Bill Text: CA AB56 | 2019-2020 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Electricity: procurement by the California Alternative Energy and Advanced Transportation Financing Authority.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Engrossed - Dead) 2019-08-28 - In committee: Reconsideration granted. [AB56 Detail]

Download: California-2019-AB56-Amended.html

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Amended  IN  Assembly  March 18, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill

No. 56

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Introduced by Assembly Member Eduardo Garcia

December 03, 2018

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An act to add Section 400.5 to the Public Utilities Commission, relating to electricity. An act to add Division 1.7 (commencing with Section 3600) to the Public Utilities Code, relating to electricity.

LEGISLATIVE COUNSEL'S DIGEST

AB 56, as amended, Eduardo Garcia. Statewide central electricity procurement entity. California Clean Electricity Authority

Existing law, enacted during the 2000–01 energy crisis, creates the California Consumer Power and Conservation Financing Authority, with prescribed powers and responsibilities, including power to issue revenue bonds for the purposes of augmenting electrical generating facilities and to ensure a sufficient and reliable supply of electricity. The authority is also authorized to finance incentives for investment in cost-effective, energy-efficient appliances and energy demand reduction, to achieve an adequate energy capacity reserve level, and to provide financing for the retrofit of inefficient electrical powerplants. Existing law prohibits the financing authority from approving any new program, enterprise, or project, on or after January 1, 2007, unless authority to approve such an activity is granted by statute enacted on or before January 1, 2007. Until January 1, 2007, the financing authority was authorized to request proposals from qualified participating parties to purchase, lease, or otherwise acquire sites for the purpose of developing generation facilities that would provide the lowest cost electricity to consumers over the life of the facilities.

This bill would authorize the Public Utilities Commission (PUC) and the State Energy Resources Conservation and Development Commission (Energy Commission) to jointly establish the California Clean Electricity Authority, a nonprofit, public benefit corporation, if both commissions make certain findings. The bill would authorize the authority to undertake procurement of electricity on behalf of retail end-use customers of electrical corporations, community choice aggregators, and electric service providers, collectively referred to as load-serving entities, and local publicly owned electric utilities, in support of certain energy, environmental, economic, public health, and public safety policy objectives. The bill would require the authority to submit to the Energy Commission for approval annual procurement plans proposing procurement commitments on behalf of customers of local publicly owned electric utilities. The bill would require the authority to submit to the PUC for approval annual procurement plans proposing procurement commitments on behalf of load-serving entities. Upon the approval of the procurement plan, the authority would be authorized to solicit and negotiate for procurement contracts. The bill would require the authority to develop and submit for review to either the PUC or the Energy Commission annual revenue requirements for costs incurred on behalf of customers of load-serving entities or local publicly owned electric utilities, as applicable. The bill would specify that approved revenue requirements are direct obligations of the customers of load-serving entities or local publicly owned electric utilities and would require load-serving entities and local publicly owned electric utilities to remit payments to the authority, as provided. Because the bill would impose additional duties on local publicly owned electric utilities, it would impose a state-mandated local program.

This bill would state the intent of the Legislature to appropriate $5 million dollars in the annual Budget Act to serve as a startup fund for the establishment of the authority, which the bill would require the authority to repay.

Under existing law, a violation of an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because a violation of an order or decision of the commission implementing the requirements of the bill would be a crime, this bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for specified reasons.

Existing law requires the Public Utilities Commission (PUC) and the State Energy Resources Conservation and Development Commission (Energy Commission) to undertake various actions in furtherance of meeting the state’s clean energy and pollution reduction objectives.

This bill would require the PUC and the Energy Commission to provide to the Legislature, by March 31, 2020, a joint assessment, as specified, of options for establishing a central statewide entity to procure electricity for all end-use retail customers in the state.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NOYES  

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Bill Text

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

SECTION 1.

 Division 1.7 (commencing with Section 3600) is added to the Public Utilities Code, to read:

DIVISION 1.7. California Clean Electricity Authority

CHAPTER  1. General Provisions and Definitions

3600.

