BILL ANALYSIS
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THIRD READING
Bill No: SB 411
Author: Simitian (D) and Perata (D)
Amended: 04/18/07
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 5-3, 4/24/07
AYES: Kehoe, Padilla, Ridley-Thomas, Simitian, Wiggins
NOES: Dutton, Battin, Cox
NO VOTE RECORDED: Calderon
SENATE ENV. QUALITY COMMITTEE : 5-1, 4/26/07
AYES: Simitian, Florez, Kuehl, Lowenthal, Steinberg
NOES: Aanestad
NO VOTE RECORDED: Runner
SUBJECT : Renewable energy resources
SOURCE : Author
DIGEST : This bill requires retail sellers of electricity
to increase their purchases of renewable energy so that at
least 33 percent of the retail sales come from renewable
energy resources by 2020.
ANALYSIS : Current law requires investor-owned utilities
and other retail sellers of electricity to increase their
existing purchases of renewable energy by 1% of sales per
year such that 20 percent of their retail sales, as
measured by usage, are procured from eligible renewable
resources by 2010. This is known as the Renewable
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Portfolio Standard (RPS). If the cost of renewable
electricity exceeds specified thresholds then the purchase
mandate is waived.
Current law exempts municipal utilities from the state RPS
program and instead requires these utilities to implement
and enforce their own renewable energy purchase programs
that recognize the intent of the Legislature to encourage
increasing use of renewable energy sources.
This bill requires investor-owned utilities and energy
service providers to increase their purchases of renewable
energy such that at least 33 percent of retail sales are
procured from renewable energy resources by December 31,
2020. The bill states that this shall be in the
furtherance of achieving the greenhouse gas emissions
reductions required pursuant to the enactment of AB 32
(Nunez), Chapter 488, Statutes of 2006, the California
Global Warming Solution Act of 2006.
Background
In 2002 legislation was enacted to require investor-owned
utilities (e.g. PG&E, Southern California Edison, San Diego
Gas and Electric Company) and the private companies that
compete with the utilities to increase their annual
purchases of electricity from renewable resources by at
least one percent so that 20 percent of their sales would
come from renewable sources by 2017. Last year, SB 107
(Simitian), Chapter 464. Statutes of 2006, was enacted to
accelerate the 20 percent requirement to the end of 2010.
The legislation did not require renewable energy purchases
irrespective of cost. If the cost of renewable energy
exceeded the cost of non-renewable energy by more than $70
million in any one year, then the requirement for
additional renewable energy purchases was waived. To date
virtually all renewable energy purchases have been at
prices comparable to non-renewable energy.
Earlier this year the Senate Energy, Utilities and
Communications Committee heard from experts and industry
participants about California's progress at meeting the 20
percent requirement. The investor-owned utilities were at
very different percentages: PG&E --12.4 percent, Southern
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California Edison - 16.7 percent, SDG&E - 6.3 percent. All
expressed confidence that they would achieve the 20 percent
on or about 2010 though some concern was expressed by the
California Energy Commission.
There is widespread dissatisfaction with the mechanisms
used to achieve the 20 percent RPS standard. The biggest
concern is whether the mechanism for subsidizing the
purchase of renewable energy, known as the Supplement
Energy Payment (SEP), is working. Legislation to fix the
SEP, SB 1036 (Perata) is pending before the Senate Energy,
Utilities and Communications Committee.
In 2005 the Governor adopted greenhouse gas emissions goals
for California. One of those goals was to increase the
state's procurement of renewable resources from 20 percent
by 2010 to 33 percent by 2020. A study prepared for the
Public Utilities Commission in 2005 found that it was
economically and technologically feasible to achieve the 33
percent RPS standard, noting that there was a small
negative ratepayer impact from 2011-2020 which was more
than offset by ratepayer benefits from 2021-2030. However,
that analysis was subject to high variability because of
uncertain forecasts of volatile natural gas and renewable
energy prices.
NOTE: Please refer to the senate committee analyses - both
the Senate Energy, Utilities and Communications Committee
and the Senate Environmental Quality Committee analysis of
this bill contain detailed information about statistics
regarding climate change, the intended and unintended
effects of the 20 percent RPS standards, the types of
renewable resources, the use of marketable credits and
emissions trading, and California's groundbreaking measures
intended to reduce the environmental impact of energy use.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/3/07)
Southern California Edison
Union of Concerned Scientists
Clean Power Campaign
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OPPOSITION : (Verified 5/3/07)
California Chamber of Commerce
Pacific Gas and Electric Company
Sempra Energy
ARGUMENTS IN SUPPORT : The author's office explains the
purpose of this bill as follows:
"Global warming is a threat to our health, environment, and
economy. The passage of AB 32 requires greenhouse gas
emissions from all sectors, including the electricity
sector, to be reduced to 1990 levels or below to help
mitigate these threats.
"According to state energy agencies, California's
electricity sector produced about 108 million metric tons
of carbon dioxide in 2004, an increase of over 35 percent
over 1990 levels. The emissions from this sector are
increasing twice as fast as emissions from any other
sector, including transportation. Electricity generation
now accounts for 32 percent of California's gross carbon
dioxide emissions.
"In light of the state's ambitious carbon emissions
targets, it is important that the state make the
appropriate statutory changes to give energy agencies the
flexibility they need in order to meet those goals.
Current law 'caps' the amount of renewable energy that the
California Public Utilities Commission (PUC) may order
utilities to buy or build at 20 percent. This bill would
remove this cap and authorize a requirement of up to 33
percent."
It is also important to note that the legislative intent of
the Renewables Portfolio Standard [SB 1078 (Sher), Chapter
516, Statutes of 2002] includes not only emissions
reductions but also energy diversity, reliability and
economic development. This bill facilitates fulfillment of
that intent and will be complemented by SB 410 (Simitian
and Perata) along with SB 1036 which eliminates a number of
barriers to meeting the requirement."
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ARGUMENTS IN OPPOSITION : Opponents argue the bill adds a
new premature target for RPS without a plan for feasibility
and consideration of the significant challenges that have
yet to be resolved in order to achieve the existing
standard. They argue they cannot support a policy that
excludes 30 percent of the load serving entities such as
municipal utilities from adopting similar requirements.
They point out an analysis of the impacts on grid
reliability and costs should be conducted.
Opponents argue the bill impairs the sellers ability to
generate emission reduction credits and eliminates
opportunities for utilities to identify potentially less
costly means of meeting requirements. They feel the bill
should deal with RPS transmission barriers and should
encourage investments in supply and demand resources.
NC:cm 5/7/07 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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