Today's Law As Amended


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SB-107 Renewable energy: Public Interest Energy Research, Demonstration, and Development Program.(2005-2006)



As Amends the Law Today


SECTION 1.

 Section 25620.1 of the Public Resources Code is amended to read:

25620.1.
 (a) The commission shall develop, implement, and administer the Public Interest Research, Development, and Demonstration Program that is hereby created. The program shall include a full range of research, development, and demonstration activities that, as determined by the commission, are not adequately provided for by competitive and regulated markets. The commission shall administer the program consistent with the policies of this chapter.
(b) The general goal of the program is to develop, and help bring to market, energy technologies that provide increased environmental benefits, greater system reliability, and lower system costs, and that provide tangible benefits to electric electrical  utility customers through the following investments: investments in the following: 
(1) Advanced electricity and natural gas  transportation technologies that reduce air pollution and greenhouse gas emissions  emissions of greenhouse gases  beyond applicable standards, and that benefit electricity and natural gas ratepayers.
(2) Increased energy efficiency in buildings, appliances, lighting, and other applications beyond applicable standards, and that benefit electric electrical  utility customers.
(3) Advanced electricity generation technologies that exceed applicable standards to increase reductions in greenhouse gas emissions  emissions of greenhouse gases  from electricity generation, and that benefit electric utility customers.
(4) Advanced electricity technologies that reduce or eliminate consumption of water or other finite resources, increase use of renewable energy resources, or improve transmission or distribution of electricity generated from renewable energy resources.
(c) To achieve the goals established in subdivision (b), the commission shall adopt a portfolio approach for the program that does all of the following:
(1) Effectively balances the risks, benefits, and time horizons for various activities and investments that will provide tangible energy or environmental benefits for California electricity customers.
(2) Emphasizes innovative energy supply and end use  end-use  technologies, focusing on their reliability, affordability, and environmental attributes.
(3) Includes projects that have the potential to enhance transmission and distribution capabilities.
(4) Includes projects that have the potential to enhance the reliability, peaking power, and storage capabilities of renewable energy.
(5) Demonstrates a balance of benefits to all sectors that contribute to the funding under Section 399.8 of the Public Utilities Code.
(6) Addresses key technical and scientific barriers.
(7) Demonstrates a balance between short-term, mid-term, and long-term potential.
(8) Ensures that prior, current, and future research not be unnecessarily duplicated.
(9) Provides for the future market utilization of projects funded through the program.
(10) Ensures an open project selection process and encourages the awarding of research funding for a diverse type of research as well as a diverse award recipient base and equally considers research proposals from the public and private sectors.
(11) Coordinates with other related research programs.
(d) The term “award,” as used in this chapter, may include, but is not limited to, contracts, grants, interagency agreements, loans, and other financial agreements designed to fund public interest research, demonstration, and development projects or programs.

SEC. 2.

 Section 25740 of the Public Resources Code is amended to read:

25740.
 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 33 20  percent of total retail sales of electricity in California per year by December 31, 2020. 2010. 

SEC. 3.