 In enacting this division, it is the intent of the Legislature to do all of the following:

(a) Establish the California Clean Electricity Authority, which is empowered to undertake procurement of electricity to meet the state’s climate, clean energy, and reliability goals that are not satisfied by load-serving entities and publicly owned electric utilities.

(b) Provide jurisdiction to the State Energy Resources Conservation and Development Commission to approve the procurement by the California Clean Electricity Authority that creates cost responsibility for end-use retail customers of local publicly owned electric utilities.

(c) Provide jurisdiction to the Public Utilities Commission to approve procurement by the California Clean Electricity Authority that creates cost responsibility for end-use retail customers of load-serving entities.

(d) Authorize procurement by the California Clean Electricity Authority to support the achievement of the following objectives:

(1) To accelerate the development of clean energy resources.

(2) To reduce the emissions of greenhouse gases associated with the production of electricity that serves California customers.

(3) To minimize the emissions of criteria air pollutants and toxic air contaminants in the state.

(4) To reduce fossil fuel consumption within the state.

(5) To protect public health and safety.

(6) To meet system and local resource adequacy requirements at least cost.

(7) To stimulate economic development and job creation.

(8) To promote stable electricity rates.

(9) To reduce the cost to ratepayers of procuring new clean energy resources through economies of scale, bulk procurement, and identifying available sources of federal, state, and local incentives.

(10) To assist retail sellers to comply with their obligations under the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division 1).

(e) Promote the rapid transition to complete reliance on clean energy resources at least cost consistent with the policy objectives established pursuant to Section 454.53.

3601.

 For purposes of this division, the following definitions apply:

(a) “Authority” means the California Clean Electricity Authority established pursuant to Section 3610.

(b) “Eligible renewable energy resources” has the same meaning as set forth in Section 399.12.

(c) “Load-serving entity” has the same meaning as set forth in Section 380.

(d) “Local publicly owned electric utility” has the same meaning as set forth in Section 224.3.

(e) “Retail seller” has the same meaning as set forth in Section 399.12.

CHAPTER  2. Establishment of the California Clean Electricity Authority

3610.

 The commission and the Energy Commission may each authorize the establishment of the California Clean Electricity Authority, which shall be established if both commissions authorize the establishment and make all of the following findings:

(a) The establishment of the authority pursuant to this division can assist the state with the timely achievement of the state’s clean energy and climate policy objectives.

(b) The establishment of the authority would assist in addressing shortfalls or gaps identified in the integrated resource planning of load-serving entities and local publicly owned electric utilities.

(c) The authority could successfully serve as a procurement entity for retail sellers pursuant to subdivision (f) of Section 399.13.

(d) The authority could reasonably manage power supply commitments previously executed by an electrical corporation.

3611.

 (a) Upon authorization by both the commission and the Energy Commission, the authority shall be established as a nonprofit, public benefit corporation pursuant to, and subject to, Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code.

(b) The authority shall be governed by an independent board of directors consisting of seven members appointed as follows:

(1) Three members shall be appointed by the Governor subject to Senate confirmation.

(2) Two members shall be appointed by the Speaker of the Assembly.

(3) Two members shall be appointed by the Senate Committee on Rules.

(c) (1) Each member shall be appointed to a three-year term.

(2) The initial appointment of the board shall be as follows:

(A) The Governor shall appoint one member to a one-year term, one member to a two-year term, and one member to a three-year term.

(B) The Speaker of the Assembly shall appoint one member to a two-year term and one member to a three-year term.

(C) The Senate Committee on Rules shall appoint one member to a two-year term and one member to a three-year term.

(d) The appointing authority may reappoint a member upon the expiration of that member’s term.

(e) Members shall not be affiliated with any actual or potential participant in a market administered by the Independent System Operator.

3612.

 (a) The authority shall maintain open meeting standards and meeting notice requirements consistent with the requirements of the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code) and the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code).

(b) The commission and the Energy Commission may jointly establish additional requirements relating to governance, structure, policies, and practices for the authority to the extent that those additional requirements are reasonable to ensure transparency, public accountability, public participation, and effective governance. Those requirements may include duties of care and conflict-of-interest standards for officers and directors of the authority.

