BILL ANALYSIS                                                                                                                                                                                                              1
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                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                 ALEX PADILLA, CHAIR
          

          SB 14 -  Simitian, Kehoe, Padilla, Steinberg                 
          Hearing Date:  February 3, 2009           S
          As Amended: January 29, 2009       FISCAL           B
                                                                        
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                                      DESCRIPTION
           
          Renewable Energy
           Current law  requires investor-owned utilities (IOUs) and energy  
          service providers (ESPs) to increase their existing purchases of  
          renewable energy by 1% of sales per year such that 20% of their  
          retail sales, as measured by usage, are procured from eligible  
          renewable resources by December 31, 2010.  This is known as the  
          Renewable Portfolio Standard (RPS).  

           Current law  exempts publicly owned utilities (POUs) 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 resources.

           This bill  requires IOUs, POUs, and ESPs to increase their  
          purchases of renewable energy such that at least 33% of retail  
          sales are procured from renewable energy resources by December  
          31, 2020.  For IOUs and ESPs, this is required only if the CPUC  
          determines that achieving these targets will result in just and  
          reasonable rates.

           This bill  directs the CEC (for POUs) and the PUC (for IOUs) to  
          work with the California Air Resources Board (CARB) to establish  
          penalties for failure to comply with the RPS.

           This bill  requires POUs to annually report to the California  
          Energy Commission (CEC) and customers the resource mix, RPS  
          compliance status, ratepayer charges and expenditures to comply  
          with the RPS.  The CEC is required to consult with the CARB to  
          establish penalties for the failure of a POU to comply with the  
          RPS.












           Current law  requires the CPUC to develop, by rulemaking, a  
          procurement process for renewable resources by IOUs which  
          includes the determination of a benchmark for the market price  
          (market price referent or MPR) for energy against which  
          renewable contracts are evaluated for reasonableness in price.   
          If the costs of those contracts exceeds specified thresholds  
          then the IOU's RPS purchase mandate is waived (aka cost cap).

           This bill  eliminates the calculation and use of the MPR and the  
          cap on costs and instead directs the CPUC to continue its  
          prudency review of contracts and also consider the cost impact  
          of procuring renewable resources as part of the IOU procurement  
          process, the rate impacts, effects on system reliability and the  
          environment and economic benefits of renewable procurement.

           Current law  requires renewable resources to be generated in, or  
          delivered to, the California grid.

           This bill  clarifies that, for electricity to be considered  
          delivered to the state, the generation of the resource must be  
          simultaneous with the delivery to the California grid.

           Current law  requires an electrical corporation to file for and  
          obtain a certificate of public convenience and necessity (CPCN)  
          from the CPUC in order to construct a transmission line.

           This bill  requires the CPUC to approve a CPCN for a line that  
          will facilitate the transmission of renewable generation within  
          one year of the filing of a completed CPCN application as long  
          as the CPUC has not made specified findings including  
          substantial harm under the California Environmental Quality Act  
          or that the line is not reasonable and necessary for grid  
          reliability.

           Current law  creates the Independent System Operator (ISO) as a  
          nonprofit, public benefit corporation to ensure efficient use  
          and reliable operation of the California transmission grid.

           This bill  directs the ISO to adjust its market structure to meet  
          33% and, in an effort to mitigate the cost and aggregate amount  
          of new transmission, work with public and private operators and  
          builders of transmission, and pursue joint ownership of  
          transmission by IOUs, merchant operators, and POUs.











          This bill  directs the CEC to facilitate: the development of  
          annual statewide transmission plans with the ISO that  
          incorporate all planned and existing publicly and privately  
          owned transmission with the goal of minimizing the aggregate  
          amount and cost of new transmission; siting and approval of new  
          transmission that can be jointly owned, utilized and/or  
          operated; seams agreements between the ISO, POUs and IOUs that  
          optimize the available transfer capacity of all transmission  
          grid systems.

          Rate Issues
           Current law  freezes the rates for residential electric service  
          for usage up to 130% of baseline levels.
           
          This bill  replaces the rate freeze with a index based on an  
          inflation rate.  For residential low income customers, a  
          separate index is established based on increases to the CalWORKs  
          grant.

