Bill Text: CA SB722 | 2009-2010 | Regular Session | Amended

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

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Bill Title: Utilities: renewable energy resources.

Spectrum: Partisan Bill (Democrat 7-0)

Status: (Engrossed - Dead) 2010-08-31 - In Senate. To unfinished business. [SB722 Detail]

Download: California-2009-SB722-Amended.html

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BILL NUMBER: SB 722	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MARCH 4, 2010
	AMENDED IN ASSEMBLY  JUNE 25, 2009
	AMENDED IN ASSEMBLY  JUNE 11, 2009
	AMENDED IN SENATE  APRIL 23, 2009

INTRODUCED BY    Senator   Steinberg
  Senators   Simitian,   Kehoe, 
 and Steinberg 

                        FEBRUARY 27, 2009

    An act to add Division 25.7 (commencing with Section
38700) to the Health and Safety Code, relating to greenhouse gases.
  An act to add Section 705 to the Fish and Game Code,
to amend Sections 25740, 25740.5, 25741, 25742, 25746, 25747, and
25751 of the Public Resources Code, and to amend Sections 399.2.5,
399.11, 399.12, 399.17, and 454.5 of, to amend and renumber Section
399.16 of, to amend, renumber, and add Section 399.13 of, to add
Sections 399.18, 399.26, 399.30, 399.31, and 1005.1 to, to add
Article 11 (commencing with Section 910) to Chapter 4 of Part 1 of
Division 1 of, to repeal Section 387 of, and to repeal and add
Sections 399.14 and 399.15 of, the Public Utilities Code, relating to
energy, and making an appropriation therefor. 


	LEGISLATIVE COUNSEL'S DIGEST


   SB 722, as amended,  Steinberg   Simitian
 .  Greenhouse gas credits.   Utilities:
renewable energy resources.  
   (1) Under existing law, the Public Utilities Commission (PUC) has
regulatory authority over public utilities, including electrical
corporations, as defined. Existing law requires the PUC to require
the state's 3 largest electrical corporations, Pacific Gas and
Electric Company, San Diego Gas and Electric, and Southern California
Edison, to identify a separate electrical rate component to fund
programs that enhance system reliability and provide in-state
benefits. This rate component is a nonbypassable element of local
distribution and collected on the basis of usage. Existing PUC
resolutions refer to the nonbypassable rate component as a "public
goods charge." The public goods charge moneys are collected to
support cost-effective energy efficiency and conservation activities,
public interest research and development not adequately provided by
competitive and regulated markets, and renewable energy resources.
 
   The existing Warren-Alquist State Energy Resources Conservation
and Development Act establishes the State Energy Resources
Conservation and Development Commission (Energy Commission). Existing
law establishes the Renewable Resource Trust Fund as a fund that is
continuously appropriated, with certain exceptions for administrative
expenses, in the State Treasury and requires that certain moneys
collected to support renewable energy resources through the public
goods charge are deposited into the fund and authorizes the Energy
Commission to expend the moneys pursuant to the Renewable Energy
Resources Program. The program states the intent of the Legislature
to increase the amount of electricity generated from eligible
renewable energy resources per year so that amount equals at least
20% of total retail sales of electricity in California per year by
December 31, 2010.  
   This bill would revise the Renewable Energy Resources Program to
state the intent of the Legislature to increase the amount of
electricity generated from eligible renewable energy resources per
year, so that amount equals at least 33% of total retail sales of
electricity in California per year by December 31, 2020. The bill
would revise certain terms used in the program and revise certain
eligibility criteria for a renewable electrical generation facility,
as defined, pursuant to the program.  
   (2) Existing law expresses the intent of the Legislature, in
establishing the California Renewables Portfolio Standard Program
(RPS program), to increase the amount of electricity generated per
year from eligible renewable energy resources, as defined, to an
amount that equals at least 20% of the total electricity sold to
retail customers in California per year by December 31, 2010. The RPS
program requires that a retail seller of electricity, including
electrical corporations, community choice aggregators, and electric
service providers, purchase a specified minimum percentage of
electricity generated by eligible renewable energy resources, as
defined, in any given year as a specified percentage of total
kilowatthours sold to retail end-use customers each calendar year.
The RPS program requires the PUC to implement annual procurement
targets for each retail seller to increase its total procurement of
electricity generated by eligible renewable energy resources by at
least an additional 1% of retail sales per year so that 20% of its
retail sales of electricity are procured from eligible renewable
energy resources no later than December 31, 2010. Existing law
requires the PUC to make a determination of the existing market cost
for electricity, which PUC decisions call the market price referent,
and to limit an electrical corporation's obligation to procure
electricity from eligible renewable energy resources, that exceeds
the market price referent, by a specified amount.  
   This bill would express the intent that the amount of electricity
generated per year from eligible renewable energy resources be
increased to an amount that equals at least 20% of the total
electricity sold to retail customers in California per year by
December 31, 2013, and 33% by December 31, 2020. The bill would
require that a retail seller procure the following percentages of
electricity from eligible renewable energy resources by the following
dates: (A) Until December 31, 2012, the same percentage as actually
achieved by the retail seller during 2009; (B) 20% by December 31,
2013; (C) 25% by December 31, 2016; and (D) 33% by December 31, 2020.
The bill would authorize the PUC to permit a retail seller to delay
compliance with (B) or (C) procurement levels when specified
circumstances are present, but would not authorize the PUC to permit
a retail seller to delay compliance with the (D) procurement level.
The bill would require the PUC to direct each electrical corporation
to annually prepare a renewable energy procurement plan containing
specified matter and require, to the extent feasible, that the plan
be proposed, reviewed, and adopted by the commission as part of, and
pursuant to, a general procurement plan process. The bill would
require the commission to direct all retail sellers to prepare and
submit an annual compliance report. The bill would delete the
existing market price referent provisions and instead require the PUC
to establish a methodology to determine the market price of
electricity for terms corresponding to the length of contracts with
eligible renewable energy resources, in consideration of, and
reflecting, certain matters. The bill would require the PUC to
establish a limitation on the annual expenditures made above the
market price, by an electrical corporation, in order to achieve the
procurement levels established by the PUC. The bill would require the
PUC to permit an electrical corporation to limit its procurement of
electricity from eligible renewable energy resources to that quantity
that can be procured at or below the market prices established by
the PUC, up to the limitation. The bill would delete an existing
requirement that the PUC adopt flexible rules for compliance for
retail sellers. The bill would revise the definitions of certain
terms for purposes of the RPS program. The bill would authorize an
electrical corporation to apply to the PUC for approval to construct,
own, and operate an eligible renewable energy resource and require
the PUC to approve the application if certain conditions are met,
until corporation owned and operated resources provide 8.5% of the
corporation's anticipated retail sales.  
   Under existing law, a violation of the Public Utilities Act or any
order, decision, rule, direction, demand, or requirement of the PUC
is a crime.  
   Because the provisions of this bill are within the act and require
action by the PUC to implement its requirements, a violation of
these provisions would impose a state-mandated local program by
expanding the definition of a crime.  
   (3) Under existing law, the governing board of a local publicly
owned electric utility is responsible for implementing and enforcing
a renewables portfolio standard for the utility that recognizes the
intent of the Legislature to encourage renewable resources, while
taking into consideration the effect of the standard on rates,
reliability, and financial resources and the goal of environmental
improvement.  
   This bill would repeal this provision and instead make certain of
the requirements of the RPS program, as discussed below, applicable
to local publicly owned electric utilities. By placing additional
requirements upon local publicly owned electric utilities, the bill
would impose a state-mandated local program.  
   (4) Existing law requires the Energy Commission to certify
eligible renewable energy resources, to design and implement an
accounting system to verify compliance with the RPS requirements by
retail sellers, and to develop tracking, accounting, verification,
and enforcement mechanisms for renewable energy credits, as defined.
 
   This bill would require the Energy Commission to design and
implement an accounting system to verify compliance with the RPS
requirements by retail sellers and local publicly owned electric
utilities. The bill would require the Energy Commission, among other
things, to adopt regulations specifying procedures for enforcement of
the RPS requirements that include a public process under which the
Energy Commission is authorized to issue a notice of violation and
correction with respect to a local publicly owned electric utility
and for referral to the State Air Resources Board for penalties
imposed pursuant to the California Global Warming Solutions Act of
2006. The bill would require a local publicly owned electric utility
to procure the same percentages of electricity from eligible
renewable energy resources as retail sellers are required to procure.
The bill would provide that the local publicly owned electric
utility retains discretion with respect to certain matters in
complying with the RPS, would require that certain notices be given
by the utility when adopting and periodically revising its
procurement plan, and would require the utility to report certain
information relative to RPS compliance to the Energy Commission and
its customers.  
   (5) Existing law requires the PUC to prepare and submit to the
Governor and the Legislature a written report annually before
February 1 of each year on the costs of programs and activities
conducted by an electrical corporation or gas corporation that have
more than a specified number of customers in California. 
   This bill would require the PUC to prepare and submit to the
policy and fiscal committees of the Legislature, annually before
February 1 of each year, a report on (A) all electrical corporation
revenue requirement increases associated with meeting the renewables
portfolio standard, (B) all cost savings experienced, or costs
avoided, by electrical corporations as a result of meeting the
renewables portfolio standard, (C) all costs incurred by electrical
corporations for incentives for distributed and renewable generation,
(D) all cost savings experienced, or costs avoided, by electrical
corporations as a result of incentives for distributed generation and
renewable generation, (E) specified costs for which an electrical
corporation is seeking recovery in rates that are pending
determination or approval by the PUC, (F) the decision number of each
PUC decision in the prior year authorizing an electrical corporation
to recover costs incurred in rates, and (G) any changes in the prior
year in load serviced by an electrical corporation.  
   (6) The bill would require the Energy Commission, by July 1, 2011,
to update previously conducted studies relating to determining the
effective load carrying capacity of wind and solar energy resources
on the electrical grid. The bill would require the PUC to use those
values in establishing the contribution of those resources toward
meeting specified resource adequacy requirements.  
   (7) The Public Utilities Act prohibits any electrical corporation
from beginning the construction of, among other things, a line,
plant, or system, or of any extension thereof, without having first
obtained from the PUC a certificate that the present or future public
convenience and necessity require or will require that construction,
termed a certificate of public convenience and necessity. Existing
law requires the PUC, in acting upon an application by an electrical
corporation for a certificate of public convenience and necessity, to
deem new transmission facilities necessary to the provision of
electric service if the PUC finds that new transmission facilities
are necessary to facilitate achievement of the renewable power goals
established under the RPS program. Existing law requires the PUC,
upon finding that new transmission facilities are necessary to
facilitate achievement of the renewable power goals established under
the RPS, to take all feasible actions to ensure that the
transmission rates established by the Federal Energy Regulatory
Commission (FERC) are fully reflected in any retail rates established
by the PUC.  
   This bill would require the PUC to issue a decision on an
application for a certificate of public convenience and necessity
within 18 months of the filing of a completed application under
specified circumstances. The bill would require the PUC, in acting
upon an application by an electrical corporation for a certificate of
public convenience and necessity, to deem new transmission
facilities necessary to the provision of electric service if the PUC
finds that new transmission facilities are reasonably necessary or
appropriate to facilitate achievement of the renewables portfolio
standard. The bill would require the PUC to provide assurance of the
eligibility for recovery in retail rates of any increase in
transmission costs incurred by an electrical corporation resulting
from the construction of transmission facilities in certain
circumstances and to allow recovery in retail rates of any increase
in transmission costs if not approved by the Federal Energy
Regulatory Commission if the PUC determines the costs were prudently
incurred pursuant to a specified law.  
   (8) Existing law establishes the Department of Fish and Game in
the Natural Resources Agency, and generally charges the department
with the administration and enforcement of the Fish and Game Code.
 
   This bill would require the department to establish an internal
division with the primary purpose of performing comprehensive
planning and environmental compliance services with priority given to
projects involving the building of eligible renewable energy
resources.  
   (9) The existing restructuring of the electrical industry within
the Public Utilities Act provides for the establishment of an
Independent System Operator (ISO). Existing law requires the ISO to
ensure efficient use and reliable operation of the transmission grid
consistent with achieving planning and operating reserve criteria no
less stringent than those established by the Western Electricity
Coordinating Council and the American Electric Reliability Council.
Pursuant to existing law, the ISO's tariffs are required to be
approved by the FERC.  
   This bill would require the ISO and other California balancing
authorities to work cooperatively to integrate and interconnect
eligible renewable energy resources to the transmission grid by the
most efficient means possible with the goal of minimizing the impact
and cost of new transmission facilities needed to meet both
reliability needs and the renewables portfolio standard procurement
requirements, and to accomplish this in a manner that respects the
ownership, business, and dispatch models for transmission facilities
owned by electrical corporations, local publicly owned electric
utilities, joint power agencies, and merchant transmission companies.
 
   (10) This bill would appropriate $322,000 from the Public
Utilities Commission Utilities Reimbursement Account to the PUC for
additional staffing to identify, review, and approve transmission
lines reasonably necessary or appropriate to facilitate achievement
of the renewables portfolio standard.  
   (11) 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.  
   Under existing law, a person or entity that represents that a
consumer good that it manufactures or distributes is not harmful to,
or is beneficial to, the natural environment, through the use of
specified environmental terms, is required to maintain in written
form in its records information and documentation supporting the
validity of the representation, as specified. Existing law provides
that it is unlawful for a person to make any untruthful, deceptive,
or misleading environmental marketing claim, whether explicit or
implied. A violation of these requirements is a misdemeanor.
 