3613.

 The authority shall conduct its operation consistent with applicable state laws and in the interests of the people of the state.

3614.

 The commission and Energy Commission shall each approve the annual operating budget of the authority.

CHAPTER  3. Responsibilities of the Authority

3620.

 The authority may undertake procurement to support the following objectives:

(a) The development of new generating or storage resources mandated by state law or policy on behalf of the state where a specific procurement obligation is not deemed appropriate to assign to a load-serving entity or local publicly owned electric utility by the commission and the Energy Commission, as applicable.

(b) The efficient achievement of local reliability and resource adequacy requirements for customers of load-serving entities.

(c) The satisfaction of residual or unmet needs relating to the integrated resource planning process that include the following:

(1) Achieving optimized long-term planning goals for the state after accounting for the long-term commitments made by load-serving entities.

(2) Assembling a diverse and balanced portfolio of resources needed to ensure a reliable electricity supply pursuant to Section 454.51 and achieve the goals of the integrated resource plans developed pursuant to Section 454.52 on a statewide basis.

(3) Meeting the integrated resource planning goals identified by the Energy Commission for local publicly owned electric utilities pursuant to Section 9621 that are not satisfied by the plans submitted pursuant to Section 9622.

(d) Serving as a voluntary procurement entity on behalf of one or more retail sellers for purposes of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division 1) pursuant to subdivision (f) of Section 399.13.

(e) Managing electric generating resources previously under contract with a load-serving entity, including any resources procured pursuant to subdivision (c) of Section 365.1. The authority may accept contractual assignments for those resources to the extent authorized by the commission.

(f) Any additional objectives authorized by the commission or Energy Commission.

3621.

 (a) The authority shall submit annual procurement plans for review and approval by the commission and the Energy Commission as follows:

(1) The procurement plan submitted for review by the Energy Commission shall identify proposed procurement commitments on behalf of end-use customers of local publicly owned electric utilities.

(2) The procurement plan submitted for review by the commission shall identify proposed procurement commitments on behalf of end-use customers of load-serving entities.

(b) The procurement plans shall include all of the following elements:

(1) Proposed procurement quantities and resource types to satisfy the objectives identified in Section 3620.

(2) Forecasts of all environmental, renewable energy, and resource adequacy attributes to be procured from existing and proposed contracted resources and retired for the benefit of end-use retail customers.

(3) The status of projects previously contracted by the authority that have not yet achieved initial commercial operation and an assessment of any remaining technical, financial, permitting, or interconnection issues.

(4) A process for soliciting resources designed to achieve best value at lowest cost with the goal of minimizing environmental and public health impacts.

(5) An identification of available incentives and funds from federal, state, and local sources that can be applied to reduce the cost of procurement commitments for energy storage or new eligible renewable energy resources.

(6) Proposed standard contract terms and conditions for a long-term contract with new resources.

(7) Strategies for the sale of electricity from contracted resources into wholesale markets.

(8) Proposed allocation of net costs and compliance attributes among retail end-use customers of load-serving entities and local publicly owned electric utilities.

(9) Financial reserves, bonds, or other instruments needed to facilitate procurement transactions and demonstrate creditworthiness.

(10) Any other elements adopted for required inclusion by the commission or Energy Commission.

3622.

 The commission and Energy Commission, in reviewing and approving the annual procurement plans of the authority, shall base their determinations on the plans’ consistency with the objectives set forth in Section 3620 and on assessments of the procurement commitments made by load-serving entities or local publicly owned electric utilities, as applicable. The reviews shall consider all of the following:

(a) The extent to which the aggregated commitments of the load-serving entities and the local publicly owned electric utilities are not adequate to achieve long-term reliability, clean energy, or climate objectives.

(b) The reasonableness of assigning procurement obligations to the authority in lieu of requiring incremental procurement by load-serving entities and publicly owned electric utilities.

(c) Opportunities to preserve existing procurement contracts in the event that a buyer lacks creditworthiness or faces significant financial liquidity challenges.