 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” mean the electricity output of an in‑state renewable electricity generation facility that is used to serve end‑use retail customers located within the state. Subject to verification by the accounting system established by the commission pursuant to subdivision (b) 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.
(a) (b)  “Renewable electrical  “In-state renewable electricity  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 of a balancing authority area primarily located within the state. For purposes of this subparagraph, “balancing authority area” has the same meaning as defined in Section 399.12 of the Public Utilities Code. within this state and electricity produced by the facility is delivered to an in‑state location. 
(B) The facility has its first point of interconnection to the transmission network outside the state, within the Western Electricity Coordinating Council (WECC) service area,  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.
(i) (ii)  It commences initial commercial operation after January 1, 2005.
(iii) Electricity produced by the facility is delivered to an in‑state location.
(ii) (iv)  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.
(iii) (vi)  It participates in the accounting system to verify compliance with the renewables portfolio standard by retail sellers,  once established by the commission  Energy Commission  pursuant to subdivision (b) of Section 399.25 399.13  of the Public Utilities Code.
(C) The facility meets the requirements of clauses (ii) and (iii) (i), (iii), (iv), (v), and (vi)  in subparagraph (B), but does not meet the requirements of clause (i) of subparagraph (B)  (ii)  because it commenced commences  initial operation prior to January 1, 2005, 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) Electricity generated by the facility was procured by a retail seller or local publicly owned electric utility as of January 1, 2010.
(3) 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.
(4) (ii)  If eligibility of the facility is based on the use of landfill gas, digester gas, or another renewable fuel delivered to the facility through a common carrier pipeline, the transaction for the procurement of that fuel, including the source of the fuel and delivery method, satisfies the requirements of Section 399.12.6 The facility has been part of the existing baseline of eligible renewable energy resources of a retail seller established pursuant to paragraph (2) of subdivision (b) of Section 399.15  of the Public Utilities Code and is verified pursuant to the accounting system established by the commission pursuant to 399.25 of the Public Utilities Code, or a comparable system, as determined by the commission. Code. 
(b) (3)  “Municipal solid waste conversion,” as used in subdivision (a), For the purposes of this subdivision, “solid waste conversion”  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:
(1) (A)  The technology does not use air or oxygen in the conversion process, except ambient air to maintain temperature control.
(2) (B)  The technology produces no discharges of air contaminants or emissions, including greenhouse gases as defined in Section 38505 42801.1  of the Health and Safety Code.
(3) (C)  The technology produces no discharges to surface or groundwaters of the state.
(4) (D)  The technology produces no hazardous wastes.
(5) (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.
(6) (F)  The facility at which the technology is used is in compliance with all applicable laws, regulations, and ordinances.
(7) (G)  The technology meets any other conditions established by the commission.
(8) (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.
(c) (d)  “Renewable energy public goods charge” means that portion of the nonbypassable system benefits charge required authorized  to be collected to fund renewable energy  and to be transferred to the Renewable Resource Trust Fund  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).
(d) (e)  “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.
(e) (f)  “Retail seller” means a “retail seller” as defined in Section 399.12 of the Public Utilities Code.

SEC. 4.

 Section 25740.5 is added to the Public Resources Code, 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, 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) (A) Except as provided in subparagraph (B), production incentives for new in-state renewable electricity generation facilities, including repowered or refurbished facilities.
(B) Allocations shall not be made for electricity that is generated by an in-state renewable electricity generation facility that remains under an electricity purchase contract with an electrical corporation originally entered into prior to September 24, 1996, whether amended or restated thereafter.
(C) Notwithstanding subparagraph (B), production incentives may be allowed in any month for incremental new electricity generated by an in-state renewable electricity generation facility that is repowered or refurbished, where the electricity is delivered under an electricity purchase contract with an electrical corporation originally entered into prior to September 24, 1996, whether amended or restated thereafter, if all of the following occur:
(i) The facility’s electricity purchase contract provides that all electricity delivered and sold under the contract is paid at a price that does not exceed the Public Utilities Commission approved short-run avoided cost of energy.
(ii) Either of the following is true:
(I) The electricity purchase contract is amended to provide that the kilowatthours used to determine the capacity payment in any time-of-delivery period in any month under the contract shall be equal to the actual kilowatthour production, but no greater than the five-year average of the kilowatthours delivered for the corresponding time-of-delivery period and month, in the years 1994 to 1998, inclusive.
(II) The facility’s installed capacity as of December 31, 1998, is less than 75 percent of the nameplate capacity as stated in the electricity purchase contract, the electricity purchase contract is amended to provide that the kilowatthours used to determine the capacity payment in any time-of-delivery period in any month under the contract shall be equal to the actual kilowatthour production, but no greater than the product of the five-year average of the kilowatthours delivered for the corresponding time-of-delivery period and month, in the years 1994 to 1998, inclusive, and the ratio of installed capacity as of December 31 of the previous year, but not to exceed contract nameplate capacity, to the installed capacity as of December 31, 1998.
(iii) The production incentive is payable only with respect to the kilowatthours delivered in a particular month that exceeds the corresponding five-year average calculated pursuant to clause (ii).
(2) Rebates, buydowns, or equivalent incentives for emerging renewable technologies.
(3) Customer education.
(4) 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.
(5) 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.
(6) 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.
(7) 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, 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. 5.