           Current regulation  recovers the cost of the electric and natural  
          gas low income rate assistance program from all customers,  
          including commercial and industrial customers, at a fixed rate  
          per kilowatt-hour or therm.  
           
          This bill  codifies current regulation.

           This bill  prohibits mandatory time-of-use rates for residential  
          customers.  Time-of-use rates may be offered to residential  
          customers on a voluntary basis until 2016 and on a default basis  
          after.
          



          Direct Access
           Current law  suspends the ability of electric retailers, other  
          than investor-owned utilities, to offer service until the  
          California Department of Water Resources ceases to provide  
          electricity to retail customers.
           
          This bill  authorizes those electric retailers to offer service  
          to new customer locations if they already provide service to  
          that customer.











          CPUC Reform
           Current law  establishes the offices of the California Public  
          Utilities Commission in San Francisco.
           
          This bill  requires the CPUC to meet at least once per month in  
          the City of Sacramento.

           Current law  provides that the Attorney and the Executive  
          Director of the CPUC are directed by the CPUC President.
           
          This bill  provides that the Attorney and the Executive Director  
          are directed by the commission.
           
          Current law  subjects CPUC Commissioners to confirmation by the  
          Senate.
           
          This bill  also requires that the President of the CPUC be  
          separately confirmed by the Senate.

                                      BACKGROUND
           
          Renewable Energy
          In 2002 legislation was enacted to require the IOUs (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 1% so that 20% of their sales would come  
          from renewable sources by 2017.  In 2006 legislation was enacted  
          to accelerate the 20% requirement to the end of 2010 (SB 107,  
          Simitian).  

          The RPS program does not require renewable energy purchases  
          irrespective of cost.  Each contract for the development and  
          purchase of renewable energy is submitted to the CPUC for  
          review.  Any contract below the market price is deemed per se  
          reasonable.  Any contract above the market price is submitted to  
          a procurement review group to consider the reasonableness of  
          costs.  To address the overall costs of the RPS, an above-market  
          cost cap was determined for each IOU.  If the IOUs costs reach  
          that cap in any given year, then the requirement for additional  
          renewable energy purchases at above-market costs is waived.  The  
          cost cap has not been triggered and the IOUs continue to pursue  
          renewable contracts to meet the 2010 goal.











          Since the initial adoption of the RPS program, the necessity of  
          bringing more renewable resources to the grid has been  
          heightened as a result of the mandate that the state reduce its  
          greenhouse gas (GHG) emissions to 1990 levels by 2020.  In fact  
          the CARB scoping plan adopts a statewide 33% by 2020 renewable  
          energy mix in order to achieve the GHG goals. 

           Progress toward 2010 goal  -- The CPUC reports that, for 2007,  
          the IOUs have achieved varying levels of progress toward the 20%  
          goal: PG&E - 11.4%; Southern California Edison - 15.7%; SDG&E -  
          5.2.  The numbers actually declined from 2006 due primarily to  
          load growth.  All agencies and stakeholders agree that the IOUs  
          will not meet the 2010 deadline.  However, the CPUC reported in  
          October, 2008 that an evaluation of the IOUs progress, including  
          generation developed and contracted for, would result in  
          compliance in or around 2013.

           How much to do we need  ? -- The CPUC also reported that 29,000  
          GWh (gigawatt hours) of renewable energy is in existence today.   
          An additional 31,000 GWh is necessary to reach the 20% RPS goal  
          for a total of 60,000 GWh.  To reach 33% an additional 41,000  
          GWh would be needed for a total of 101,000 GWh.  Is it  
          available?  Yes.  The Phase 1B Report of the Regional Energy  
          Transmission Initiative indicates that more than 208,000 GWh of  
          "cost-effective large scale" renewable resources are available  
          in concentrated areas (identified as Competitive Renewable  
          Energy Zones [CREZ]) within the State of California and  
          immediately adjacent areas in bordering states, thus identifying  
          resource areas to bring renewable resources far in excess of CA  
          needs.  