(d) Potential ratepayer, environmental, public health, or technological development benefits to be achieved by assigning procurement for specific resources to the authority.

3623.

 (a) The commission and Energy Commission shall review and accept, modify, or reject the respective procurement plans submitted to them for approval.

(b) (1) Upon the approval of a plan by the commission or Energy Commission or pursuant to other direction provided the commission or Energy Commission, as applicable, the authority may solicit, negotiate, or accept assignment of procurement contracts.

(2) All procurement contracts executed pursuant to an approved plan shall be submitted to the commission or Energy Commission, as applicable, for review and approval.

(3) Contracts not approved shall not be eligible for cost recovery from end-use customers of a load-serving entity or publicly owned electric utility.

3624.

 The authority shall manage the resale of electricity for its contracted resources. All resale shall occur pursuant to an approved procurement plan consistent with the objective of realizing maximum revenues to reduce the net above-market costs of those resources to end-use retail customers.

3625.

 Unless otherwise directed by the commission or Energy Commission, the authority shall acquire all environmental, renewable energy, and resource adequacy attributes associated with the electricity procured from its contracted resources. Attributed acquired by the authority shall be retired and shall not be resold or transferred.

3626.

 The authority shall limit the procurement of new eligible renewable energy resources to products that satisfy the requirements of paragraph (1) of subdivision (b) of Section 399.16.

3627.

 New construction work resulting from the procurement of newly developed resources under this division shall be deemed public works for purposes of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of the Labor Code.

CHAPTER  4. Adjustment to Compliance Obligations

3630.

 (a) (1) The retirement of renewable, environmental, or resource adequacy attributes by the authority shall result in adjustments to specific compliance obligations for a load-serving entity or local publicly owned electric utility assigned to collect the costs incurred for the procurement of those attributes.

(2) The retirement of renewable energy credits associated with electricity procured from eligible renewable energy resources shall be used to reduce the obligations of retail sellers and local publicly owned electric utilities pursuant to the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division 1). Reduction in compliance obligations shall apply to all of the following:

(A) The procurement quantity requirements established pursuant to subdivision (b) of Section 399.15 or subdivision (b) of Section 399.30.

(B) The portfolio content category requirements established pursuant to subdivision (c) of Section 399.16 and paragraph (3) of subdivision (c) of Section 399.30. Reduction shall be based on the original portfolio content category of the procurement conducted by the authority.

(C) The contract duration requirement pursuant to subdivision (b) of Section 399.13 and paragraph (1) of subdivision (d) of Section 399.30. Reduction shall be based on the original contract duration procurement conducted by the authority for newly developed resources.

(3) The retirement of resource adequacy attributes shall be used to reduce, by an equivalent amount, the requirements applied to load-serving entities pursuant to Section 380.

(b) The commission and Energy Commission, as appropriate, shall ensure that procurement by the authority and the adjustment pursuant to this section of a retail seller’s or a local publicly owned electric utility’s compliance obligations do not do any of the following:

(1) Infringe on the flexibility of a load-serving entity or local publicly owned electric utility to procure electricity resources to serve end-use customer loads.

(2) Prevent a load-serving entity or local publicly owned electric utility from voluntary overcompliance with a state standard or requirement.

(3) Affect the calculation of emissions of greenhouse gases attributable to the procurement of a load-serving entity or local publicly owned electric utility.

(4) Affect reporting by retail suppliers under the power source disclosure program pursuant to Section 398.4.

CHAPTER  5. Cost Recovery

3640.

 The authority shall develop and submit annual revenue requirements for review and approval by the commission and Energy Commission to recover the net costs associated with the activities resulting from previously approved procurement plans. The revenue requirements shall, include, at a minimum, all of the following:

(a) Reasonable administrative, and overhead and transaction costs associated with the operation of the authority.

(b) Procurement costs associated with approved contracts.

(c) Anticipated revenues from the resale of electricity.

(d) Approved reserves in an amount determined by the commission and the Energy Commission to be necessary or desirable to support credit and collateral requirements associated with procurement activities.

