting in order to

enable the Energy Commission to post the information on its Internet

Web site. This requirement is satisfied if the local publicly owned

electric utility provides the uniform resource locator (URL) that

links to this information.

(3) Upon distribution to its governing body of information related

to its renewable energy resources procurement status and future

plans, for its consideration at a noticed public meeting, the local

publicly owned electric utility shall make that information available

to the public and shall provide the Energy Commission with an

electronic copy of the documents for posting on the Energy Commission'

s Internet Web site. This requirement is satisfied if the local

publicly owned electric utility provides the uniform resource locator

(URL) that links to the documents or information regarding other

manners of access to the documents.

(g) A local publicly owned electric utility shall annually submit

to the Energy Commission documentation regarding eligible renewable

energy resources procurement contracts that it executed during the

prior year, as follows:

(1) A description of the eligible renewable energy resource,

including the duration of the contract or electricity purchase

agreement.

(2) A description and identification of the electrical generating

facility providing the eligible renewable energy resource under the

contract.

(3) An estimate of the percentage increase in the utility's

total net program retail sales of

electricity from eligible renewable energy resources that will result

from the contract.

(h) A public utility district that receives all of its electricity

pursuant to a preference right adopted and authorized by the United

States Congress pursuant to Section 4 of the Trinity River Division

Act of August 12, 1955 (Public Law 84-386) shall be in compliance

with the renewable energy procurement requirements of this article.

(i) For a local publicly owned electric utility that was in

existence on or before January 1, 2009, that provides retail electric

service to 15,000 or fewer customer accounts in California, and is

interconnected to a balancing authority located outside this state

but within the WECC, an eligible renewable energy resource includes a

facility that is located outside California that is connected to the

WECC transmission system, if all of the following conditions are

met:

(1) The electricity generated by the facility is procured by the

local publicly owned electric utility, is delivered to the balancing

authority area in which the local publicly owned electric utility is

located, and is not used to fulfill renewable energy procurement

requirements of other states.

(2) The local publicly owned electric utility participates in, and

complies with, the accounting system administered by the Energy

Commission pursuant to this article.

(3) The Energy Commission verifies that the electricity generated

by the facility is eligible to meet the renewables portfolio standard

procurement requirements.

(j) Notwithstanding subdivision (a), for a local publicly owned

electric utility that is a joint powers authority of districts

established pursuant to state law on or before January 1, 2005, that

furnish electric services other than to residential customers, and is

formed pursuant to the Irrigation District Law (Division 11

(commencing with Section 20500) of the Water Code), the percentage of

total kilowatthours sold to the district's retail end-use customers,

upon which the renewables portfolio standard procurement

requirements in subdivision (b) are calculated, shall be based on the

authority's average net program retail sales over the

previous seven years. If the authority has not furnished electric

service for seven years, then the calculation shall be based on

average net program retail sales over the number of

completed years during which the authority has provided electric

service.

(k) A local publicly owned electric utility in a city and county

that only receives greater than 67 percent of its electricity sources

from hydroelectric generation located within the state that it owns

and operates, and that does not meet the definition of a "renewable

electrical generation facility" pursuant to Section 25741 of the

Public Resources Code, shall be required to procure eligible

renewable energy resources, including renewable energy credits, to

meet only the electricity demands unsatisfied by its hydroelectric

generation in any given year, in order to satisfy its renewable

energy procurement requirements.

(l) Each local publicly owned electric utility shall report, on an

annual basis, to its customers and to the Energy Commission, all of

the following:

(1) Expenditures of public goods funds collected pursuant to

Section 385 for eligible renewable energy resource development.

Reports shall contain a description of programs, expenditures, and

expected or actual results.

(2) The resource mix used to serve its customers by energy source.

(3) The utility's status in implementing a renewables portfolio

standard pursuant to subdivision (a) and the utility's progress

toward attaining the standard following implementation.

(m) A local publicly owned electric utility shall retain

discretion over both of the following:

(1) The mix of eligible renewable energy resources procured by the

utility and those additional generation resources procured by the

utility for purposes of ensuring resource adequacy and reliability.

(2) The reasonable costs incurred by the utility for eligible

renewable energy resources owned by the utility.

(n) On or before July 1, 2011, the Energy Commission shall adopt

regulations specifying procedures for enforcement of this article.

The regulations shall include a public process under which the Energy

Commission may issue a notice of violation and correction against a

local publicly owned electric utility for failure to comply with this

article, and for referral of violations to the State Air Resources

Board for penalties pursuant to subdivision (o).

(o) (1) Upon a determination by the Energy Commission that a local

publicly owned electric utility has failed to comply with this

article, the Energy Commission shall refer the failure to comply with

this article to the State Air Resources Board, which may impose

penalties to enforce this article consistent with Part 6 (commencing

with Section 38580) of Division 25.5 of the Health and Safety Code.

Any penalties imposed shall be comparable to those adopted by the

commission for noncompliance by retail sellers.

(2) If Division 25.5 (commencing with Section 38500) of the Health

and Safety Code is suspended or repealed, the State Air Resources

Board may take action to enforce this article on local publicly owned

electric utilities consistent with Section 41513 of the Health and

Safety Code, and impose penalties on a local publicly owned electric

utility consistent with Article 3 (commencing with Section 42400) of

Chapter 4 of Part 4 of, and Chapter 1.5 (commencing with Section

43025) of Part 5 of, Division 26 of the Health and Safety Code.

(3) For the purpose of this subdivision, this section is an

emissions reduction measure pursuant to Section 38580 of the Health

and Safety Code.

(4) If the State Air Resources Board has imposed a penalty upon a

local publicly owned electric utility for the utility's failure to

comply with this article, the State Air Resources Board shall not

impose an additional penalty for the same infraction, or the same

failure to comply, with any renewables procurement requirement

imposed upon the utility pursuant to the California Global Warming

Solutions Act of 2006 (Division 25.5 (commencing with Section 38500)

of the Health and Safety Code).

(5) Any penalties collected by the State Air Resources Board

pursuant to this article shall be deposited in the Air Pollution

Control Fund and, upon appropriation by the Legislature, shall be

expended for reducing emissions of air pollution or greenhouse gases

within the same geographic area as the local publicly owned electric

utility.

(p) The commission has no authority or jurisdiction to enforce any

of the requirements of this article on a local publicly owned

electric utility.