On July 25, 2017, California Governor Jerry Brown signed legislation extending the state’s cap-and-trade program through 2030. The signing ceremony for Assembly Bill (AB) 398 included former California Governor Arnold Schwarzenegger, who signed the first state statute authorizing cap-and-trade in 2006, AB 32.  The ceremony cemented the deal that Governor Brown struck with California lawmakers, passing AB 398 with bi-partisan support and a two-thirds majority of the Legislature.  In contrast to the passage of Senate Bill 32 in 2016, which extended California’s greenhouse gas reduction (GHG) targets through 2030 with the enactment of one simple sentence into statute, AB 398 stretched for pages.  AB 398 provided many details to be incorporated into the cap-and-trade regulation by the California Air Resources Board (ARB), the agency in charge of implementing cap-and-trade, and laid out requirements to mitigate the impacts of GHG regulation on regulated industry and increase in-state benefits.

Among the more note-worthy provisions of AB 398 were (1) a price ceiling on cap-and-trade allowances, (2) limitations on the use of offsets, particularly from out-of-state projects, and (3) a continuation of previous allowance allocations to vulnerable industries. ARB will also report to the Legislature by the end of 2025 on statutory changes needed to reduce leakage, including a potential border carbon adjustment.  Outside of the cap-and-trade regulation itself, the bill provides support to regulated entities with relief from sales and use taxes and prohibits local air districts from enacting additional GHG emissions reduction requirements.

In crafting the AB 398 deal, proponents of the bill wisely secured the votes necessary to pass the bill with a two-thirds majority and avoid the question whether cap-and-trade auctions post-2020 would be an unlawful tax under Proposition 26. The most recent cap-and-trade litigation in California Chamber of Commerce v. ARB and Morning Star Packing Co. v. ARB avoided this question, given that the original statute authorizing cap-and-trade, AB 32, was passed before Proposition 26 was voted in.  Proponents also secured support from sources as disparate as the California Chamber of Commerce, California Manufacturers and Technology Association, Natural Resources Defense Council, and Environmental Defense Fund.  Nevertheless, I would not rule out further judicial tangles on the implementation of AB 398 with amendments to the cap-and-trade regulation.
Continue Reading California Extends Cap-and-Trade Through 2030

Yesterday the California Supreme Court denied a petition for review of the cap-and-trade lawsuits brought by a coalition of business interests, headed by the California Chamber of Commerce and Morning Star Packing Company. The Court of Appeal decision issued in April 2017, which upheld the legality of California’s cap-and-trade auctions in the related cases California

Stoel Rives’ Energy Team has been monitoring and providing summaries of key energy-related bills introduced by California legislators since the beginning of the 2017-2018 Legislative Session. June 2, 2017 was the deadline by which the legislature was required to pass bills out of the house of origin.  Failing to meet that deadline does not automatically prevent a bill from proceeding through the legislative process; however, such failure will prevent the bill from being considered by the full legislature or the Governor during the first half of the Legislative Session.  Below is a summary of bills we have been following that have most recently changed.  We will continue to monitor and update these energy-related bills as the legislative session proceeds.

Assembly Bills

AB 79 (Levine, D): Electrical generation: hourly greenhouse gas emissions: electricity from unspecified sources.
STATUS: Ordered to Senate June 1, 2017.

  • Initially introduced as a bill to decrease the amount energy consumed from coal-fired generation resources, AB 79 was revamped to require, by January 1, 2019, the State Air Resources Board (CARB), in consultation with the Independent System Operator (ISO), to regularly update its methodology for the calculation of emissions of greenhouse gases associated with electricity from unspecified sources. The bill would require the CPUC and the CEC to incorporate the methodology into programs addressing the disclosure of the emissions of greenhouse gases and the procurement of electricity by entities under the respective jurisdiction of each.

Continue Reading Updates to Energy Related Bills in the 2017-2018 California Legislative Session

On May 19, 2017, the California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) held a joint en banc on customer and retail choice in California. In attendance were CPUC Commissioners Guzman Aceves, Randolph, Peterman, and President Picker.  CEC Commissioners McAllister, Douglas, and Chair Weisenmiller attended.

The en banc was intended to address

On April 6th, the energy storage market received a boost in California when state regulators authorized $196 million in new rebates for customers who install onsite (behind the meter) energy storage systems.

Background

The change occurs under the California Self Generation Incentive Program (“SGIP”). SGIP provides a financial rebate to energy customers who install new

In our first post, the Stoel Rives’ Energy Team provided a summary of energy related bills introduced by California legislators during the first half of the 2017-2018 Legislative Session. Provided below is a summary of changes to bills we have been following, as well as a list of energy related bills not included in our previous entry. We will continue to monitor and update all energy related bills as the legislative session proceeds.