   This bill would make it unlawful for a person, as defined, to
represent in an advertisement or in any other sales or promotional
materials made available to the public for the sale of a greenhouse
gas credit or emission reduction, that the credit or reduction
reduces greenhouse gas emissions unless certain requirements are met.
The bill would also require a person that represents in an
advertisement or in any sales or promotional materials made available
to the public for the sale of a greenhouse gas credit or emission
reduction, that the credit or emission reduction results in a
reduction of greenhouse gases to maintain in written form and make
available to any member of the public who requests it certain
information and documentation supporting the validity of that
representation. A violation of these provisions would be punishable
by a specified civil penalty and would create a civil cause of
action. Reasonable attorney fees and costs would be available for any
such action brought. These requirements would become operative on
January 1, 2011, and would become inoperative if the Federal Trade
Commission adopts binding and enforceable trade rules or regulations
for claims or representations for greenhouse gas emission reduction
credits or reductions to protect consumers. 
   Vote: majority. Appropriation:  no   yes
 . Fiscal committee:  no   yes  .
State-mandated local program:  no   yes  .


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 705 is added to the  
Fish and Game Code  , to read:  
   705.  (a) For purposes of this section, "eligible renewable energy
resources" has the same meaning as in the California Renewables
Portfolio Standard Program (Article 16 (commencing with Section
399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public
Utilities Code).
   (b) The department shall establish an internal division with the
primary purpose of performing comprehensive planning and
environmental compliance services with priority given to projects
involving the building of eligible renewable energy resources.
   (c) The internal division shall ensure the timely completion of
plans pursuant to the Natural Community Conservation Planning Act
(Chapter 10 (commencing with Section 2800) of Division 3). 
   SEC. 2.    Section 25740 of the   Public
Resources Code   is amended to read: 
   25740.   The Legislature finds and declares that the State Air
Resources Board has identified a statewide 33 percent renewables
portfolio standard as a key measure to comply with the requirements
of the California Global Warming Solutions Act of 2006.  It is
the intent of the Legislature in establishing this program, to
increase the amount of electricity generated from eligible renewable
energy resources per year, so that it equals at least  20
  33  percent of total retail sales of electricity
in California per year by December 31,  2010  
2020  .
   SEC. 3.    Section 25740.5 of the   Public
Resources Code   is amended to read: 
   25740.5.  (a) The commission shall optimize public investment and
ensure that the most cost-effective and efficient investments in
renewable energy resources are vigorously pursued.
   (b) The commission's long-term goal shall be a fully competitive
and self-sustaining supply of electricity generated from renewable
sources.
   (c) The program objective shall be to increase, in the near term,
the quantity of California's electricity generated by 
in-state  renewable  electricity generation
facilities   electrical generation facilities located in
this state  , while protecting system reliability, fostering
resource diversity, and obtaining the greatest environmental benefits
for California residents.
   (d) An additional objective of the program shall be to identify
and support emerging renewable technologies in distributed generation
applications that have the greatest near-term commercial promise and
that merit targeted assistance.
   (e) The Legislature recommends allocations among all of the
following:
   (1) Rebates, buydowns, or equivalent incentives for emerging
renewable technologies.
   (2) Customer education.
   (3) Production incentives for reducing fuel costs, that are
confirmed to the satisfaction of the commission, at solid fuel
biomass energy facilities in order to provide demonstrable
environmental and public benefits, including improved air quality.
   (4) Solar thermal generating resources that enhance the
environmental value or reliability of the electrical system and that
require financial assistance to remain economically viable, as
determined by the commission. The commission may require financial
disclosure from applicants for purposes of this paragraph.
   (5) Specified fuel cell technologies, if the commission makes all
of the following findings:
   (A) The specified technologies have similar or better air
pollutant characteristics than renewable technologies in the report
made pursuant to Section 25748.
   (B) The specified technologies require financial assistance to
become commercially viable by reference to wholesale generation
prices.
   (C) The specified technologies could contribute significantly to
the infrastructure development or other innovation required to meet
the long-term objective of a self-sustaining, competitive supply of
electricity generated from renewable sources.
   (6) Existing wind-generating resources, if the commission finds
that the existing wind-generating resources are a cost-effective
source of reliable energy and environmental benefits compared with
other  in-state  renewable electricity
generation facilities   electrical generation facilities
located in this state  , and that the existing wind-generating
resources require financial assistance to remain economically viable.
The commission may require financial disclosure from applicants for
the purposes of this paragraph.
   (f) Notwithstanding any other provision of law, moneys collected
for renewable energy pursuant to Article 15 (commencing with Section
399) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities
Code shall be transferred to the Renewable Resource Trust Fund.
Moneys collected between January 1, 2007, and January 1, 2012, shall
be used for the purposes specified in this chapter.
   SEC. 4.    Section 25741 of the   Public
Resources Code   is amended to read: 
   25741.  As used in this chapter, the following terms have the
following meaning: 
   (a) "Delivered" and "delivery," have the same meaning as defined
in Section 399.12 of the Public Utilities Code.  
    (a) "Delivered" and "delivery" mean the electricity output of an
in-state renewable electricity generation facility 
    (b)     "Procurement entity" means any
person or corporation  that  is used to serve end-use
  enters into an agreement with a  retail 
customers located within the state. Subject   seller
 to  verification by the accounting system established
by the commission   procure eligible renewable energy
resources  pursuant to subdivision  (b)  
(g)  of Section 399.13 of the Public Utilities Code  ,
electricity shall be deemed delivered if it is either generated at a
location within the state, or is scheduled for consumption by
California end-use retail customers. Subject to criteria adopted by
the commission, electricity generated by an eligible renewable energy
resource may be considered "delivered" regardless of whether the
electricity is generated at a different time from consumption by a
California end-use customer  . 
    (b) "In-state renewable electricity 
    (c)     "Renewable electrical 
generation facility" means a facility that meets all of the following
criteria:
   (1) The facility uses biomass, solar thermal, photovoltaic, wind,
geothermal, fuel cells using renewable fuels, small hydroelectric
generation of 30 megawatts or less, digester gas, municipal solid
waste conversion, landfill gas, ocean wave, ocean thermal, or tidal
current, and any additions or enhancements to the facility using that
technology.
   (2) The facility satisfies one of the following requirements:
   (A) The facility is located in the state or near the border of the
state with the first point of connection to the transmission network
 within this state and electricity produced by 
 of a balancing authority area primarily located within  the
 facility is delivered to an in-state location. 
 state. 
   (B) The facility has its first point of interconnection to the
transmission network outside the state and satisfies all of the
following requirements:
   (i) It is connected to the transmission network within the Western
Electricity Coordinating Council (WECC) service territory.
   (ii) It commences initial commercial operation after January 1,
 2005.   2010.  
   (iii) Electricity produced by the facility is delivered to an
in-state location.  
    (iv) 
    (iii)  It will not cause or contribute to any violation
of a California environmental quality standard or requirement.

   (v) If the facility is outside of the United States, it is
developed and operated in a manner that is as protective of the
environment as a similar facility located in the state. 

    (vi) 
    (iv)  It participates in the accounting system to verify
compliance with the renewables portfolio standard  by retail
sellers,  once established by the  Energy
Commission   commission  pursuant to subdivision
(b) of Section  399.13   399.25  of the
Public Utilities Code.
   (C) The facility meets the requirements of clauses (i), (iii),
 (iv), (v),  and  (vi) in  
(iv) of  subparagraph (B), but does not meet the requirements of
clause (ii)  of subparagraph (B)  because it 
commences   commenced  initial operation prior to
January 1,  2005,   2010,  if the facility
satisfies either of the following requirements:
   (i) The electricity is from incremental generation resulting from
expansion or repowering of the facility.
   (ii)  The facility has been part of  
Electricity generated by  the  existing baseline of
eligible renewable energy resources of   facility was
procured by  a retail seller  established pursuant to
paragraph (2) of subdivision (b) of Section 399.15 of the Public
Utilities Code  or  has been part of the existing
baseline of eligible renewable energy resources of a  local
publicly owned electric utility  established pursuant to
Section 387   as  of  the Public Utilities
Code.   May 31, 2009.  
   (3) Any existing landfill gas facility approved by a publicly
owned electric utility prior to September 16, 2009, as a renewable
electric generation facility shall continue to qualify as a renewable
electric generation facility.  
   (4) If the facility is outside the United States, it is developed
and operated in a manner that is as protective of the environment as
a similar facility located in the state.  
    (3) For the purposes of this subdivision, "solid waste conversion"