           Siting new Generation  -- It is important to recognize that the  
          scale of renewable development being pursued by California is  
          unprecedented.  It is more aggressive than any other state in  
          the union and perhaps the world.  To put this into context, the  
          committee is aware of only two significantly sized, concentrated  
          solar thermal energy sources in the country - Southern  
          California Edison's 640 MW SEGS units which came on line in the  
          late 1980s and the Nevada Solar One unit near Boulder City,  
          Nevada at 64 MW which came on line in 2007.  The CEC now has six  
          solar thermal projects in permitting totaling more than 2,500 MW  
          and impacting more than 21,000 acres of land.  The CEC is in  
          uncharted territory.  The staff demands, careful agency  










          coordination (e.g. State Department of Fish & Game, Federal  
          Bureau of Land Management, and Department of Defense), CEQA  
          implications and other planning challenges are only just now  
          coming to the fore.

           The RETI  -- The Renewable Energy Transmission Initiative (RETI)  
          is a statewide initiative to help identify the transmission  
          projects needed to accommodate these renewable energy goals,  
          support future energy policy, and facilitate transmission  
          corridor designation and transmission and generation siting and  
          permitting. RETI will be an open and transparent collaborative  
          process in which all interested parties are encouraged to  
          participate. 

          RETI has assessed all competitive renewable energy zones in  
          California and some in neighboring states that can provide  
          significant electricity to California consumers by the year  
          2020. RETI has also identified those zones that can be developed  
          in the most cost effective and environmentally benign manner and  
          will prepare detailed transmission plans for those zones  
          identified for development. 

          The RETI effort is supervised by a coordinating committee  
          comprised of California entities responsible for ensuring the  
          implementation of the state's renewable energy policies and  
          development of electric infrastructure, namely: 

                 California Public Utilities Commission
                 California Energy Commission
                 California Independent System Operator
                 Publicly-Owned Utilities (SCPPA, SMUD, and NCPA) 

           Transmission progress  -- Three new transmission lines have been  
          approved for California or are nearing approval - Tehachapi,  
          Sunrise, Devers-Palo Verde 2.  The CPUC's October 2008 RPS  
          status report indicates that two new transmission lines are  
          necessary to meet the 20% goal.  An additional five lines would  
          be needed to achieve 33% by 2020.

          Rate Issues
           130% of Baseline  -- One of the most public consequences of the  
          2000-01 energy crisis was skyrocketing energy prices.  In 2000  
          California consumers and industry paid $27 billion for energy,  











          more than triple the $7.4 billion they paid in 1999.<1>  Retail  
          electric rates for investor-owned utility customers increased  
          10% in January 2001 and another 30% in March.  

          In an effort to protect residential customers from the worst of  
          those increases, the Legislature approved a rate freeze for a  
          portion of residential usage equal to 130% of the baseline  
          quantity.  (The baseline quantity of electricity is established  
          by the CPUC and is intended to meet roughly 60% of the average  
          residential usage.  It varies by region and by season.)  The  
          effect was to keep electric rates affordable for those using  
          moderate amounts of electricity, primarily lower income  
          households, while increasing the bills of the largest  
          residential energy consumers.  This rate freeze will remain in  
          effect until the bonds which were sold to finance the energy  
          purchases are retired, probably after 2020.

          The investor-owned utilities have expressed concerns that the  
          rate freeze for usage up to 130% of baseline is causing rates  
          for residential usage greater than 130% of baseline to increase  
          beyond reasonable levels.  Below is a comparison of electric  
          rates for usage below 130% of baseline and for the highest cost  
          tier of residential usage:

                cents per kwh            PG&E      SCE<2> SDG&E
                Lowest cost tier         12        12        13
               Highest cost tier        41        30   24 

          The residential rate provisions in this bill replace the freeze  
          with an index based on inflation, with a minimum increase of 3%  
          and a maximum increase of 5%.  After January 1, 2019 this index  
          is repealed and rates may be set by the CPUC without  
          restriction.  

          Low income customers can participate in a rate discount program  
          known as CARE (California Alternative Rates for Energy).   
          Customers whose household income is less than 200% of the  
          federal poverty level (e.g. $43,200 for a family of 4) get a 20%  
          ---------------------------
          <1> Attorney General's Energy White Paper: A Law Enforcement  
          Perspective on the California Energy Crisis, by Attorney General  
          Bill Lockyer.  April 2004, p. 18.
          <2> SCE has a 20% revenue increase pending before the CPUC, so  
          the highest cost tier will increase.  A decision is expected in  
          February.









          discount on their electric bill.  The cost of the CARE program  
          is recovered through a surcharge on all non-CARE electric rates.  
           Under this bill the CPUC may increase the rates for usage up to  
          130% of baseline for CARE customers by the rate of increase for  
          CalWORKs grants.  (CalWORKs is the state version of the federal  
          Temporary Aid for Needy Families program which provides aid for  
          low income families with children.  CalWORKs grants have not  
          increased over the past decade.)  

