Bill Text: CA SB1440 | 2017-2018 | Regular Session | Amended

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

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Bill Title: Energy: biomethane: biomethane procurement.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Passed) 2018-09-23 - Chaptered by Secretary of State. Chapter 739, Statutes of 2018. [SB1440 Detail]

Download: California-2017-SB1440-Amended.html

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Amended  IN  Senate  April 30, 2018

Amended  IN  Senate  April 09, 2018

Amended  IN  Senate  March 22, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill

No. 1440

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Introduced by Senator Hueso

February 16, 2018

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An act to add Chapter 11 (commencing with Section 2898) to Part 2 of Division 1 of the Public Utilities Code, relating to energy. An act to amend Section 25420 of the Health and Safety Code, to amend Section 40106 of the Public Resources Code, and to add Section 2814 to, and to add Chapter 11 (commencing with Section 2898) 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 procurement goals. Energy: biomethane: biogas and biomethane procurement program.

Existing law requires the Office of Environmental Health Hazard Assessment, in consultation with the State Air Resources Board (state board), the Department of Toxic Substances Control, the Department of Resources Recycling and Recovery, and the California Environmental Protection Agency, to compile a list of constituents of concern that could pose risks to human health and that are found in biogas, as defined, at concentrations that significantly exceed the concentrations of those constituents in natural gas. Existing law defines biomass conversion for the purposes of the California Integrated Waste Management Act of 1989, which requires each city, county, and regional agency, if any, to develop a source reduction and recycling element of an integrated waste management plan.

This bill would revise the definitions of biogas and biomass conversion for these purposes.

Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law requires the commission to authorize the construction of an interconnection with existing transmission facilities for gas or electricity by a private energy producer upon application of the private energy producer if the commission makes specified findings. Existing law requires the private energy producer to provide and to pay the total cost of the interconnection as well as other specified costs.

This bill would require an electrical corporation, gas corporation, local publicly owned gas or electric utility, electrical cooperative, or any other entity, except an electric service provider, that offers electrical or natural gas service and accepts an interconnection application from a private energy producer to provide the private energy producer with a sourced line-item justification, as defined, for the overall estimated cost of the interconnection. By placing additional requirements upon local publicly owned utilities, this bill would impose a state-mandated local program. The bill would also authorize the private energy producer to dispute the reasonableness of the overall estimated cost of the interconnection through an appeal process to be determined by the commission.

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. Existing law requires the PUC, in consultation with the State Energy Resources Conservation and Development Commission and the 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 state board, in consultation with the PUC, to establish a requirement that all gas corporations with over 100,000 customers and other purchasers of biogas, except publicly owned gas utilities, procure biogas and biomethane consistent with specified conservation requirements and policies in current law. This bill would require the state board, in consultation with the PUC, to update the biogas and biomethane procurement program’s requirements every 5 years. This bill would require the commission to allow recovery in rates of the costs of investments for this program, when specified conditions are met.

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.

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 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 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.

Digest Key

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

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Bill Text

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

SECTION 1.

 Section 25420 of the Health and Safety Code is amended to read:

25420.

 For purposes of this chapter, the following definitions apply:

(a) “Biogas” means gas that is produced from the anaerobic decomposition of organic material. material or the noncombustion thermal conversion of eligible biomass feedstock consistent with Section 40106 of the Public Resources Code.

(b) “Biomethane” means biogas that meets the standards adopted pursuant to subdivisions (c) and (d) of Section 25421 for injection into a common carrier pipeline.

(c) “Board” means the State Air Resources Board.

(d) “CalRecycle” means the Department of Resources Recycling and Recovery.

(e) “Commission” means the Public Utilities Commission.

(f) “Common carrier pipeline” means a gas conveyance pipeline, located in California, that is owned or operated by a utility or gas corporation, excluding a dedicated pipeline.

(g) “Dedicated pipeline” means a conveyance of biogas or biomethane that is not part of a common carrier pipeline system, and which conveys biogas from a biogas producer to a conditioning facility or an electrical generation facility.

(h) “Department” means the Department of Toxic Substances Control.

(i) “Gas corporation” has the same meaning as defined in Section 222 of the Public Utilities Code and is subject to rate regulation by the commission.

(j) “Hazardous waste landfill” means a landfill that is a hazardous waste facility, as defined in Section 25117.1.

(k) “Office” means the Office of Environmental Health Hazard Assessment.

(l) “Person” means an individual, trust, firm, joint stock company, partnership, association, business concern, limited liability company, or corporation. “Person” also includes any city, county, district, and the state or any department or agency thereof, or the federal government or any department or agency thereof to the extent permitted by law.

SEC. 2.

 Section 40106 of the Public Resources Code is amended to read:

40106.

 (a) “Biomass conversion” means the production of heat, fuels, or electricity by the controlled combustion of, or the use of other noncombustion thermal conversion technologies on, the following materials, when separated from other solid waste:

(1) Agricultural crop residues.

(2) Bark, lawn, yard, and garden clippings.

(3) Leaves, silvicultural residue, and tree and brush pruning.

(4) Wood, wood chips, and wood waste.

