Senate Bill No. 2

CHAPTER 1

An act to add Section 705 to the Fish and Game Code, to amend Sections 25740, 25740.5, 25741, 25742, 25746, 25747, and 25751 of, to add Section 25519.5 to, and to add and repeal Section 25741.5 of, the Public Resources Code, and to amend Sections 399.11, 399.12, 399.20, and 454.5 of, to amend, renumber , and add Sections 399.13 and 399.16 of, to add Sections 399.18, 399.19, 399.26, 399.30, 399.31, and 1005.1 to, to add Article 11 (commencing with Section 910) to Chapter 4 of P art 1 of Di vision 1 of, to repeal Section 387 of, and to repeal and add Sections 399.14, 399.15, and 399.17 of, the Public Utilities Code, relating to ener gy , and making an appropriation therefor

.

[Appro v ed by Go v ernor April 12, 2011. Filed with Secretary of State April 12, 2011.]

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SB 2, Simitian

. Ener gy: rene w able ener gy resources. (1) Under e xisting la w , the Public Utilities Commission (PUC) has

re gulatory authority o v er public utilities, including electrical corporations, as de fi ned. Existing la w requires the PUC to require the state ’ s 3 lar gest electrical corporations, P aci fi c Gas and Electric Compan y , San Die go Gas and Electric, and Southern California Edison, to identify a separate electrical rate component to fund programs that enhance system reliability and pro vide in-state bene fi ts. This rate component is a nonbypassable element of local distrib ution and collected on the basis of usage. Existing PUC resolutions refer to the nonbypassable rate component as a “ public goods char ge. ” The public goods char ge mone ys are collected to support cost-ef fecti v e ener gy ef fi cienc y and conserv ation acti vities, public interest research and de v elopment not adequately pro vided by competiti v e and re gulated mark ets, and rene w able ener gy resources. The e xisting W

arren-Alquist State Ener gy Resources Conserv ation and De v elopment Act establishes the State Ener gy Resources Conserv ation and De v elopment Commission (Ener gy Commission). The act requires the commission to certify suf fi cient sites and related f

acilities that are required to pro vide a supply of electric po wer suf fi cient to accommodate projected demand for po wer state wide. The act requires the commission to transmit
a cop y of an application for certi fi cation of a site and related f acility to, among other entities, each federal and state agenc y ha ving jurisdiction or special interest in matters pertinent to the proposed site and related f acilities and to the Attorne y General. This bill w ould require an applicant to inform the United States Department of Defense of a proposed project and that an application will

**** 97be fi led with the commission if the site and related f acility speci fi ed in the application are proposed to be located within 1,000 feet of a military installation, or lie within special use airspace or beneath a lo w-le v el fl ight path, as de fi ned. Existing la w establishes the Rene w able Resource T rust Fund as a fund that is continuously appropriated, with certain e xceptions for administrati v e

e xpenses, in the State T

reasury , and requires that certain mone ys collected to support rene w able ener gy resources through the public goods char ge are deposited into the fund and authorizes the Ener gy Commission to e xpend the mone ys pursuant to the Rene w able Ener gy Resources Program. The program states the intent of the Le gislature to increase the amount of electricity generated from eligible rene w able ener gy resources per year so that amount equals at least 20% of total retail sales of electricity in California per year by December 31, 2010. This bill w ould re vise the Rene w able Ener gy Resources Program to state the intent of the Le gislature to increase the amount of electricity generated from eligible rene w able ener gy resources per year , so that amount equals at least 33% of total retail sales of electricity in California per year by December 31, 2020. The bill w ould re vise certain terms used in the program, and re vise certain eligibility criteria for a rene w able electrical generation f acility , as de fi ned, pursuant to the program. (2) Existing la w e xpresses the intent of the Le gislature, in establishing the California Rene w ables Portfolio Standard Program (RPS program), to increase the amount of electricity generated per year from eligible rene w able

ener gy resources, as de fi ned, to an amount that equals at least 20% of the total electricity sold to retail customers in California per year by December 31, 2010. The RPS program requires that a retail seller of electricity

, including electrical corporations, community choice aggre g ators, and electric service pro viders, purchase a speci fi ed minimum percentage of electricity generated by eligible rene w able ener gy resources, as de fi ned, in an y gi v en year as a speci fi ed percentage of total kilo w atthours sold to retail end-use customers each calendar year

. The RPS program requires the PUC to implement annual procurement tar gets for each retail seller to increase its total procurement of electricity generated by eligible rene w able ener gy resources by at least an additional 1% of retail sales per year so that 20% of its retail sales of electricity are procured from eligible rene w able ener gy resources no later than December 31, 2010. Existing la w requires the PUC to mak e a determination of the e xisting mark et cost for electricity , which PUC decisions call the mark et price referent, and to limit an electrical corporation ’ s oblig ation to procure electricity from eligible rene w able ener gy resources, that e xceeds the mark et price referent, by a speci fi ed amount. This bill w ould e xpress the intent that the amount of electricity generated per year from eligible rene w able ener gy resources be increased to an amount that equals at least 20% of the total electricity sold to retail customers in California per year by December 31, 2013, and 33% by December 31, 2020. The bill w ould require the PUC, by January 1, 2012, to establish the quantity of electricity products from eligible rene w able ener gy resources to be

**** 97 — 2

— Ch. 1procured by each retail seller for speci fi ed compliance periods, suf fi cient to ensure that the procurement of electricity products from eligible rene w able

ener gy resources achie v es 25% of retail sales by December 31, 2016, and 33% of retail sales by December 31, 2020, and that retail sellers procure not less than 33% of retail sales in all subsequent years. The bill, consistent with the goals of procuring the least-cost and best- fi t eligible rene w able

ener gy resources that meet project viability principles, w ould require that all retail sellers procure a balanced portfolio of electricity products from eligible rene w able ener gy resources, as speci fi ed. The bill w ould require the PUC to w ai v e enforcement of the rene w ables portfolio standard procurement requirement if the PUC fi nds that the retail seller has demonstrated certain conditions e xist that are be yond the control of the retail seller and will pre v ent compliance, and has tak en all reasonable actions under its control to achie v e compliance. The bill w ould require the PUC to direct each electrical corporation to annually prepare a rene w able ener gy procurement plan containing speci fi ed matters and require, to the e xtent feasible, that the plan be proposed, re vie wed, and adopted by the PUC as part of, and pursuant to, a general procurement plan process. The bill w ould require the PUC to direct all retail sellers to prepare and submit an annual compliance report. The bill w ould delete the e xisting mark et price referent
pro visions, and instead require the PUC to establish a limitation for each electrical corporation on the procurement e xpenditures for all eligible

rene w able ener gy resources used to comply with the rene w ables portfolio standard. The bill w ould require that by January 1, 2016, the PUC report to the Le gislature assessing whether each electrical corporation can achie v e a 33% rene w ables portfolio standard by December 31, 2020, and maintain that le v el thereafter , within the cost limitations. The bill w ould pro vide that, if the cost limitation for an electrical corporation is insuf fi cient to support the projected costs of meeting the rene w ables portfolio standard procurement requirements, the electrical corporation is authorized to refrain from entering into ne w contracts or constructing f acilities be yond the quantity that can be procured within the limitation, unless eligible rene w able ener gy resources can be procured without e xceeding a de minimis increase in rates, consistent with the electrical corporation ’ s general procurement plan. The bill w ould delete an e xisting requirement that the PUC adopt fl e xible rules for compliance for retail sellers. The bill w ould re vise the de fi nitions of certain terms for purposes of the RPS program, w ould recast certain pro visions applicable only to an electrical corporation with 60,000 or fe wer customer accounts in California that serv es retail end-use customers outside of California, and w ould add pro visions applicable to certain smaller electrical corporations. The bill w ould authorize an electrical corporation to apply to the PUC for appro v al to construct, o wn, and operate an eligible rene w able

ener gy resource, and w ould require the PUC to appro v e the application if certain conditions are met, until electrical corporation o wned and operated
resources pro vide 8.25% of the corporation ’ s anticipated retail sales. Under e xisting la w , a violation of the Public Utilities Act or an y order

, decision, rule, direction, demand, or requirement of the PUC is a crime.

**** 97 Ch. 1

— 3

—Because the pro visions of this bill are within the act and require action

by the PUC to implement its requirements, a violation of these pro visions

w ould impose a state-mandated local program by e xpanding the de fi nition of a crime. (3) Under e xisting la w , the go v erning board of a local publicly o wned electric utility is responsible for implementing and enforcing a rene w ables portfolio standard for the utility that recognizes the intent of the Le gislature to encourage rene w able resources, while taking into consideration the ef fect of the standard on rates, reliability , and fi nancial resources and the goal of

en vironmental impro v ement. This bill w ould repeal this pro vision, and instead generally mak e the requirements of the RPS program applicable to local publicly o wned electric utilities, e xcept that the utility ’ s go v erning board w ould be responsible for implementation of those requirements, instead of the PUC, and certain enforcement authority with respect to local publicly o wned electric utilities

w ould be gi v en to the Ener gy Commission and State Air Resources Board, instead of the PUC. By placing additional requirements upon local publicly

o wned electric utilities, the bill w ould impose a state-mandated local
program. (4) Existing la w requires the Ener gy Commission to certify eligible

rene w able ener gy resources, to design and implement an accounting system
to v erify compliance with the RPS requirements by retail sellers, and to de v elop tracking, accounting, v eri fi cation, and enforcement mechanisms for rene w able ener gy credits, as de fi ned. This bill w ould require the Ener gy Commission to design and implement an accounting system to v erify compliance with the RPS requirements by retail sellers and local publicly o wned electric utilities. The bill w ould require the Ener gy Commission, among other things, to adopt re gulations by July 1, 2011, specifying procedures for enforcement of the RPS requirements that include a public process under which the Ener gy Commission is authorized to issue a notice of violation and correction with respect to a local publicly o wned electric utility and for referral to the State Air Resources Board for penalties imposed pursuant to the California Global W arming Solutions Act of 2006 or other la ws if that act is suspended or repealed. This bill w ould re vise the de fi nition of rene w able ener gy credit. The bill w ould require the Ener gy Commission, by June 30, 2011, to study and pro vide a report to the Le gislature that analyzes run-of-ri v er h ydroelectric generating f acilities, as de fi ned, in British Columbia, including whether these f

acilities are, or should be, included as rene w able electrical generation f

acilities for purposes of the Rene w able Ener gy Resources Program administered by the Ener gy Commission or eligible rene w able

ener gy resources for purposes of the RPS program. (5) Existing la w requires the PUC, by February 1 of each year , to prepare and submit to the Go v ernor and the Le gislature a written report on the costs of programs and acti vities conducted by an electrical corporation or g as corporation that ha v e more than a speci fi ed number of customers in California.

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— Ch. 1This bill w ould require the PUC, by February 1 of each year , to prepare

and submit to the polic y and fi scal committees of the Le gislature a report on (A) all electrical corporation re v enue requirement increases associated with meeting the rene w ables portfolio standard, (B) all cost savings

e xperienced, or costs av oided, by electrical corporations as a result of meeting the rene w ables portfolio standard, (C) all costs incurred by electrical corporations for incenti v es for distrib uted and rene w able generation, (D) all cost sa vings e xperienced, or costs av oided, by electrical corporations as a result of incenti v es for distrib uted generation and rene w able generation, (E) speci fi ed costs for which an electrical corporation is seeking reco v ery in rates that are pending determination or appro v al by the PUC, (F) the decision number of each PUC decision in the prior year authorizing an electrical corporation to reco v er costs incurred in rates, (G) an y changes in the prior year in load serviced by an electrical corporation, and (H) the ef forts each electrical corporation is taking to recruit and train emplo yees to ensure an adequately trained and a v ailable w orkforce. (6) The bill w ould require the PUC, by July 1, 2011, to determine the ef fecti v e load carrying capacity of wind and solar ener gy resources on the electrical grid. The bill w ould require the PUC to use those v alues in establishing the contrib ution of those resources to w ard meeting speci fi ed resource adequac y requirements. (7) The Public Utilities Act prohibits an y electrical corporation from be ginning the construction of, among other things, a line, plant, or system, or of an y e xtension thereof, without ha ving fi rst obtained from the PUC a certi fi cate that the present or future public con v enience and necessity require or will require that construction, termed a certi fi cate of public con v enience and necessity

. This bill w ould require the PUC to issue a decision on an application for a certi fi cate of public con v enience and necessity within 18 months of the fi ling of a completed application under speci fi ed circumstances. (8) Existing la w establishes the Department of Fish and Game in the Natural Resources Agenc y , and generally char ges the department with the administration and enforcement of the Fish and Game Code. This bill w ould require the department to establish an internal di vision with the primary purpose of performing comprehensi v e planning and

en vironmental compliance services with priority gi v en to projects in v olving the b uilding of eligible rene w able ener gy resources. (9) The e xisting restructuring of the electrical industry within the Public Utilities Act pro vides for the establishment of an Independent System Operator (ISO). Existing la w requires the ISO to ensure ef fi cient use and reliable operation of the transmission grid consistent with achie ving planning and operating reserv e criteria no less stringent than those established by the W estern Electricity Coordinating Council of the North American Electric Reliability Corporation. Pursuant to e xisting la w , the ISO ’ s tarif fs are required to be appro v ed by the Federal Ener gy Re gulatory Commission. This bill w ould require the ISO and other California balancing authorities
to w ork cooperati v ely to inte grate and interconnect eligible rene w able ener gy