           CARE Cost Allocation  -- The cost of the CARE program is  
          currently recovered from all non-CARE customers through a  
          surcharge.  Some parties are attempting to revise the formula  
          for assessing the surcharge to increase the amount of costs  
          recovered from smaller customers.  A CPUC Administrative Law  
          Judge (ALJ) has issued a decision which declines to revise the  
          formula.  That decision is pending before the CPUC.<3>  The cost  
          allocation in this bill represents current practice and is  
          consistent with the ALJ decision.

          Direct Access
          Another aspect of California's response to the 2000-01 energy  
          crisis was to suspend the authority of electric retailers and  
          marketers to sell to retail customers.  Certain electric  
          retailers manipulated the electricity market, driving up prices  
          and causing widespread electricity shortages and rolling  
          blackouts.<4>  By suspending the authority of those electric  
          retailers to acquire new customers, California created a more  
          stable marketplace, which was a prerequisite for the state to  
          contract for and finance adequate electric supplies.  The  
          suspension of direct access is lifted when the state, through  
          the California Department of Water Resources, is no longer  
          providing electricity to California electric customers.  These  
          contracts expire toward the end of the next decade, though the  
          CPUC, over the objection of the Senate leadership, has commenced  
          an effort to end or transfer those contracts much earlier.

          CPUC Reform
          There have been concerns raised about the CPUC's lack of  
          ---------------------------
          <3> A.07-12-006.
          <4> A reminder of the avariciousness of some of these retailers  
          is The Rolling Blackout Theme Song, a sophomoric ditty hailing  
          blackouts as creating great wealth opportunities for electricity  
          sellers, unearthed during the investigation into wrongdoing by  
          Enron.









          responsiveness to the Legislature and, at times, the lack of  
          collegiality among commissioners.  A number of bills have been  
          introduced to rectify these concerns though none have been  
          enacted.  The CPUC reform provisions in this bill, as well as  
          other provisions not in this bill, were contained in AB 1973  
          (Ruskin), which passed the Senate last year as an urgency  
          measure but was held in the Assembly.

                                       COMMENTS
           
          Renewable Energy
           1.Ratepayer Protections  -- The goal of the RPS procurement  
            process is to ensure that program rules maximize competitive  
            market forces in order to promote long-term reduction of  
            renewable costs and to keep prices paid to producers in line  
            with their actual costs.  How to achieve that goal is the  
            subject of great debate.  One end of the spectrum argues that  
            the current use of the MPR to establish a benchmark price for  
            renewable resources, coupled with an overall cost cap,  
            provides cost certainty and transparency.  TURN opines that  
            "mandating a hard target for renewable energy purchases  
            inherently creates the ability for a seller to drive up prices  
            if there is insufficient renewable power supply to meet the  
            requirements of all buyers."

            The other end argues that renewable resource procurement  
            should be no different than procurement for any other type of  
            electricity; any attempt to set any price whether as a  
            benchmark, a floor, a cap, or in between, will act to deter  
            price competition between renewable resource developers and  
            act as a price-driver.  Consequently, the procurement process  
            should set no benchmark prices, cost cap, or any other hard  
            number and rely on the CPUC to reject proposed contracts that  
            it considers excessively expensive and not viable which is  
            similar to the procurement process for fossil-fueled  
            generation (e.g. natural gas fired plants).

            This bill leans toward the latter approach by eliminating  
            prescriptive elements of the RPS procurement process, removing  
            all price signals and hard cost caps, and providing more  
            flexibility to the CPUC to evaluate costs in the context of an  
            IOU's entire portfolio.

            It is critical to note that no person or entity has been able  










            to quantify the costs of complying with the RPS mandate at  
            20%, 33% or any other level.  Of course no one can accurately  
            predict the price of natural gas into the future either.   
            Natural gas is the main source for electricity at 45.2% of the  
            total system power.

            The author has expressed his intent to continue to work with  
            the parties to find the right balance between market forces  
            and ratepayer impacts.