 Section 25742 of the Public Resources Code is amended to read:

25742.
 (a) Ten 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, 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 incentives under this section shall be limited to those technologies found eligible for funds by the commission pursuant to paragraphs (4), (5), and (7) of subdivision (e) of Section 25740.5.
(b) Any funds used to support in-state renewable electricity generation facilities pursuant to this section shall be expended in accordance with the provisions of this chapter, including the following conditions:
(1) The commission shall establish a production incentive, which shall not exceed payment caps established by the commission, representing the difference between target prices and the price paid for electricity, if sufficient funds are available. If there are insufficient funds in any payment period to pay either the difference between the target and price paid for electricity or the payment caps, production incentives shall be based on the amount determined by dividing available funds by eligible generation.
(2) The commission may establish a time-differentiated incentive structure that encourages plants to run the maximum feasible amount of time and that provides a higher incentive when the plants are receiving the lowest price.
(3) The commission may consider inflation and production costs.
(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 is used on site.
(d) (1) The commission shall award funding to eligible facilities based on a facility’s individual need. In assessing a facility’s individual need, the commission shall, to the extent feasible, consider all of the following:
(A) The amount of the funds being considered for an award to the facility.
(B) The cumulative amount of funds the facility has received previously from the commission and other state sources.
(C) The value of any current federal or state tax credits.
(D) The facility’s contract price for energy and capacity.
(E) The likelihood that the award will make the facility competitive and self-sustaining within the 2007–2011 investment cycle.
(F) Any other criteria as determined by the commission.
(2) The assessment shall also consider the public benefits provided by the operation of the facility.
(3) The commission shall use its assessment of the facility’s individual need to determine the value of an award to the public relative to other renewable energy investment alternatives.
(4) The commission shall compile its findings and report them to the Legislature in the reports prepared pursuant to Section 25748.

SEC. 6.

 Section 25743 of the Public Resources Code is amended to read:

