Amended  IN  Senate  April 09, 2018
Amended  IN  Senate  March 22, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 1440

Introduced by Senator Hueso

February 16, 2018

An act to add and repeal Chapter 11 (commencing with Section 2898) of to Part 2 of Division 1 of the Public Utilities Code, relating to energy.


LEGISLATIVE COUNSEL'S DIGEST


SB 1440, as amended, Hueso. Energy: biomethane: Pipeline Decarbonization Program. biomethane procurement goals.
Existing law requires state agencies to consider and, as appropriate, adopt policies and incentives to significantly increase the sustainable production and use of renewable gas. Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including gas corporations. Existing law requires the PUC to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, and that facilitate the development of a variety of sources of in-state biomethane. Existing law requires the PUC, in consultation with the State Energy Resources Conservation and Development Commission (Energy Commission) and the State Air Resources Board (state board), to consider additional policies to support the development and use in the state of renewable gas that reduce short-lived climate pollutants in the state.
This bill would require the PUC, in consultation with the state board, before July 1, 2019, to establish a biomethane procurement program that requires certain gas corporations, until January 1, 2030, to annually procure their proportionate share of a total of 32 billion cubic feet of biomethane statewide, from sources that reduce the emissions of greenhouse gases and in furtherance of the statewide greenhouse gas emissions limit. The bill would require the program, to the extent consistent with federal and state law, to prioritize the procurement of biomethane from certain biomethane producers and to require the procurement of minimum volumes of biomethane produced in-state from eligible feedstocks sufficient to support the achievement of certain methane reduction goals. with goals for gas corporations to collectively procure, on an annual basis, their proportionate share of a statewide total of 32 billion cubic feet of biomethane from sources that have a first point of interconnection with the pipeline system in California. The bill would also set goals for the procurement of biomethane produced from identified source materials. The bill would require the PUC to approve, or modify and approve, a gas corporation’s application to recover in the rate base the investments in infrastructure necessary to deliver biomethane from a biomethane producer to the pipeline system with full cost recovery from the gas corporation’s customers. The bill would require certain other costs incurred by a gas corporation to comply with the program’s requirements to be allocated as a fully nonbypassable fixed charge or a nonbypassable demand differentiated fixed charge to the gas corporation’s customers. The bill would authorize the PUC to relieve a gas corporation from meeting the program’s requirements goals if the compliance costs are above a specified amount. This bill would require the PUC to require up to 15% of annual revenues received by a gas corporation as a result of the allocation of greenhouse gas allowances to natural gas suppliers to be used for reducing the cost or impact of biomethane used in stationary sources to support certain existing greenhouse gas reduction goals.
Under the Public Utilities Act a violation of any order, decision, rule, direction, demand, or requirement of the commission is a crime.
Because the violation of an order of the commission implementing the bill’s provisions would be a crime, this bill would impose a state-mandated local program.
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 a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 Chapter 11 (commencing with Section 2898) is added to Part 2 of Division 1 of the Public Utilities Code, to read:
CHAPTER  11. Pipeline Decarbonization Biomethane Procurement Program

2898.
 For (a) This chapter shall be known, and may be cited, as the Biomethane Procurement Program.
(b) For purposes of this chapter, “biomethane” shall include gas that is produced through gasification. biomethane is gas generated from organic waste through anaerobic digestion, gasification, pyrolysis, or other conversion technology that converts organic matter to gas. Biomethane may be produced from multiple sources, including agricultural waste, forest waste, landfills, wastewater treatment byproducts, livestock waste, and diverted organic waste.

2898.1.
 (a) (1) Before July 1, 2019, the commission, in consultation with the State Air Resources Board, shall establish a biomethane procurement program that requires each gas corporation, until January 1, 2030, to annually procure its proportionate share of a total of 32 billion cubic feet of biomethane statewide, from sources that biomethane procurement goals for gas corporations to collectively procure 32 billion cubic feet of biomethane from sources that have a first point of interconnection with the pipeline system in California. Procurement counting toward this goal shall reduce the emissions of greenhouse gases, including short-lived climate pollutants, and in furtherance further the achievement of the statewide greenhouse gas emissions limit established pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code). The proportionate share of each gas corporation shall be calculated based on the ratio of the gas corporation’s core volume of natural gas sold in California in 2018 compared to the total statewide core volume of natural gas sold in California in 2018.