           2.Impact of the Global Warming Solutions Act (AB 32)  -- The  
            adoption of a 33% mandate as a component of the CARB scoping  
            plan significantly alters the goals of the RPS program and  
            should be considered in evaluating the procurement process and  
            costs.  When the RPS goal was originally adopted the benefits  
            of renewable resources were localized - reduced emissions,  
            green jobs, energy independence.  The RPS is now a key  
            strategy to reduce GHG emissions.  Returning to the issue of a  
            cost cap - can and should the RPS program be suspended if a  
            hard cost cap is reached or the CPUC determines that costs are  
            unreasonable?  Currently RPS costs are measured against the  
            costs of natural gas.  Is this the correct measure?  If a cost  
            cap is reached, can we afford to put our GHG reduction goals  
            at risk by suspending RPS compliance?  Should RPS costs be  
            measured against the costs of other GHG reduction measures?

           3.Publicly Owned Utilities  -- For the first time this bill would  
            mandate that POUs meet a firm RPS goal of 33%.  The committee  
            has received no opposition to the goal of 33% for the POUs.   
            Those groups have however expressed concern about enforcement  
            of the mandate and the possibility that state authorities  
            would be permitted to control procurement policies and costs.   
            Adding to the debate, the IOUs firmly argue that the mandate  
            and its enforcement should apply equally to all load serving  
            entities.  This bill addresses that issue by directing the CEC  
            (for the POUs) and the PUC (for the IOUs) to develop  
            compliance penalties for all entities under the CARBs existing  
            AB 32 enforcement authority.  The bill also attempts to  
            address a concern by the POUs that a state regulating entity  
            would extend its reach into the elements of a POUs procurement  
            plan.  The bill may go too far and open the door for a POU to  
            make determinations that it cannot comply with the RPS that  
            would supersede the CEC/CARB enforcement authority.  The  
            author has expressed his intent to continue to work with the  










            parties to find the right balance between local and state  
            control.

           4.Renewable Energy Credit and Deliverabilty  -- A Renewable  
            Energy Credit (REC) generally represents the environmental and  
            renewable attributes of renewable electricity as a separate  
            commodity from the energy itself. In concept and under current  
            law, a REC can be sold either "bundled" with the underlying  
            energy or "unbundled" into a separate REC trading market.  In  
            general, RECs can be traded in voluntary markets or compliance  
            markets.  In the voluntary market, any company (e.g. a grocery  
            store chain) that wishes to claim that it is powered by clean  
            energy may buy non-renewable power from its local energy  
            provider and also buy an equivalent amount of RECs that have  
                                              been "unbundled" from renewable energy produced elsewhere.  In  
            some RPS compliance markets, the load serving entities can use  
            unbundled RECs, rather than actual renewable energy, to comply  
            with their RPS goals. In either case, once the RECs are  
            unbundled from the energy, the energy is considered  
            non-renewable power.

            In the Western region of the U.S., RECs (both voluntary and  
            compliance) are tracked using the Western Renewable Energy  
            Generation Information System (WREGIS) as called for under  
            current law. WREGIS was launched in mid-2007. 

            This author, who also authored the legislation permitting the  
            trading of RECs, states that the intent was to only allow the  
            trading of RECs - bundled or unbundled - within the state.   
            However, an attenuated interpretation of the definition of  
            "delivered" under current law by the CEC, has resulted in  
            contracts for renewable generation from as far away as  
            Montana.  Generation that can never be physically delivered to  
            the California grid because of its remote location and the  
            fact that the ISO has no ability to monitor, control or  
            schedule the generation.  The consequence is that the  
            renewable resource would be generated out of state at one time  
            and sold to a third party, not delivered to California and  
            might be referred to as a bait and switch.  The third party  
            would later deliver "system power" to the California grid when  
            scheduled by the IOU and ISO.  As TURN notes "since a  
            significant amount of firm imports into California are from  
            coal plants, it is now likely that utilities and load serving  
            entities will be getting RPS credit for importing coal power."  










             Coal contracts of greater than five years duration are  
            prohibited under state law.  System power contracts are not  
            prohibited.   