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—resources to the transmission grid by the most ef fi cient means possible with the goal of minimizing the impact and cost of ne w transmission f acilities needed to meet both reliability needs and the rene w ables portfolio standard procurement requirements, and to accomplish this in a manner that respects the o wnership, b usiness, and dispatch models for transmission f acilities

o wned by electrical corporations, local publicly o wned electric utilities, joint po wer agencies, and independent transmission companies. (10) This bill w ould appropriate $322,000 from the Public Utilities Commission Utilities Reimb ursement Account to the PUC for additional staf fi ng to identify , re vie w , and appro v e transmission lines reasonably necessary or appropriate to f acilitate achie v ement of the rene w ables portfolio standard. (11) The California Constitution requires the state to reimb urse local agencies and school districts for certain costs mandated by the state. Statutory
pro visions establish procedures for making that reimb ursement. This bill w ould pro vide that no reimb ursement is required by this act for speci fi ed reasons. **Appropriation: yes.**

The people of the State of California do enact as follows:

SECTION 1. This act shall be kno wn, and may be cited, as the California Rene w able Ener gy Resources Act. SEC. 2. Section 705 is added to the Fish and Game Code , to read: 705. (a) F or purposes of this section, “ eligible rene w able ener gy

resources ” has the same meaning as in the California Rene w ables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3 of P art 1 of Di vision 1 of the Public Utilities Code). (b) The department shall establish an internal di vision with the primary purpose of performing comprehensi v e planning and en vironmental compliance services with priority gi v en to projects in v olving the b uilding of eligible rene w able ener gy resources. (c) The internal di vision shall ensure the timely completion of plans pursuant to the Natural Community Conserv ation Planning Act (Chapter 10 (commencing with Section 2800) of Di vision 3). SEC. 3. Section 25519.5 is added to the Public Resources Code , to read: 25519.5. (a) If the site and related f acilities speci fi ed in the application are proposed to be located within 1,000 feet of a military installation, or lie within special use airspace or beneath a lo w-le v el fl ight path, as de fi ned in Section 21098, the applicant shall inform the United States Department of Defense of the proposed project and that an application will be fi led with the commission. (b) If pro vided by the United States Department of Defense, the applicant shall include within the application a description of its consultation with the department, with re g ard to potential impacts upon national security

, including potential impacts on the land, sea, and airspace identi fi ed by the

**** 97 — 6

— Ch. 1United States Department of Defense and its impacted service components,

for conducting operations and training, or for the research, de v elopment, testing, and e v aluation of weapons, sensors, and tactics. If the information is pro vided after the application is fi led, the applicant shall forw ard the information upon receipt. SEC. 4. Section 25740 of the Public Resources Code is amended to read: 25740. It is the intent of the Le gislature in establishing this program, to increase the amount of electricity generated from eligible rene w able ener gy resources per year , so that it equals at least 33 percent of total retail sales of electricity in California per year by December 31, 2020. SEC. 5. Section 25740.5 of the Public Resources Code is amended to read: 25740.5. (a) The commission shall optimize public in v estment and ensure that the most cost-ef fecti v e and ef

fi cient in v estments in rene w able

ener gy resources are vigorously pursued. (b) The commission ’ s long-term goal shall be a fully competiti v e and self-sustaining supply of electricity generated from rene w able sources. (c) The program objecti v e shall be to increase, in the near term, the quantity of California ’ s electricity generated by rene w able electrical generation f

acilities located in this state, while protecting system reliability

, fostering resource di v ersity , and obtaining the greatest en vironmental bene fi ts for California residents. (d) An additional objecti v e of the program shall be to identify and support

emer ging rene w able technologies in distrib uted generation applications that hav e the greatest near -term commercial promise and that merit tar geted assistance. (e) The Le gislature recommends allocations among all of the follo wing: (1) Rebates, b uydo wns, or equi v alent incenti v es for emer ging rene w able technologies. (2) Customer education. (3) Production incenti v es for reducing fuel costs, that are con fi rmed to the satisf action of the commission, at solid fuel biomass ener gy f acilities in order to pro vide demonstrable en vironmental and public bene fi ts, including impro v ed air quality

. (4) Solar thermal generating resources that enhance the en vironmental

v alue or reliability of the electrical system and that require fi nancial assistance to remain economically viable, as determined by the commission. The commission may require fi nancial disclosure from applicants for purposes of this paragraph. (5) Speci fi ed fuel cell technologies, if the commission mak es all of the follo wing fi ndings: (A) The speci fi ed technologies ha v e similar or better air pollutant characteristics than rene w able technologies in the report made pursuant to Section 25748. (B) The speci fi ed technologies require fi nancial assistance to become commercially viable by reference to wholesale generation prices.

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—(C) The speci fi ed technologies could contrib ute signi fi cantly to the

infrastructure de v elopment or other inno v ation required to meet the long-term objecti v e of a self-sustaining, competiti v e supply of electricity generated from rene w able sources. (6) Existing wind-generating resources, if the commission fi nds that the

e xisting wind-generating resources are a cost-ef fecti v e source of reliable

ener gy and en

vironmental bene fi ts compared with other rene w able electrical generation f

acilities located in this state, and that the e xisting wind-generating resources require fi nancial assistance to remain economically viable. The commission may require fi nancial disclosure from applicants for the purposes of this paragraph. (f) Notwithstanding an y other la w , mone ys collected for rene w able ener gy pursuant to Article 15 (commencing with Section 399) of Chapter 2.3 of P art 1 of Di vision 1 of the Public Utilities Code shall be transferred to the Rene w able Resource T

rust Fund. Mone ys collected between January 1, 2007, and January 1, 2012, shall be used for the purposes speci fi ed in this chapter

. SEC. 6. Section 25741 of the Public Resources Code is amended to read: 25741. As used in this chapter , the follo wing terms ha v e the follo wing meaning: (a) “ Rene w able electrical generation f acility ” means a f

acility that meets all of the follo wing criteria: (1) The f

acility uses biomass, solar thermal, photo v oltaic, wind, geothermal, fuel cells using rene w able fuels, small h ydroelectric generation of 30 me g a w atts or less, digester g as, municipal solid w aste con v ersion, land fi ll g as, ocean w av e, ocean thermal, or tidal current, and an y additions or enhancements to the f

acility using that technology

. (2) The f acility satis fi es one of the follo wing requirements: (A) The f acility is located in the state or near the border of the state with the fi rst point of connection to the transmission netw ork of a balancing authority area primarily located within the state. F or purposes of this subparagraph, “ balancing authority area ” has the same meaning as de fi ned in Section 399.12 of the Public Utilities Code. (B) The f acility has its fi rst point of interconnection to the transmission
netw ork outside the state, within the W estern Electricity Coordinating Council (WECC) service area, and satis fi es all of the follo wing requirements: (i) It commences initial commercial operation after January 1, 2005. (ii) It will not cause or contrib ute to an y violation of a California

en vironmental quality standard or requirement. (iii) It participates in the accounting system to v erify compliance with the rene w ables portfolio standard once established by the commission pursuant to subdi vision (b) of Section 399.25 of the Public Utilities Code. (C) The f

acility meets the requirements of clauses (ii) and (iii) in subparagraph (B), b ut does not meet the requirements of clause (i) of subparagraph (B) because it commenced initial operation prior to January 1, 2005, if the f

acility satis fi es either of the follo wing requirements:

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— Ch. 1(i) The electricity is from incremental generation resulting from e xpansion

or repo wering of the f

acility

. (ii) Electricity generated by the f acility w as procured by a retail seller or local publicly o wned electric utility as of January 1, 2010. (3) If the f

acility is outside the United States, it is de v eloped and operated in a manner that is as protecti v e of the en vironment as a similar f

acility located in the state. (b) “ Municipal solid w aste con v ersion, ” as used in subdi vision (a), means a technology that uses a noncomb ustion thermal process to con v ert solid

w aste to a clean-b urning fuel for the purpose of generating electricity , and that meets all of the follo wing criteria: (1) The technology does not use air or oxygen in the con v ersion process,

e xcept ambient air to maintain temperature control. (2) The technology produces no dischar ges of air contaminants or emissions, including greenhouse g ases as de fi ned in Section 38505 of the Health and Safety Code. (3) The technology produces no dischar ges to surf ace or groundw aters of the state. (4) The technology produces no hazardous w astes. (5) T o the maximum e xtent feasible, the technology remo v es all

rec yclable materials and mark etable green w aste compostable materials from the solid w aste stream prior to the con v ersion process and the o wner or operator of the f

acility certi fi es that those materials will be rec ycled or composted. (6) The f acility at which the technology is used is in compliance with all applicable la ws, re gulations, and ordinances. (7) The technology meets an y other conditions established by the commission. (8) The f acility certi fi es that an y local agenc y sending solid w aste to the f acility di v erted at least 30 percent of all solid w aste it collects through solid

w aste reduction, rec ycling, and composting. F or purposes of this paragraph,

“ local agenc y ” means an y city , county , or special district, or subdi vision thereof, which is authorized to pro vide solid w aste handling services. (c) “ Rene w able ener gy public goods char ge ” means that portion of the nonbypassable system bene fi ts char ge required to be collected to fund

rene w able ener gy pursuant to the Reliable Electric Service In v estments Act (Article 15 (commencing with Section 399) of Chapter 2.3 of P art 1 of Di vision 1 of the Public Utilities Code). (d) “ Report ” means the report entitled “ In v esting in Rene w able Electricity Generation in California ” (June 2001, Publication Number P500-00-022) submitted to the Go v ernor and the Le gislature by the commission. (e) “ Retail seller ” means a “ retail seller ” as de fi ned in Section 399.12 of the Public Utilities Code. SEC. 7. Section 25741.5 is added to the Public Resources Code , to read: 25741.5. (a) By June 30, 2011, after pro viding public notice and an opportunity for public comment, including holding at least one public

w orkshop, and follo wing consultation with interested go v ernmental entities,

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—the commission shall study and pro vide a report to the Le gislature that

analyzes run-of-ri v er h ydroelectric generating f acilities in British Columbia, including whether these f acilities are, or should be, included as rene w able electrical generation f

acilities pursuant to Section 25741 or eligible

rene w able ener

gy resources pursuant to Article 16 (commencing with Section 399.11) of Chapter 2.3 of P art 1 of Di vision 1 of the Public Utilities Code. (b) By completing the study and making recommendations, the commission shall consider the ef fect that inclusion w ould hav e upon all of the follo wing: (1) Emissions of carbon dioxide and other greenhouse g ases. (2) Emissions of air pollutants. (3) W ater quality , recreation, and fi sheries. (4) An y other en

vironmental impact caused by run-of-ri v er h ydroelectric generating f

acilities. (c) The report submitted pursuant to this section shall be submitted in compliance with Section 9795 of the Go v ernment Code. (d) Pursuant to Section 10231.5 of the Go v ernment Code, this section is repealed on January 1, 2015. SEC. 8. Section 25742 of the Public Resources Code is amended to read: 25742. (a) T

wenty percent of the funds collected pursuant to the

rene w able ener gy public goods char ge shall be used for programs that are designed to achie v e fully competiti v e and self-sustaining e xisting rene w able electrical generation f

acilities located in this state, and to secure for the state the en vironmental, economic, and reliability bene fi ts that continued operation of those f

acilities will pro vide during the 2007

– 2011 in v estment c ycle. Eligibility for production incenti v es under this section shall be limited to those technologies found eligible for funds by the commission pursuant to paragraphs (3), (4), and (6) of subdi vision (e) of Section 25740.5. (b) An y funds used to support rene w able electrical generation f acilities located in this state pursuant to this section shall be e xpended in accordance with the pro visions of this chapter

. (c) F acilities that are eligible to recei v e funding pursuant to this section shall be re gistered in accordance with criteria de v eloped by the commission and those f

acilities shall not recei v e payments for an y electricity produced that has an y of the follo wing characteristics: (1) Is sold at monthly a v erage rates equal to, or greater than, the applicable tar get price, as determined by the commission. (2) Is used onsite. (d) (1) Existing f

acilities located in this state generating electricity from biomass ener gy shall be eligible for funding and otherwise considered a

rene w able electrical generation f acility only if the y report to the commission the types and quantities of biomass fuels used. (2) The commission shall report the types and quantities of biomass fuels used by each f

acility to the Le gislature in the reports prepared pursuant to Section 25748. (e) Each e xisting f

acility seeking an a w ard pursuant to this section shall be e v aluated by the commission to determine the amount of the funds being

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— Ch. 1sought, the cumulati v e amount of funds the f acility has recei v ed pre viously from the commission and other state sources, the v alue of an y past and current federal or state tax credits, the f acility ’ s contract price for ener gy and capacity , the prices recei v ed by similar f acilities, the mark et v alue of the f acility , and the lik elihood that the a w ard will mak e the f acility competiti v e and self-sustaining within the 2007

– 2011 in v estment c ycle. The commission shall use this e v aluation to determine the v alue of an a w ard to the public relati v e to other rene w able ener gy in v estment alternati v es. The commission shall compile its fi ndings and report them to the Le gislature in the reports prepared pursuant to Section 25748. SEC. 9. Section 25746 of the Public Resources Code is amended to read: 25746. (a) One percent of the mone y collected pursuant to the rene w able

ener gy public goods char ge shall be used in accordance with this chapter to promote rene w able ener gy and disseminate information on rene w able

ener gy technologies, including emer ging rene w able technologies, and to help de v elop a consumer mark et for rene w able ener gy and for small-scale

emer ging rene w able ener gy technologies. (b) If the commission pro vides funding for a re gional accounting system
to v erify compliance with the rene w able portfolio standard by retail sellers, pursuant to subdi vision (b) of Section 399.25 of the Public Utilities Code, the commission shall reco v er all costs from user fees. SEC. 10. Section 25747 of the Public Resources Code is amended to read: 25747. (a) The commission shall adopt guidelines go v erning the funding programs authorized under this chapter , at a publicly noticed meeting of fering all interested parties an opportunity to comment. Substanti v e changes to the guidelines shall not be adopted without at least 10 days ’ written notice to the public. The public notice of meetings required by this subdi vision shall not be less than 30 days. Notwithstanding an y other la w , an y guidelines adopted pursuant to this chapter or Section 399.25 of the Public Utilities Code, shall be e x empt from the requirements of Chapter 3.5 (commencing with Section 11340) of P art 1 of Di vision 3 of T itle 2 of the Go v ernment Code. The Le gislature declares that the changes made to this subdi vision by the act amending this section during the 2002 portion of the 2001

– 02 Re gular Session are declaratory of, and not a change in e xisting la w

. (b) Funds to further the purposes of this chapter may be committed for multiple years. (c) A w ards made pursuant to this chapter are grants, subject to appeal to the commission upon a sho wing that f actors other than those described in the guidelines adopted by the commission were applied in making the

a w ards and payments. An y actions tak en by an applicant to apply for , or become or remain eligible and re gistered to recei v e, payments or a w ards, including satisfying conditions speci fi ed by the commission, shall not constitute the rendering of goods, services, or a direct bene fi t to the commission.