Amended Bills

AB 35 (Quirk, D): Residential and nonresidential buildings: energy savings program.  
STATUS: Introduced December 15, 2016;
amended March 23, 2017.

  • AB 35 was previously drafted to require agencies implementing energy efficiency programs to establish metrics and collect and use data systematically across those programs to increase the performance of those programs in low-income communities.
     
    • As amended, AB 35 now proposes changing the State Energy Resources Conservation and Development Commission’s program to achieve greater energy savings in California’s existing residential and nonresidential building stock by adopting an update to the program at least once every five years instead of every three years.

AB 655 (O’Donnell, D): California Renewables Portfolio Standard Program.    
STATUS: Introduced February 14, 2017; amended March 23, 2017.

  • The California Renewables Portfolio Standard Program requires the CPUC to establish a renewables portfolio standard requiring all retail sellers, as defined, to procure a minimum quantity of electricity products from eligible renewable energy resources, as defined, so that the total kilowatt hours of these resources sold to their retail end-use customers achieves 25 percent of retail sales by December 31, 2016, 33 percent by December 31, 2020, 40 percent by December 31, 2024, 45 percent by December 31, 2027, and 50 percent by December 31, 2030. The program additionally requires each local publicly owned electric utility, as defined, to procure a minimum quantity of electricity products from eligible renewable energy resources to achieve the procurement requirements established by the program. Further, existing law provides that a facility engaged in the combustion of municipal solid waste is not an eligible renewable energy resource, except as regards to generation before January 1, 2017, from a facility located in Stanislaus County prior to September 26, 1996.
     
    • This bill would provide that a facility engaged in the transformation of municipal solid waste is an eligible renewable energy resource, and can earn renewable energy credits, if it operates, on an annual basis, at not less than 20 percent below the permitted emissions of air contaminants, or toxic air contaminants concentration limits, for the facility and the operator of the facility has reported its emissions to the applicable air pollution control district or air quality management district for a period of not less than five years, as specified.

Continue Reading Updates to Energy Related Bills in the 2017-2018 California Legislative Session

On April 4, 2017 (NextEra Desert Center Blythe, LLC v. FERC, Case No. 16-1003 (“NextEra”)), the DC Circuit issued a decision remanding back to the Federal Energy Regulatory Commission (“FERC”) orders denying NextEra Desert Center Blythe, LLC’s (“NextEra”) complaint against the California Independent System Operator Corporation (“CAISO”) regarding the allocation of congestion revenue rights (“CRRs”) under the CAISO tariff. The DC Circuit’s ruling was narrow, based on finding ambiguity in the relevant contract and tariff provisions where FERC determined there was none. The court’s decision highlights the importance of addressing potential regulatory cost recovery options in a FERC-jurisdictional contract.
Continue Reading Generator Receives Another Shot at Obtaining CAISO Congestion Revenue Rights

The community solar program in California is off to a slow start. The reasons for this slow start were discussed at a solar developer’s forum held by the state’s major utilities and policymakers on April 5, 2017.

Background on Community Solar in California

California’s community solar program is formally known as the Enhanced Community Renewables (“ECR”) program. The ECR program is part of the larger Green Tariff Shared Renewables (“GTSR”) program. The GTSR program was signed into law in 2013, and final program rules were adopted in May 2016. Together, these programs require the California investor-owned utilities (“IOUs”) to procure 600 megawatts (“MW”) of new renewable energy.

Under the ECR component of the program, customers can enter into agreements directly with third party project developers to purchase new clean energy generated by a project located in their community. ECR projects are limited to sizes between 500 kW and 20 MW.

As we recently reported, the IOUs held their first request for offer (“RFO”) last fall, which sought to award power purchase agreements (“PPAs”) for 170 MW of new renewable energy from ECR projects. However, very few bids were submitted in the solicitation, and ultimately no PPAs were awarded. The developer forum was intended to discuss some of the reasons for this lackluster performance.
Continue Reading California Community Solar Forum Points to Need for Reforms

Today the California Public Utilities Commission (CPUC) and California Energy Commission (CEC) announced that they will hold a joint forum on May 19, 2017 to discuss the future of retail electricity in California.

According to the announcement, by around 2025, over 80% of all electricity customers of the state’s three main investor-owned utilities (IOUs)

On Thursday, a 2-1 decision by the Third District Court of Appeal in Sacramento upheld California’s program to reduce carbon emissions. California’s controversial and signature cap-and-trade program creates a firm limit on carbon emissions and auctions allowances that permit companies to release greenhouse gases into the atmosphere. Covered entities are generally large emitters of greenhouse gases, who under the program must surrender emissions allowances or offset credits to cover their emissions, or face monetary penalties or other negative consequences. Auctions are a key component of how California expects to meet its targets to reduce emissions to 1990 levels by 2020, and 40 percent below 1990 levels by 2030.
Continue Reading California Court of Appeals Upholds California’s Cap-and-Trade Program