Amended  IN  Assembly  August 20, 2018
Amended  IN  Assembly  August 06, 2018
Amended  IN  Assembly  July 03, 2018
Amended  IN  Assembly  June 14, 2018
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 add Section 39730.9 to the Health and Safety Code, and to add Sections 748.3 and 2814 to Article 10 (commencing with Section 650) to Chapter 3 of Part 1 of Division 1 of the Public Utilities Code, relating to energy.


LEGISLATIVE COUNSEL'S DIGEST


SB 1440, as amended, Hueso. Energy: biomethane: biomethane procurement program. procurement.

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. Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

This bill would amend the act to require a gas corporation that offers 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.

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, Public Utilities Commission (PUC), in consultation with the State Energy Resources Conservation and Development Commission and the state board, State Air Resources 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, require the PUC, in consultation with the PUC, State Air Resources Board, to adopt a regulation to establish a requirement that all consider adopting specific biomethane procurement targets or goals for each gas corporations with over 100,000 customers procure biomethane consistent with specified conservation requirements and policies in current law and other requirements, including a requirement that these gas corporations collectively procure 32 billion cubic feet of biomethane annually by January 1, 2030. This bill would require the state board, in consultation with the PUC, to review this biomethane procurement regulation, and report to the Legislature on the progress toward meeting those requirements, on or before January 1, 2025. corporation, as specified. The bill would require the PUC, if the PUC adopts those targets or goals, to take certain actions in regards to the development of the targets or goals and the procurement of the biomethane to meet those targets or goals.

This bill would allocate to a gas corporation’s customers the costs incurred by the gas corporation to comply with the biomethane procurement program’s requirements, as specified.

Because certain provisions of this bill require commission enforcement and a violation of the commission’s orders would be a crime, this bill would impose a state-mandated local program by creating a new crime.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.
Because the provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by expanding the operation of a 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 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.

 Article 10 (commencing with Section 650) is added to Chapter 3 of Part 1 of Division 1 of the Public Utilities Code, to read:
Article  10. Biomethane Procurement

650.
 For purposes of this article, “biomethane” means a 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.

651.
 (a) The commission, in consultation with the State Air Resources Board, shall consider adopting specific biomethane procurement targets or goals for each gas corporation so that each gas corporation procures a proportionate share, as determined by the commission, of biomethane annually. Prior to establishing biomethane procurement targets or goals, the commission shall make both of the following findings:
(1) The targets or goals are cost-effective means of achieving the forecast reduction in the emissions of short-lived climate pollutants pursuant to Section 39730.5 of the Health and Safety Code and other greenhouse gases pursuant to Division 25.5 (commencing with Section 38500) of the Health and Safety Code.
(2) The targets or goals comply with all applicable state and federal laws.
(b) If the commission adopts specific biomethane procurement targets or goals for each gas corporation pursuant to subdivision (a), the commission shall do all of the following:
(1) Consider the recommendations developed pursuant to Section 39730.8 of the Health and Safety Code.
(2) Ensure the targets or goals are consistent with the organic waste disposal reduction targets specified in Section 39730.6 of the Health and Safety Code and the regulations adopted pursuant to Section 42652.5 of the Public Resources Code to achieve those targets.
(3) Ensure that biomethane eligible for any procurement program meets one of the following conditions:
(A) The biomethane is delivered to California through a dedicated pipeline.
(B) The biomethane is delivered to California through a common carrier pipeline and meets both of the following requirements:
(i) The source of biomethane injects the biomethane into a common carrier pipeline that physically flows within California, or toward the end user in California for which the biomethane was produced.
(ii) The seller or purchaser of the biomethane demonstrates that the capture or production of biomethane directly results in at least one of the following environmental benefits to California:
(I) The reduction or avoidance of the emission of any criteria air pollutant, toxic air contaminant, or greenhouse gas in California.
(II) The reduction or avoidance of pollutants that could have an adverse impact on waters of the state.
(III) The alleviation of a local nuisance within California that is associated with the emission of odors.

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.
SECTION 1.Section 39730.9 is added to the Health and Safety Code, to read:
39730.9.

(a)For purposes of this section:

(1)“Biomethane” means methane produced from an organic waste feedstock that meets the standards adopted pursuant to subdivisions (c) and (d) of Section 25421 for injection into a common carrier pipeline that is either:

(A)Produced from the anaerobic decomposition of organic material, including codigestion, or

(B)Produced from the noncombustion thermal conversion of the following materials, when separated from other waste.

(i)Agricultural crop residues.

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

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

(iv)Wood, wood chips, and wood waste.

(v)Nonrecyclable pulp or nonrecyclable paper materials.

(vi)Livestock excreta.

(vii)Municipal sewage sludge or biosolids.

(2)“Codigestion” means the anaerobic digestion of multiple biodegradable substrates or feedstocks.

(b)In furtherance of achieving the emission reductions required by this chapter, on or before January 1, 2021, the state board shall adopt a regulation requiring the procurement of biomethane.

(c)The state board shall consult with the Public Utilities Commission to develop specific procurement targets for each gas corporation, as defined in Section 222 of the Public Utilities Code, with over 100,000 customers, so that each of these gas corporations procures a proportionate share of a total of 32 billion cubic feet of biomethane annually by January 1, 2030.