**** 97 Ch. 1

— 11

—(d) An a w ard made pursuant to this chapter , the amount of the a w ard,

and the terms and conditions of the grant are public information. SEC. 11. Section 25751 of the Public Resources Code is amended to read: 25751. (a) The Rene w able Resource T rust Fund is hereby created in the State T

reasury

. (b) The follo wing accounts are hereby established within the Rene w able Resource T

rust Fund: (1) Existing Rene w able Resources Account. (2) Emer ging Rene w able Resources Account. (3) Rene w able Resources Consumer Education Account. (c) The mone y in the fund may be e xpended, only upon appropriation by the Le gislature in the annual Budget Act, for the follo wing purposes: (1) The administration of this article by the state. (2) The state ’ s e xpenditures associated with the accounting system established by the commission pursuant to subdi vision (b) of Section 399.25 of the Public Utilities Code. (d) That portion of re v enues collected by electrical corporations for the bene fi t of in-state operation and de v elopment of e xisting and emer ging

rene w able resource technologies, pursuant to Section 399.8 of the Public Utilities Code, shall be transmitted to the commission at least quarterly for deposit in the Rene w able Resource T rust Fund pursuant to Section 25740.5. After setting aside in the fund mone y that may be needed for e xpenditures authorized by the annual Budget Act in accordance with subdi vision (c), the T reasurer shall immediately deposit mone y recei v ed pursuant to this section into the accounts created pursuant to subdi vision (b) in proportions designated by the commission for the current calendar year . Notwithstanding Section 13340 of the Go v ernment Code, the mone y in the fund and the accounts within the fund are hereby continuously appropriated to the commission without re g ard to fi scal years for the purposes enumerated in this chapter

. (e) Upon noti fi cation by the commission, the Controller shall pay all

a w ards of the mone y in the accounts created pursuant to subdi vision (b) for purposes enumerated in this chapter

. The eligibility of each a w ard shall be determined solely by the commission based on the procedures it adopts under this chapter . Based on the eligibility of each a w ard, the commission shall also establish the need for a multiyear commitment to an y particular

a w ard and so advise the Department of Finance. Eligible a w ards submitted by the commission to the Controller shall be accompanied by information specifying the account from which payment should be made and the amount of each payment; a summary description of ho w payment of the a w ard furthers the purposes enumerated in this chapter; and an accounting of future costs associated with an y a w ard or group of a

w ards kno wn to the commission to represent a portion of a multiyear funding commitment. (f) The commission may transfer funds between accounts for cash fl o w purposes, pro vided that the balance due each account is restored and the transfer does not adv ersely af fect an y of the accounts.

**** 97 — 12

— Ch. 1(g) The Department of Finance shall conduct an independent audit of

the Rene w able Resource T rust Fund and its related accounts annually , and
pro vide an audit report to the Le gislature not later than March 1 of each year for which this article is operati v e. The Department of Finance ’ s report shall include information re g arding re v enues, payment of a w ards, reserv es held for future commitments, unencumbered cash balances, and other matters that the Director of Finance determines may be of importance to the Le gislature. SEC. 12. Section 387 of the Public Utilities Code is repealed. SEC. 13. Section 399.11 of the Public Utilities Code is amended to read: 399.11. The Le gislature fi nds and declares all of the follo wing: (a) In order to attain a tar get of generating 20 percent of total retail sales of electricity in California from eligible rene w able ener gy resources by December 31, 2013, and 33 percent by December 31, 2020, it is the intent of the Le gislature that the commission and the Ener gy Commission implement the California Rene w ables Portfolio Standard Program described in this article. (b) Achie ving the rene w ables portfolio standard through the procurement of v arious electricity products from eligible rene w able ener gy resources is intended to pro vide unique bene fi ts to California, including all of the follo wing, each of which independently justi fi es the program: (1) Displacing fossil fuel consumption within the state. (2) Adding ne w electrical generating f acilities in the transmission netw ork within the W

estern 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 g ases associated with electrical generation. (5) Promoting stable retail rates for electric service. (6) Meeting the state ’ s need for a di v ersi fi ed and balanced ener gy generation portfolio. (7) Assistance with meeting the state ’ s resource adequac y requirements. (8) Contrib uting to the safe and reliable operation of the electrical grid, including pro viding predictable electrical supply , v oltage support, lo wer line losses, and congestion relief. (9) Implementing the state ’ s transmission and land use planning acti vities related to de v elopment of eligible rene w able ener gy resources. (c) The California Rene w ables Portfolio Standard Program is intended to complement the Rene w able Ener gy Resources Program administered by the Ener gy Commission and established pursuant to Chapter 8.6 (commencing with Section 25740) of Di vision 15 of the Public Resources Code. (d) Ne w and modi fi ed electric transmission f acilities may be necessary to f acilitate the state achie ving its rene w ables portfolio standard tar gets. (e) (1) Supplying electricity to California end-use customers that is generated by eligible rene w able ener gy resources is necessary to impro v e California ’ s air quality and public health, and the commission shall ensure rates are just and reasonable, and are not signi fi cantly af fected by the

**** 97 Ch. 1

— 13

—procurement requirements of this article. This electricity may be generated

an ywhere in the interconnected grid that includes man y states, and areas of both Canada and Me xico. (2) This article requires generating resources located outside of California, b ut 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 ha v e already e x ecuted, and the commission has appro v ed, po wer purchase agreements with eligible

rene w able ener gy resources located outside of California that will supply electricity to California end-use customers. These resources will fully count
to w ard meeting the rene w ables portfolio standard procurement requirements. In addition, there are nearly 7,000 me g a w atts of additional proposed

rene w able ener gy resources located outside of California that are a w aiting interconnection appro v al from the Independent System Operator

. All of these resources, if procured, will count as eligible rene w able ener gy resources that satisfy the portfolio content requirements of paragraph (1) of subdi vision (c) of Section 399.16. SEC. 14. Section 399.12 of the Public Utilities Code is amended to read: 399.12. F or purposes of this article, the follo wing terms ha v e the follo wing meanings: (a) “ Conduit h ydroelectric f acility ” means a f

acility for the generation of electricity that uses only the h ydroelectric potential of an e xisting pipe, ditch, fl ume, siphon, tunnel, canal, or other manmade conduit that is operated to distrib ute w ater for a bene fi cial use. (b) “ Balancing authority ” means the responsible entity that inte grates resource plans ahead of time, maintains load-interchange generation balance within a balancing authority area, and supports interconnection frequenc y 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

o v er a balancing authority area primarily located in this state and operating for retail sellers and local publicly o wned electric utilities subject to the requirements of this article and includes the Independent System Operator (ISO) and a local publicly o wned 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 rene w able ener gy resource ” means an electrical generating f acility that meets the de fi nition of an a “ rene w able electrical generation f acility ” in Section 25741 of the Public Resources Code, subject to the follo wing: (1) (A) An e xisting small h ydroelectric generation f acility of 30

me g a w atts or less shall be eligible only if a retail seller or local publicly

**** 97 — 14

— Ch. 1o wned electric utility procured the electricity from the f acility as of December 31, 2005. A small h ydroelectric generation unit with a nameplate capacity not e xceeding 40 me g a w atts that is operated as part of a w ater supply or con

v e yance system is an eligible rene w able ener gy resource if the retail seller or local publicly o wned electric utility procured the electricity from the f acility as of December 31, 2005. A ne w h ydroelectric f acility that commences generation of electricity after December 31, 2005, is not an eligible rene w able ener gy resource if it will cause an adv erse impact on instream bene fi cial uses or cause a change in the v olume or timing of
stream fl o w

. (B) Notwithstanding subparagraph (A), a conduit h ydroelectric f acility of 30 me g a w atts or less that commenced operation before January 1, 2006, is an eligible rene w able ener gy resource. A conduit h ydroelectric f acility of 30 me g a w atts or less that commences operation after December 31, 2005, is an eligible rene w able ener gy resource so long as it does not cause an adv erse impact on instream bene fi cial uses or cause a change in the v olume or timing of stream fl o w

. (C) A f acility appro v ed by the go v erning board of a local publicly o wned electric utility prior to June 1, 2010, for procurement to satisfy rene w able

ener gy procurement oblig ations adopted pursuant to former Section 387, shall be certi fi ed as an eligible rene w able ener gy resource by the Ener gy Commission pursuant to this article, if the f acility is a “ rene w able electrical generation f

acility ” as de fi ned in Section 25741 of the Public Resources Code. (2) A f acility eng aged in the comb ustion of municipal solid w aste shall not be considered an eligible rene w able ener gy resource unless it is located in Stanislaus County and w as operational prior to September 26, 1996. (f) “ Procure ” means to acquire through o wnership or contract. (g) “ Procurement entity ” means an y person or corporation authorized by the commission to enter into contracts to procure eligible rene w able

ener gy resources on behalf of customers of a retail seller pursuant to subdi vision (f) of Section 399.13. (h) (1) “ Rene w able energy credit ” means a certi fi cate of proof associated with the generation of electricity from an eligible rene w able ener gy resource, issued through the accounting system established by the Ener gy Commission pursuant to Section 399.25, that one unit of electricity w as generated and deli v ered by an eligible rene w able ener gy resource. (2) “ Rene w able ener gy credit ” includes all rene w able and en vironmental attrib utes associated with the production of electricity from the eligible

rene w able ener gy resource, e xcept for an emissions reduction credit issued pursuant to Section 40709 of the Health and Safety Code and an y credits or payments associated with the reduction of solid w aste and treatment bene fi ts created by the utilization of biomass or biog as fuels. (3) (A) An electricity generated by an eligible rene w able ener gy resource attrib utable to the use of nonrene w able fuels, be yond a de minimis quantity used to generate electricity in the same process through which the f acility

con v erts rene w able fuel to electricity , shall not result in the creation of a

**** 97 Ch. 1

— 15

—rene w able ener gy credit. The Ener gy Commission shall set the de minimis

quantity of nonrene w able fuels for each rene w able ener gy technology at a le v el of no more than 2 percent of the total quantity of fuel used by the technology to generate electricity

. The Ener gy Commission may adjust the de minimis quantity for an indi vidual f acility , up to a maximum of 5 percent, if it fi nds that all of the follo wing conditions are met: (i) The f acility demonstrates that the higher quantity of nonrene w able fuel will lead to an increase in generation from the eligible rene w able ener gy f acility that is signi fi cantly greater than generation from the nonrene w able fuel alone. (ii) The f acility demonstrates that the higher quantity of nonrene w able fuels will reduce the v ariability of its electrical output in a manner that results in net en

vironmental bene fi ts to the state. (iii) The higher quantity of nonrene w able fuel is limited to either natural
g as or h ydrogen deri v ed by reformation of a fossil fuel. (B) Electricity generated by a small h ydroelectric generation f acility shall not result in the creation of a rene w able ener gy credit unless the f acility meets the requirements of subparagraph (A) of paragraph (1) of subdi vision (e). (C) Electricity generated by a conduit h ydroelectric generation f acility shall not result in the creation of a rene w able ener gy credit unless the f acility meets the requirements of subparagraph (B) of paragraph (1) of subdi vision (e). (D) Electricity generated by a f acility eng aged in the comb ustion of municipal solid w aste shall not result in the creation of a rene w able ener gy credit unless the f

acility meets the requirements of paragraph (2) of subdi vision (e). (i) “ Rene w ables portfolio standard ” means the speci fi ed percentage of electricity generated by eligible rene w able ener gy resources that a retail seller or a local publicly o wned electric utility is required to procure pursuant to this article. (j) “ Retail seller ” means an entity eng aged in the retail sale of electricity to end-use customers located within the state, including an y of the follo wing: (1) An electrical corporation, as de fi ned in Section 218. (2) A community choice aggre g ator

. The commission shall institute a rulemaking to determine the manner in which a community choice aggre g ator will participate in the rene w ables portfolio standard program subject to the same terms and conditions applicable to an electrical corporation. (3) An electric service pro vider , as de fi ned in Section 218.3, for all sales of electricity to customers be ginning January 1, 2006. The commission shall institute a rulemaking to determine the manner in which electric service
pro viders will participate in the rene w ables portfolio standard program. The electric service pro vider 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 pro vider and a retail customer prior to the suspension of direct access by the commission pursuant to Section 80110 of the W ater Code.