            Additionally, a pending rulemaking by the CPUC couples the  
            CECs attenuated definition of "delivery" with the REC  
            authority resulting in a pending decision to permit the  
            trading of unlimited RECs to achieve RPS compliance from  
            anywhere in the Western Electric Coordinating Council (WECC).   
            (The WECC works with regional transmission operators to ensure  
            the reliability and market efficiencies of the bulk power  
            system in 14 western states, Alberta and British Columbia.  It  
            does not schedule or control power on California's  
            transmission lines.)

            The author has clarified the definition of "delivered" and  
            "delivery" so that any renewable resource generated out of  
            state would be required to be simultaneously delivered to the  
            California grid.  The result would effectively eliminate  
            contracts for renewable resources in remote out of state  
            locations to be used for RPS compliance.  Existing contracts  
            would not be affected; it would only be ineligible for  
            California RPS compliance.  The author is not resistant to  
            permitting the use of some amount of "unbundled" out of state  
            RECs for compliance with the RPS but the "bundling" of the  
            RECs with out of state, nonrenewable generation is  
            inconsistent with California's broader environmental goals.   
            He further notes that, although the development of out of  
            state renewable resources with California ratepayer funds does  
            address the state's goal of reducing GHG emissions, it does  
            not support he state's goals of reducing in-state emissions  
            from fossil-fueled plants or the development of green jobs.

            The author has expressed his intent to continue to work with  
            the parties to find the right balance between California's  
            environmental and workforce goals and to permit the use of  
            some quantity of unbundled RECs.

           5.Flexible Compliance  -- The CPUC is required to adopt, by  
            rulemaking, flexible rules for compliance with the RPS  
            including rules permitting the application of excess  
            procurement from one year to subsequent years, or makeup  
            inadequate procurement in one year within no more than the  
            following three years. The CPUC is also required to ensure  










            that the rules address situations of insufficient  
            transmission.  This bill proposes to eliminate what has become  
            more commonly known as the "transmission offramp" from the  
            flexible compliance rules.  The author's intent is to again  
            reduce the prescriptive elements of the RPS program. 

            The IOUs argue that they need the specific assurance that lack  
            of transmission will be an excuse for failure to comply with  
            the RPS goals.  They note that the CPUC has reported that the  
            lack of transmission is the single largest barrier to bringing  
            more renewable resources online and that it should therefore  
            be acknowledged and not ignored in the meeting the RPS.

           6.Utility-Owned Generation  -- The increasingly widespread  
            interest in renewable energy has created a sellers market.   
            This creates the incentive for more renewable energy projects,  
            but it can also result in unduly high costs for renewable  
            energy as the suppliers exercise their market power.  One  
            mechanism for mitigating that market power, and additionally  
            ensuring that in-state renewable energy projects are built, is  
            to authorize or encourage the investor-owned utilities to own  
            their own renewable energy generation projects.  Utility-owned  
            projects can be less expensive for customers because the power  
            is priced at the utility's cost, rather than what is likely to  
            be a far higher market price.  Moreover, utilities still have  
            excellent access to capital, and their cost of capital is  
            commensurately low.  However, care would need to be exercised  
            to ensure that the utility doesn't favor a project it owns  
            over a competing project that is better for utility customers.  


           7.What Counts  ? -- Current law specifies the fuels and generating  
            technologies that are eligible under the RPS.  The most common  
            renewable resources being contracted for are solar, wind,  
            geothermal, biomass, biogas and small hydroelectric (less than  
            30 MW).  Several groups have called for an expansion of the  
            limit on small hydro from 30 MW to 50 MW and to also grant the  
            CEC the broad authority to add new technologies to the program  
            as they come to market.  

            It generally takes a great deal of time to move a technology  
            from the research and development phase to commercial  
            viability.  Consequently, it is not clear that there wouldn't  
            be sufficient time for the Legislature to respond and expand  










            the list of eligible resources.  Additionally, the Legislature  
            may be best positioned to consider new technologies in the  
            broader context of the state's environmental goals.  An  
            example would be the burning of landfill waste to create  
            energy which is generally precluded under current law.  The  
            policy has significant implications for the state's waste  
            management policies and its goals to "reduce, reuse, recycle."  
             This is not a policy or law under the purview of the CEC  
            which has as its primary focus energy.  