(d)In addition to the procurement targets adopted pursuant to subdivision (c), the state board may adopt procurement requirements for precommercial biomethane technologies of up to two billion cubic feet annually by January 1, 2030. The state board and the Public Utilities Commission shall limit the cost impacts of this subdivision to the maximum extent possible while also encouraging the development of new technologies to generate biomethane and reduce methane emissions.

(e)In adopting a biomethane procurement regulation pursuant to subdivision (b), the state board, in consultation with the Department of Resources Recycling and Recovery, shall:

(1)Consider the recommendations developed pursuant to Section 39730.8.

(2)Ensure the regulation is consistent with the organic waste disposal reduction requirements of Section 39730.6 and the regulations adopted pursuant to Section 42652.5 of the Public Resources Code to achieve those targets.

(3)Ensure that biomethane eligible for this procurement program satisfies all applicable requirements established by the state board and that the biomethane meets one of the following conditions:

(A)The biomethane is delivered to California through a dedicated pipeline.

(B)The biomethane is delivered to California through a common carrier pipeline and meets both of the following requirements:

(i)The source of biomethane injects the biomethane into a common carrier pipeline that physically flows within California, or toward the end user in California for which the biomethane was produced.

(ii)The seller or purchaser of the biomethane demonstrates that the capture or production of biomethane directly results in at least one of the following environmental benefits to California:

(I)The reduction or avoidance of the emission of any criteria air pollutant, toxic air contaminant, or greenhouse gas in California.

(II)The reduction or avoidance of pollutants that could have an adverse impact on waters of the state.

(III)The alleviation of a local nuisance within California that is associated with the emission of odors.

(4)(A)Adopt targets for specific sectors, including, but not limited to, landfill gas, livestock waste, diverted organic waste, wastewater treatment, and food processing waste.

(B)In adopting the targets pursuant to this paragraph, the state board shall do both of the following:

(i)Adopt a declining target for biomethane from landfill gas in accordance with achieving the goals outlined in Section 39730.6.

(ii)Prioritize feedstocks with the highest reductions in methane emissions, while ensuring a balanced and diverse overall portfolio of resources and an increase in the beneficial use of methane from organic sources.

(5)Ensure the regulation achieves emissions reductions that are cost effective compared to other methane emissions reduction strategies.

(f)(1)The state board may count volumes procured by nonutility enterprises towards the 32 billion cubic foot requirement if the gas procured meets the requirements of Section 399.12.6 of the Public Utilities Code and is injected into the common carrier pipeline network.

(2)Biomethane producers may choose to have multiple offtake agreements with the utilities and nonutility enterprises.

(3)Gas corporations shall have adequate time to correct for any gas not supplied as required pursuant to a procurement contract of a nonutility enterprise that has been counted towards the 32 billion cubic foot requirement by January 1, 2030.

(g)The state board, in consultation with the Public Utilities Commission, shall ensure all of the following:

(1)Consistency, to the extent possible, with the recommendations of the California Council on Science and Technology pursuant to Section 784.1 of the Public Utilities Code.

(2)That each gas corporation meets its biomethane procurement requirements through contracts with terms of no less than 10 years duration, formed pursuant to a competitive solicitation process or a bilateral agreement reviewed and approved by the Public Utilities Commission.

(3)That gas corporations do not unfairly compete with nonutility enterprises.

(h)The state board, in consultation with the Public Utilities Commission, shall review the biomethane procurement regulation adopted pursuant to subdivision (b), and report to the Legislature, pursuant to Section 9795 of the Government Code, on the progress toward meeting the regulation’s requirements on or before January 1, 2026.

SEC. 2.Section 748.3 is added to the Public Utilities Code, to read:
748.3.

(a)For the purposes of this section, “biomethane procurement program” refers to the program adopted by the State Air Resources Board in consultation with the commission, pursuant to Section 39730.9 of the Health and Safety Code.

(b)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 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, subject to the commission’s authority to determine just and reasonable expenditures pursuant to Article 1 (commencing with Section 451) of Chapter 3 and this article. The value of any environmental credits the utility may receive for the biomethane procured under the biomethane procurement program in excess of the cost the utility incurred to purchase the biomethane shall be credited to both core and noncore customers on the same basis that the commission allocates the costs incurred pursuant to this subdivision.

(c)The commission may require up to 15 percent of the 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.

(d)A gas corporation shall only sell biomethane pursuant to a commission-approved tariff.

(e)Notwithstanding any other provision of this section, both of the following shall apply:

(1)If, after taking into account the value received by a gas corporation upon any resale of biomethane, including any environmental credits that the biomethane producer chooses to include with the sale of the biomethane, the cost to the gas corporation of the biomethane purchased to comply with the biomethane procurement program exceeds an average cost of fifteen dollars ($15) per million British thermal units above the average S&P GSCI Natural Gas Index price, the gas corporation shall no longer be required to procure gas above that cost to comply with the biomethane procurement program.

(2)If, after taking into account the value received by a gas corporation upon any resale of biomethane, including any environmental credits that the biomethane producer chooses to include with the sale of the biomethane, the gas corporation’s total annual cost to comply with the biomethane program exceeds 5 percent of its revenue requirement for that year, the gas corporation shall no longer be required to procure additional gas to comply with the program for that year.

(f)The commission shall adopt an appropriate reservation system to identify annual funding demand under this section and provide preconstruction confirmation of funding availability for eligible projects.

SEC. 3.Section 2814 is added to the Public Utilities Code, to read:
2814.

(a)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)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, including, but not limited to, the price of labor, materials, and third-party charges.

SEC. 4.

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.