**** 97 — 16

— Ch. 1(4) “ Retail seller ” does not include an y of the follo wing:

(A) A corporation or person emplo ying cogeneration technology or producing electricity consistent with subdi vision (b) of Section 218. (B) The Department of W ater Resources acting in its capacity pursuant to Di vision 27 (commencing with Section 80000) of the W ater Code. (C) A local publicly o wned electric utility

. (k) “ WECC ” means the W estern Electricity Coordinating Council of the North American Electric Reliability Corporation, or a successor to either corporation. SEC. 15. Section 399.13 of the Public Utilities Code is amended and renumbered to read: 399.25. The Ener gy Commission shall do all of the follo wing: (a) Certify eligible rene w able ener gy resources that it determines meet the criteria described in subdi vision (e) of Section 399.12. (b) Design and implement an accounting system to v erify compliance with the rene w ables portfolio standard by retail sellers and local publicly

o wned electric utilities, to ensure that electricity generated by an eligible

rene w able ener gy resource is counted only once for the purpose of meeting the rene w ables portfolio standard of this state or an y other state, to certify

rene w able ener gy credits produced by eligible rene w able ener gy resources, and to v erify retail product claims in this state or an y other state. In establishing the guidelines go v erning this accounting system, the Ener gy Commission shall collect data from electricity mark et participants that it deems necessary to v erify compliance of retail sellers and local publicly

o wned electric utilities, in accordance with the requirements of this article and the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Di vision 7 of T itle 1 of the Go v ernment Code). In seeking data from electrical corporations, the Ener gy Commission shall request data from the commission. The commission shall collect data from electrical corporations and remit the data to the Ener gy Commission within 90 days of the request. (c) Establish a system for tracking and v erifying rene w able energy credits that, through the use of independently audited data, v eri fi es the generation of electricity associated with each rene w able ener gy credit and protects
ag ainst multiple counting of the same rene w able ener gy credit. The Ener gy Commission shall consult with other western states and with the WECC in the de v elopment of this system. (d) Certify , for purposes of compliance with the rene w ables portfolio standard requirements by a retail seller , the eligibility of rene w able ener gy credits associated with eligible rene w able ener gy resources procured by a local publicly o wned electric utility , if the Ener gy Commission determines that all of the conditions of Section 399.31 ha v e been met. SEC. 16. Section 399.13 is added to the Public Utilities Code , to read: 399.13. (a) (1) The commission shall direct each electrical corporation to annually prepare a rene w able ener gy procurement plan that includes the matter in paragraph (5), to satisfy its oblig ations under the rene w ables portfolio standard. T

o the e xtent feasible, this procurement plan shall be

**** 97 Ch. 1

— 17

—proposed, re vie wed, and adopted by the commission as part of, and pursuant

to, a general procurement plan process. The commission shall require each electrical corporation to re vie w and update its rene w able ener gy procurement plan as it determines to be necessary

. (2) Ev ery electrical corporation that o wns electrical transmission f acilities shall annually prepare, as part of the Federal Ener gy Re gulatory Commission Order 890 process, and submit to the commission, a report identifying an y electrical transmission f

acility , upgrade, or enhancement that is reasonably necessary to achie v e the rene w ables portfolio standard procurement requirements of this article. Each report shall look forw ard at least fi v e years and, to ensure that adequate in v estments are made in a timely manner , shall include a preliminary schedule when an application for a certi fi cate of public

con v enience and necessity will be made, pursuant to Chapter 5 (commencing with Section 1001), for an y electrical transmission f acility identi fi ed as being reasonably necessary to achie v e the rene w able ener gy resources procurement requirements of this article. Each electrical corporation that

o wns electrical transmission f acilities shall ensure that project-speci fi c 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 follo wing: (A) The current status and progress made during the prior year to w ard procurement of eligible rene w able ener gy resources as a percentage of retail sales, including, if applicable, the status of an y necessary siting and permitting appro v als from federal, state, and local agencies for those eligible

rene w able ener gy resources procured by the retail seller , and the current status of compliance with the portfolio content requirements of subdi vision (c) of Section 399.16, including procurement of eligible rene w able ener gy resources located outside the state and within the WECC and unb undled

rene w able ener gy credits. (B) If the retail seller is an electrical corporation, the current status and progress made during the prior year to w ard construction of, and upgrades to, transmission and distrib ution f acilities and other electrical system components it o wns to interconnect eligible rene w able ener gy resources and to supply the electricity generated by those resources to load, including the status of planning, siting, and permitting transmission f acilities by federal, state, and local agencies. (C) Recommendations to remo v e impediments to making progress to w ard achie ving the rene w able ener gy resources procurement requirements established pursuant to this article. (4) The commission shall adopt, by rulemaking, all of the follo wing: (A) A process that pro vides criteria for the rank ordering and selection of least-cost and best- fi t eligible rene w able ener gy resources to comply with the California Rene w ables Portfolio Standard Program oblig ations on a total cost basis. This process shall tak e into account all of the follo wing: (i) Estimates of indirect costs associated with needed transmission in v estments and ongoing electrical corporation e xpenses resulting from inte grating and operating eligible rene w able ener gy resources.

**** 97 — 18

— Ch. 1(ii) The cost impact of procuring the eligible rene w able ener gy resources

on the electrical corporation ’ s electricity portfolio. (iii) The viability of the project to construct and reliably operate the eligible rene w able ener gy resource, including the de v eloper ’ s e xperience, the feasibility of the technology used to generate electricity , and the risk that the f acility will not be b uilt, or that construction will be delayed, with the result that electricity will not be supplied as required by the contract. (i v) W orkforce recruitment, training, and retention ef forts, including the emplo yment gro wth associated with the construction and operation of eligible

rene w able ener

gy resources and goals for recruitment and training of w omen, minorities, and disabled v eterans. (B) Rules permitting retail sellers to accumulate, be ginning January 1, 2011, e xcess procurement in one compliance period to be applied to an y subsequent compliance period. The rules shall apply equally to all retail sellers. In determining the quantity of e xcess 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 e v ent shall electricity products meeting the portfolio content of paragraph (3) of subdi vision (b) of Section 399.16 be counted as e xcess procurement. (C) Standard terms and conditions to be used by all electrical corporations in contracting for eligible rene w able ener gy resources, including performance requirements for rene w able generators. A contract for the purchase of electricity generated by an eligible rene w able ener gy resource, at a minimum, shall include the rene w able ener gy credits associated with all electricity generation speci fi ed under the contract. The standard terms and conditions shall include the requirement that, no later than six months after the commission ’ s appro v al of an electricity purchase agreement entered into pursuant to this article, the follo wing 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 abo v e the minimum procurement le v el necessary to comply with the rene w ables portfolio standard to mitig ate the risk that rene w able projects planned or under contract are delayed or canceled. This paragraph does not preclude an electrical corporation from v oluntarily proposing a mar gin of procurement abo v e the appropriate minimum mar gin established by the commission. (5) Consistent with the goal of increasing California ’ s reliance on eligible

rene w able ener gy resources, the rene w able ener gy procurement plan submitted by an electrical corporation shall include all of the follo wing: (A) An assessment of annual or multiyear portfolio supplies and demand to determine the optimal mix of eligible rene w able ener gy resources with deli v erability characteristics that may include peaking, dispatchable, baseload, fi rm, and as-av ailable capacity

. (B) Potential compliance delays related to the conditions described in paragraph (4) of subdi vision (b) of Section 399.15.

**** 97 Ch. 1

— 19

—(C) A bid solicitation setting forth the need for eligible rene w able ener gy

resources of each deli v erability characteristic, required online dates, and locational preferences, if an y

. (D) A status update on the de v elopment schedule of all eligible rene w able

ener gy resources currently under contract. (E) Consideration of mechanisms for price adjustments associated with the costs of k e y components for eligible rene w able ener gy resource projects with online dates more than 24 months after the date of contract e x ecution. (F) An assessment of the risk that an eligible rene w able ener gy resource will not be b uilt, or that construction will be delayed, with the result that electricity will not be deli v ered as required by the contract. (6) In soliciting and procuring eligible rene w able ener gy resources, each electrical corporation shall of fer contracts of no less than 10 years duration, unless the commission appro v es of a contract of shorter duration. (7) In soliciting and procuring eligible rene w able ener gy resources for California-based projects, each electrical corporation shall gi v e preference
to rene w able ener gy projects that pro vide en vironmental and economic bene fi ts to communities af fl icted with po v erty or high unemplo yment, or that suf fer from high emission le v els of toxic air contaminants, criteria air pollutants, and greenhouse g ases. (b) A retail seller may enter into a combination of long- and short-term contracts for electricity and associated rene w able ener gy credits. The commission may authorize a retail seller to enter into a contract of less than 10 years ’ duration with an eligible rene w able ener gy resource, if the commission has established, for each retail seller , minimum quantities of eligible rene w able ener gy resources to be procured through contracts of at least 10 years ’ duration. (c) The commission shall re vie w and accept, modify , or reject each electrical corporation ’ s rene w able ener gy resource procurement plan prior to the commencement of rene w able ener gy procurement pursuant to this article by an electrical corporation. (d) Unless pre viously preappro v ed by the commission, an electrical corporation shall submit a contract for the generation of an eligible rene w able

ener gy resource to the commission for re vie w and appro v al consistent with
an appro v ed rene w able ener gy resource procurement plan. If the commission determines that the bid prices are ele v ated due to a lack of ef fecti v e competition among the bidders, the commission shall direct the electrical corporation to rene gotiate the contracts or conduct a ne w solicitation. (e) If an electrical corporation f ails to comply with a commission order adopting a rene w able ener gy resource procurement plan, the commission shall e x ercise its authority pursuant to Section 2113 to require compliance. The commission shall enforce comparable penalties on an y retail seller that is not an electrical corporation that f ails to meet the procurement tar gets 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 rene w able ener gy resources to satisfy the retail seller ’ s

**** 97 — 20

— Ch. 1rene w ables portfolio standard procurement requirements. The commission

shall not require an y person or corporation to act as a procurement entity or require an y party to purchase eligible rene w able ener gy resources from a procurement entity

. (2) Subject to re vie w and appro v al by the commission, the procurement entity shall be permitted to reco v er reasonable administrati v e and procurement costs through the retail rates of end-use customers that are

serv ed by the procurement entity and are directly bene fi ting from the procurement of eligible rene w able ener gy resources. (g) Procurement and administrati v e costs associated with contracts entered into by an electrical corporation for eligible rene w able ener gy resources pursuant to this article and appro v ed by the commission are reasonable and prudent and shall be reco v erable in rates. (h) Construction, alteration, demolition, installation, and repair w ork on an eligible rene w able ener gy resource that recei v es production incenti v es pursuant to Section 25742 of the Public Resources Code, including w ork performed to qualify , recei v e, or maintain production incenti v es, are “ public

w orks ” for the purposes of Chapter 1 (commencing with Section 1720) of P art 7 of Di vision 2 of the Labor Code. SEC. 17. Section 399.14 of the Public Utilities Code is repealed. SEC. 18. Section 399.14 is added to the Public Utilities Code , to read: 399.14. (a) (1) An electrical corporation, pursuant to Chapter 5 (commencing with Section 1001), and in order to meet its unmet rene w ables portfolio standard procurement requirements, may apply to the commission for appro v al to construct, o wn, and operate an eligible rene w able ener gy

resource. (2) If the proposed eligible rene w able ener gy resource complies with the requirements of subdi vision (b), the commission shall appro v e an application fi led pursuant to paragraph (1), until the commission has appro v ed applications for eligible rene w able ener gy resources for the electrical corporation that, when constructed and operating, will pro vide 8.25 percent of the electrical corporation ’ s anticipated retail sales by December 31, 2020, and thereafter

. (3) The commission may appro v e additional applications for eligible

rene w able ener gy resources once the commission has appro v ed suf fi cient applications for eligible rene w able ener gy resources for the electrical corporation that, when constructed and operating, will pro vide 8.25 percent of the electrical corporation ’ s anticipated retail sales by December 31, 2020, and thereafter

. (b) The commission shall not appro v e an y application by an electrical corporation pursuant to subdi vision (a) unless both of the follo wing conditions are met: (1) The eligible rene w able ener gy resource utilizes a viable technology at a reasonable cost. (2) The eligible rene w able ener gy resource pro vides comparable or superior v alue to ratepayers when compared to then recent contracts for generation pro vided by eligible rene w able ener gy resources.