    (d)     "Municipal solid waste conversion,"
as used in subdivision (c),  means a technology that uses a
noncombustion thermal process to convert solid waste to a
clean-burning fuel for the purpose of generating electricity, and
that meets all of the following criteria:
   (A) The technology does not use air or oxygen in the conversion
process, except ambient air to maintain temperature control.
   (B) The technology produces no discharges of air contaminants or
emissions, including greenhouse gases as defined in Section 38505 of
the Health and Safety Code.
   (C) The technology produces no discharges to surface or
groundwaters of the state.
   (D) The technology produces no hazardous wastes.
   (E) To the maximum extent feasible, the technology removes all
recyclable materials and marketable green waste compostable materials
from the solid waste stream prior to the conversion process and the
owner or operator of the facility certifies that those materials will
be recycled or composted.
   (F) The facility at which the technology is used is in compliance
with all applicable laws, regulations, and ordinances.
   (G) The technology meets any other conditions established by the
commission.
   (H) The facility certifies that any local agency sending solid
waste to the facility diverted at least 30 percent of all solid waste
it collects through solid waste reduction, recycling, and
composting. For purposes of this paragraph, "local agency" means any
city, county, or special district, or subdivision thereof, which is
authorized to provide solid waste handling services. 
   (c) "Procurement entity" means any person or corporation that
enters into an agreement with a retail seller to procure eligible
renewable energy resources pursuant to subdivision (f) of Section
399.14 of the Public Utilities Code.  
    (d) 
    (e)  "Renewable energy public goods charge" means that
portion of the nonbypassable system benefits charge 
authorized   required  to be collected  and
 to  be transferred to the Renewable Resource Trust
Fund   fund renewable energy  pursuant to the
Reliable Electric Service Investments Act (Article 15 (commencing
with Section 399) of Chapter 2.3 of Part 1 of Division 1 of the
Public Utilities Code). 
    (e) 
    (f)  "Report" means the report entitled "Investing in
Renewable Electricity Generation in California" (June 2001,
Publication Number P500-00-022) submitted to the Governor and the
Legislature by the commission. 
    (f) 
    (g)  "Retail seller" means a "retail seller" as defined
in Section 399.12 of the Public Utilities Code.
   SEC. 5.    Section 25742 of the   Public
Resources Code   is amended to read: 
   25742.  (a) Twenty percent of the funds collected pursuant to the
renewable energy public goods charge shall be used for programs that
are designed to achieve fully competitive and self-sustaining
existing  in-state  renewable  electricity
generation facilities   electrical generation facilities
located in this state  , and to secure for the state the
environmental, economic, and reliability benefits that continued
operation of those facilities will provide during the 2007-2011
investment cycle. Eligibility for production incentives under this
section shall be limited to those technologies found eligible for
funds by the commission pursuant to paragraphs (3), (4), and (6) of
subdivision (e) of Section 25740.5.
   (b) Any funds used to support  in-state 
renewable  electricity   electrical 
generation facilities  located in this state  pursuant to
this section shall be expended in accordance with the provisions of
this chapter.
   (c) Facilities that are eligible to receive funding pursuant to
this section shall be registered in accordance with criteria
developed by the commission and those facilities shall not receive
payments for any electricity produced that has any of the following
characteristics:
   (1) Is sold at monthly average rates equal to, or greater than,
the applicable target price, as determined by the commission.
   (2) Is used onsite.
   (d) (1) Existing facilities  located in this state 
generating electricity from biomass energy shall be eligible for
funding and otherwise considered  an in-state renewable
electricity   a renewable electrical  generation
facility only if they report to the commission the types and
quantities of biomass fuels used.
   (2) The commission shall report the types and quantities of
biomass fuels used by each facility to the Legislature in the reports
prepared pursuant to Section 25748.
   (e) Each existing facility seeking an award pursuant to this
section shall be evaluated by the commission to determine the amount
of the funds being sought, the cumulative amount of funds the
facility has received previously from the commission and other state
sources, the value of any past and current federal or state tax
credits, the facility's contract price for energy and capacity, the
prices received by similar facilities, the market value of the
facility, and the likelihood that the award will make the facility
competitive and self-sustaining within the 2007-2011 investment
cycle. The commission shall use this evaluation to determine the
value of an award to the public relative to other renewable energy
investment alternatives. The commission shall compile its findings
and report them to the Legislature in the reports prepared pursuant
to Section 25748.
   SEC. 6.    Section 25746 of the   Public
Resources Code   is amended to read: 
   25746.  (a) One percent of the money collected pursuant to the
renewable energy public goods charge shall be used in accordance with
this chapter to promote renewable energy and disseminate information
on renewable energy technologies, including emerging renewable
technologies, and to help develop a consumer market for renewable
energy and for small-scale emerging renewable energy technologies.
   (b) If the commission provides funding for a regional accounting
system to verify compliance with the renewable portfolio standard by
retail sellers, pursuant to subdivision (b) of Section 
399.13   399.25  of the Public Utilities Code, the
commission shall recover all costs from user fees.
   SEC. 7.    Section 25747 of the   Public
Resources Code   is amended to read: 
   25747.  (a) The commission shall adopt guidelines governing the
funding programs authorized under this chapter, at a publicly noticed
meeting offering all interested parties an opportunity to comment.
Substantive changes to the guidelines may not be adopted without at
least 10 days' written notice to the public. The public notice of
meetings required by this subdivision may not be less than 30 days.
Notwithstanding any other provision of law, any guidelines adopted
pursuant to this chapter or Section  399.13  
399.25  of the Public Utilities Code, shall be exempt from the
requirements of Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code. The Legislature
declares that the changes made to this subdivision by the act
amending this section during the 2002 portion of the 2001-02 Regular
Session are declaratory of, and not a change in existing law.
   (b) Funds to further the purposes of this chapter may be committed
for multiple years.
   (c) Awards made pursuant to this chapter are grants, subject to
appeal to the commission upon a showing that factors other than those
described in the guidelines adopted by the commission were applied
in making the awards and payments. Any actions taken by an applicant
to apply for, or become or remain eligible and registered to receive,
payments or awards, including satisfying conditions specified by the
commission, shall not constitute the rendering of goods, services,
or a direct benefit to the commission.
   (d) An award made pursuant to this chapter, the amount of the
award, and the terms and conditions of the grant are public
information.
   SEC. 8.    Section 25751 of the   Public
Resources Code   is amended to read: 
   25751.  (a) The Renewable Resource Trust Fund is hereby created in
the State Treasury.
   (b) The following accounts are hereby established within the
Renewable Resource Trust Fund:
   (1) Existing Renewable Resources Account.
   (2) Emerging Renewable Resources Account.
   (3) Renewable Resources Consumer Education Account.
   (c) The money in the fund may be expended, only upon appropriation
by the Legislature in the annual Budget Act, for the following
purposes:
   (1) The administration of this article by the state.
   (2) The state's expenditures associated with the accounting system
established by the commission pursuant to subdivision (b) of Section
 399.13   399.25  of the Public Utilities
Code.
   (d) That portion of revenues collected by electrical corporations
for the benefit of in-state operation and development of existing and
new and emerging renewable resource technologies, pursuant to
Section 399.8 of the Public Utilities Code, shall be transmitted to
the commission at least quarterly for deposit in the Renewable
Resource Trust Fund pursuant to Section 25740.5. After setting aside
in the fund money that may be needed for expenditures authorized by
the annual Budget Act in accordance with subdivision (c), the
Treasurer shall immediately deposit money received pursuant to this
section into the accounts created pursuant to subdivision (b) in
proportions designated by the commission for the current calendar
year. Notwithstanding Section 13340 of the Government Code, the money
in the fund and the accounts within the fund are hereby continuously
appropriated to the commission without regard to fiscal year for the
purposes enumerated in this chapter.
   (e) Upon notification by the commission, the Controller shall pay
all awards of the money in the accounts created pursuant to
subdivision (b) for purposes enumerated in this chapter. The
eligibility of each award shall be determined solely by the
commission based on the procedures it adopts under this chapter.
Based on the eligibility of each award, the commission shall also
establish the need for a multiyear commitment to any particular award
and so advise the Department of Finance. Eligible awards submitted
by the commission to the Controller shall be accompanied by
information specifying the account from which payment should be made
and the amount of each payment; a summary description of how payment
of the award furthers the purposes enumerated in this chapter; and an
accounting of future costs associated with any award or group of
awards known to the commission to represent a portion of a multiyear
funding commitment.
   (f) The commission may transfer funds between accounts for
cashflow purposes, provided that the balance due each account is
restored and the transfer does not adversely affect any of the
accounts.
   (g) The Department of Finance shall conduct an independent audit
of the Renewable Resource Trust Fund and its related accounts
annually, and provide an audit report to the Legislature not later
than March 1 of each year for which this article is operative. The
Department of Finance's report shall include information regarding
revenues, payment of awards, reserves held for future commitments,
unencumbered cash balances, and other matters that the Director of
Finance determines may be of importance to the Legislature.
   SEC. 9.    Section 387 of the   Public
Utilities Code   is repealed.  
   387.  (a) Each governing body of a local publicly owned electric
utility shall be responsible for implementing and enforcing a
renewables portfolio standard that recognizes the intent of the
Legislature to encourage renewable resources, while taking into
consideration the effect of the standard on rates, reliability, and
financial resources and the goal of environmental improvement.
   (b) Each local publicly owned electric utility shall report, on an
annual basis, to its customers and to the State Energy Resources
Conservation and Development Commission, the following:
   (1) Expenditures of public goods funds collected pursuant to
Section 385 for eligible renewable energy resource development.
Reports shall contain a description of programs, expenditures, and
expected or actual results.
   (2) The resource mix used to serve its customers by fuel type.
Reports shall contain the contribution of each type of renewable
energy resource with separate categories for those fuels that are
eligible renewable energy resources as defined in Section 399.12,
except that the electricity is delivered to the local publicly owned
electric utility and not a retail seller. Electricity shall be
reported as having been delivered to the local publicly owned
electric utility from an eligible renewable energy resource when the
electricity would qualify for compliance with the renewables
portfolio standard if it were delivered to a retail seller.
   (3) The utility's status in implementing a renewables portfolio
standard pursuant to subdivision (a) and the utility's progress
toward attaining the standard following implementation. 
   SEC. 10.    Section 399.2.5 of the   Public
Utilities Code   is amended to read: 
   399.2.5.  (a) Notwithstanding  any other provision in
 Sections 1001 to 1013, inclusive, an application of an
electrical corporation for a certificate authorizing the construction
of new transmission facilities  shall be deemed to be
  is  necessary to the provision of electric
service for purposes of  any determination made under
 Section 1003 if the commission finds that the new facility
is  reasonably  necessary  or appropriate  to
facilitate achievement of the  renewable power goals
  renewables portfolio standard  established in
Article 16 (commencing with Section 399.11).
   (b) With respect to a transmission facility described in
subdivision (a), the commission shall take all feasible actions to
ensure that the transmission rates established by the Federal Energy
Regulatory Commission are fully reflected in any retail rates
established by the commission. These actions shall include  ,
but are not limited to   all of the following  :
   (1) Making findings, where supported by an evidentiary record,
that those transmission facilities provide benefit to the
transmission network and are  reasonably  necessary  or
appropriate  to facilitate the achievement of the renewables
portfolio standard established in Article 16 (commencing with Section
399.11).
   (2) Directing the utility to which the generator will be
interconnected, where the direction is not preempted by federal law,
to seek the recovery through general transmission rates of the costs
associated with the transmission facilities.
   (3) Asserting the positions described in paragraphs (1) and (2) to
the Federal Energy Regulatory Commission in appropriate proceedings.

   (4)  Allowing   Providing assurance, prior to
a determination of rate recovery by the Federal Energy Regulatory
Commission (FERC) of those costs that are subject to FERC
jurisdiction, of the eligibility for  recovery in retail rates
of any increase in transmission costs incurred by an electrical
corporation resulting from the construction of the transmission
facilities  that are not approved for recovery in
transmission rates by the Federal Energy Regulatory Commission after
the commission determines that the costs were prudently incurred in
accordance with subdivision (a) of Section 454  . 
   (5) Allowing recovery in retail rates of any increase in
transmission costs if the FERC does not approve recovery of those
costs in the rates that are subject to FERC jurisdiction after the
commission determines that the costs were prudently incurred in
accordance with subdivision (a) of Section 454.  
   (c) (1) The commission shall approve an advice letter seeking
assurance of cost recovery pursuant to paragraph (4) of subdivision
(b), if either of the following is true:  
   (A) The new transmission line or facility is an upgrade of an
existing transmission line or facility, or is a new facility within
either an existing transmission right-of-way or a transmission
corridor zone that has been designated by the Energy Commission
pursuant to Section 25331 of the Public Resources Code, and is
consistent with the
priority transmission projects in the conceptual transmission plan in
the final Phase 3 report produced by the public collaborative
stakeholder planning process known as the Renewable Energy
Transmission Initiative (RETI).  
   (B) Not less than 50 percent of the planned use for the capacity
of the new transmission line or facility is for interconnecting
eligible renewable energy resources, as determined by the Independent
System Operator or an electrical corporation, and all
interconnection requests for that transmission line or facility are
for generation facilities that comply with the greenhouse gases
emission performance standard established pursuant to Chapter 3
(commencing with Section 8340) of Division 4.1.  
   (2) Approval of an advice letter pursuant to paragraph (1) is not
binding upon the commission in making its determination whether or
not to approve an application for a certificate of public convenience
and necessity pursuant to Chapter 5 (commencing with Section 1001).

   SEC. 11.    Section 399.11 of the   Public
Utilities Code   is amended to read: 
   399.11.  The Legislature finds and declares all of the following:
   (a) In order to attain a target of generating 20 percent of total
retail sales of electricity in California from eligible renewable
energy resources by December 31,  2010,   2013,
 and  33 percent by December 31, 2020, and  for the
purposes of increasing the diversity, reliability, public health 
,  and environmental benefits of the energy mix,  reducing
emissions of greenhouse gases, and promoting economic development
 it is the intent of the Legislature that the commission and the
 State  Energy  Resources Conservation and
Development  Commission implement the California Renewables
Portfolio Standard Program described in this article.
   (b) Increasing California's reliance on eligible renewable energy
resources may promote stable electricity prices, protect public
health, improve environmental quality, stimulate sustainable economic
development, create new employment opportunities, and reduce
reliance on imported fuels.
   (c) The development of eligible renewable energy resources and the
delivery of the electricity generated by those resources to
customers in California may ameliorate air quality problems
throughout the state and improve public health by reducing the
burning of fossil fuels and the associated environmental impacts and
by reducing in-state fossil fuel consumption.
   (d) The California Renewables Portfolio Standard Program is
intended to complement the Renewable Energy Resources Program
administered by the  State  Energy 
Resources Conservation and Development  Commission and
established pursuant to Chapter 8.6 (commencing with Section 25740)
of Division 15 of the Public Resources Code.
   (e) New and modified electric transmission facilities  may
  will  be necessary to facilitate the state
achieving its renewables portfolio standard targets. 
   (f) (1) Delivering genuine renewable electricity to California
end-use customers is necessary to improve California's air quality
and public health, and California end-use customers may be paying
higher rates to achieve the procurement requirements of this article.
This delivered electricity may be generated anywhere in the
interconnected grid that includes many states, and areas of both
Canada and Mexico.  
   (2) The definition of "delivered" and "delivery" requires
generating resources located outside of California, but able to
deliver that electricity to California end-use customers, to be
treated identically to generating resources located within the state,
without discrimination.  
   (3) California electrical corporations have already executed, and
the commission has approved, power purchase agreements with eligible
renewable energy resources located outside of California that will
deliver renewable electricity to California end-use customers, and
there are nearly 10,000 megawatts of additional proposed renewable
energy resources located outside of California that are awaiting
interconnection approval from the Independent System Operator. All of
the delivered resources should count as eligible renewable energy
resources under the renewables portfolio standard procurement
requirements. 
   SEC. 12.    Section 399.12 of the   Public
Utilities Code   is amended to read: 
   399.12.  For purposes of this article, the following terms have
the following meanings:
   (a) "Conduit hydroelectric facility" means a facility for the
generation of electricity that uses only the hydroelectric potential
of an existing pipe, ditch, flume, siphon, tunnel, canal, or other
manmade conduit that is operated to distribute water for a beneficial
use.
   (b) "Delivered" and  "delivery" have the same meaning as
provided in subdivision (a) of Section 25741 of the Public Resources
Code   "delivery," with respect to electricity, means
___  .
   (c) "Eligible renewable energy resource" means an 
electric   electrical  generating facility that
meets the definition of  "in-state renewable electricity
  a "renewable electrical  generation facility" in
Section 25741 of the Public Resources Code, subject to the following
 limitations  :
   (1) (A) An existing small hydroelectric generation facility of 30
megawatts or less shall be eligible only if a retail seller or local
publicly owned electric utility owned or procured the electricity
from the facility as of December 31, 2005.  A small hydroelectric
generation unit with a nameplate capacity not exceeding 40 megawatts
that is operated as part of a water supply or conveyance system
serving the jurisdiction of a local publicly owned electric utility
is an eligible renewable energy resource if the local publicly owned
electric utility owned or procured the electricity from the facility
as of December 31, 2005.  A new hydroelectric facility is not an
eligible renewable energy resource if it will cause an adverse
impact on instream beneficial uses or cause a change in the volume or
timing of streamflow.
   (B) Notwithstanding subparagraph (A), a conduit hydroelectric
facility of 30 megawatts or less that commenced operation before
January 1, 2006, is an eligible renewable energy resource. A conduit
hydroelectric facility of 30 megawatts or less that commences
operation after December 31, 2005, is an eligible renewable energy
resource so long as it does not cause an adverse impact on instream
beneficial uses or cause a change in the volume or timing of
streamflow.
   (2) A facility engaged in the combustion of municipal solid waste
shall not be considered an eligible renewable resource unless it is
located in Stanislaus County and was operational prior to September
26, 1996.
   (d) "Procure" means  that   to acquire
through ownership or contract. For purposes of meeting the renewables
portfolio standard procurement requirements,  a retail seller
or local publicly owned electric utility  receives 
 may procure either  delivered electricity generated by an
eligible renewable energy resource that it owns or  for which
it has entered into an electricity purchase agreement  
renewable energy credits associated with electricity generated, but
not necessarily delivered by, an eligible renewable energy resource
 . Nothing in this article is intended to imply that the
purchase of electricity from third parties in a wholesale transaction
is the preferred method of fulfilling a retail seller's obligation
to comply with this article or the obligation of a local publicly
owned electric utility to meet its renewables portfolio standard
implemented pursuant to Section  387   399.30
 . 
   (e) "Renewables portfolio standard" means the specified percentage
of electricity generated by eligible renewable energy resources that
a retail seller is required to procure pursuant to this article or
the obligation of a local publicly owned electric utility to meet its
renewables portfolio standard implemented pursuant to Section 387.
 