(e) An adjustment to account for prior year over- or under-collections.

(f) Repayment of the General Fund for an amount appropriated by the Legislature to fund the initial startup of the authority, if any.

3641.

 (a) For costs incurred on behalf of retail customers of a local publicly owned electric utility, the authority shall be entitled to recover revenue requirements approved by the Energy Commission. Approved revenue requirements shall be a direct obligation of retail end-use customers, with all payments to be remitted to the authority by each local publicly owned electric utility.

(b) The Energy Commission shall permit each local publicly owned electric utility to determine reasonable methods of allocating and collecting approved revenue requirements attributable to its end-use customers.

3642.

 (a) For costs incurred on behalf of retail customers of a load-serving entity, the authority shall be entitled to recover revenue requirements approved by the commission. Approved revenue requirements shall be a direct obligation of the retail end-use customers of load-serving entities, with all payments to be remitted to the authority by load-serving entities.

(b) The commission shall approve a method for recovering revenue requirements from retail end-use customers of load-serving entities by a rate component that is a nonbypassable element of the local distribution service and collected on the basis of usage. Cost approved on behalf of customers of each load-serving entity shall be recovered from those customers. The recovery method shall ensure that all end-use retail customers pay a fair and reasonable share of the cost obligations and that those obligations cannot be avoided if a customer migrates to another load-serving entity or installs new self-generation resources.

SEC. 2.

 It is the intent of the Legislature to appropriate five million dollars ($5,000,000) in the annual Budget Act to serve a startup fund for the establishment of the California Clean Electricity Authority, which shall be repaid by the authority.

SEC. 3.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act or because costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SECTION 1.Section 400.5 is added to the Public Utilities Code, to read:

400.5.

(a)By March 31, 2020, the commission and the Energy Commission shall provide to the Legislature, in compliance with Section 9795 of the Government Code, a joint assessment of options for establishing a statewide central procurement entity on behalf of retail sellers in the state. This assessment shall consider the role of any proposed central procurement entity in doing all of the following:

(1)Entering into long-term contracts for newly developed renewable energy resources, energy storage, and other preferred resources. For these purposes, “preferred resources” means those resources described in the state’s Energy Action Plan II, Implementation Roadmap for Energy Policies, a joint document adopted by the Energy Commission and the commission (September 21, 2005), as that description of preferred resources may be modified by the commission.

(2)Contracting for renewable energy resources when they are at risk of retirement, if they provide demonstrated environmental and public health benefits to the state, including, but not limited to, benefit from a reduction of toxic and criteria air emissions.

(3)Developing financing tools to minimize the cost of new generation projects.

(b)In conducting the assessment pursuant to subdivision (a), the commission and the Energy Commission shall consider the benefits, costs, and risks of assigning the procurement entity function to any of the following:

(1)A state agency or state power authority.

(2)A person or corporation, whether for-profit or nonprofit.

(3)An existing retail supplier, electrical corporation, or local publicly owned electric utility.

(c)The assessment shall evaluate the need for, and appropriate design of, the following features of a central procurement structure:

(1)The recovery of reasonable and prudent administrative and procurement costs through the retail rates of end-use customers in a fair and equitable manner.

(2)The process for advance review and up-front approval of any procurement commitments.

(3)Methods of assigning specific responsibilities to the procurement entity based on the outcome of state resource planning processes and other need determinations.

(4)Options for voluntary participation or self-provision of required resources by a retail seller, as defined in Section 399.12.

(5)A reasonable and legally defensible approach to evaluating the local environmental, reliability, air quality, and public health benefits of various resources solicited by the procurement entity. This approach shall include consideration of ways to minimize emissions of criteria pollutants, toxic air contaminants, and greenhouse gases, protect public health, and reduce environmental impacts of resources to the maximum extent feasible.

(d)The commission and the Energy Commission shall conduct a joint public process for completing the assessment and shall solicit comments from interested stakeholders.

(e)Pursuant to Section 10231.5 of the Government Code, this section becomes inoperative on March 31, 2024, and is repealed on January 1, 2025.