            The municipal utilities and PG&E argue that the 30 MW cap on  
            small hydroelectric should be expanded to 50 MW which would  
            allow the capture and development of additional non-GHG  
            emitting resources at a minimum of environmental disruption.   
            The California Hydropower Reform Coalition strongly opposes  
            this change because it would result in "increased dams to  
            impound and divert water to off-river bypass reaches, some of  
            which are miles long." 

            The author has expressed his intent to continue to work with  
            the parties to achieve the appropriate balance of technologies  
            in the program to ensure compliance with the RPS.
           
          8.Effective Date  -- Current law requires that compliance with  
            the 20% RPS goal be achieved by December 31, 2010.  This bill  
            continues that goal but makes several program changes,  
            particularly impacting procurement policies, which would  
            become effective on January 1, 2010.  Although some changes  
            could take effect immediately there may be the need to clarify  
            how and when other program changes would take affect and how  
            they would apply to the 33% goal.

           9.Unmet Need  -- Current law requires the IOUs to procure  
            renewable resources "in order to fulfill unmet long-term  
            resource needs."  This language does not appear in this bill.   
              Its inclusion would ensure that an IOU is not obligated to  
            procure renewable resources beyond its retail electricity  
            needs.  The author may wish to consider reinstating this  
            provision to Public Utility Code Sections 399.15 (a) and  
            454.15 (b)(9)(A).

           10.                                Above and Beyond 33%  -- Some  
            municipal utilities have reported that their current portfolio  
            takes them far beyond the 33% mandate.  They are concerned  










            that the law could be read to preclude them from going beyond  
            the 33% mandate.  The author may wish to clarify that any  
            utility could choose to go beyond the mandate but a regulatory  
            agency could not mandate it.
           
          11.                                Similar Legislation  -- A  
            similar bill, AB 64 (Krekorian et al) has been introduced in  
            the Assembly and is pending referral to a policy committee.

           12.                                Double Referral  -- This bill  
            has been double referred to the Senate Rules Committee.

          Rate Issues/Direct Access
           Expanding a Consensus  -- The combination of rate issues and  
          direct access provisions is the product of lengthy negotiations  
          between the investor-owned utilities and consumer advocates that  
          began in early 2008.  The agreement was amended into SB 1536  
          (Kehoe) toward the end of last session and represented a  
          consensus among those parties at that time.  However, SB 1536  
          was not permitted a hearing in the Assembly.  The investor-owned  
          utilities and consumer groups are working to extend the  
          consensus to include additional parties, including large  
          consumer and retail electric seller interests.

          CPUC Reform
           Finding the Right Balance -- By making the CPUC Executive  
          Director and Attorney subject to the direction of the  
          commissioners rather than the President, this bill is  
          reinstating the chain of command that existed prior to 2000.    
          By making the key staff positions report to the President,  
          current law gives the President strong control.  This can  
          facilitate decisiveness and action, necessary in times of  
          crisis.  But at its worst, it can lead to a stifling of debate  
          and a lack of consideration for other points of view.   
          Developing an organizational structure that strikes the  
          appropriate balance between the extremes is the difficult  
          challenge.  The reform measures in this bill dilute the  
          President's authority, though the President clearly remains the  
          first among equals at the CPUC because s/he is selected by the  
          Governor.
           
                                      POSITIONS
           
           Sponsor:










           Author

           Support:*
           American Lung Association of California
          American Federation of State, County and Municipal Employees
          Breathe California
          Clean Power Campaign
          Division of Ratepayer Advocates (with amendments)
          GreenVolts
          Independent Energy Producers (if amended)
          Large-Scale Solar Association (with amendments)
          Natural Resources Defense Council (if amended)
          RightCycle Enterprises
          Sierra Club (if amended)
          The Solar Alliance (with amendments)
          Union of Concerned Scientists (if amended)

           Concerns:*
           The Utility Reform Network

           Oppose:*
           Alliance for Retail Energy Markets
          California Large Energy Consumers Association (unless amended)
          California Manufacturers & Technology Association
          Direct Energy (unless amended)
          Pacific Gas and Electric Company (unless amended)
          Southern California Edison (unless amended)
          *All correspondence was received prior to the January 29th  
          amendments of the bill.
          


          Kellie Smith and Randy Chinn
          SB 14 Analysis
          Hearing Date:  February 3, 2009