25743.
 (a) Fifty-one and one-half percent of the money collected pursuant to the renewable energy public goods charge shall be used for programs designed to foster the development of new in-state renewable electricity generation facilities, and to secure for the state the environmental, economic, and reliability benefits that operation of those facilities will provide.
(b) Any funds used for new in-state renewable electricity generation facilities pursuant to this section shall be expended in accordance with the report, subject to all of the following requirements:
(1) In order to cover the above market costs of eligible renewable energy resources as approved by the Public Utilities Commission and selected by retail sellers to fulfill their obligations under Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code, the commission shall award funds in the form of supplemental energy payments, subject to the following criteria:
(A) The commission may establish caps on supplemental energy payments. The caps shall be designed to provide for a viable energy market capable of achieving the goals of Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code. The commission may waive application of the caps to accommodate a facility if it is demonstrated to the satisfaction of the commission that operation of the facility would provide substantial economic and environmental benefits to end-use customers subject to the renewable energy public goods charge.
(B) Supplemental energy payments shall be awarded only to facilities that are eligible for funding under this section.
(C) Supplemental energy payments awarded to facilities selected by a retail seller or procurement entity pursuant to Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code shall be paid for no longer than 10 years, but shall, subject to the payment caps in subparagraph (A), be equal to the cumulative above-market costs relative to the applicable market price referent at the time of initial contracting, over the duration of the contract with the retail seller or procurement entity.
(D) The commission shall reduce or terminate supplemental energy payments for projects that fail either to commence and maintain operations consistent with the contractual obligations to an electrical corporation, or that fail to meet eligibility requirements.
(E) Funds shall be managed in an equitable manner in order for retail sellers to meet their obligation under Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code.
(F) A project selected by an electrical corporation may receive supplemental energy payments only if it results from a competitive solicitation that is found by the Public Utilities Commission to comply with the California Renewables Portfolio Standard Program under Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code, and the project has entered into an electricity purchase agreement resulting from that solicitation, that is approved by the Public Utilities Commission. A project selected for an electricity purchase agreement by another retail seller or procurement entity may receive supplemental energy payments only if the Public Utilities Commission determines that the selection of the project is consistent with the results of a least-cost and best-fit process, and the supplemental energy payments are reasonable in comparison to those paid under similar contracts with other retail sellers. The commission may not award supplemental energy payments to service load that is not subject to the renewable energy public goods charge.
(G) (i) Supplemental energy payments shall not be awarded for any purchases of renewable energy credits.
(ii) Supplemental energy payments shall not be awarded for electricity purchase agreements that have a duration of less than 10 years. The ineligibility of agreements of less than 10 years duration for supplemental energy payments does not constitute an insufficiency in supplemental energy payments pursuant to paragraph (4) or (5) of subdivision (b) of Section 399.15.
(2) (A) A facility that is located outside of California shall not be eligible for funding under this section unless it satisfies the requirements of this subdivision and the criteria of subparagraph (B) of paragraph (2) of subdivision (b) of Section 25741.
(B) No more than 10 percent of the funds available under this section shall be awarded to facilities located outside of California.
(3) 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 may not receive payments for any electricity produced that has any of the following characteristics:
(A) Is sold under an existing long-term contract with an existing in-state electrical corporation if the contract includes fixed energy or capacity payments, except for that electricity that satisfies subparagraph (C) of paragraph (1) of subdivision (c) of Section 399.6 of the Public Utilities Code.
(B) Is used onsite or is sold to customers in a manner that excludes competition transition charge payments, or is otherwise excluded from competition transition charge payments.
(C) Is a hydroelectric generation project that will require a new or increased appropriation of water under Part 2 (commencing with Section 1200) of Division 2 of the Water Code, or any other provision authorizing an appropriation of water.
(D) Is a solid waste conversion facility, unless the facility meets the criteria established in paragraph (3) of subdivision (b) of Section 25741 and the facility certifies that any local agency sending solid waste to the facility is in compliance with Division 30 (commencing with Section 40000), has reduced, recycled, or composted solid waste to the maximum extent feasible, and shall have been found by the California Integrated Waste Management Board to have diverted at least 30 percent of all solid waste through source reduction, recycling, and composting.
(4) Eligibility to compete for funds or to receive funds shall be contingent upon having to sell the electricity generated by the renewable electricity generation facility to customers subject to the renewable energy public goods charge.
(5) The commission may require applicants competing for funding to post a forfeitable bid bond or other financial guaranty as an assurance of the applicant’s intent to move forward expeditiously with the project proposed. The amount of any bid bond or financial guaranty may not exceed 10 percent of the total amount of the funding requested by the applicant.
(6) In awarding funding, the commission may provide preference to projects that provide tangible demonstrable benefits to communities with a plurality of minority or low-income populations.
(c) Repowered existing facilities shall be eligible for funding under this subdivision if the capital investment to repower the existing facility equals at least 80 percent of the value of the repowered facility.
(d) Facilities engaging in the direct combustion of municipal solid waste or tires are not eligible for funding under this subdivision.
(e) Production incentives awarded under this subdivision prior to January 1, 2002, shall commence on the date that a project begins electricity production, provided that the project was operational prior to January 1, 2002, unless the commission finds that the project will not be operational prior to January 1, 2002, due to circumstances beyond the control of the developer. Upon making a finding that the project will not be operational due to circumstances beyond the control of the developer, the commission shall pay production incentives over a five-year period, commencing on the date of operation, provided that the date that a project begins electricity production may not extend beyond January 1, 2007.
(f) Facilities generating electricity from biomass energy shall be considered an in-state renewable electricity generation facility to the extent that they report to the commission the types and quantities of biomass fuels used and certify to the satisfaction of the commission that fuel utilization is limited to the following:
(1) Agricultural crops and agricultural wastes and residues.
(2) Solid waste materials such as waste pallets, crates, dunnage, manufacturing, and construction wood wastes, landscape or right-of-way tree trimmings, mill residues that are directly the result of the milling of lumber, and rangeland maintenance residues.
(3) Wood and wood wastes that meet all of the following requirements:
(A) Have been harvested pursuant to an approved timber harvest plan prepared in accordance with the Z’berg-Nejedly Forest Practice Act of 1973 (Chapter 8 (commencing with Section 4511) of Part 2 of Division 4).
(B) Have been harvested for the purpose of forest fire fuel reduction or forest stand improvement.
(C) Do not transport or cause the transportation of species known to harbor insect or disease nests outside zones of infestation or current quarantine zones, as identified by the Department of Food and Agriculture or the Department of Forestry and Fire Protection, unless approved by the Department of Food and Agriculture and the Department of Forestry and Fire Protection.

SEC. 7.

 Section 25744.5 is added to the Public Resources Code, to read:

25744.5.
 The commission shall allocate and use funding available for emerging renewable technologies pursuant to Section 25744 and Section 25751 to fund photovoltaic and solar thermal electric technologies in accordance with eligibility criteria and conditions established pursuant to Chapter 8.8 (commencing with Section 25780).

SEC. 8.

 Section 25745 of the Public Resources Code is repealed.

SEC. 9.

 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 renewables renewable  portfolio standard by retail sellers, pursuant to subdivision (b) of Section 399.25 399.13  of the Public Utilities Code, the commission shall recover all costs from user fees.

SEC. 10.

 Section 25749 of the Public Resources Code is repealed.

SEC. 11.