   (f) 
    (e)  (1) "Renewable energy credit" means a certificate
of proof  associated with the generation of electricity from an
eligible renewable energy resource  , issued through the
accounting system established by the Energy Commission pursuant to
Section  399.13   399.25  , that one unit
of electricity was generated  and delivered  by an
eligible renewable energy resource.
   (2) "Renewable energy credit" includes all renewable and
environmental attributes associated with the production of
electricity from the eligible renewable energy resource, except for
an emissions reduction credit issued pursuant to Section 40709 of the
Health and Safety Code and any credits or payments associated with
the reduction of solid waste and treatment benefits created by the
utilization of biomass or biogas fuels.
   (3)  (A)    No electricity generated by an
eligible renewable energy resource attributable to the use of
nonrenewable fuels, beyond a de minimis quantity, as determined by
the Energy Commission  for each renewable energy technology 
, shall result in the creation of a renewable energy credit. 
   (B) No electricity generated by a small hydroelectric generation
facility shall result in the creation of a renewable energy credit
unless the facility meets the requirements of subparagraph (A) of
paragraph (1) of subdivision (c).  
   (C) No electricity generated by a conduit hydroelectric generation
facility shall result in the creation of a renewable energy credit
unless the facility meets the requirements of subparagraph (B) of
paragraph (1) of subdivision (c).  
   (D) No electricity generated by a facility engaged in the
combustion of municipal solid waste shall result in the creation of a
renewable energy credit unless the facility meets the requirements
of paragraph (2) of subdivision (c).  
   (f) "Renewable energy public goods charge" means that portion of
the nonbypassable system benefits charge required to be collected to
fund renewable energy pursuant to the Reliable Electric Service
Investments Act (Article 15 (commencing with Section 399) of Chapter
2.3 of Part 1 of Division 1, for an electrical corporation, and
pursuant to Section 385 for a local publicly owned electric utility.
 
   (g) "Renewables portfolio standard" means the specified percentage
of electricity generated by eligible renewable energy resources that
a retail seller or a local publicly owned electric utility is
required to procure pursuant to this article.  
   (g) 
    (h)  "Retail seller" means an entity engaged in the
retail sale of electricity to end-use customers located within the
state, including any of the following:
   (1) An electrical corporation, as defined in Section 218.
   (2) A community choice aggregator. The commission shall institute
a rulemaking to determine the manner in which a community choice
aggregator will participate in the renewables portfolio standard
program subject to the same terms and conditions applicable to an
electrical corporation.
   (3) An electric service provider, as defined in Section 218.3, for
all sales of electricity to customers beginning January 1, 2006. The
commission shall institute a rulemaking to determine the manner in
which electric service providers will participate in the renewables
portfolio standard program. The electric service provider shall be
subject to the same terms and conditions applicable to an electrical
corporation pursuant to this article. Nothing in this paragraph shall
impair a contract entered into between an electric service provider
and a retail customer prior to the suspension of direct access by the
commission pursuant to Section 80110 of the Water Code.
   (4) "Retail seller" does not include any of the following:
   (A) A corporation or person employing cogeneration technology or
producing electricity consistent with subdivision (b) of Section 218.