(5) Nonrecyclable pulp or nonrecyclable paper materials.

(6) Livestock waste.

(7) Municipal sewage sludge.

(8) Landfill waste.

(9) Diverted organic waste.

(b) “Biomass conversion” does not include the controlled combustion of recyclable pulp or recyclable paper materials, or materials that contain sewage sludge, industrial sludge, medical waste, hazardous waste, or either high-level or low-level radioactive waste.

(c) For purposes of this section, “nonrecyclable pulp or nonrecyclable paper materials” means either of the following, as determined by the department:

(1) Paper products or fibrous materials that cannot be technically, feasibly, or legally recycled because of the manner in which the product or material has been manufactured, treated, coated, or constructed.

(2) Paper products or fibrous materials that have become soiled or contaminated and as a result cannot be technically, feasibly, or legally recycled.

SEC. 3.

 Section 2814 is added to the Public Utilities Code, to read:

2814.

 (a) An electrical corporation, gas corporation, local publicly owned electric or gas utility, electrical cooperative, or any other entity, except an electric service provider, that offers electrical or natural gas service and accepts an interconnection application from a private energy producer shall provide the private energy producer with a sourced line-item justification for the overall estimated cost of the interconnection.

(b) The private energy producer may dispute the reasonableness of the overall estimated cost of the interconnection through an appeal process, as determined by the commission.

(c) For the purposes of this section, “sourced line-item justification” means a document that, on separate lines, breaks down the estimated cost of the interconnection into the smallest and most irreducible categories of expenses necessary to complete the interconnection. The price and necessity of each expense shall be justified with documentation, including, but not limited to, the price of labor, parts, equipment, and maintenance.

SEC. 4.

 Chapter 11 (commencing with Section 2898) is added to Part 2 of Division 1 of the Public Utilities Code, to read:

CHAPTER  11. Biogas and Biomethane Procurement Program

2898.

 For the purposes of this chapter:

(a) “Biogas” has the same definition as in Section 25420 of the Health and Safety Code.

(b) “Biomethane” means biogas that meets the standards adopted pursuant to subdivisions (c) and (d) of Section 25421 of the Health and Safety Code for injection into a common carrier pipeline.

2898.1.

 (a) On or before July 1, 2019, the State Air Resources Board, in consultation with the commission, shall adopt a biogas and biomethane procurement requirement for gas corporations with over 100,000 customers and other purchasers of biogas, except local publicly owned gas utilities. The program shall be known and may be cited as the Biogas and Biomethane Procurement Program. The Biogas and Biomethane Procurement Program requirements shall be consistent with all of the following:

(1) The organic waste diversion requirement of Section 39730.6 of the Health and Safety Code.

(2) The requirements of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1).

(3) The requirements of Section 399.12.6.

(b) In adopting the biogas and biomethane procurement requirements, the State Air Resources Board and the commission shall ensure all of the following:

(1) Appropriate allocations by the organic waste sector to meet the requirements of Section 39730 of the Health and Safety Code and state policies to reduce greenhouse gases.

(2) Consistency with the recommendations of the California Council on Science and Technology pursuant to Section 784.1.

(3) Adoption of a long-term contract requirement that provides sufficient certainty and duration to secure the investment needed for new and upgraded biogas and biomethane production facilities.

(4) Adoption of targets for specific sectors including, but not limited to, landfill waste, municipal sewage sludge, livestock waste, diverted organic waste, and wastewater.

(c) (1) The overall procurement mandate for biogas across all sectors shall be determined by the State Air Resources Board, in consultation with the commission, through the regulatory process.

(2) The overall procurement mandate for biomethane across all sectors shall initially be set to 32 billion cubic feet.

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

(e) (1) The commission shall allow recovery in rates, or other alternatives as appropriate, of the costs of investments pursuant to this chapter for prudent and reasonable investments for infrastructure that provide direct benefits, such as safety, reliability, affordability, or greenhouse gas reduction, to all classes of ratepayers, and that are in the interests of all classes of ratepayers.

(2) The following investments shall be eligible for recovery:

(A) Direct investments in the procurement and installation of infrastructure necessary to achieve interconnection between the natural gas transmission and distribution pipeline network and biomethane generation and collection equipment, including, but not limited to, gathering lines for dairy cluster biomethane projects.

(B) Installation of utility infrastructure to achieve interconnection with facilities that generate biomethane.

(C) Other investments the commission determines support the purposes of this chapter.

(f) It is not the intent of the Legislature in enacting this chapter to supplant any existing state biogas or biomethane programs, rules, or regulations.

SEC. 5.

 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, within the meaning of Section 17556 of the Government Code.

SECTION 1.Chapter 11 (commencing with Section 2898) is added to Part 2 of Division 1 of the Public Utilities Code, to read:

11.Biomethane Procurement Program

2898.

(a)This chapter shall be known, and may be cited, as the Biomethane Procurement Program.

(b)For purposes of this chapter, 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 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 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).

(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 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 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 achieve the biomethane procurement program’s 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 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 ask the commission for relief from meeting the biomethane procurement program goals.

(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.

2898.7.

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

2898.8.

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.