 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) The Existing Renewable Resources Account.
(2) New Renewable Resources Account.
(3) Emerging Renewable Resources Account.
(4) 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 of the Public Utilities Code.
(b) (d)  The Emerging Renewable Resources Account is hereby established within the Renewable Resources Trust Fund.  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 25740.5, shall be transmitted to the commission at least quarterly for deposit in the Renewable Resource Trust Fund pursuant to Section 399.6 of the Public Utilities Code. 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 moneys in the account  money in the fund and the accounts within the fund  are hereby continuously appropriated to the commission without regard to fiscal years year  for the following purposes: purposes enumerated in this chapter. 
(1) To close out the award of incentives for emerging technologies in accordance with former Section 25744, as this law existed prior to the enactment of the Budget Act of 2012, for which applications had been approved before the enactment of the Budget Act of 2012.
(2) To close out consumer education activities in accordance with former Section 25746, as this law existed prior to the enactment of the Budget Act of 2012.
(3) To provide funding for the New Solar Homes Partnership pursuant to paragraph (3) of subdivision (e) of Section 2851 of the Public Utilities Code.
(c) The Controller shall provide to the commission funds pursuant to the continuous appropriation in, and for purposes specified in, subdivision (b).
(d) (e)  The Controller shall provide to the commission moneys from the fund sufficient to satisfy all contract and grant awards that were made  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 pursuant to former Sections 25744 and 25746, and Chapter 8.8 (commencing with Section 25780), as these laws existed prior to the enactment of the Budget Act of 2012. 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.
(e) (g)  If the Public Utilities Commission determines that the commission should be the third-party administrator for the New Solar Homes Partnership Program pursuant to subparagraph (A) of paragraph (3) of subdivision (e) of Section 2851 of the Public Utilities Code, any moneys made available to fund the New Solar Homes Partnership Program shall be deposited into the Emerging Renewable Resources Account of the Renewable Resource Trust Fund and used for this purpose. 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. 12.

 Section 387 of the Public Utilities Code is amended to read:

387.
 (a) For purposes of this article, the following terms have the following meanings:
(1) “Carbon-free electrical resource” means a source of electrical generation that emits no greenhouse gases when generating electricity that is deliverable to retail end-use customers in California.
(2) “Load-serving entity” has the same meaning as defined in Section 380.
(3) (a)  “Provider of last resort” means a load-serving entity that the commission determines meets the minimum requirements of this article and designates to provide electrical service to any retail customer whose service is transferred to the designated load-serving entity because the customer’s load-serving entity failed to provide, or denied, service to the customer or otherwise failed to meet its obligations. Each governing body of a local publicly owned electric utility, as defined in Section 9604, 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) The provider of last resort shall be the electrical corporation in its service territory unless provided otherwise in a service territory boundary agreement entered into pursuant to Article 1 (commencing with Section 8101) of Chapter 6 of Division 4, or unless another load-serving entity is designated by the commission pursuant to subdivision (c).
(c) The commission may designate a load-serving entity other than the electrical corporation to serve as a provider of last resort in the electrical corporation’s service territory by approving a joint application by the electrical corporation and the load-serving entity that proposes to become the new provider of last resort in the electrical corporation’s service territory. The application may request a transfer of the responsibilities of the provider of last resort for the entire service territory of the electrical corporation or for a portion of that service territory. The application shall include all of the following:
(1) A demonstrated ability by the load-serving entity seeking to become the new provider of last resort to post a bond sufficient to meet the minimum threshold established pursuant to subdivision (e).
(2) A demonstrated history of contracting for electricity and access to carbon-free electrical resources by the load-serving entity seeking to become provider of last resort.
(3) A viable plan for meeting the resource adequacy requirements established pursuant to Section 380, the requirements of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11)), and all other load-serving entity procurement requirements.
(4) A history of the load-serving entity seeking to become the provider of last resort participating in, and complying with the requirements of, the integrated resource planning process pursuant to Sections 454.51, 454.52, and 454.54, and all other load-serving entity procurement requirements.
(5) The full disclosure by the load-serving entity seeking to become the provider of last resort of any fines or penalties imposed by, or violations of law found by, any regulatory body of any state or territory, or the federal government.
(6) A detailed history of the safety record of the load-serving entity seeking to become the provider of last resort.
(7) An implementation plan to provide for universal access, equitable treatment of all classes of customers, and other customer protections including electric service disconnection procedures consistent with Sections 718 and 779.3.
(d) The commission shall develop a process to facilitate a joint application from load-serving entities that are not electrical corporations to request to transfer the responsibilities of the provider of last resort. This process shall apply when one load-serving entity that is not an electrical corporation has already been designated as a provider of last resort, as described in subdivision (c). The commission may approve a joint application by the designated provider of last resort and the load-serving entity that proposes to become the new provider of last resort in the service territory. The application may request a transfer of responsibilities of the provider of last resort for the entire service territory or for a portion of that service territory. The application shall include all of the elements described in subdivision (c). All of the requirements of this article are applicable to the load-serving entity that proposes to become the new provider of last resort in the applicable service territory.
(e) While a load-serving entity is serving as the new provider of last resort pursuant to subdivision (c), the commission shall not enforce the provider of last resort requirements on the former provider of last resort.
(f) The commission shall develop additional threshold attributes for a load-serving entity other than an electrical corporation to serve as a provider of last resort to retail end-use customers in California that include all of the following:
(1) Minimum insurance requirements.
(2) Minimum financial requirements necessary to provide electricity to retail end-use customers in each service territory.
(3) Compliance with resource adequacy requirements pursuant to Section 380, requirements of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11)), integrated resource planning requirements pursuant to Sections 454.51, 454.52, and 454.54, and all other state-mandated procurement requirements.
(4) Electric service disconnection rules pursuant to Sections 718 and 779.3.
(5) Any additional minimum requirements that the commission determines are needed to ensure that the provider of last resort will perform its obligation to serve.
(g) The commission shall ensure that the provider of last resort for each service territory receives reasonable cost recovery for being designated and serving as a provider of last resort.
(h) (b)  To ensure continued achievement of California’s greenhouse gas emission reduction and air quality goals, and continued accounting of emissions of greenhouse gases for California pursuant to Part 2 (commencing with Section 38530) of Division 25.5 of the Health and Safety Code and other emissions reporting programs, in preparation for an unplanned customer migration to a provider of last resort, the commission, in consultation with the Energy Commission, may do both of  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) Establish rules for all load-serving entities in preparation of any potentially large and unplanned customer migration. 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) Recommend to agencies modifications to relevant regulations.
(i) (2)  Notwithstanding any other law, electrical corporations shall continue to provide all metering, billing, and collection to retail customers served by the provider of last resort. Bills sent by an electrical corporation to retail customers shall identify the designated provider of last resort. The commission shall determine the terms and conditions under which the electrical corporation provides these services to the provider of last resort. 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. 
(j) The commission shall supervise and regulate each provider of last resort, as necessary, as a public utility for the services provided by the provider of last resort pursuant to this article to ensure the provision of electrical service to customers without disruption if a load-serving entity fails to provide, or denies, service to any retail end-use customer in California for any reason. The commission may do all things that are necessary and convenient in the exercise of this power.
(k) (3)  Nothing in this section limits the authority of the commission to regulate the terms of service or establish requirements for provider of last resort service by an electrical corporation or any new provider of last resort. 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. 13.

 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, 2013, 33 percent by December 31, 2020, 50 percent by December 31, 2026, and 60 percent by December 31, 2030,  2010, and for the purposes of increasing the diversity, reliability, public health and environmental benefits of the energy mix,  it is the intent of the Legislature that the commission and the Energy  State Energy Resources Conservation and Development  Commission implement the California Renewables Portfolio Standard Program described in this article.
(b) Achieving the renewables portfolio standard through the procurement of various electricity products from  Increasing California’s reliance on  eligible renewable energy resources is intended to provide unique benefits to California, including all of the following, each of which independently justifies the program: 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. 
(1) Displacing fossil fuel consumption within the state.
(2) Adding new electrical generating facilities in the transmission network within the WECC service area.
(3) Reducing air pollution, particularly criteria pollutant emissions and toxic air contaminants, in the state.
(4) Meeting the state’s climate change goals by reducing emissions of greenhouse gases associated with electrical generation.
(5) Promoting stable retail rates for electric service.
(6) Meeting the state’s need for a diversified and balanced energy generation portfolio.
(7) Assisting with meeting the state’s resource adequacy requirements.
(8) (c)  Contributing to the safe and reliable operation of the electrical grid, including providing predictable electrical supply, voltage support, lower line losses, and congestion relief. 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. 
(9) Implementing the state’s transmission and land use planning activities related to development of eligible renewable energy resources.
(c) (d)  The California Renewables Portfolio Standard Program is intended to complement the Renewable Energy Resources Program administered by the Energy  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.
(d) (e)  New and modified electric transmission facilities may be necessary to facilitate the state achieving its renewables portfolio standard targets.
(e) (1) Supplying electricity to California end-use customers that is generated by eligible renewable energy resources is necessary to improve California’s air quality and public health, particularly in disadvantaged communities identified pursuant to Section 39711 of the Health and Safety Code, and the commission shall ensure rates are just and reasonable, and are not significantly affected by the procurement requirements of this article. This electricity may be generated anywhere in the interconnected grid that includes many states, and areas of both Canada and Mexico.
(2) This article requires generating resources located outside of California that are able to supply 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 supply electricity to California end-use customers. These resources will fully count toward meeting the renewables portfolio standard procurement requirements.