(2)The commission, in consultation with the State Air Resources Board, shall review and, if necessary, update the biomethane procurement program’s requirements at least once every five years, with the first review concluding before January 1, 2025.

(3)To the extent consistent with federal and state law, the biomethane procurement program shall prioritize the procurement of biomethane from a biomethane producer that has a first point of interconnection with the pipeline system in California.

(4)To the extent consistent with federal and state law, the biomethane procurement program shall require the procurement of minimum volumes of biomethane produced in-state from eligible feedstocks sufficient to support the achievement of the methane reduction goals established in Chapter 395 of the Statutes of 2016. Biomethane procured in addition to these minimum volume requirements may be procured from any market-competitive supplies, including out-of-state resources.

(2) Commencing January 1, 2020, and every two years thereafter, each gas corporation shall report to the State Air Resources Board the gas corporation’s progress in achieving the goal set forth in paragraph (1) of subdivision (a) including the costs associated with that progress.
(3) The commission shall allocate to each gas corporation a proportionate share of the goal set forth in paragraph (1) of subdivision (a) based on the following categories:
(A) Dairy–six billion cubic feet.
(B) Diverted organic waste–12 billion cubic feet.
(C) Food processing waste–up to two billion cubic feet.
(D) Landfill–six billion cubic feet.
(E) Any feedstock sourced from California–six billion cubic feet.
(b) (1) The commission shall approve, or modify and approve, a gas corporation’s application to recover in the rate base the investments in infrastructure necessary to deliver biomethane from a biomethane producer to the pipeline system, including the point of receipt downstream, just and reasonable investment required to interconnect biomethane production to the existing pipeline system, including the just and reasonable investment for the point of receipt and any downstream facilities required to facilitate the receipt of biomethane, with full cost recovery from the gas corporation’s customers, including both core and noncore customers.
(2) Any costs incurred by a gas corporation to comply with the biomethane procurement program’s requirements goals that are in excess of the resale value of the biomethane it procured shall be allocated as a fully nonbypassable fixed charge or a nonbypassable demand differentiated fixed charge to the gas corporation’s customers, including both core and noncore customers.
(c) A gas corporation may meet achieve the biomethane procurement program’s requirements goals through contracts formed pursuant to a competitive solicitation process or a bilateral agreement, and may enter into procurement contracts with up to a 15-year term.
(d) Notwithstanding any other provision of this chapter, if the costs to comply with achieve the biomethane procurement program goals exceed an average cost of fifteen dollars ($15) per million British thermal units above the average Natural Gas Index price, a gas corporation may apply to ask the commission for relief from meeting subsequent the biomethane procurement program requirements. goals.

(e)To the extent consistent with federal and state law, the commission shall authorize a gas corporation to trade, buy, and sell any renewable energy credit associated with biomethane production and use.

(f)

(e) A gas corporation shall manage the costs associated with transactions made pursuant to this chapter, including any renewable energy credits the gas corporation obtains, outside of its core portfolio.
(f) Notwithstanding any other provision of this chapter, a gas corporation shall enter into procurement contracts for biomethane, subject to market availability, to be delivered into the natural gas system.

2898.8.

The requirements of this chapter shall only apply

2898.7.
 This chapter applies only to a gas corporation that, as of January 1, 2018, had 100,000 or more core customer accounts in California.

2898.9.

This chapter shall remain in effect only until January 1, 2030, and as of that date is repealed.

2898.8.
 The commission, in consultation with the State Air Resources Board, shall direct gas corporations to implement not less than three agricultural and forest waste pilot projects to demonstrate interconnection to the common carrier pipeline system and to demonstrate additional in-state short-lived climate pollutants reductions. A gas corporation may recover in the rate base the investment required for these pilot projects, including the investment for infrastructure required to interconnect with the natural gas system.

2898.9.
 The commission shall require up to 15 percent of revenues received annually by a gas corporation as a result of the direct allocation of greenhouse gas allowances to natural gas suppliers pursuant to subdivision (f) of Section 95890 of Title 17 of the California Code of Regulations to be used for reducing the cost or impact of biomethane used in stationary sources to support the goals specified in Chapter 249 of the Statutes of 2016.

SEC. 2.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only 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.