   (B) The Department of Water Resources acting in its capacity
pursuant to Division 27 (commencing with Section 80000) of the Water
Code.
   (C) A local publicly owned electric utility. 
   (i) "WECC" means the Western Electricity Coordinating Council of
the North American Electric Reliability Corporation, or a successor
to either corporation. 
   SEC. 13.    Section 399.13 of the Public Utilities
Code is amen   ded and renumbered to read: 
    399.13.   399.25.   The Energy
Commission shall do all of the following:
   (a) Certify eligible renewable energy resources that it determines
meet the criteria described in subdivision  (b) 
 (c)  of Section 399.12.
   (b) Design and implement an accounting system to verify compliance
with the renewables portfolio standard by retail sellers  and
local publicly owned electric utilities  , to ensure that
electricity generated by an eligible renewable energy resource is
counted only once for the purpose of meeting the renewables portfolio
standard of this state or any other state, to certify renewable
energy credits produced by eligible renewable energy resources, and
to verify retail product claims in this state or any other state. In
establishing the guidelines governing this accounting system, the
Energy Commission shall collect data from electricity market
participants that it deems necessary to verify compliance of retail
sellers  and local publicly owned electric utilities  , in
accordance with the requirements of this article and the California
Public Records Act (Chapter 3.5 (commencing with Section 6250) of
Division 7 of Title 1 of the Government Code). In seeking data from
electrical corporations, the Energy Commission shall request data
from the commission. The commission shall collect data from
electrical corporations and remit the data to the Energy Commission
within 90 days of the request.
   (c) Establish a system for tracking and verifying renewable energy
credits that, through the use of independently audited data,
verifies the generation and delivery of electricity associated with
each renewable energy credit and protects against multiple counting
of the same renewable energy credit. The Energy Commission shall
consult with other western states and with the Western Electricity
Coordinating Council in the development of this system.
   (d) Certify, for purposes of compliance with the 
renewable   renewables  portfolio standard
requirements by a retail seller, the eligibility of renewable energy
credits associated with deliveries of electricity by an eligible
renewable energy resource to a local publicly owned electric utility,
if the Energy Commission determines that  all of  the
 following  conditions  of Section 399.31 
have been  satisfied:   met.  
   (1) The local publicly owned electric utility that is procuring
the electricity is in compliance with the requirements of Section
387.  
   (2) The local publicly owned electric utility has established an
annual renewables portfolio standard target comparable to those
applicable to an electrical corporation, is procuring sufficient
eligible renewable energy resources to satisfy the targets, and will
not fail to satisfy the targets in the event that the renewable
energy credit is sold to another retail seller. 
   SEC. 14.    Section 399.13 is added to the 
Public Utilities Code   , to read:  
   399.13.  (a) (1) The commission shall direct each electrical
corporation to annually prepare a renewable energy procurement plan
that includes the matter in paragraph (5), to satisfy its obligations
under the renewables portfolio standard. To the extent feasible,
this procurement plan shall be proposed, reviewed, and adopted by the
commission as part of, and pursuant to, a general procurement plan
process. The commission shall require each electrical corporation to
review and update its renewable energy procurement plan as it
determines to be necessary.
   (2) Every electrical corporation that owns electrical transmission
facilities shall annually prepare, as part of the Federal Energy
Regulatory Commission Order 890 process, and submit to the
commission, a report identifying any electrical transmission
facility, upgrade, or enhancement that is reasonably necessary to
achieve the renewable energy resources procurement requirements of
this article. Each report shall look forward at least five years and,
to ensure that adequate investments are made in a timely manner,
shall include a preliminary schedule when an application for a
certificate of public convenience and necessity will be made,
pursuant to Chapter 5 (commencing with Section 1001), for any
electrical transmission facility identified as being reasonably
necessary to achieve the renewable energy resources procurement
requirements of this article. Each electrical corporation that owns
electrical transmission facilities shall ensure that project specific
interconnection studies are completed in a timely manner.
   (3) The commission shall direct each retail seller to prepare and
submit an annual compliance report that includes all of the
following:
   (A) The current status and progress made during the prior year
toward procurement of eligible renewable energy resources as a
percentage of retail sales, including, if applicable, the status of
any necessary siting and permitting approvals from federal, state,
and local agencies for those in-state eligible renewable energy
resources procured by the retail seller, procurement of eligible
renewable energy resources located outside the state and within the
WECC, and procurement of renewable energy credits.
   (B) If the retail seller is an electrical corporation, the current
status and progress made during the prior year toward construction
of, and upgrades to, transmission and distribution facilities and
other electrical system components it owns to interconnect eligible
renewable energy resources and to deliver the electricity generated
by those resources to load, including the status of planning, siting,
and permitting transmission facilities by federal, state, and local
agencies.
   (C) Recommendations to remove impediments to making progress
toward achieving the renewable energy resources procurement
requirements established pursuant to this article.
   (4) The commission shall adopt, by rulemaking, all of the
following:
   (A) A process that provides criteria for the rank ordering and
selection of least-cost and best-fit eligible renewable energy
resources to comply with the California Renewables Portfolio Standard
Program obligations on a total cost basis. This process shall take
into account all of the following:
   (i) Estimates of indirect costs associated with needed
transmission investments and ongoing electrical corporation expenses
resulting from integrating and operating eligible renewable energy
resources.
   (ii) The cost impact of procuring the eligible renewable energy
resources on the electrical corporation's electricity portfolio.
   (iii) The viability of the project to construct and reliably
operate the eligible renewable energy resource, including the
developer's experience, the feasibility of the technology used to
generate electricity, and the risk that the facility will not be
built, or that construction will be delayed, with the result that
electricity will not be delivered as required by the contract.
   (B) Rules permitting retail sellers to apply excess procurement in
one year to subsequent years.
   (C) Standard terms and conditions to be used by all electrical
corporations in contracting for eligible renewable energy resources,
including performance requirements for renewable generators. A
contract for the purchase of electricity generated by an eligible
renewable energy resource shall, at a minimum, include the renewable
energy credits associated with all electricity generation specified
under the contract. The standard terms and conditions shall include
the requirement that, no later than six months after the commission's
approval of an electricity purchase agreement entered into pursuant
to this article, the following information about the agreement shall
be disclosed by the commission: party names, resource type, project
location, and project capacity.
   (D) An appropriate minimum margin of procurement above the minimum
procurement level necessary to comply with the renewables portfolio
standard to mitigate the risk that renewable projects planned or
under contract are delayed or canceled. Nothing in this paragraph
shall preclude an electrical corporation from voluntarily proposing a
margin of procurement above the appropriate minimum margin
established by the commission.
   (5) Consistent with the goal of increasing California's reliance
on eligible renewable energy resources, the renewable energy
procurement plan submitted by an electrical corporation shall include
all of the following:
   (A) An assessment of annual or multiyear portfolio supplies and
demand to determine the optimal mix of eligible renewable energy
resources with deliverability characteristics that may include
peaking, dispatchable, baseload, firm, and as-available capacity.
   (B) Potential compliance delays related to the conditions
described in paragraph (4) of subdivision (b) of Section 399.15.
   (C) A bid solicitation setting forth the need for eligible
renewable energy resources of each deliverability characteristic,
required online dates, and locational preferences, if any.
   (D) A status update on the development schedule of all eligible
renewable energy resources currently under contract.
   (E) Consideration of mechanisms for price adjustments associated
with the costs of key components for eligible renewable energy
resource projects with online dates more than 24 months after the
date of contract execution.
   (F) An assessment of the risk that an eligible renewable energy
resource will not be built, or that construction will be delayed,
with the result that electricity will not be delivered as required by
the contract.
   (6) In soliciting and procuring eligible renewable energy
resources, each electrical corporation shall offer contracts of no
less than 10 years in duration, unless the commission approves of a
contract of shorter duration.
   (7) In soliciting and procuring eligible renewable energy
resources for California-based projects, each electrical corporation
shall give preference to renewable energy projects that provide
environmental and economic benefits to communities afflicted with
poverty or high unemployment, or that suffer from high emission
levels of toxic air contaminants, criteria air pollutants, and
greenhouse gases.
   (b) A retail seller may enter into a combination of long- and
short-term contracts for delivery of electricity and associated
renewable energy credits. The commission may authorize a retail
seller to enter into a contract of less than 10 years' duration with
an eligible renewable energy resource, if the commission has
established, for each retail seller, minimum quantities of eligible
renewable energy resources to be procured through contracts of at
least 10 years' duration.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's renewable energy resource procurement plan
prior to the commencement of renewable energy procurement pursuant to
this article by an electrical corporation.
   (d) Unless previously preapproved by the commission, an electrical
corporation shall submit a contract for the generation of an
eligible renewable energy resource to the commission for review and
approval consistent with an approved renewable energy resource
procurement plan. If the commission determines that the bid prices
are elevated due to a lack of effective competition among the
bidders, the commission shall direct the electrical corporation to
renegotiate the contracts or conduct a new solicitation.
   (e) The commission shall establish milestones in the development
of the project to evaluate the potential for compliance with the
adopted renewable energy resource procurement plan and a set of
actions that will occur as a result of not meeting those milestones.
These actions may include, but shall not be limited to, determining a
cure period for failure to meet milestones, a suspense period on the
contract online date for events beyond the developer's control that
cause a failure to meet milestones, allowing other developers that
are prepared to go forward to move ahead of suspended contracts, and
the forfeiture of deposits.
   (f) If an electrical corporation fails to comply with a commission
order adopting a renewable energy resource procurement plan, the
commission shall exercise its authority pursuant to Section 2113 to
require compliance.
     The commission shall enforce comparable penalties on any retail
seller that is not an electrical corporation that fails to meet the
procurement targets established pursuant to Section 399.15.
   (g) (1) The commission may authorize a procurement entity to enter
into contracts on behalf of customers of a retail seller for
deliveries of eligible renewable energy resources to satisfy the
retail seller's renewables portfolio standard procurement
requirements. The commission may not require any person or
corporation to act as a procurement entity or require any party to
purchase eligible renewable energy resources from a procurement
entity.
   (2) Subject to review and approval by the commission, the
procurement entity shall be permitted to recover reasonable
administrative and procurement costs through the retail rates of
end-use customers that are served by the procurement entity and are
directly benefiting from the procurement of eligible renewable energy
resources.
   (h) Procurement and administrative costs associated with contracts
entered into by an electrical corporation for eligible renewable
energy resources pursuant to this article and approved by the
commission shall be deemed reasonable and shall be recoverable in
rates.
   (i) Construction, alteration, demolition, installation, and repair
work on an eligible renewable energy resource that receives
production incentives pursuant to Section 25742 of the Public
Resources Code, including work performed to qualify, receive, or
maintain production incentives are "public works" for the purposes of
Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of
the Labor Code. 
   SEC. 15.    Section 399.14 of the   Public
Utilities Code   is repealed.  
   399.14.  (a) (1) The commission shall direct each electrical
corporation to prepare a renewable energy procurement plan that
includes the matter in paragraph (3), to satisfy its obligations
under the renewables portfolio standard. To the extent feasible, this
procurement plan shall be proposed, reviewed, and adopted by the
commission as part of, and pursuant to, a general procurement plan
process. The commission shall require each electrical corporation to
review and update its renewable energy procurement plan as it
determines to be necessary.
   (2) The commission shall adopt, by rulemaking, all of the
following:
   (A) A process for determining market prices pursuant to
subdivision (c) of Section 399.15. The commission shall make specific
determinations of market prices after the closing date of a
competitive solicitation conducted by an electrical corporation for
eligible renewable energy resources.
   (B) A process that provides criteria for the rank ordering and
selection of least-cost and best-fit eligible renewable energy
resources to comply with the annual California Renewables Portfolio
Standard Program obligations on a total cost basis. This process
shall consider estimates of indirect costs associated with needed
transmission investments and ongoing utility expenses resulting from
integrating and operating eligible renewable energy resources.
   (C) (i) Flexible rules for compliance, including rules permitting
retail sellers to apply excess procurement in one year to subsequent
years or inadequate procurement in one year to no more than the
following three years. The flexible rules for compliance shall apply
to all years, including years before and after a retail seller
procures at least 20 percent of total retail sales of electricity
from eligible renewable energy resources.
   (ii) The flexible rules for compliance shall address situations
where, as a result of insufficient transmission, a retail seller is
unable to procure eligible renewable energy resources sufficient to
satisfy the requirements of this article. Any rules addressing
insufficient transmission shall require a finding by the commission
that the retail seller has undertaken all reasonable efforts to do
all of the following:
   (I) Utilize flexible delivery points.
   (II) Ensure the availability of any needed transmission capacity.
   (III) If the retail seller is an electric corporation, to
construct needed transmission facilities.
   (IV) Nothing in this subparagraph shall be construed to revise any
portion of Section 454.5.
   (D) Standard terms and conditions to be used by all electrical
corporations in contracting for eligible renewable energy resources,
including performance requirements for renewable generators. A
contract for the purchase of electricity generated by an eligible
renewable energy resource shall, at a minimum, include the renewable
energy credits associated with all electricity generation specified
under the contract. The standard terms and conditions shall include
the requirement that, no later than six months after the commission's
approval of an electricity purchase agreement entered into pursuant
to this article, the following information about the agreement shall
be disclosed by the commission: party names, resource type, project
location, and project capacity.
   (3) Consistent with the goal of procuring the least-cost and
best-fit eligible renewable energy resources, the renewable energy
procurement plan submitted by an electrical corporation shall include
all of the following:
   (A) An assessment of annual or multiyear portfolio supplies and
demand to determine the optimal mix of eligible renewable energy
resources with deliverability characteristics that may include
peaking, dispatchable, baseload, firm, and as-available capacity.
   (B) Provisions for employing available compliance flexibility
mechanisms established by the commission.
   (C) A bid solicitation setting forth the need for eligible
renewable energy resources of each deliverability characteristic,
required online dates, and locational preferences, if any.
   (4) In soliciting and procuring eligible renewable energy
resources, each electrical corporation shall offer contracts of no
less than 10 years in duration, unless the commission approves of a
contract of shorter duration.
   (5) In soliciting and procuring eligible renewable energy
resources, each electrical corporation may give preference to
projects that provide tangible demonstrable benefits to communities
with a plurality of minority or low-income populations.
   (b) The commission may authorize a retail seller to enter into a
contract of less than 10 years' duration with an eligible renewable
energy resource, if the commission has established, for each retail
seller, minimum quantities of eligible renewable energy resources to
be procured either through contracts of at least 10 years' duration
or from new facilities commencing commercial operations on or after
January 1, 2005.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's renewable energy procurement plan prior to
the commencement of renewable procurement pursuant to this article by
an electrical corporation.
   (d) The commission shall review the results of an eligible
renewable energy resources solicitation submitted for approval by an
electrical corporation and accept or reject proposed contracts with
eligible renewable energy resources based on consistency with the
approved renewable energy procurement plan. If the commission
determines that the bid prices are elevated due to a lack of
effective competition among the bidders, the commission shall direct
the electrical corporation to renegotiate the contracts or conduct a
new solicitation.
   (e) If an electrical corporation fails to comply with a commission
order adopting a renewable energy procurement plan, the commission
shall exercise its authority pursuant to Section 2113 to require
compliance. The commission shall enforce comparable penalties on any
other retail seller that fails to meet annual procurement targets
established pursuant to Section 399.15.
   (f) (1) The commission may authorize a procurement entity to enter
into contracts on behalf of customers of a retail seller for
deliveries of eligible renewable energy resources to satisfy annual
renewables portfolio standard obligations. The commission may not
require any person or corporation to act as a procurement entity or
require any party to purchase eligible renewable energy resources
from a procurement entity.
   (2) Subject to review and approval by the commission, the
procurement entity shall be permitted to recover reasonable
administrative and procurement costs through the retail rates of
end-use customers that are served by the procurement entity and are
directly benefiting from the procurement of eligible renewable energy
resources.
   (g) Procurement and administrative costs associated with long-term
contracts entered into by an electrical corporation for eligible
renewable energy resources pursuant to this article and approved by
the commission shall be deemed reasonable per se, and shall be
recoverable in rates.
   (h) Construction, alteration, demolition, installation, and repair
work on an eligible renewable energy resource that receives
production incentives pursuant to Section 25742 of the Public
Resources Code, including work performed to qualify, receive, or
maintain production incentives is "public works" for the purposes of
Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of
the Labor Code. 
   SEC. 16.    Section 399.14 is added to the  
Public Utilities Code   , to read:  
   399.14.  (a) (1) An electrical corporation may, pursuant to
Chapter 5 (commencing with Section 1001), and in order to meet its
renewables portfolio standard procurement requirements, apply to the
commission for approval to construct, own, and operate an eligible
renewable energy resource.
   (2) If the proposed eligible renewable energy resource complies
with the requirements of subdivision (b), the commission shall
approve an application filed pursuant to paragraph (1), until the
commission has approved applications for eligible renewable energy
resources for the electrical corporation that, when constructed and
operating, will provide 8.25 percent of the electrical corporation's
anticipated retail sales by December 31, 2020.
   (3) The commission may approve additional applications for
eligible renewable energy resources once the commission has approved
sufficient applications for eligible renewable energy resources for
the electrical corporation that, when constructed and operating, will
provide 8.25 percent of the electrical corporation's anticipated
retail sales by December 31, 2020.
   (b) The commission shall not approve any application by an
electrical corporation pursuant to subdivision (a) unless both of the
following conditions are met:
   (1) The eligible renewable energy resource utilizes a viable
technology at a reasonable cost.
   (2) The eligible renewable energy resource provides comparable or
superior value to ratepayers when compared to then recent or
contemporaneous solicitations for generation provided by eligible
renewable energy resources.
   (c) In approving any application by an electrical corporation for
approval to construct, own, and operate an eligible renewable energy
resource, the commission shall apply traditional cost-of-service
ratemaking, including reasonableness review after construction is
completed. 
   SEC. 17.    Section 399.15 of the   Public
Utilities Code   is repealed.  
   399.15.  (a) In order to fulfill unmet long-term resource needs,
the commission shall establish a renewables portfolio standard
requiring all electrical corporations to procure a minimum quantity
of electricity generated by eligible renewable energy resources as a
specified percentage of total kilowatthours sold to their retail
end-use customers each calendar year, subject to limits on the total
amount of costs expended above the market prices determined in
subdivision (c), to achieve the targets established under this
article.
   (b) The commission shall implement annual procurement targets for
each retail seller as follows:
   (1) Each retail seller shall, pursuant to subdivision (a),
increase its total procurement of eligible renewable energy resources
by at least an additional 1 percent of retail sales per year so that
20 percent of its retail sales are procured from eligible renewable
energy resources no later than December 31, 2010. A retail seller
with 20 percent of retail sales procured from eligible renewable
energy resources in any year shall not be required to increase its
procurement of renewable energy resources in the following year.
   (2) For purposes of setting annual procurement targets, the
commission shall establish an initial baseline for each retail seller
based on the actual percentage of retail sales procured from
eligible renewable energy resources in 2001, and to the extent
applicable, adjusted going forward pursuant to Section 399.12.
   (3) Only for purposes of establishing these targets, the
commission shall include all electricity sold to retail customers by
the Department of Water Resources pursuant to Section 80100 of the
Water Code in the calculation of retail sales by an electrical
corporation.
   (4) In the event that a retail seller fails to procure sufficient
eligible renewable energy resources in a given year to meet any
annual target established pursuant to this subdivision, the retail
seller shall procure additional eligible renewable energy resources
in subsequent years to compensate for the shortfall, subject to the
limitation on costs for electrical corporations established pursuant
to subdivision (d).
   (c) The commission shall establish a methodology to determine the
market price of electricity for terms corresponding to the length of
contracts with eligible renewable energy resources, in consideration
of the following:
   (1) The long-term market price of electricity for fixed price
contracts, determined pursuant to an electrical corporation's general
procurement activities as authorized by the commission.
   (2) The long-term ownership, operating, and fixed-price fuel costs
associated with fixed-price electricity from new generating
facilities.
   (3) The value of different products including baseload, peaking,
and as-available electricity.
   (d) The commission shall establish, for each electrical
corporation, a limitation on the total costs expended above the
market prices determined in subdivision (c) for the procurement of
eligible renewable energy resources to achieve the annual procurement
targets established under this article.
   (1) The cost limitation shall be equal to the amount of funds
transferred to each electrical corporation by the Energy Commission
pursuant to subdivision (b) of Section 25743 of the Public Resources
Code and the 51.5 percent of the funds which would have been
collected through January 1, 2012, from the customers of the
electrical corporation based on the renewable energy public goods
charge in effect as of January 1, 2007.
   (2) The above-market costs of a contract selected by an electrical
corporation may be counted toward the cost limitation if all of the
following conditions are satisfied:
   (A) The contract has been approved by the commission and was
selected through a competitive solicitation pursuant to the
requirements of subdivision (d) of Section 399.14.
   (B) The contract covers a duration of no less than 10 years.
   (C) The contracted project is a new or repowered facility
commencing commercial operations on or after January 1, 2005.
   (D) No purchases of renewable energy credits may be eligible for
consideration as an above-market cost.
   (E) The above-market costs of a contract do not include any
indirect expenses including imbalance energy charges, sale of excess
energy, decreased generation from existing resources, or transmission
upgrades.
   (3) If the cost limitation for an electrical corporation is
insufficient to support the total costs expended above the market
prices determined in subdivision (c) for the procurement of eligible
renewable energy resources satisfying the conditions of paragraph
(2), the commission shall allow the electrical corporation to limit
its procurement to the quantity of eligible renewable energy
resources that can be procured at or below the market prices
established in subdivision (c).
   (4) Nothing in this section prevents an electrical corporation
from voluntarily proposing to procure eligible renewable energy
resources at above-market prices that are not counted toward the cost
limitation. Any voluntary procurement involving above-market costs
shall be subject to commission approval prior to the expense being
recovered in rates.
   (e) The establishment of a renewables portfolio standard shall not
constitute implementation by the commission of the federal Public
Utility Regulatory Policies Act of 1978 (Public Law 95-617).
   (f) The commission shall consult with the Energy Commission in
calculating market prices under subdivision (c) and establishing
other renewables portfolio standard policies. 
   SEC. 18.    Section 399.15 is added to the  
Public Utilities Code   , to read:  
   399.15.  (a) In order to fulfill unmet long-term resource needs,
the commission shall establish a renewables portfolio standard
requiring all retail sellers to procure a minimum quantity of
electricity generated by eligible renewable energy resources as a
specified percentage of total kilowatthours sold to their retail
end-use customers each compliance period to achieve the targets
established under this article.
   (b) The commission shall implement renewables portfolio standard
procurement requirements only as follows:
   (1) Each retail seller shall procure the following minimum
percentages of eligible renewable energy resources in the following
years, and continue to procure at least those percentages in
subsequent years:
   (A) Until December 31, 2012, the same percentage as actually
achieved by the retail seller during 2009.
   (B) Twenty percent by December 31, 2013.
   (C) Twenty-five percent by December 31, 2016.
   (D) Thirty-three percent by December 31, 2020.
   (2) A retail seller with 33 percent of its retail sales of
electricity procured from eligible renewable energy resources in any
year shall not be required to increase its procurement of renewable
energy resources, except to the extent required to maintain a 33
percent renewables portfolio standard. A retail seller may
voluntarily increase its procurement of eligible renewable energy
resources beyond the renewables portfolio standard procurement
requirements.
   (3) Only for purposes of establishing the renewables portfolio
standard procurement requirements of paragraph (1), the commission
shall include all electricity sold to retail customers by the
Department of Water Resources pursuant to Section 80100 of the Water
Code in the calculation of retail sales by an electrical corporation.