SEC. 14.

 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) “Balancing authority” means the responsible entity that integrates resource plans ahead of time, maintains load-interchange generation balance within a balancing authority area, and supports interconnection frequency in real time.
(c) “Balancing authority area” means the collection of generation, transmission, and loads within the metered boundaries of the area within which the balancing authority maintains the electrical load-resource balance.
(d) (a)  “California balancing authority” is a balancing authority with control over a balancing authority area primarily located in this state and operating for retail sellers and local publicly owned electric utilities subject to the requirements of this article and includes the Independent System Operator (ISO) and a local publicly owned electric utility operating a transmission grid that is not under the operational control of the ISO. A California balancing authority is responsible for the operation of the transmission grid within its metered boundaries which is not limited by the political boundaries of the State of California. “Delivered” and “delivery” have the same meaning as provided in subdivision (a) of Section 25741 of the Public Resources Code. 
(e) (b)  “Eligible renewable energy resource” means an electrical electric  generating facility that meets the definition of a “renewable electrical “in-state renewable electricity  generation facility” in Section 25741 of the Public Resources Code, subject to the following: 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 new hydroelectric facility that commences generation of electricity after December 31, 2005,  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. require a new or increased appropriation or diversion of water from a watercourse. 
(B) Notwithstanding subparagraph (A), a conduit hydroelectric facility of  an existing conduit hydroelectric facility, as defined by Section 823a of Title 16 of the United States Code, of  30 megawatts or less that commenced operation before January 1, 2006, is  less, shall be  an eligible renewable energy resource. A new  conduit hydroelectric facility of  facility, as defined by Section 823a of Title 16 of the United States Code, of  30 megawatts or less that commences operation after December 31, 2005, is  less, shall be  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. require a new or increased appropriation or diversion of water from a watercourse. 
(C) A facility approved by the governing board of a local publicly owned electric utility prior to June 1, 2010, for procurement to satisfy renewable energy procurement obligations adopted pursuant to former Section 387, shall be certified as an eligible renewable energy resource by the Energy Commission pursuant to this article, if the facility is a “renewable electrical generation facility” as defined in Section 25741 of the Public Resources Code.
(D) (i) 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 is an eligible renewable energy resource only for the retail seller or local publicly owned electric utility that procured the electricity from the unit as of December 31, 2005. No unit shall be eligible pursuant to this subparagraph if an application for certification is submitted to the Energy Commission after January 1, 2013. Only one retail seller or local publicly owned electric utility shall be deemed to have procured electricity from a given unit as of December 31, 2005.
(ii) Notwithstanding clause (i), a local publicly owned electric utility that meets the criteria of subdivision (j) of Section 399.30 may sell to another local publicly owned electric utility electricity from small hydroelectric generation units that qualify as eligible renewable energy resources under clause (i), and that electricity may be used by the local publicly owned electric utility that purchased the electricity to meet its renewables portfolio standard procurement requirements. The total of all those sales from the utility shall be no greater than 100,000 megawatthours of electricity.
(iii) The amendments made to this subdivision by the act adding this subparagraph are intended to clarify existing law and apply from December 10, 2011.
(2) (3)  (A)  A facility engaged in the combustion of municipal solid waste shall not be considered an eligible renewable energy resource. resource unless it is located in Stanislaus County and was operational prior to September 26, 1996. 
(B) (c)  Subparagraph (A) does not apply to generation before January 1, 2017, from a facility located in Stanislaus County that was operational prior to September 26, 1996. “Energy Commission” means the State Energy Resources Conservation and Development Commission. 
(d) “Local publicly owned electric utility” has the same meaning as provided in subdivision (d) of Section 9604.
(f) (e)  “Procure” means to acquire through ownership or contract. that a retail seller receives delivered electricity generated by an eligible renewable energy resource that it owns or for which it has entered into an electricity purchase agreement. 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. 
(g) (f)  “Procurement entity” means any person or corporation authorized by the commission to enter into contracts to procure  “Renewables portfolio standard” means the specified percentage of electricity generated by  eligible renewable energy resources on behalf of customers of  that  a retail seller pursuant to subdivision (f) of Section 399.13. is required to procure pursuant to this article. 
(h) (g)  (1) “Renewable energy credit” means a certificate of proof associated with the generation of electricity from an eligible renewable energy resource,  proof,  issued through the accounting system established by the Energy Commission pursuant to Section 399.25, 399.13,  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   electricity  generated by an eligible renewable energy resource attributable to the use of nonrenewable fuels, beyond a de minimis quantity used to generate electricity in the same process through which the facility converts renewable fuel to electricity, shall not  minimus quantity, as determined by the Energy Commission, shall  result in the creation of a renewable energy credit. The Energy Commission shall set the de minimis quantity of nonrenewable fuels for each renewable energy technology at a level of no more than 2 percent of the total quantity of fuel used by the technology to generate electricity. The Energy Commission may adjust the de minimis quantity for an individual facility, up to a maximum of 5 percent, if it finds that all of the following conditions are met: 
(i) The facility demonstrates that the higher quantity of nonrenewable fuel will lead to an increase in generation from the eligible renewable energy facility that is significantly greater than generation from the nonrenewable fuel alone.
(ii) The facility demonstrates that the higher quantity of nonrenewable fuels will reduce the variability of its electrical output in a manner that results in net environmental benefits to the state.
(iii) The higher quantity of nonrenewable fuel is limited to either natural gas or hydrogen derived by reformation of a fossil fuel.
(B) Electricity generated by a small hydroelectric generation facility shall not result in the creation of a renewable energy credit unless the facility meets the requirements of subparagraph (A) or (D) of paragraph (1) of subdivision (e).
(C) Electricity generated by a conduit hydroelectric generation facility shall not result in the creation of a renewable energy credit unless the facility meets the requirements of subparagraph (B) of paragraph (1) of subdivision (e).
(D) Electricity generated by a facility engaged in the combustion of municipal solid waste shall not result in the creation of a renewable energy credit. This subparagraph does not apply to renewable energy credits that were generated before January 1, 2017, by a facility engaged in the combustion of municipal solid waste located in Stanislaus County that was operational prior to September 26, 1996, and sold pursuant to contacts entered into before January 1, 2017.
(i) “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.
(j) (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. A  The commission shall institute a rulemaking to determine the manner in which a  community choice aggregator shall 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. The electric service  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. This paragraph does not  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.
(k) “WECC” means the Western Electricity Coordinating Council of the North American Electric Reliability Corporation, or a successor to the corporation.

