Amended  IN  Senate  May 25, 2018
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

Introduced by Senator Hueso
(Principal coauthor: Senator Lara)
(Principal coauthor: Assembly Member Quirk)
(Coauthor: Assembly Member Grayson)

February 16, 2018

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: 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, a gas corporation 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, customers, except publicly owned gas utilities, procure biogas and biomethane consistent with specified conservation requirements and policies in current law. law and other requirements. This bill would require the state board, in consultation with the PUC, to update the biogas and biomethane procurement program’s requirements requirements, and report to the Legislature on the progress toward meeting those requirements, every 5 years. This bill would require the commission to allow recovery in rates of the costs of investments for this program, program when specified conditions are met. met, subject to the commission’s authority to determine just and reasonable expenditures.
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.

 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 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. sludge or biosolids.

(8)Landfill waste.

(9)

(8) Diverted organic waste.
(b) “Biomass conversion” does not include the controlled combustion of recyclable pulp or recyclable paper materials, or materials that contain 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 A gas corporation that offers 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)

(b) 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, interconnection, including, but not limited to, the price of labor, parts, equipment, and maintenance. materials, and third-party charges.

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, January 1, 2020, 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, customers, 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.

(3) A gas corporation shall meet the biomethane procurement program’s requirements through contracts with terms of no fewer than 10 years, formed pursuant to a competitive solicitation process or a bilateral agreement.
(4) Adoption of targets for specific sectors sectors, including, but not limited to, landfill waste, municipal sewage sludge, gas, livestock waste, diverted organic waste, and wastewater. wastewater treatment.
(5) In adopting the targets in paragraph (4), the State Air Resources Board shall adopt a declining target for landfill gas in accordance with achieving the goals outlined in Section 39730.6 of the Health and Safety Code.
(6) Additions to the environmental benefits of existing state biogas or biomethane programs, rules, or regulations, including, but not limited to, furthering the purposes of methane reductions required in Section 39730.5 of the Health and Safety Code.
(7) That utilities do not unfairly compete with nonutility enterprises.

(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)

(c) (1) The overall procurement mandate for biomethane across all commercially available sectors shall initially be determined by the State Air Resources Board, in consultation with the commission, and initially be set to 32 billion cubic feet.
(2) The overall procurement mandate for biomethane generated using nascent technologies or other technologies not included in paragraph (1), including those using forest and agricultural biomass as a fuel source or others consistent with Section 40106 of the Public Resources Code, shall initially be set to up to two billion cubic feet. The State Air Resources Board and the commission shall limit the cost impacts of this paragraph to the maximum extent possible while also encouraging the development of new technologies to generate biomethane.
(d) The State Air Resources Board, in consultation with the commission, shall review and, if necessary, update the biogas and biomethane procurement program requirements requirements, and report to the Legislature, pursuant to Section 9795 of the Government Code, on the progress toward meeting the 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 rates of the costs of utility 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 Fifty percent of the direct investment in infrastructure necessary to achieve interconnection between from 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. up to and including the point of receipt. The point of receipt is limited to equipment that monitors gas quality, prevents noncompliant gas from entering the common carrier system, and meters and odorizes gas.

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

(C)

(B) Other investments the commission determines support the purposes of this chapter.
(3) Utility investment shall be limited to three million dollars ($3,000,000) per project.
(f) Any costs incurred by a gas corporation to comply with the biomethane procurement program’s requirements that are in excess of the resale value of the biomethane it procures shall be allocated as a fully nonbypassable charge to the gas corporation’s customers, including both core and noncore customers, subject to the commission’s authority to determine just and reasonable expenditures pursuant to Article 1 (commencing with Section 451) of the Public Utilities Code.
(g) The commission shall require 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 to offset the costs of procuring biomethane to meet the requirements of this chapter.
(h) Notwithstanding any other provision of this chapter, if the cost of the commodity purchased to comply with the biomethane procurement program exceeds an average cost of fifteen dollars ($15) per million British thermal units above the average National Gas Index price, a gas corporation shall no longer be required to procure gas above that cost to comply with this program.

(f)

(i) 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.