   (4) The commission may only allow a retail seller for a maximum of
two years per request to delay compliance with a renewables
portfolio standard procurement requirement established pursuant to
subparagraph (B) or (C) of paragraph (1), if it finds that the retail
seller has demonstrated that either of the following conditions will
prevent timely compliance:
   (A) There is inadequate transmission capacity to allow for
sufficient electricity to be delivered from proposed eligible
renewable energy resource projects using the current operational
protocols of the Independent System Operator (ISO). The commission
shall consult with the ISO in making its findings relative to the
existence of this condition. In making its findings relative to the
existence of this condition with respect to a retail seller that owns
transmission lines, the commission shall consider both of the
following:
   (i) Whether the retail seller has undertaken all reasonable
measures to develop and construct new transmission lines or upgrades
to existing lines in a timely fashion.
   (ii) Whether the retail seller has taken all reasonable
operational measures, as verified by the ISO, to maximize deliveries
of electricity from eligible renewable energy resources in advance of
transmission availability.
   (B) Unanticipated permitting, interconnection, or other delays for
procured eligible renewable energy resource projects, or there is an
insufficient supply of delivered electricity from eligible renewable
energy resources available to the retail seller. In making this
finding, the commission shall consider whether the retail seller has
prudently managed portfolio risks, relied on sufficient viable
projects, sought to develop its own eligible renewable energy
resources, and procured an appropriate minimum margin of procurement
above the minimum procurement level necessary to comply with the
renewables portfolio standard to compensate for foreseeable delays or
insufficient supply.
   (5) Prior to granting a delay pursuant to paragraph (4), the
commission shall require a retail seller to demonstrate that it has
presented evidence that it has made material progress in reducing its
compliance deficit and has taken all reasonable measures consistent
with this article to procure cost-effective distributed generation
and renewable energy credits consistent with the restrictions in
paragraph (6) of subdivision (a) of Section 399.21.
   (6) The commission may not approve any request to delay a
compliance obligation for which it has already granted a delay unless
a retail seller presents evidence that it has made material progress
in reducing its compliance deficiency and has identified and taken
all reasonable actions under its control to pursue additional options
to comply with the delayed interim procurement obligation and remove
impediments that are related to its delay.
   (7) The commission may not authorize any delay in achieving the 33
percent by December 31, 2020, renewables portfolio standard
procurement requirement of subparagraph (D) of paragraph (1).
   (8) If a retail seller fails to procure sufficient eligible
renewable energy resources to comply with a renewables portfolio
standard procurement requirement and fails to obtain an order from
the commission authorizing a compliance delay pursuant to paragraph
(4), the commission shall exercise its authority pursuant to Section
2113.
   (c) The commission shall establish a methodology to determine the
market price of electricity for terms corresponding to the length of
contracts with eligible renewable energy resources, in consideration
of the long-term ownership, operating, and fixed-price fuel costs
associated with fixed-price electricity from new generating
facilities. The methodology shall reflect all of the following:
   (1) The value of different products including baseload, peaking,
and as-available electricity.
   (2) All current and anticipated environmental compliance costs,
including mitigation of emissions of greenhouse gases and air
pollution offsets associated with the operation of new generating
facilities.
   (d) (1) The commission shall establish a limitation for each
electrical corporation on the expenditures above the market costs
determined in subdivision (c) for the procurement of all eligible
renewable energy resources that are used to comply with the
electrical corporation's renewables portfolio standard. The cost
limitation shall equal 6 percent of the total bundled electric
revenues recorded by the electrical corporation in 2008 multiplied by
the number of years remaining until 2020. Total bundled
                                  electric revenues shall include
revenues collected by the electrical corporation on behalf of the
Department of Water Resources for procurement activities conducted
pursuant to Division 27 (commencing with Section 80000) of the Water
Code.
   (2) The calculation of the above-market costs shall include all
procurement of eligible renewable energy resources that are used to
comply with the electrical corporation's renewables portfolio
standard that are submitted for approval to the commission after
January 1, 2011.
   (3) The above-market costs of procurement do not include any
indirect expenses, including imbalance energy charges, sale of excess
energy, decreased generation from existing resources, or
transmission upgrades.
   (4) Calculations of the above-market costs shall include, as a
reduction to the total above-market costs, procurement from eligible
renewable energy resources that are used to meet the renewables
portfolio standard procurement requirements established pursuant to
paragraph (1) of subdivision (b) that are below the market prices
determined in subdivision (c) for each year.
   (5) In calculating the limit on above-market costs established in
paragraph (1), the commission shall account for the potential that
some procured resources may be delayed or canceled.
   (e) If the cost limitation for an electrical corporation is
insufficient to support the projected net above-market costs
identified in subdivision (d), the commission shall allow the
electrical corporation to refrain from entering into new contracts or
to construct facilities for that future year beyond the quantity of
eligible renewable energy resources that can be procured at or below
the market prices established in subdivision (c).
   (f) Notwithstanding subdivision (e), if an electrical corporation'
s net annual above-market costs for a future year exceed the
electrical corporation's cost limitation, the electrical corporation
may voluntarily propose to procure eligible renewable energy
resources at above-market prices. Any voluntary procurement under
this paragraph shall be subject to commission approval prior to the
expense being recovered in rates.
   (g) (1) The commission shall monitor the status of the cost
limitation for each electrical corporation in order to ensure
compliance with this article.
   (2) If the commission determines that an electrical corporation
may exceed its cost limitation prior to achieving the renewables
portfolio standard procurement requirements, the commission shall do
all of the following within 60 days of making that determination:
   (A) Investigate and identify the reasons why the electrical
corporation may exceed its annual cost limitation.
   (B) Identify those actions that can be taken to ensure that the
electrical corporation continues to comply with its renewables
portfolio standard procurement requirements.
   (C) Notify the appropriate policy and fiscal committees of the
Legislature that the electrical corporation may exceed its cost
limitation, the reasons why the electrical corporation may exceed its
cost limitation, and those actions that may be taken by the
electrical corporation to comply with the renewables portfolio
standard procurement requirements.
   (3) The commission shall examine mechanisms for mitigating the
potential impact of low fossil fuel prices on the cost limitation of
each electrical corporation and make recommendations to the
Legislature on any changes in law it identifies to mitigate those
impacts.
   (h) The commission shall examine and adopt mechanisms to limit the
potential influence of the market prices established in subdivision
(c) on seller pricing and buyer contract selection.
   (i) The establishment of a renewables portfolio standard shall not
constitute implementation by the commission of the federal Public
Utility Regulatory Policies Act of 1978 (Public Law 95-617).
   (j) The commission shall consult with the Energy Commission in
establishing renewables portfolio standard policies. 
   SEC. 19.    Section 399.16 of the   Public
Utilities Code   is amended and renumbered to read: 
    399.16.   399.21   (a) The commission,
by rule,  may   shall  authorize the use of
renewable energy credits to satisfy the  requirements of the
 renewables portfolio standard  procurement
requirements  established pursuant to this article, subject to
the following conditions:
   (1) Prior to authorizing any renewable energy credit to be used
toward satisfying  annual procurement targets  
the renewables portfolio standard procurement requirements  ,
the commission and the Energy Commission shall conclude that the
tracking system established pursuant to subdivision (c) of Section
 399.13   399.25  , is operational, is
capable of independently verifying  that  the electricity
generated by an eligible renewable energy resource and  is 
delivered to the retail seller, and can ensure that renewable energy
credits shall not be double counted by any seller of electricity
within the service territory of the  Western Electricity
Coordinating Council (WECC)   WECC  .
   (2)  A   Each  renewable energy credit
shall be counted only once for compliance with the renewables
portfolio standard of this state or any other state, or for verifying
retail product claims in this state or any other state. 
   (3)  The electricity is delivered to a retail seller, the
Independent System Operator, or a local publicly owned electric
utility.  
   (4) 
    (3)  All revenues received by an electrical corporation
for the sale of a renewable energy credit shall be credited to the
benefit of ratepayers. 
   (5) 
    (4)  No renewable energy credits shall be created for
electricity generated pursuant to any electricity purchase contract
with a retail seller or a local publicly owned electric utility
executed before January 1, 2005, unless the contract contains
explicit terms and conditions specifying the ownership or disposition
of those credits. Deliveries under those contracts shall be tracked
through the accounting system described in subdivision (b) of Section
 399.13   399.25  and included in the
 baseline  quantity of eligible renewable energy
resources of the purchasing retail seller pursuant to Section 399.15.

   (6) 
    (5)  No renewable energy credits shall be created for
electricity generated under any electricity purchase contract
executed after January 1, 2005, pursuant to the federal Public
Utility Regulatory Policies Act of 1978 (16 U.S.C. Sec. 2601 et
seq.). Deliveries under the electricity purchase contracts shall be
tracked through the accounting system described in subdivision (b) of
Section 399.12 and count toward the renewables portfolio standard
obligations of the purchasing retail seller. 
   (7) The commission may limit the quantity of renewable energy
credits that may be procured unbundled from electricity generation by
any retail seller, to meet the requirements of this article.
 
   (8) No electrical corporation shall be obligated to procure
renewable energy credits to satisfy the requirements of this article
in the event that the total costs expended above the applicable
market prices for the procurement of eligible renewable energy
resources exceeds the cost limitation established pursuant to
subdivision (d) of Section 399.15.  
   (6) The use, by a retail seller, of renewable energy credits
associated with electricity that does not satisfy the delivery
requirements of subdivision (b) of Section 399.12 shall be limited to
25 percent of the retail seller's renewables portfolio standard
procurement requirements.  
   (7) If a retail seller exceeds the 25-percent limitation of
paragraph (6) as a result of contracts executed prior to September
18, 2009, and if those contracts are approved by the commission, the
retail seller shall be allowed to fully use the renewable energy
credits toward meeting its renewables portfolio standard procurement
requirements through the original term of the approved contracts, but
may not procure additional renewable energy credits associated with
electricity that does not satisfy the delivery requirements of
subdivision (b) of Section 399.12. For a local publicly owned
electric utility acting pursuant to subdivision (c) of Section
399.30, contract execution occurs on the date of project approval by
the utility's governing board or the board of a joint powers
authority of which the utility is a member and that approval shall
take the place of approval by the commission for a retail seller.
 