**** 97 Ch. 1

— 21

—(c) In appro ving an y application by an electrical corporation for appro v al

to construct, o wn, and operate an eligible rene w able ener gy resource, the commission shall apply traditional cost-of-service ratemaking. When applying traditional cost-of-service ratemaking, the commission, in the certi fi cate authorizing the ne w construction, shall specify the maximum cost determined to be reasonable and prudent for the construction of the f acility and the cost of initial operation of the f acility . Upon a fi ling by the electrical corporation, the commission may authorize an increase in the maximum cost of construction if it determines that the cost has in f act increased, that the cost increase is determined to be reasonable and prudent, and that the present or future public con v enience or necessity require construction of the project at the increased cost. SEC. 19. Section 399.15 of the Public Utilities Code is repealed. SEC. 20. Section 399.15 is added to the Public Utilities Code , to read: 399.15. (a) In order to ful fi ll unmet long-term resource needs, the commission shall establish a rene w ables portfolio standard requiring all retail sellers to procure a minimum quantity of electricity products from eligible rene w able ener gy resources as a speci fi ed percentage of total kilo w atthours sold to their retail end-use customers each compliance period to achie v e the tar gets established under this article. F or an y retail seller procuring at least 14 percent of retail sales from eligible rene w able ener gy resources in 2010, the de fi cits associated with an y pre vious rene w ables portfolio standard shall not be added to an y procurement requirement pursuant to this article. (b) The commission shall implement rene w ables portfolio standard procurement requirements only as follo ws: (1) Each retail seller shall procure a minimum quantity of eligible

rene w able ener gy resources for each of the follo wing compliance periods: (A) January 1, 2011, to December 31, 2013, inclusi v e. (B) January 1, 2014, to December 31, 2016, inclusi v e. (C) January 1, 2017, to December 31, 2020, inclusi v e. (2) (A) No later than January 1, 2012, the commission shall establish the quantity of electricity products from eligible rene w able ener gy 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, inclusi v e, the commission shall require procurement for each retail seller equal to an a v erage of 20 percent of retail sales. F or the follo wing compliance periods, the quantities shall re fl ect reasonable progress in each of the interv ening years suf fi cient to ensure that the procurement of electricity products from eligible rene w able ener gy resources achie v es 25 percent of retail sales by December 31, 2016, and 33 percent of retail sales by December 31, 2020. The commission shall require retail sellers to procure not less than 33 percent of retail sales of electricity products from eligible rene w able ener gy resources in all subsequent years.

**** 97 — 22

— Ch. 1(C) Retail sellers shall be oblig ated to procure no less than the quantities

associated with all interv ening years by the end of each compliance period. Retail sellers shall not be required to demonstrate a speci fi c quantity of procurement for an y indi vidual interv ening year

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

rene w able ener

gy resources in e xcess of the quantities identi fi ed in paragraph (2). A retail seller may v oluntarily increase its procurement of eligible

rene w able ener gy resources be yond the rene w ables portfolio standard procurement requirements. (4) Only for purposes of establishing the rene w ables 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 W ater Resources pursuant to Di vision 27 (commencing with Section 80000) of the W ater Code in the calculation of retail sales by an electrical corporation. (5) The commission shall w ai v e enforcement of this section if it fi nds that the retail seller has demonstrated an y of the follo wing conditions are be yond the control of the retail seller and will pre v ent compliance: (A) There is inadequate transmission capacity to allo w for suf fi cient electricity to be deli v ered from proposed eligible rene w able ener gy resource projects using the current operational protocols of the Independent System Operator . In making its fi ndings relati v e to the e xistence of this condition with respect to a retail seller that o wns transmission lines, the commission shall consider both of the follo wing: (i) Whether the retail seller has undertak en, in a timely f

ashion, reasonable measures under its control and consistent with its oblig ations under local, state, and federal la ws and re gulations, to de v elop and construct ne w transmission lines or upgrades to e xisting lines intended to transmit electricity generated by eligible rene w able ener gy resources. In determining the reasonableness of a retail seller ’ s actions, the commission shall consider the retail seller ’ s e xpectations for full-cost reco v ery for these transmission lines and upgrades. (ii) Whether the retail seller has tak en all reasonable operational measures to maximize cost-ef

fecti v e deli v eries of electricity from eligible rene w able

ener gy resources in adv ance of transmission a v ailability

. (B) Permitting, interconnection, or other circumstances that delay procured eligible rene w able ener gy resource projects, or there is an insuf fi cient supply of eligible rene w able ener gy resources av ailable to the retail seller . In making a fi nding that this condition pre v ents timely compliance, the commission shall consider whether the retail seller has done all of the follo wing: (i) Prudently managed portfolio risks, including relying on a suf fi cient number of viable projects. (ii) Sought to de v elop one of the follo wing: its o wn eligible rene w able

ener gy resources, transmission to interconnect to eligible rene w able ener gy resources, or ener gy storage used to inte grate eligible rene w able ener gy

resources. This clause shall not require an electrical corporation to pursue

**** 97 Ch. 1

— 23

—de v elopment of eligible rene w able ener gy resources pursuant to Section

399.14. (iii) Procured an appropriate minimum mar gin of procurement abo v e the minimum procurement le v el necessary to comply with the rene w ables portfolio standard to compensate for foreseeable delays or insuf fi cient supply

. (i v) T ak en reasonable measures, under the control of the retail seller , to procure cost-ef

fecti v e distrib uted generation and allo w able unb undled

rene w able ener gy credits. (C) Unanticipated curtailment of eligible rene w able ener gy resources necessary to address the needs of a balancing authority

. (6) If the commission w ai v es 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 tak en in each of the interv ening years suf fi cient to satisfy future procurement requirements. (7) The commission shall not w ai v e enforcement pursuant to this section, unless the retail seller demonstrates that it has tak en all reasonable actions under its control, as set forth in paragraph (5), to achie v e full compliance. (8) If a retail seller f

ails to procure suf

fi cient eligible rene w able ener gy resources to comply with a procurement requirement pursuant to paragraphs (1) and (2) and f

ails to obtain an order from the commission w ai ving enforcement pursuant to paragraph (5), the commission shall e x ercise its authority pursuant to Section 2113. (9) De fi cits 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 e xpenditures for all eligible rene w able

ener gy resources used to comply with the rene w ables portfolio standard. In establishing this limitation, the commission shall rely on the follo wing: (1) The most recent rene w able ener gy procurement plan. (2) Procurement e xpenditures that approximate the e xpected cost of b uilding, o wning, and operating eligible rene w able ener gy resources. (3) The potential that some planned resource additions may be delayed or canceled. (d) In de v eloping the limitation pursuant to subdi vision (c), the commission shall ensure all of the follo wing: (1) The limitation is set at a le v el that pre v ents disproportionate rate impacts. (2) The costs of all procurement credited to w ard achie ving the rene w ables portfolio standard are counted to w ards the limitation. (3) Procurement e xpenditures do not include an y indirect e xpenses, including imbalance ener gy char ges, sale of e xcess ener gy , decreased generation from e xisting resources, transmission upgrades, or the costs associated with relicensing an y utility-o wned h ydroelectric f acilities. (e) (1) No later than January 1, 2016, the commission shall prepare a report to the Le gislature assessing whether each electrical corporation can

**** 97 — 24

— Ch. 1achie v e a 33-percent rene w ables portfolio standard by December 31, 2020,

and maintain that le v el thereafter , within the adopted cost limitations. If the commission determines that it is necessary to change the limitation for procurement costs incurred by an y electrical corporation after that date, it
may propose a re vised cap consistent with the criteria in subdi visions (c) and (d). The proposed modi fi cations shall tak e ef fect no earlier than January 1, 2017. (2) Notwithstanding Section 10231.5 of the Go v ernment Code, the requirement for submitting a report imposed under paragraph (1) is inoperati v e on January 1, 2021. (3) A report to be submitted pursuant to paragraph (1) shall be submitted in compliance with Section 9795 of the Go v ernment Code. (f) If the cost limitation for an electrical corporation is insuf fi cient to support the projected costs of meeting the rene w ables portfolio standard procurement requirements, the electrical corporation may refrain from entering into ne w contracts or constructing f acilities be yond the quantity that can be procured within the limitation, unless eligible rene w able ener gy resources can be procured without e xceeding 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

e xceed its cost limitation prior to achie ving the rene w ables portfolio standard procurement requirements, the commission shall do both of the follo wing within 60 days of making that determination: (A) In v estig ate and identify the reasons wh y the electrical corporation
may e xceed its annual cost limitation. (B) Notify the appropriate polic y and fi scal committees of the Le gislature that the electrical corporation may e xceed its cost limitation, and include the reasons wh y the electrical corporation may e xceed its cost limitation. (h) The establishment of a rene w ables portfolio standard shall not constitute implementation by the commission of the federal Public Utility Re gulatory Policies Act of 1978 (Public La w 95-617). SEC. 21. Section 399.16 of the Public Utilities Code is amended and renumbered to read: 399.21. (a) The commission, by rule, shall authorize the use of rene w able

ener gy credits to satisfy the rene w ables portfolio standard procurement requirements established pursuant to this article, subject to the follo wing conditions: (1) Prior to authorizing an y rene w able ener gy credit to be used to w ard satisfying the rene w ables portfolio standard procurement requirements, the commission and the Ener gy Commission shall conclude that the tracking system established pursuant to subdi vision (c) of Section 399.25, is operational, is capable of independently v erifying that electricity earning the credit is generated by an eligible rene w able ener gy resource, and can

**** 97 Ch. 1

— 25

—ensure that rene w able ener gy credits shall not be double counted by an y

seller of electricity within the service territory of the WECC. (2) Each rene w able ener gy credit shall be counted only once for compliance with the rene w ables portfolio standard of this state or an y other state, or for v erifying retail product claims in this state or an y other state. (3) All re v enues recei v ed by an electrical corporation for the sale of a

rene w able ener gy credit shall be credited to the bene fi t of ratepayers. (4) Rene w able energy credits shall not be created for electricity generated pursuant to an y electricity purchase contract with a retail seller or a local publicly o wned electric utility e x ecuted before January 1, 2005, unless the contract contains e xplicit terms and conditions specifying the o wnership or disposition of those credits. Procurement under those contracts shall be track ed through the accounting system described in subdi vision (b) of Section 399.25 and included in the quantity of eligible rene w able ener gy resources of the purchasing retail seller pursuant to Section 399.15. (5) Rene w able energy credits shall not be created for electricity generated under an y electricity purchase contract e x ecuted after January 1, 2005, pursuant to the federal Public Utility Re gulatory Policies Act of 1978 (16 U.S.C. Sec. 2601 et seq.). Procurement under the electricity purchase contracts shall be track ed through the accounting system implemented by the Ener gy Commission pursuant to subdi vision (b) of Section 399.25 and
count to w ard the rene w ables portfolio standard procurement requirements of the purchasing retail seller

. (6) A rene w able ener gy credit shall not be eligible for compliance with

a rene w ables portfolio standard procurement requirement unless it is retired in the tracking system established pursuant to subdi vision (c) of Section 399.25 by the retail seller or local publicly o wned electric utility within 36 months from the initial date of generation of the associated electricity

. (b) The commission shall allo w an electrical corporation to reco v er the reasonable costs of purchasing, selling, and administering rene w able ener gy credit contracts in rates. SEC. 22. Section 399.16 is added to the Public Utilities Code , to read: 399.16. (a) V

arious electricity products from eligible rene w able ener gy resources located within the WECC transmission netw ork service area shall be eligible to comply with the rene w ables portfolio standard procurement requirements in Section 399.15. These electricity products may be dif ferentiated by their impacts on the operation of the grid in supplying electricity , as well as, meeting the requirements of this article. (b) Consistent with the goals of procuring the least-cost and best- fi t electricity products from eligible rene w able ener gy resources that meet project viability principles adopted by the commission pursuant to paragraph (4) of subdi vision (a) of Section 399.13 and that pro vide the bene fi ts set forth in Section 399.11, a balanced portfolio of eligible rene w able ener gy resources shall be procured consisting of the follo wing portfolio content
cate gories: (1) Eligible rene w able ener gy resource electricity products that meet either of the follo wing criteria:

**** 97 — 26

— Ch. 1(A) Ha v e a fi rst point of interconnection with a California balancing

authority , ha v e a fi rst point of interconnection with distrib ution f acilities used to serv e end users within a California balancing authority area, or are scheduled from the eligible rene w able ener gy resource into a California balancing authority without substituting electricity from another source. The use of another source to pro vide real-time ancillary services required to maintain an hourly or subhourly import schedule into a California balancing authority shall be permitted, b ut only the fraction of the schedule actually generated by the eligible rene w able ener gy resource shall count
to w ard this portfolio content cate gory

. (B) Hav e an agreement to dynamically transfer electricity to a California balancing authority

. (2) Firmed and shaped eligible rene w able ener gy resource electricity products pro viding incremental electricity and scheduled into a California balancing authority

. (3) Eligible rene w able ener gy resource electricity products, or an y fraction of the electricity generated, including unb undled rene w able ener gy credits, that do not qualify under the criteria of paragraph (1) or (2). (c) In order to achie v e a balanced portfolio, all retail sellers shall meet the follo wing requirements for all procurement credited to w ards each compliance period: (1) Not less than 50 percent for the compliance period ending December 31, 2013, 65 percent for the compliance period ending December 31, 2016, and 75 percent thereafter of the eligible rene w able ener gy resource electricity products associated with contracts e x ecuted after June 1, 2010, shall meet the product content requirements of paragraph (1) of subdi vision (b). (2) Not more than 25 percent for the compliance period ending December 31, 2013, 15 percent for the compliance period ending December 31, 2016, and 10 percent thereafter of the eligible rene w able ener gy resource electricity products associated with contracts e x ecuted after June 1, 2010, shall meet the product content requirements of paragraph (3) of subdi vision (b). (3) An y rene w able ener gy resources contracts e x ecuted on or after June 1, 2010, not subject to the limitations of paragraph (1) or (2), shall meet the product content requirements of paragraph (2) of subdi vision (b). (d) An y contract or o wnership agreement originally e x ecuted prior to June 1, 2010, shall count in full to w ards the procurement requirements established pursuant to this article, if all of the follo wing conditions are met: (1) The rene w able ener gy resource w as eligible under the rules in place as of the date when the contract w as e x ecuted. (2) F or an electrical corporation, the contract has been appro v ed by the commission, e v en if that appro v al occurs after June 1, 2010. (3) An y contract amendments or modi fi cations occurring after June 1, 2010, do not increase the nameplate capacity or e xpected quantities of annual generation, or substitute a dif ferent rene w able ener gy resource. The duration of the contract may be e xtended if the original contract speci fi ed a procurement commitment of 15 or more years.

**** 97 Ch. 1

— 27

—(e) A retail seller may apply to the commission for a reduction of a

procurement content requirement of subdi vision (c). The commission may reduce a procurement content requirement of subdi vision (c) to the e xtent the retail seller demonstrates that it cannot comply with that subdi vision because of conditions be yond the control of the retail seller as pro vided in paragraph (5) of subdi vision (b) of Section 399.15. The commission shall not, under an y circumstance, reduce the oblig ation speci fi ed in paragraph (1) of subdi vision (c) belo w 65 percent for an y compliance oblig ation after December 31, 2016. SEC. 23. Section 399.17 of the Public Utilities Code is repealed. SEC. 24. Section 399.17 is added to the Public Utilities Code , to read: 399.17. (a) (1) Subject to this section, the requirements of this article apply to an electrical corporation that as of January 1, 2010, had 60,000 or fe wer customer accounts in California and met either of the follo wing requirements: (A) Serv ed retail end-use customers outside California. (B) W as located in a control area that is not under the operational balancing authority of the Independent System Operator or other California balancing authority and recei v es the majority of its electrical requirements from generating f

acilities located outside of California. (2) This section applies to a successor entity to all or a portion of the service territory of an electrical corporation meeting the requirements of paragraph (1), b ut only to the e xtent that the successor entity will hav e 60,000 or fe wer customer accounts in California. (b) F or an electrical corporation or qualifying successor entity meeting the requirements of subdi vision (a), electricity products from eligible

rene w able energy resources may be used for compliance with the rene w ables portfolio standard procurement requirements notwithstanding an y procurement content limitation in Section 399.16 and an eligible rene w able

ener gy resource includes a f acility that is located outside California, if the f acility is connected to the WECC transmission system, pro vided all of the follo wing conditions are met: (1) An y portion of the electricity generated by the f acility and allocated by the electrical corporation or qualifying successor entity for its California customers, and is not used to ful fi ll rene w able ener gy procurement requirements in other states. (2) The electrical corporation or qualifying successor entity participates in, and complies with, the accounting system administered by the Ener gy Commission pursuant to subdi vision (b) of Section 399.25. (3) The Ener gy Commission v eri fi es that the electricity generated by the f acility is eligible to meet the procurement requirements of this article. (c) The commission shall determine the procurement requirements for an electrical corporation or qualifying successor entity meeting the requirements of subdi vision (a) as a speci fi ed percentage of total kilo w atthours sold by the electrical corporation to its retail end-use customers in California in a compliance period.

**** 97 — 28

— Ch. 1(d) An electrical corporation or qualifying successor entity meeting the

requirements of subdi vision (a) may use an inte grated resource plan prepared in compliance with the requirements of another state utility re gulatory commission, to ful fi ll the requirement to prepare a rene w able ener gy procurement plan pursuant to this article, pro vided the plan meets the requirements of Sections 399.13, 399.14, and 399.25, as modi fi ed by this section. (e) Procurement and administrati v e costs associated with long-term contracts for eligible rene w able ener gy resources pursuant to this article entered into by an electrical corporation or qualifying successor entity meeting the requirements of subdi vision (a) and appro v ed by the commission, are reasonable and prudent and shall be reco v erable in rates of the electrical corporation or its successor ’ s California customers, pro vided the costs are
not reco v erable in rates in other states serv ed by the electrical corporation. (f) Procurement e xpenditures for electricity products from eligible

rene w able ener gy resources pursuant to this section by an electrical corporation or successor entity meeting the requirements of subdi vision (a) shall be subject to a limitation on procurement e xpenditures established by the commission pursuant to subdi vision (c) of Section 399.15. SEC. 25. Section 399.18 is added to the Public Utilities Code , to read: 399.18. (a) This section applies to an electrical corporation that as of January 1, 2010, met either of the follo wing conditions: (1) Serv ed 30,000 or fe wer customer accounts in California and had issued at least four solicitations for eligible rene w able ener gy resources prior to June 1, 2010. (2) Had 1,000 or fe wer customer accounts in California and w as not connected to an y transmission system or to the California Independent System Operator

. (b) F or an electrical corporation or its successor , electricity products from eligible rene w able ener gy resources may be used for compliance with this article, notwithstanding an y procurement content limitation in Section 399.16, pro vided that both of the follo wing conditions are met: (1) The electrical corporation or its successor participates in, and complies with, the accounting system administered by the Ener gy Commission pursuant to subdi vision (b) of Section 399.25. (2) The Ener gy Commission v eri fi es that the electricity generated by the f acility is eligible to meet the requirements of Section 399.15. SEC. 26. Section 399.19 is added to the Public Utilities Code , to read: 399.19. The commission, in consultation with the Ener gy Commission, shall report to the Le gislature by January 1 of e v ery e v en-numbered year on all of the follo wing: (a) The progress and status of procurement acti vities by each retail seller

. (b) The status of permitting and siting eligible rene w able ener gy resources and transmission f

acilities necessary to supply electricity generated to load, including the time tak en to permit each eligible rene w able ener gy resource and transmission line or upgrade, e xplanations of f ailures to meet permitting

**** 97 Ch. 1

— 29

—milestones, and recommendations for impro v ements to e xpedite permitting

and siting processes. (c) The projected ability of each electrical corporation to meet the

rene w ables portfolio standard procurement requirements under the cost limitations in subdi vision (d) of Section 399.15 and an y recommendations for re visions of those cost limitations. (d) An y barriers to, and polic y recommendations for , achie ving the

rene w ables portfolio standard pursuant to this article. SEC. 27. Section 399.20 of the Public Utilities Code is amended to read: 399.20. (a) It is the polic y of this state and the intent of the Le gislature to encourage electrical generation from eligible rene w able ener gy resources. (b) As used in this section, “ electric generation f acility ” means an electric generation f

acility located within the service territory of, and de v eloped to sell electricity to, an electrical corporation that meets all of the follo wing criteria: (1) Has an ef

fecti v e capacity of not more than three me g a w atts. (2) Is interconnected and operates in parallel with the electrical transmission and distrib ution grid. (3) Is strate gically located and interconnected to the electrical transmission and distrib ution grid in a manner that optimizes the deli v erability of electricity generated at the f acility to load centers. (4) Is an eligible rene w able ener gy resource. (c) Ev ery electrical corporation shall fi le with the commission a standard tarif f for electricity purchased from an electric generation f acility

. The commission may modify or adjust the requirements of this section for an y electrical corporation with less than 100,000 service connections, as indi vidual circumstances merit. (d) (1) The tarif

f shall pro vide for payment for e v ery kilo w atthour of electricity purchased from an electric generation f acility for a period of 10, 15, or 20 years, as authorized by the commission. The payment shall be the mark et price determined by the commission pursuant to paragraph (2) and shall include all current and anticipated en vironmental compliance costs, including, b ut not limited to, mitig ation of emissions of greenhouse g ases and air pollution of

fsets associated with the operation of ne w generating f acilities in the local air pollution control or air quality management district where the electric generation f acility is located. (2) The commission shall establish a methodology to determine the mark et price of electricity for terms corresponding to the length of contracts with an electric generation f acility , in consideration of the follo wing: (A) The long-term mark et price of electricity for fi x ed price contracts, determined pursuant to an electrical corporation ’ s general procurement acti vities as authorized by the commission. (B) The long-term o wnership, operating, and fi x ed-price fuel costs associated with fi x ed-price electricity from ne w generating f acilities. (C) The v alue of dif

ferent electricity products including baseload, peaking, and as-av ailable electricity

.

**** 97 — 30

— Ch. 1(3) The commission may adjust the payment rate to re fl ect the v alue of

e v ery kilo w atthour of electricity generated on a time-of-deli v ery basis. (4) The commission shall ensure, with respect to rates and char ges, that ratepayers that do not recei v e service pursuant to the tarif f are indif

ferent to whether a ratepayer with an electric generation f acility recei v es service pursuant to the tarif

f. (e) An electrical corporation shall pro vide e xpedited interconnection procedures to an electric generation f acility located on a distrib ution circuit that generates electricity at a time and in a manner so as to of fset the peak demand on the distrib ution circuit, if the electrical corporation determines that the electric generation f acility will not adv ersely af fect the distrib ution grid. The commission shall consider and may establish a v alue for an electric generation f

acility located on a distrib ution circuit that generates electricity at a time and in a manner so as to of fset the peak demand on the distrib ution circuit. (f) An electrical corporation shall mak e the tarif f a v ailable to the o wner or operator of an electric generation f acility within the service territory of the electrical corporation, upon request, on a fi rst-come- fi rst-serv ed basis, until the electrical corporation meets its proportionate share of a state wide cap of 750 me g a w atts cumulati v e rated generation capacity serv ed under this section and Section 387.6. The proportionate share shall be calculated based on the ratio of the electrical corporation ’ s peak demand compared to the total state wide peak demand. (g) The electrical corporation may mak e the terms of the tarif f a v ailable
to o wners and operators of an electric generation f acility in the form of a standard contract subject to commission appro v al. (h) Ev ery kilo w atthour of electricity purchased from an electric generation f acility shall count to w ard meeting the electrical corporation ’ s rene w ables portfolio standard annual procurement tar gets for purposes of paragraph (1) of subdi vision (b) of Section 399.15. (i) The ph ysical generating capacity of an electric generation f acility shall count to w ard the electrical corporation ’ s resource adequac y requirement for purposes of Section 380. (j) (1) The commission shall establish performance standards for an y electric generation f

acility that has a capacity greater than one me g a w att to ensure that those f

acilities are constructed, operated, and maintained to generate the e xpected annual net production of electricity and do not impact system reliability

. (2) The commission may reduce the three me g a w att capacity limitation of paragraph (1) of subdi vision (b) if the commission fi nds that a reduced capacity limitation is necessary to maintain system reliability within that electrical corporation ’ s service territory

. (k) (1) An y o wner or operator of an electric generation f acility that recei v ed ratepayer -funded incenti v es in accordance with Section 379.6 of this code, or with Section 25782 of the Public Resources Code, and participated in a net metering program pursuant to Sections 2827, 2827.9, and 2827.10 of this code prior to January 1, 2010, shall be eligible for a

**** 97 Ch. 1

— 31

—tarif

f or standard contract fi led by an electrical corporation pursuant to this section. (2) In establishing the tarif fs or standard contracts pursuant to this section, the commission shall consider ratepayer -funded incenti v e payments pre viously recei v ed by the generation f acility pursuant to Section 379.6 of this code or Section 25782 of the Public Resources Code. The commission shall require reimb ursement of an y funds recei v ed from these incenti v e programs to an electric generation f acility , in order for that f acility to be eligible for a tarif

f or standard contract fi led by an electrical corporation pursuant to this section, unless the commission determines ratepayers ha v e recei v ed suf

fi cient v alue from the incenti v es pro vided to the f acility based on ho w long the project has been in operation and the amount of rene w able electricity pre viously generated by the f acility

. (3) A customer that recei v es service under a tarif f or contract appro v ed by the commission pursuant to this section is not eligible to participate in

an y net metering program. ( l ) An o wner or operator of an electric generation f acility electing to recei v e service under a tarif f or contract appro v ed by the commission shall continue to recei v e service under the tarif f or contract until either of the follo wing occurs: (1) The o wner or operator of an electric generation f acility no longer meets the eligibility requirements for recei ving service pursuant to the tarif f
or contract. (2) The period of service established by the commission pursuant to subdi vision (d) is completed. (m) W ithin 10 days of receipt of a request for a tarif f pursuant to this section from an o wner or operator of an electric generation f acility , the electrical corporation that recei v es the request shall post a cop y of the request on its Internet W

eb site. The information posted on the Internet W eb site shall include the name of the city in which the f acility is located, b ut information that is proprietary and con fi dential, including, b ut not limited to, address information be yond the name of the city in which the f acility is located, shall be redacted. (n) An electrical corporation may den y a tarif f request pursuant to this section if the electrical corporation mak es an y of the follo wing fi ndings: (1) The electric generation f acility does not meet the requirements of this section. (2) The transmission or distrib ution grid that w ould serv e as the point of interconnection is inadequate. (3) The electric generation f acility does not meet all applicable state and local la ws and b uilding standards and utility interconnection requirements. (4) The aggre g ate of all electric generating f acilities on a distrib ution circuit w ould adv ersely impact utility operation and load restoration ef forts of the distrib ution system. (o) Upon recei ving a notice of denial from an electrical corporation, the

o wner or operator of the electric generation f acility denied a tarif

f pursuant to this section shall ha v e the right to appeal that decision to the commission.