   (8) No renewable energy credit shall be eligible for compliance
with a renewables portfolio standard procurement requirement after 18
months from the initial date of generation of the associated
electricity. A renewable energy credit is used for compliance when
the retail seller or local publicly owned electric utility
irrevocably retires the credit within the tracking system established
pursuant to subdivision (c) of Section 399.25.  
   (9) If an electrical corporation or local publicly owned electric
utility owns and operates eligible renewable energy resources
constructed after January 1, 2008, in its service territory or in the
service territory of another electrical corporation or local
publicly owned utility, it may use additional renewable energy
credits beyond those allowed by paragraphs (6) and (7) in an amount
authorized by this paragraph. The additional renewable energy credits
shall be equal to the average annual amount of delivered electricity
from the owned and operated eligible renewable energy resources, or
the forecast of the delivered electricity from the resource after its
construction has begun. Ownership of the resources shall be obtained
by the electrical corporation no later than the time of commencement
of commercial operation. The maximum amount of additional renewable
energy credits authorized under this section shall not exceed 5
percent of the electrical corporation's renewables portfolio standard
procurement requirements.  
   (9) 
    (10)  Any additional condition that the commission
determines is reasonable.
   (b) The commission shall allow an electrical corporation to
recover the reasonable costs of purchasing renewable energy credits
in rates.
   SEC. 20.    Section 399.17 of the   Public
Utilities Code   is amended to read: 
   399.17.  (a) Subject to the provisions of this section, the
requirements of this article apply to an electrical corporation with
60,000 or fewer customer accounts in California  and  that
 either  serves retail end-use customers outside California
 or that is located in a control area that is not under the
operational control of the Independent System Operator and receives
the majority of its electrical requirements from generating
facilities located outside of California .
   (b) For an electrical corporation with 60,000 or fewer customer
accounts in California  and  that  either  serves
retail end-use customers outside California,  or that is located
in a control area that is not under the operational control of the
Independent System Operator and receives the majority of its
electrical requirements from generating facilities located outside of
California,  an eligible renewable energy resource includes a
facility that is located outside California, if the facility is
connected to the  Western Electricity Coordinating Council
(WECC)   WECC  transmission system, provided all of
the following conditions are met:
   (1) The electricity generated by the facility is procured by the
electrical corporation on behalf of its California customers, and is
not used to fulfill renewable energy procurement requirements in
other states.
   (2) The electrical corporation participates in, and complies with,
the accounting system administered by the Energy Commission pursuant
to subdivision (b) of Section  399.13.  
399.25. 
   (3) The Energy Commission verifies that the electricity generated
by the facility is eligible to meet the  annual 
procurement  targets   requirements  of
this article.
   (c) The commission shall determine the  annual 
procurement  targets   requirements  for an
electrical corporation with 60,000 or fewer customer accounts in
California that serves retail end-use customers outside California,
as a specified percentage of total kilowatthours sold by the
electrical corporation to its retail end-use customers in California
in a calendar year.
   (d) An electrical corporation with 60,000 or fewer customer
accounts in California that serves retail end-use customers outside
California, may use an integrated resource plan prepared in
compliance with the requirements of another state utility regulatory
commission, to fulfill the requirement to prepare a renewable energy
procurement plan pursuant to this article, provided the plan meets
the requirements of Sections 399.11, 399.12, 399.13,  or 399.14,
 and  399.14,   399.25,  as modified
by this section.
   (e) Procurement and administrative costs associated with long-term
contracts entered into by an electrical corporation with 60,000 or
fewer customer accounts in California that  either  serves
retail end-use customers outside California,  or that is located
in a control area that is not under the operational control of the
Independent System Operator and receives the majority of its
electrical requirements from generating facilities located outside of
California,  for eligible renewable energy resources pursuant
to this article, at or below the market price determined by the
commission pursuant to subdivision (c) of Section 399.15, shall be
deemed reasonable per se, and shall be recoverable in rates of the
electrical corporation's California customers, provided the costs are
not recoverable in rates in other states served by the electrical
corporation.
   SEC. 21.    Section 399.18 is added to the  
Public Utilities Code   , to read:  
   399.18.  The commission, in consultation with the Energy
Commission, shall report to the Legislature by January 1 of every
even-numbered year on all of the following:
   (a) The progress and status of procurement activities by each
retail seller.
   (b) The status of permitting and siting eligible renewable energy
resources and transmission facilities necessary to deliver the
electricity generated to load, including the time taken to permit
each eligible renewable energy resource and transmission line or
upgrade, explanations of failures to meet permitting milestones, and
recommendations for improvements to expedite permitting and siting
processes.
   (c) The projected ability of each electrical corporation to meet
the renewables portfolio standard procurement requirements under the
cost limitations in subdivision (d) of Section 399.15 and any
recommendations for revisions of those cost limitations.
   (d) Any barriers to, and policy recommendations for, achieving the
renewables portfolio standard pursuant to this article. 
   SEC. 22.    Section 399.26 is added to the  
Public Utilities Code   , to read:  
   399.26.  (a) In order for the state to meet the requirements of
the California Renewables Portfolio Standard Program, substantially
increased amounts of electricity generated by eligible renewable
energy resources must be integrated with, and interconnected to, the
transmission grid that is either owned by, or under the operational
control of, the local publicly owned electric utilities and the
transmission grid that is under the operational control of the
Independent System Operator.
   (b) The Independent System Operator and the balancing authority of
each area in California shall do both of the following:
   (1) Work cooperatively to integrate and interconnect eligible
renewable energy resources to the transmission grid by the most
efficient means possible with the goal of minimizing the impact and
cost of new transmission needed to meet both reliability needs and
the renewables portfolio standard procurement requirements.
   (2) Accomplish the requirements of paragraph (1) in a manner that
respects the ownership, business, and dispatch models for
transmission facilities owned by electrical corporations, local
publicly owned electric utilities, joint powers agencies, and
merchant transmission companies.
   (c) The Independent System Operator shall seek any approvals from
the Federal Energy Regulatory Commission that are necessary to
accomplish the goals and requirements of this article.
   (d) In order to maintain electric service reliability and to
minimize the construction of fossil fuel electrical generation
capacity to support the integration of intermittent renewable
electrical generation into the electrical grid, by July 1, 2011, the
Energy Commission shall update its previously conducted studies to
determine the effective load carrying capacity of wind and solar
energy resources on the California electrical grid. The commission
shall use those effective load carrying capacity values in
establishing the contribution of wind and solar energy resources
toward meeting the resource adequacy requirements established
pursuant to Section 380. 
   SEC. 23.    Section 399.30 is added to the  
Public Utilities Code   , to read:  
   399.30.  (a) In order to fulfill unmet long-term generation
resource needs, each local publicly owned electric utility shall
adopt and implement a renewable energy resources procurement plan
that requires the utility to procure a minimum quantity of
electricity generated by eligible renewable energy resources,
including renewable energy credits, as a specified percentage of
total kilowatthours sold to the utility's retail end-use customers,
each calendar year, to achieve the targets of subdivision (b).
   (b) The governing board shall implement procurement targets for a
local publicly owned electric utility that require the utility to
procure the following minimum percentages of eligible renewable
energy resources in the following years, and continue to procure
those percentages in subsequent years:
   (1) Until December 31, 2012, the same percentage as actually
achieved by the utility in 2009.
   (2) Twenty percent by December 31, 2013.
   (3) Twenty-five percent by December 31, 2016.
   (4) Thirty-three percent by December 31, 2020.
   (c) (1) A local publicly owned electric utility may use renewable
energy credits associated with electricity generated, but not
necessarily delivered by, an eligible renewable energy resource, to
meet its renewables portfolio standard procurement requirements to
the same extent as permitted for a retail seller pursuant to
subdivision (a) of Section 399.21.
   (2) A local publicly owned electric utility may adopt rules
permitting the utility to apply excess procurement in one year to
subsequent years in the same manner as allowed for retail sellers
pursuant to Section 399.13.
   (d) The governing board of the local publicly owned electric
utility shall adopt a program for the enforcement of this article on
or before January 1, 2011. The program shall be adopted at a publicly
noticed meeting offering all interested parties an opportunity to
comment. Not less than 30 days' notice shall be given to the public
of any meeting held for purposes of adopting the program. Not less
than 10 days' notice shall be given to the public before any meeting
is held to make a substantive change to the program.
   (e) (1) Each local publicly owned electric utility shall annually
post notice, in accordance with Chapter 9 (commencing with Section
54950) of Part 1 of Division 2 of Title 5 of the Government Code,
whenever its governing body will deliberate in public on its
renewable energy resources procurement plan.
   (2) Contemporaneous with the posting of the notice of a public
meeting to consider the renewable energy resources procurement plan,
the local publicly owned electric utility shall notify the Energy
Commission of the date, time, and location of the meeting in order to
enable the Energy Commission to post the information on its Internet
Web site. This requirement is satisfied if the local publicly owned
electric utility provides the uniform resource locator (URL) that
links to this information.
   (3) Upon distribution to its governing body of information related
to its renewable energy resources procurement status and future
plans, for its consideration at a noticed public meeting, the local
publicly owned electric utility shall make that information available
to the public and shall provide the Energy Commission with an
electronic copy of the documents for posting on the Energy Commission'
s Internet Web site. This requirement is satisfied if the local
publicly owned electric utility provides the uniform resource locator
(URL) that links to the documents or information regarding other
manners of access to the documents.
   (f) A local publicly owned electric utility shall annually submit
to the Energy Commission documentation regarding eligible renewable
energy resources procurement contracts that it executed during the
prior year, as follows:
   (1) A description of the eligible renewable energy resource,
including the duration of the contract or electricity purchase
agreement.
   (2) A description and identification of the electrical generating
facility providing the eligible renewable energy resource under the
contract.
   (3) An estimate of the percentage increase in the utility's total
retail sales of electricity from eligible renewable energy resources
that will result from the contract.
   (g) A public utility district that receives all of its electricity
pursuant to a preference right adopted and authorized by the United
States Congress pursuant to Section 4 of the Trinity River Division
Act of August 12, 1955 (Public Law 84-386) shall be in compliance
with the renewable energy procurement requirements of this article.
   (h) For a local publicly owned electric utility that was in
existence on or before January 1, 2009, that provides retail electric
service to 15,000 or fewer customer accounts in California, and is
interconnected to a balancing authority located outside this state
but within the WECC, an eligible renewable energy resource includes a
facility that is located outside California that is connected to the
WECC transmission system, if all of the following conditions are
met:
   (1) The electricity generated by the facility is procured by the
local publicly owned electric utility, is delivered to the balancing
authority area in which the local publicly owned electric utility is
located, and is not used to fulfill renewable energy procurement
requirements of other states.
   (2) The local publicly owned electric utility participates in, and
complies with, the accounting system administered by the Energy
Commission pursuant to Article 4.
   (3) The Energy Commission verifies that the electricity generated
by the facility is eligible to meet the renewables portfolio standard
procurement requirements.
   (i) Notwithstanding subdivision (a), for a local publicly owned
electric utility that is a joint powers authority of districts that
furnish electric services other than to residential customers, and is
formed pursuant to the Irrigation District Law (Division 11
(commencing with Section 20500) of the Water Code), the percentage of
total kilowatthours sold to the district's retail end-use customers,
upon which the renewables portfolio standard procurement
requirements in subdivision (b) are calculated, shall be based on the
average retail sales over the previous three years.
   (j) A local publicly owned electric utility in a city and county
that only receives greater than 67 percent of its electricity sources
from hydroelectric generation located within the state that it owns
and operates, and that does not meet the definition of a "renewable
electrical generation facility" pursuant to Section 25741 of the
Public Resources Code, shall be required to procure eligible
renewable energy resources, including renewable energy credits, to
meet only the electricity demands unsatisfied by its hydroelectric
generation in any given year, in order to satisfy its renewable
energy procurement requirements.
                                                (k) Each local
publicly owned electric utility shall report, on an annual basis, to
its customers and to the Energy Commission, all of the following:
   (1) Expenditures of public goods funds collected pursuant to
Section 385 for eligible renewable energy resource development.
Reports shall contain a description of programs, expenditures, and
expected or actual results.
   (2) The resource mix used to serve its customers by energy source.

   (3) The utility's status in implementing a renewables portfolio
standard pursuant to subdivision (a) and the utility's progress
toward attaining the standard following implementation.
   (l) A local publicly owned electric utility shall retain
discretion over all of the following:
   (1) The mix of eligible renewable energy resources procured or
owned by the utility and those additional generation resources
procured or owned by the utility for purposes of ensuring resource
adequacy and reliability.
   (2) The prices paid by the utility for electricity generated by
eligible renewable energy resources.
   (3) The reasonable costs incurred by the utility for eligible
renewable energy resources owned by the utility.
   (m) On or before July 1, 2011, the Energy Commission shall adopt
regulations specifying procedures for enforcement of this article.
The regulations shall include a public process under which the Energy
Commission may issue a notice of violation and correction against a
local publicly owned electric utility for failure to comply with this
article, and for referral of violations to the State Air Resources
Board for penalties pursuant to subdivision (n).
   (n) (1) Upon a determination by the Energy Commission that a local
publicly owned electric utility has failed to comply with this
article, the Energy Commission shall refer the failure to comply with
this article to the State Air Resources Board which may impose
penalties to enforce this article consistent with Part 6 (commencing
with Section 38580) of Division 25.5 of the Health and Safety Code.
   (2) For the purpose of this subdivision, this section is an
emissions reduction measure pursuant to Section 38580 of the Health
and Safety Code.
   (3) If the State Air Resources Board has imposed a penalty upon a
local publicly owned electric utility for the utility's failure to
comply with this article, the State Air Resources Board shall not
impose an additional penalty for the same infraction, or the same
failure to comply, with any renewables procurement requirement
imposed upon the utility pursuant to the California Global Warming
Solutions Act of 2006 (Division 25.5 (commencing with Section 38500)
of the Health and Safety Code).
   (o) The commission has no authority or jurisdiction to enforce any
of the requirements of this article on a local publicly owned
electric utility. 
   SEC. 24.    Section 399.31 is added to the  
Public Utilities Code   , to read:  
   399.31.  A retail seller may procure renewable energy credits
associated with deliveries of electricity by an eligible renewable
energy resource to a local publicly owned electric utility, for
purposes of compliance with the renewables portfolio standard
requirements, if both of the following conditions are met:
   (a) The local publicly owned electric utility has adopted and
implemented a renewable energy resources procurement plan that
complies with the renewables portfolio standard adopted by the Energy
Commission pursuant to subdivision (f) of Section 399.25.
   (b) The local publicly owned electric utility is procuring
sufficient eligible renewable energy resources to satisfy the target
standard, and will not fail to satisfy the target standard in the
event that the renewable energy credit is sold to the retail seller.