**** 97 — 32

— Ch. 1(p) In order to ensure the safety and reliability of electric generation

f acilities, the o wner of an electric generation f acility recei ving a tarif

f pursuant to this section shall pro vide an inspection and maintenance report to the electrical corporation at least once e v ery other year

. The inspection and maintenance report shall be prepared at the o wner ’ s or operator ’ s

e xpense by a California-licensed contractor who is not the o wner or operator of the electric generation f acility

. A California-licensed electrician shall perform the inspection of the electrical portion of the generation f acility

. (q) The contract between the electric generation f acility recei ving the tarif f and the electrical corporation shall contain pro visions that ensure that construction of the electric generating f acility complies with all applicable state and local la ws and b uilding standards, and utility interconnection requirements. (r) (1) All construction and installation of f acilities of the electrical corporation, including at the point of the output meter or at the transmission or distrib ution grid, shall be performed only by that electrical corporation. (2) All interconnection f

acilities installed on the electrical corporation ’ s side of the transfer point for electricity between the electrical corporation and the electrical conductors of the electric generation f acility shall be

o wned, operated, and maintained only by the electrical corporation. The

o wnership, installation, operation, reading, and testing of re v enue metering equipment for electric generating f acilities shall only be performed by the electrical corporation. SEC. 28. Section 399.26 is added to the Public Utilities Code , to read: 399.26. (a) In order for the state to meet the requirements of the California Rene w ables Portfolio Standard Program, substantially increased amounts of electricity generated by eligible rene w able ener gy resources must be inte grated with, and interconnected to, the transmission grid that is either o wned by , or under the operational control of, the local publicly

o wned electric utilities and the transmission grid that is under the operational control of the Independent System Operator

. (b) The Independent System Operator and the balancing authority of each area in California shall do both of the follo wing: (1) W ork cooperati v ely to inte grate and interconnect eligible rene w able

ener gy resources to the transmission grid by the most ef fi cient means possible with the goal of minimizing the impact and cost of ne w transmission needed to meet both reliability needs and the rene w ables portfolio standard procurement requirements. (2) Accomplish the requirements of paragraph (1) in a manner that respects the o wnership, b usiness, and dispatch models for transmission f acilities o wned by electrical corporations, local publicly o wned electric utilities, joint po wers agencies, and independent transmission companies. (c) The Independent System Operator shall seek an y appro v als from the Federal Ener gy Re gulatory Commission that are necessary to accomplish the goals and requirements of this article. (d) In order to maintain electric service reliability and to minimize the construction of fossil fuel electrical generation capacity to support the

**** 97 Ch. 1

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—inte gration of intermittent rene w able electrical generation into the electrical

grid, by July 1, 2011, the commission shall determine the ef fecti v e load carrying capacity of wind and solar ener gy resources on the California electrical grid. The commission shall use those ef fecti v e load carrying capacity v alues in establishing the contrib ution of wind and solar ener gy resources to w ard meeting the resource adequac y requirements established pursuant to Section 380. SEC. 29. Section 399.30 is added to the Public Utilities Code , to read: 399.30. (a) In order to ful fi ll unmet long-term generation resource needs, each local publicly o wned electric utility shall adopt and implement a

rene w able ener gy resources procurement plan that requires the utility to procure a minimum quantity of electricity products from eligible rene w able

ener gy resources, including rene w able ener gy credits, as a speci fi ed percentage of total kilo w atthours sold to the utility ’ s retail end-use customers, each compliance period, to achie v e the tar gets of subdi vision (c). (b) The go v erning board shall implement procurement tar gets for a local publicly o wned electric utility that require the utility to procure a minimum quantity of eligible rene w able ener gy resources for each of the follo wing compliance periods: (1) January 1, 2011, to December 31, 2013, inclusi v e. (2) January 1, 2014, to December 31, 2016, inclusi v e. (3) January 1, 2017, to December 31, 2020, inclusi v e. (c) The go v erning board of a local publicly o wned electric utility shall ensure all of the follo wing: (1) The quantities of eligible rene w able ener gy resources to be procured for the compliance period from January 1, 2011, to December 31, 2013, inclusi v e, are equal to an a v erage of 20 percent of retail sales. (2) The quantities of eligible rene w able ener gy resources to be procured for all other compliance periods re fl ect reasonable progress in each of the interv ening years suf

fi cient to ensure that the procurement of electricity products from eligible rene w able ener gy resources achie v es 25 percent of retail sales by December 31, 2016, and 33 percent of retail sales by December 31, 2020. The local go v erning board shall require the local publicly o wned utilities to procure not less than 33 percent of retail sales of electricity products from eligible rene w able ener gy resources in all subsequent years. (3) A local publicly o wned electric utility shall adopt procurement requirements consistent with Section 399.16. (d) The go v erning board of a local publicly o wned electric utility may adopt the follo wing measures: (1) Rules permitting the utility to apply e xcess procurement in one compliance period to subsequent compliance periods in the same manner as allo wed for retail sellers pursuant to Section 399.13. (2) Conditions that allo w for delaying timely compliance consistent with subdi vision (b) of Section 399.15. (3) Cost limitations for procurement e xpenditures consistent with subdi vision (c) of Section 399.15.

**** 97 — 34

— Ch. 1(e) The go v erning board of the local publicly o wned 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 of fering all interested parties an opportunity to comment. Not less than 30 days ’ notice shall be gi v en to the public of an y meeting held for purposes of adopting the program. Not less than 10 days ’ notice shall be gi v en to the public before an y meeting is held to mak e a substanti v e change to the
program. (f) (1) Each local publicly o wned electric utility shall annually post notice, in accordance with Chapter 9 (commencing with Section 54950) of P art 1 of Di vision 2 of T itle 5 of the Go v ernment Code, whene v er its
go v erning body will deliberate in public on its rene w able ener gy resources procurement plan. (2) Contemporaneous with the posting of the notice of a public meeting to consider the rene w able ener gy resources procurement plan, the local publicly o wned electric utility shall notify the Ener gy Commission of the date, time, and location of the meeting in order to enable the Ener gy Commission to post the information on its Internet W eb site. This requirement is satis fi ed if the local publicly o wned electric utility pro vides the uniform resource locator (URL) that links to this information. (3) Upon distrib ution to its go v erning body of information related to its

rene w able ener gy resources procurement status and future plans, for its consideration at a noticed public meeting, the local publicly o wned electric utility shall mak e that information a v ailable to the public and shall pro vide the Ener gy Commission with an electronic cop y of the documents for posting on the Ener gy Commission ’ s Internet W eb site. This requirement is satis fi ed if the local publicly o wned electric utility pro vides the uniform resource locator (URL) that links to the documents or information re g arding other manners of access to the documents. (g) A local publicly o wned electric utility shall annually submit to the Ener gy Commission documentation re g arding eligible rene w able ener gy resources procurement contracts that it e x ecuted during the prior year , as follo ws: (1) A description of the eligible rene w able ener gy resource, including the duration of the contract or electricity purchase agreement. (2) A description and identi fi cation of the electrical generating f acility
pro viding the eligible rene w able ener gy resource under the contract. (3) An estimate of the percentage increase in the utility ’ s total retail sales of electricity from eligible rene w able ener gy resources that will result from the contract. (h) A public utility district that recei v es all of its electricity pursuant to a preference right adopted and authorized by the United States Congress pursuant to Section 4 of the T rinity Ri v er Di vision Act of August 12, 1955 (Public La w 84-386) shall be in compliance with the rene w able ener gy procurement requirements of this article. (i) F or a local publicly o wned electric utility that w as in e xistence on or before January 1, 2009, that pro vides retail electric service to 15,000 or

**** 97 Ch. 1

— 35

—fe wer customer accounts in California, and is interconnected to a balancing

authority located outside this state b ut within the WECC, an eligible

rene w able ener gy resource includes a f acility that is located outside California that is connected to the WECC transmission system, if all of the follo wing conditions are met: (1) The electricity generated by the f acility is procured by the local publicly o wned electric utility , is deli v ered to the balancing authority area in which the local publicly o wned electric utility is located, and is not used to ful fi ll rene w able ener gy procurement requirements of other states. (2) The local publicly o wned electric utility participates in, and complies with, the accounting system administered by the Ener gy Commission pursuant to this article. (3) The Ener gy Commission v eri fi es that the electricity generated by the f acility is eligible to meet the rene w ables portfolio standard procurement requirements. (j) Notwithstanding subdi vision (a), for a local publicly o wned electric utility that is a joint po wers authority of districts established pursuant to state la w on or before January 1, 2005, that furnish electric services other than to residential customers, and is formed pursuant to the Irrig ation District La w (Di vision 11 (commencing with Section 20500) of the W ater Code), the percentage of total kilo w atthours sold to the district ’ s retail end-use customers, upon which the rene w ables portfolio standard procurement requirements in subdi vision (b) are calculated, shall be based on the authority ’ s a

v erage retail sales o v er the pre vious se v en years. If the authority has not furnished electric service for se v en years, then the calculation shall be based on a v erage retail sales o v er the number of completed years during which the authority has pro vided electric service. (k) A local publicly o wned electric utility in a city and county that only recei v es greater than 67 percent of its electricity sources from h ydroelectric generation located within the state that it o wns and operates, and that does not meet the de fi nition of a “ rene w able electrical generation f acility ” pursuant to Section 25741 of the Public Resources Code, shall be required to procure eligible rene w able ener gy resources, including rene w able ener gy credits, to meet only the electricity demands unsatis fi ed by its h ydroelectric generation in an y gi v en year , in order to satisfy its rene w able ener gy procurement requirements. ( l ) Each local publicly o wned electric utility shall report, on an annual basis, to its customers and to the Ener gy Commission, all of the follo wing: (1) Expenditures of public goods funds collected pursuant to Section 385 for eligible rene w able ener gy resource de v elopment. Reports shall contain a description of programs, e xpenditures, and e xpected or actual results. (2) The resource mix used to serv e its customers by ener gy source. (3) The utility ’ s status in implementing a rene w ables portfolio standard pursuant to subdi vision (a) and the utility ’ s progress to w ard attaining the standard follo wing implementation. (m) A local publicly o wned electric utility shall retain discretion o v er both of the follo wing:

**** 97 — 36

— Ch. 1(1) The mix of eligible rene w able energy resources procured by the utility

and those additional generation resources procured by the utility for purposes of ensuring resource adequac y and reliability

. (2) The reasonable costs incurred by the utility for eligible rene w able

ener gy resources o wned by the utility

. (n) On or before July 1, 2011, the Ener gy Commission shall adopt

re gulations specifying procedures for enforcement of this article. The

re gulations shall include a public process under which the Ener gy Commission may issue a notice of violation and correction ag ainst a local publicly o wned electric utility for f ailure to comply with this article, and for referral of violations to the State Air Resources Board for penalties pursuant to subdi vision (o). (o) (1) Upon a determination by the Ener gy Commission that a local publicly o wned electric utility has f ailed to comply with this article, the Ener gy Commission shall refer the f ailure to comply with this article to the State Air Resources Board, which may impose penalties to enforce this article consistent with P art 6 (commencing with Section 38580) of Di vision 25.5 of the Health and Safety Code. An y penalties imposed shall be comparable to those adopted by the commission for noncompliance by retail sellers. (2) If Di vision 25.5 (commencing with Section 38500) of the Health and Safety Code is suspended or repealed, the State Air Resources Board may tak e action to enforce this article on local publicly o wned electric utilities consistent with Section 41513 of the Health and Safety Code, and impose penalties on a local publicly o wned electric utility consistent with Article 3 (commencing with Section 42400) of Chapter 4 of P art 4 of, and Chapter 1.5 (commencing with Section 43025) of P art 5 of, Di vision 26 of the Health and Safety Code. (3) F or the purpose of this subdi vision, 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 o wned electric utility for the utility ’ s f ailure to comply with this article, the State Air Resources Board shall not impose an additional penalty for the same infraction, or the same f ailure to comply , with an y rene w ables procurement requirement imposed upon the utility pursuant to the California Global W arming Solutions Act of 2006 (Di vision 25.5 (commencing with Section 38500) of the Health and Safety Code). (5) An y 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 Le gislature, shall be e xpended for reducing emissions of air pollution or greenhouse g ases within the same geographic area as the local publicly o wned electric utility

. (p) The commission has no authority or jurisdiction to enforce an y of the requirements of this article on a local publicly o wned electric utility

. SEC. 30. Section 399.31 is added to the Public Utilities Code , to read: 399.31. A retail seller may procure rene w able ener gy credits associated with deli v eries of electricity by an eligible rene w able ener gy resource to a

**** 97 Ch. 1

— 37

—local publicly o wned electric utility , for purposes of compliance with the

rene w ables portfolio standard requirements, if both of the follo wing conditions are met: (a) The local publicly o wned electric utility has adopted and implemented

a rene w able ener gy resources procurement plan that complies with the

rene w ables portfolio standard adopted pursuant to Section 399.30. (b) The local publicly o wned electric utility is procuring suf fi cient eligible

rene w able ener gy resources to satisfy the tar get standard, and will not f ail to satisfy the tar get standard in the e v ent that the rene w able ener gy credit is sold to the retail seller

. SEC. 31. Section 454.5 of the Public Utilities Code is amended to read: 454.5. (a) The commission shall specify the allocation of electricity

, including quantity , characteristics, and duration of electricity deli v ery , that the Department of W

ater Resources shall pro vide under its po wer purchase agreements to the customers of each electrical corporation, which shall be

re fl ected in the electrical corporation ’ s proposed procurement plan. Each electrical corporation shall fi le a proposed procurement plan with the commission not later than 60 days after the commission speci fi es the allocation of electricity

. The proposed procurement plan shall specify the date that the electrical corporation intends to resume procurement of electricity for its retail customers, consistent with its oblig ation to serv e. After the commission ’ s adoption of a procurement plan, the commission shall allo w not less than 60 days before the electrical corporation resumes procurement pursuant to this section. (b) An electrical corporation ’ s proposed procurement plan shall include, b ut not be limited to, all of the follo wing: (1) An assessment of the price risk associated with the electrical corporation ’ s portfolio, including an y utility-retained generation, e xisting
po wer purchase and e xchange contracts, and proposed contracts or purchases under which an electrical corporation will procure electricity , electricity demand reductions, and electricity-related products and the remaining open position to be serv ed by spot mark et transactions. (2) A de fi nition of each electricity product, electricity-related product, and procurement related fi nancial product, including support and justi fi cation for the product type and amount to be procured under the plan. (3) The duration of the plan. (4) The duration, timing, and range of quantities of each product to be procured. (5) A competiti v e procurement process under which the electrical corporation may request bids for procurement-related services, including the format and criteria of that procurement process. (6) An incenti v e mechanism, if an y incenti v e mechanism is proposed, including the type of transactions to be co v ered by that mechanism, their respecti v e procurement benchmarks, and other parameters needed to determine the sharing of risks and bene fi ts. (7) The upfront standards and criteria by which the acceptability and eligibility for rate reco v ery of a proposed procurement transaction will be

**** 97 — 38

— Ch. 1kno wn by the electrical corporation prior to e x ecution of the transaction.

This shall include an e xpedited appro v al process for the commission ’ s

re vie w of proposed contracts and subsequent appro v al or rejection thereof. The electrical corporation shall propose alternati v e procurement choices in the e v ent a contract is rejected. (8) Procedures for updating the procurement plan. (9) A sho wing that the procurement plan will achie v e the follo wing: (A) The electrical corporation, in order to ful fi ll its unmet resource needs, shall procure resources from eligible rene w able ener gy resources in an amount suf

fi cient to meet its procurement requirements pursuant to the California Rene w ables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3). (B) The electrical corporation shall create or maintain a di v ersi fi ed procurement portfolio consisting of both short-term and long-term electricity and electricity-related and demand reduction products. (C) The electrical corporation shall fi rst meet its unmet resource needs through all a v ailable ener gy ef fi cienc y and demand reduction resources that are cost ef

fecti v e, reliable, and feasible. (10) The electrical corporation ’ s risk management polic y , strate gy , and practices, including speci fi c measures of price stability

. (11) A plan to achie v e appropriate increases in di v ersity of o wnership and di v ersity of fuel supply of nonutility electrical generation. (12) A mechanism for reco v ery of reasonable administrati v e costs related to procurement in the generation component of rates. (c) The commission shall re vie w and accept, modify , or reject each electrical corporation ’ s procurement plan. The commission ’ s re vie w shall consider each electrical corporation ’ s indi vidual procurement situation, and shall gi v e strong consideration to that situation in determining which one or more of the features set forth in this subdi vision shall apply to that electrical corporation. A procurement plan appro v ed by the commission shall contain one or more of the follo wing features, pro vided that the commission may not appro v e a feature or mechanism for an electrical corporation if it fi nds that the feature or mechanism w ould impair the restoration of an electrical corporation ’ s creditw orthiness or w ould lead to a deterioration of an electrical corporation ’ s creditw orthiness: (1) A competiti v e procurement process under which the electrical corporation may request bids for procurement-related services. The commission shall specify the format of that procurement process, as well as criteria to ensure that the auction process is open and adequately subscribed. An y purchases made in compliance with the commission-authorized process shall be reco v ered in the generation component of rates. (2) An incenti v e mechanism that establishes a procurement benchmark or benchmarks and authorizes the electrical corporation to procure from the mark et, subject to comparing the electrical corporation ’ s performance to the commission-authorized benchmark or benchmarks. The incenti v e mechanism shall be clear , achie v able, and contain quanti fi able objecti v es

**** 97 Ch. 1

— 39

—and standards. The incenti v e mechanism shall contain balanced risk and

re w ard incenti v es that limit the risk and re w ard of an electrical corporation. (3) Upfront achie v able standards and criteria by which the acceptability and eligibility for rate reco v ery of a proposed procurement transaction will be kno wn by the electrical corporation prior to the e x ecution of the bilateral contract for the transaction. The commission shall pro vide for e xpedited

re vie w and either appro v e or reject the indi vidual contracts submitted by the electrical corporation to ensure compliance with its procurement plan. T o the e xtent the commission rejects a proposed contract pursuant to this criteria, the commission shall designate alternati v e procurement choices obtained in the procurement plan that will be reco v erable for ratemaking
purposes. (d) A procurement plan appro v ed by the commission shall accomplish each of the follo wing objecti v es: (1) Enable the electrical corporation to ful fi ll its oblig ation to serv e its customers at just and reasonable rates. (2) Eliminate the need for after -the-f act reasonableness re vie ws of an electrical corporation ’ s actions in compliance with an appro v ed procurement plan, including resulting electricity procurement contracts, practices, and related e xpenses. Ho we v er , the commission may establish a re gulatory process to v erify and ensure that each contract w as administered in accordance with the terms of the contract, and contract disputes that may arise are reasonably resolv ed. (3) Ensure timely reco v ery of prospecti v e procurement costs incurred pursuant to an appro v ed procurement plan. The commission shall establish rates based on forecasts of procurement costs adopted by the commission, actual procurement costs incurred, or combination thereof, as determined by the commission. The commission shall establish po wer procurement balancing accounts to track the dif ferences between recorded re v enues and costs incurred pursuant to an appro v ed procurement plan. The commission shall re vie w the po wer procurement balancing accounts, not less than semiannually , and shall adjust rates or order refunds, as necessary , to promptly amortize a balancing account, according to a schedule determined by the commission. Until January 1, 2006, the commission shall ensure that

an y o v ercollection or undercollection in the po wer procurement balancing account does not e xceed 5 percent of the electrical corporation ’ s actual recorded generation re v enues for the prior calendar year e xcluding re v enues collected for the Department of W ater Resources. The commission shall determine the schedule for amortizing the o v ercollection or undercollection in the balancing account to ensure that the 5 percent threshold is not

e xceeded. After January 1, 2006, this adjustment shall occur when deemed appropriate by the commission consistent with the objecti v es of this section. (4) Moderate the price risk associated with serving its retail customers, including the price risk embedded in its long-term supply contracts, by authorizing an electrical corporation to enter into fi nancial and other electricity-related product contracts.

**** 97 — 40

— Ch. 1(5) Pro vide for just and reasonable rates, with an appropriate balancing

of price stability and price le v el in the electrical corporation ’ s procurement plan. (e) The commission shall pro vide for the periodic re vie w and prospecti v e modi fi cation of an electrical corporation ’ s procurement plan. (f) The commission may eng age an independent consultant or advisory service to e v aluate risk management and strate gy

. The reasonable costs of

an y consultant or advisory service is a reimb ursable e xpense and eligible for funding pursuant to Section 631. (g) The commission shall adopt appropriate procedures to ensure the

con fi dentiality of an y mark et sensiti v e information submitted in an electrical corporation ’ s proposed procurement plan or resulting from or related to its
appro v ed procurement plan, including, b ut not limited to, proposed or

e x ecuted po wer purchase agreements, data request responses, or consultant reports, or an y combination, pro vided that the Of fi ce of Ratepayer Adv ocates and other consumer groups that are nonmark et participants shall be pro vided access to this information under con fi dentiality procedures authorized by the commission. (h) Nothing in this section alters, modi fi es, or amends the commission ’ s

o v ersight of af

fi liate transactions under its rules and decisions or the commission ’ s e xisting authority to in v estig ate and penalize an electrical corporation ’ s alle ged fraudulent acti vities, or to disallo w costs incurred as a result of gross incompetence, fraud, ab use, or similar grounds. Nothing in this section e xpands, modi fi es, or limits the State Ener gy Resources Conserv ation and De v elopment Commission ’ s e xisting authority and responsibilities as set forth in Sections 25216, 25216.5, and 25323 of the Public Resources Code. (i) An electrical corporation that serv es less than 500,000 electric retail customers within the state may fi le with the commission a request for

e x emption from this section, which the commission shall grant upon a sho wing of good cause. (j) (1) Prior to its appro v al pursuant to Section 851 of an y di v estiture of generation assets o wned by an electrical corporation on or after the date of enactment of the act adding this section, the commission shall determine the impact of the proposed di v estiture on the electrical corporation ’ s procurement rates and shall appro v e a di v estiture only to the e xtent it fi nds, taking into account the ef fect of the di v estiture on procurement rates, that the di v estiture is in the public interest and will result in net ratepayer bene fi ts. (2) An y electrical corporation ’ s procurement necessitated as a result of the di v estiture of generation assets on or after the ef fecti v e date of the act adding this subdi vision shall be subject to the mechanisms and procedures set forth in this section only if its actual cost is less than the recent historical cost of the di v ested generation assets. (3) Notwithstanding paragraph (2), the commission may deem proposed procurement eligible to use the procedures in this section upon its appro v al of asset di v estiture pursuant to Section 851.

**** 97 Ch. 1

— 41

—SEC. 32. Article 11 (commencing with Section 910) is added to Chapter

4 of P art 1 of Di vision 1 of the Public Utilities Code , to read:

Article 11. Reports

910. (a) By February 1 of each year , the commission shall prepare and submit to the polic y and fi scal committees of the Le gislature a written report summarizing the follo wing information: (1) All electrical corporation re v enue requirement increases associated with meeting the rene w ables portfolio standard, as de fi ned in Section 399.12, including direct procurement costs for eligible rene w able ener gy resources and rene w able ener gy credits, administrati v e e xpenses for procurement,

e xpenses incurred to ensure a reliable supply of electricity , and e xpenses for upgrades to the electrical transmission and distrib ution grid necessary to the deli v ery of electricity from eligible rene w able ener gy resources to load. (2) All cost savings e xperienced, or costs av oided, by electrical corporations as a result of meeting the rene w ables portfolio standard. (3) All costs incurred by electrical corporations for incenti v es for distrib uted and rene w able generation, including the self-generation incenti v e program, the California Solar Initiati v e, and net ener gy metering. (4) All cost savings e xperienced, or costs av oided, by electrical corporations as a result of incenti v es for distrib uted and rene w able generation. (5) All rene w able, fossil fuel, and nuclear procurement costs, research, study , or pilot program costs, or other program costs for which an electrical corporation is seeking reco v ery in rates, that is pending determination or
appro v al by the commission. (6) The decision number for each decision of the commission of reco v ery in rates of costs incurred by an electrical corporation since the preceding report. (7) An y change in the electrical load serviced by an electrical corporation since the preceding report. (8) The ef

forts each electrical corporation is taking to recruit and train emplo yees to ensure an adequately trained and a v ailable w orkforce, including the number of ne w emplo yees hired by the electrical corporation for purposes of implementing the requirements of Article 16 (commencing with Section 399.11) of Chapter 2.3, the goals adopted by the electrical corporation for increasing w omen, minority , and disabled v eterans trained or hired for purposes of implementing the requirements of Article 16 (commencing with Section 399.11) of Chapter 2.3, and, to the e xtent information is a v ailable, the number of ne w emplo yees hired and the number of w omen, minority

, and disabled v eterans trained or hired by persons or corporations o wning or operating eligible rene w able ener gy resources under contract with an electrical corporation. This paragraph does not pro vide the commission with

**** 97 — 42

— Ch. 1authority to eng age in, re gulate, or e xpand its authority to include, w orkforce

recruitment or training. (b) The commission may combine the information required by this section with the reports prepared pursuant to Article 16 (commencing with Section 399.11) of Chapter 2.3. SEC. 33. Section 1005.1 is added to the Public Utilities Code , to read: 1005.1. (a) The commission shall issue a decision on an application for a certi fi cate within 18 months of the date of fi ling of the completed application, when all of the follo wing are true: (1) The application is for a certi fi cate for b uilding or upgrading an electrical transmission line that the commission fi nds necessary to pro vide transmission to load centers for electricity generated in a high priority

rene w able ener gy zone or is reasonably necessary to f acilitate achie v ement of the rene w ables portfolio standard established in Article 16 (commencing with Section 399.11) of Chapter 2.3. (2) The commission has considered all of the follo wing: (A) The utilization of rights-of-w ay by upgrading e xisting transmission f acilities instead of b uilding ne w transmission f acilities, where technically and economically justi fi able. (B) The e xpansion of e xisting rights-of-w ay , if technically and economically feasible, when construction of ne w transmission lines is required. (C) The creation of ne w rights-of-w ay when justi fi ed by en vironmental, technical, and economic reasons. (D) The a v ailability of cost-ef fecti v e alternati v es to transmission, such

as ener gy ef

fi cienc y measures and distrib uted generation. (3) The commission has not e xpressly found an y of the follo wing: (A) That the in

v estment is not reasonable and necessary to maintain or enhance reliability of the transmission grid. (B) That the b uilding or upgrading of the electrical transmission line will not maintain or enhance ef fi cient use of the transmission grid. (C) That the transmission line f ails to meet other applicable standards and requirements for appro v al and construction. (b) An e xtension of time may be granted by the commission if it fi nds the e xtension is necessary for completion of re vie w pursuant to the California En vironmental Quality Act (Di vision 13 (commencing with Section 21000) of the Public Resources Code). SEC. 34. No reimb ursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agenc y or school district has the authority to le vy service char ges, fees, or assessments suf fi cient to pay for the program or le v el of service mandated by this act or because costs that may be incurred by a local agenc y or school district will be incurred because this act creates a ne w crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Go v ernment Code, or changes the de fi nition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

**** 97 Ch. 1

— 43

—SEC. 35. The sum of three hundred twenty-tw o thousand dollars

($322,000) is hereby appropriated from the Public Utilities Commission Utilities Reimb ursement Account to the Public Utilities Commission for additional staf

fi ng to identify , re vie w , and appro v e transmission lines reasonably necessary or appropriate to f acilitate achie v ement of the

rene w ables portfolio standard established in Article 16 (commencing with Section 399.11) of Chapter 2.3 of P art 1 of Di vision 1 of the Public Utilities Code.

O

**** 97 — 44

— Ch. 1