   SEC. 25.    Section 454.5 of the   Public
Utilities Code   is amended to read: 
   454.5.  (a) The commission shall specify the allocation of
electricity, including quantity, characteristics, and duration of
electricity delivery, that the Department of Water Resources shall
provide under its power purchase agreements to the customers of each
electrical corporation, which shall be reflected in the electrical
corporation's proposed procurement plan. Each electrical corporation
shall file a proposed procurement plan with the commission not later
than 60 days after the commission specifies the allocation of
electricity. The proposed procurement plan shall specify the date
that the electrical corporation intends to resume procurement of
electricity for its retail customers, consistent with its obligation
to serve. After the commission's adoption of a procurement plan, the
commission shall allow not less than 60 days before the electrical
corporation resumes procurement pursuant to this section.
   (b) An electrical corporation's proposed procurement plan shall
include, but not be limited to, all of the following:
   (1) An assessment of the price risk associated with the electrical
corporation's portfolio, including any utility-retained generation,
existing power purchase and exchange contracts, and proposed
contracts or purchases under which an electrical corporation will
procure electricity, electricity demand reductions, and
electricity-related products and the remaining open position to be
served by spot market transactions.
   (2) A definition of each electricity product, electricity-related
product, and procurement related financial product, including support
and justification for the product type and amount to be procured
under the plan.
   (3) The duration of the plan.
   (4) The duration, timing, and range of quantities of each product
to be procured.
   (5) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services,
including the format and criteria of that procurement process.
   (6) An incentive mechanism, if any incentive mechanism is
proposed, including the type of transactions to be covered by that
mechanism, their respective procurement benchmarks, and other
parameters needed to determine the sharing of risks and benefits.
   (7) The upfront standards and criteria by which the acceptability
and eligibility for rate recovery of a proposed procurement
transaction will be known by the electrical corporation prior to
execution of the transaction. This shall include an expedited
approval process for the commission's review of proposed contracts
and subsequent approval or rejection thereof. The electrical
corporation shall propose alternative procurement choices in the
event a contract is rejected.
   (8) Procedures for updating the procurement plan.
   (9) A showing that the procurement plan will achieve the
following:
   (A) The electrical corporation  will   shall
 , in order to fulfill its unmet resource needs  and in
furtherance of Section 701.3, until a 20 percent renewable resources
portfolio is achieved  , procure  resources from
eligible  renewable energy resources  with the goal of
ensuring that at least an additional 1 percent per year of the
electricity sold by the electrical corporation is generated from
renewable energy resources, provided sufficient funds are made
available pursuant to Sections 399.6 and 399.15, to cover the
above-market costs for new renewable energy resources  
in an amount sufficient to meet its procurement requirements pursuant
to the California Renewables Portfolio Standard Program (Article 16
(commencing with Section 399.11) of Chapter 2.3)  .
   (B) The electrical corporation will create or maintain a
diversified procurement portfolio consisting of both short-term and
long-term electricity and electricity-related and demand reduction
products.
   (C) The electrical corporation will first meet its unmet resource
needs through all available energy efficiency and demand reduction
resources that are cost effective, reliable, and feasible.
   (10) The electrical corporation's risk management policy,
strategy, and practices, including specific measures of price
stability.
   (11) A plan to achieve appropriate increases in diversity of
ownership and diversity of fuel supply of nonutility electrical
generation.
   (12) A mechanism for recovery of reasonable administrative costs
related to procurement in the generation component of rates.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's procurement plan. The commission's review
shall consider each electrical corporation's individual procurement
situation, and shall give strong consideration to that situation in
determining which one or more of the features set forth in this
subdivision shall apply to that electrical corporation. A procurement
plan approved by the commission shall contain one or more of the
following features, provided that the commission may not approve a
feature or mechanism for an electrical corporation if it finds that
the feature or mechanism would impair the restoration of an
electrical corporation's creditworthiness or would lead to a
deterioration of an electrical corporation's creditworthiness:
   (1) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services. The
commission shall specify the format of that procurement process, as
well as criteria to ensure that the auction process is open and
adequately subscribed. Any purchases made in compliance with the
commission-authorized process shall be recovered in the generation
component of rates.
   (2) An incentive mechanism that establishes a procurement
benchmark or benchmarks and authorizes the electrical corporation to
procure from the market, subject to comparing the electrical
corporation's performance to the commission-authorized benchmark or
benchmarks. The incentive mechanism shall be clear, achievable, and
contain quantifiable objectives and standards. The incentive
mechanism shall contain balanced risk and reward incentives that
limit the risk and reward of an electrical corporation.
   (3) Upfront achievable standards and criteria by which the
acceptability and eligibility for rate recovery of a proposed
procurement transaction will be known by the electrical corporation
prior to the execution of the bilateral contract for the transaction.
The commission shall provide for expedited review and either approve
or reject the individual contracts submitted by the electrical
corporation to ensure compliance with its procurement plan. To the
extent the commission rejects a proposed contract pursuant to this
criteria, the commission shall designate alternative procurement
choices obtained in the procurement plan that will be recoverable for
ratemaking purposes.
   (d) A procurement plan approved by the commission shall accomplish
each of the following objectives:
   (1) Enable the electrical corporation to fulfill its obligation to
serve its customers at just and reasonable rates.
   (2) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation's actions in compliance with an approved
procurement plan, including resulting electricity procurement
contracts, practices, and related expenses. However, the commission
may establish a regulatory process to verify and  assure
  ensure  that each contract was administered in
accordance with the terms of the contract, and contract disputes
which may arise are reasonably resolved.
   (3) Ensure timely recovery of prospective procurement costs
incurred pursuant to an approved procurement plan. The commission
shall establish rates based on forecasts of procurement costs adopted
by the commission, actual procurement costs incurred, or combination
thereof, as determined by the commission. The commission shall
establish power procurement balancing accounts to track the
differences between recorded revenues and costs incurred pursuant to
an approved procurement plan. The commission shall review the power
procurement balancing accounts, not less than semiannually, and shall
adjust rates or order refunds, as necessary, to promptly amortize a
balancing account, according to a schedule determined by the
commission. Until January 1, 2006, the commission shall ensure that
any overcollection or undercollection in the power procurement
balancing account does not exceed 5 percent of the electrical
corporation's actual recorded generation revenues for the prior
calendar year excluding revenues collected for the Department of
Water Resources. The commission shall determine the schedule for
amortizing the overcollection or undercollection in the balancing
account to ensure that the 5 percent threshold is not exceeded. After
January 1, 2006, this adjustment shall occur when deemed appropriate
by the commission consistent with the objectives of this section.
   (4) Moderate the price risk associated with serving its retail
customers, including the price risk embedded in its long-term supply
contracts, by authorizing an electrical corporation to enter into
financial and other electricity-related product contracts.
   (5) Provide for just and reasonable rates, with an appropriate
balancing of price stability and price level in the electrical
corporation's procurement plan.
   (e) The commission shall provide for the periodic review and
prospective modification of an electrical corporation's procurement
plan.
   (f) The commission may engage an independent consultant or
advisory service to evaluate risk management and strategy. The
reasonable costs of any consultant or advisory service is a
reimbursable expense and eligible for funding pursuant to Section
631.
   (g) The commission shall adopt appropriate procedures to ensure
the confidentiality of any market sensitive information submitted in
an electrical corporation's proposed procurement plan or resulting
from or related to its approved procurement plan, including, but not
limited to, proposed or executed power purchase agreements, data
request responses, or consultant reports, or any combination,
provided that the Office of Ratepayer Advocates and other consumer
groups that are nonmarket participants shall be provided access to
this information under confidentiality procedures authorized by the
commission.
   (h) Nothing in this section alters, modifies, or amends the
commission's oversight of affiliate transactions under its rules and
decisions or the commission's existing authority to investigate and
penalize an electrical corporation's alleged fraudulent activities,
or to disallow costs incurred as a result of gross incompetence,
fraud, abuse, or similar grounds. Nothing in this section expands,
modifies, or limits the State Energy Resources Conservation and
Development Commission's existing authority and responsibilities as
set forth in Sections 25216, 25216.5, and 25323 of the Public
Resources Code.
   (i) An electrical corporation that serves less than 500,000
electric retail customers within the state may file with the
commission a request for exemption from this section, which the
commission shall grant upon a showing of good cause.
   (j) (1) Prior to its approval pursuant to Section 851 of any
divestiture of generation assets owned by an electrical corporation
on or after the date of enactment of the act adding this section, the
commission shall determine the impact of the proposed divestiture on
the electrical corporation's procurement rates and shall approve a
divestiture only to the extent it finds, taking into account the
effect of the divestiture on procurement rates, that the divestiture
is in the public interest and will result in net ratepayer benefits.
   (2) Any electrical corporation's procurement necessitated as a
result of the divestiture of generation assets on or after the
effective date of the act adding this subdivision shall be subject to
the mechanisms and procedures set forth in this section only if its
actual cost is less than the recent historical cost of the divested
generation assets.
   (3) Notwithstanding paragraph (2), the commission may deem
proposed procurement eligible to use the procedures in this section
upon its approval of asset divestiture pursuant to Section 851.
   SEC. 26.   Article 11 (commencing with Section 910)
is added to Chapter 4 of Part 1 of Division 1 of the  
Public Utilities Code   , to read:  

      Article 11.  Reports


   910.  (a) The commission shall, on an annual basis by February 1
of each year, prepare and submit to the policy and fiscal committees
of the Legislature a written report summarizing the following
information:
   (1) All electrical corporation revenue requirement increases
associated with meeting the renewables portfolio standard, as defined
in Section 399.12, including direct procurement costs for eligible
renewable energy resources and renewable energy credits,
administrative expenses for procurement, expenses incurred to ensure
a reliable supply of electricity, and expenses for upgrades to the
electrical transmission and distribution grid necessary to the
delivery of electricity from eligible renewable energy resources to
load.
   (2) All cost savings experienced, or costs avoided, by electrical
corporations as a result of meeting the renewables portfolio
standard.
   (3) All costs incurred by electrical corporations for incentives
for distributed and renewable generation, including the
self-generation incentive program, the California Solar Initiative,
and net energy metering.
   (4) All cost savings experienced, or costs avoided, by electrical
corporations as a result of incentives for distributed and renewable
generation.
   (5) All renewable, fossil fuel, and nuclear procurement costs,
research, study, or pilot program costs, or other program costs for
which an electrical corporation is seeking recovery in rates, that is
pending determination or approval by the commission.
   (6) The decision number for each decision of the commission of
recovery in rates of costs incurred by an electrical corporation
since the preceding report.
   (7) Any change in the electrical load serviced by an electrical
corporation since the preceding report.
   (b) The commission may combine the information required by this
section with the reports prepared pursuant to Article 16 (commencing
with Section 399.11) of Chapter 2.3. 
   SEC. 27.    Section 1005.1 is added to the 
Public Utilities Code   , to read:  
   1005.1.  (a) The commission shall issue a decision on an
application for a certificate within 18 months of the date of filing
of the completed application, when all of the following are true:
   (1) The application is for a certificate for building or upgrading
an electrical transmission line that the commission finds necessary
to provide transmission to load centers for electricity generated in
a high priority renewable energy zone or is reasonably necessary to
facilitate achievement of the renewables portfolio standard
established in Article 16 (commencing with Section 399.11) of Chapter
2.3.
   (2) The commission has considered all of the following:
   (A) The utilization of rights-of-way by upgrading existing
transmission facilities instead of building new transmission
facilities, where technically and economically justifiable.
   (B) The expansion of existing rights-of-way, if technically and
economically feasible, when construction of new transmission lines is
required.
   (C) The creation of new rights-of-way when justified by
environmental, technical, and economic reasons.
   (D) The availability of cost-effective alternatives to
transmission, such as energy efficiency measures and distributed
generation.
   (3) The commission has not expressly found any of the following:
   (A) That the investment is not reasonable and necessary to
maintain or enhance reliability of the transmission grid.
   (B) That the building or upgrading of the electrical transmission
line will not maintain or enhance efficient use of the transmission
grid.
   (C) That the transmission line fails to meet other applicable
standards and requirements for approval and construction.
   (b) An extension of time may be granted by the commission if it
finds the extension is necessary for completion of review pursuant to
the California Environmental Quality Act (Division 13 (commencing
with Section 21000) of the Public Resources Code). 
   SEC. 28   .    No reimbursement is required
by this act pursuant to Section 6 of Article XIII B of the California
Constitution because certain 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.  
   With respect to certain other costs, 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. 
   SEC. 29.    The sum of three hundred twenty-two
thousand dollars ($322,000) is hereby appropriated from the Public
Utilities Commission Utilities Reimbursement Account to the Public
Utilities Commission for additional staffing to identify, review, and
approve transmission lines reasonably necessary or appropriate to
facilitate achievement of the renewables portfolio standard
established in Article 16 (commencing with Section 399.11) of Chapter
2.3 of Part 1 of Division 1 of the Public Utilities Code. 

  SECTION 1.    Division 25.7 (commencing with
Section 38700) is added to the Health and Safety Code, to read:

      DIVISION 25.7.  GREENHOUSE GAS REDUCTION REPRESENTATIONS


   38700.  The Legislature finds and declares all of the following:
   (a) Global warming poses a serious challenge to the world's
environment and economy.
   (b) With increasing concern regarding climate change, there has
been an increase in the advertising, sale, and transfer of greenhouse
gas emission reduction credits, offsets, and similar products
designed to allow individuals or entities, or both, to purchase
emission reduction credits to voluntarily offset greenhouse gas
emissions from the activities of the purchaser.
   (c)  While voluntary greenhouse gas emission reductions can
contribute to efforts to reduce global warming, consumers and other
members of the public have few protections or standardized methods by
which to ensure that they are purchasing or obtaining emission
reduction credits that actually reduce greenhouse gases, reduce
global warming, and improve the environment.
   (d) The purposes of this division are to protect the consumer and
to ensure that the benefits to the environment through the sale of
legitimate greenhouse gas emission reduction credits, offsets, or
similar products are realized.
   38701.  For the purposes of this division, the following terms
have the following meanings:
   (a) "Greenhouse gas credit," "emission reduction," "credit,"
"offset," "reduction," or any similar term, means a voluntary
reduction in the emissions of greenhouse gases into the atmosphere
undertaken for the purposes of selling, trading, or otherwise
providing the credit or emission reduction to another party.
   (b) "Person" has the same meaning as set forth in subdivision (c)
of Section 17577.1 of the Business and Professions Code.
   38702.  It is unlawful for any person to represent in an
advertisement or in any other sales or promotional materials made
available to the public for the sale of a greenhouse gas credit or
emission reduction, that the credit or reduction reduces greenhouse
gas emissions unless it meets one or more of the following
conditions:
   (a) The credit or emission reduction meets methodologies or
standards that have been adopted or approved by the State Air
Resources Board pursuant to Division 25.5 (commencing with Section
38500).
   (b) The credit or emission reduction complies with one or more
protocols for voluntary emission reductions of greenhouse gases
adopted by the California Climate Action Registry consistent with the
requirements in former Chapter 6 (commencing with Section 42800) of
Part 4 of Division 26, as effective on December 31, 2007, and is
registered with the California Climate Action Registry.
   (c) The person demonstrates, and discloses in any advertising or
other sales or promotional material made available to the public,
that the credit or emission reduction meets all of the following
conditions:
   (1) The credit or emission reduction is quantifiable and
measurable in a manner that is consistent with the protocols
developed pursuant to the reporting regulations adopted by the State
Air Resources Board
pursuant to Part 2 (commencing with Section 38530) of Division 25.5.
   (2) The credit or emission reduction is surplus, and is in
addition to any greenhouse gas emission reduction that otherwise
would occur.
   (3) The credit or emission reduction is verifiable by a state,
regional, or local agency within the State of California.
   (4) The credit or emission reduction does not cause or contribute
to a violation of any state or federal ambient air quality standard
or toxic air contaminant standard.
   38703.  (a) Any person that represents in an advertisement or in
any other sales or promotional materials made available to the public
for the sale of a greenhouse gas credit or emission reduction, that
the credit or emission reduction results in a reduction in greenhouse
gases, shall maintain in written form and make available to any
member of the public who requests it all of the following information
and documentation supporting the validity of the representation:
   (1) The basis for the claim, including documentation that one or
more of the conditions required by Section 38702 have been met.
   (2) Information on any adverse environmental or public health
impacts associated with the creation and maintenance of the credit or
emission reduction, including impacts on species, habitat,
ecosystems, land use, biodiversity, air quality, water supply and
quality, access to food, and production of food.
   (b) A retailer that does not initiate a representation by
advertising or through other means available to the public shall not
be deemed to be in violation of this section.
   38704.  (a) A violation of this division is punishable by a civil
penalty not to exceed two thousand five hundred dollars ($2,500) per
violation, and by the payment of the cost of the purchase of the
credit, offset, or reduction as defined pursuant to subdivision (a)
of Section 38701.
   (b) A violation of this division creates a civil cause of action
that may be brought by any person or governmental entity.
   (c) Reasonable attorney fees and costs shall be available for any
action brought pursuant to this section.
   (d) A violation of this division is not a crime.
   (e) The remedies provided in this section are in addition to any
other rights or remedies under any other provision of law.
   38705.  This division shall become operative on January 1, 2011,
and shall become inoperative if the Federal Trade Commission adopts
binding and enforceable trade rules or regulations for claims or
representations for greenhouse gas emission reduction credits or
reductions to protect consumers.