SEC. 15.

 Section 399.13 of the Public Utilities Code is amended to read:

399.13.
 (a) (1) The commission shall direct each electrical corporation to annually prepare a renewable energy procurement plan that includes the elements specified in paragraph (6), 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. The commission shall require all other retail sellers to prepare and submit renewable energy procurement plans that address the requirements identified in paragraph (6).
(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 renewables portfolio standard 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  Energy Commission shall do  all of the following:
(a) Certify eligible renewable energy resources that it determines meet the criteria described in subdivision (b) of Section 399.12.
(A) (b)  The current status and progress made during the prior year toward procurement of  Design and implement an accounting system to verify compliance with the renewables portfolio standard by retail sellers, 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 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 eligible renewable energy resources procured by the retail seller, and the current status of compliance with the portfolio content requirements of subdivision (c) of Section 399.16, including procurement of eligible renewable energy resources located outside the state and within the WECC and unbundled renewable energy credits. 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, 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 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 the following conditions have been satisfied:
(1) The local publicly owned electric utility that is procuring the electricity is in compliance with the requirements of Section 387.
(B) (2)  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  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 and  to supply the electricity generated by those resources to load, including the status of planning, siting, and permitting transmission facilities by federal, state, and local agencies. 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. 
(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 review each annual compliance report filed by a retail seller. The commission shall notify a retail seller if the commission has determined, based upon its review, that the retail seller may be at risk of not satisfying the renewable energy procurement requirements for the then-current or a future compliance period and shall provide recommendations in that circumstance regarding satisfying those requirements.
(5) The commission shall adopt, by rulemaking, all of the following:
(A) (e)  A process that provides criteria for the rank ordering and selection of least-cost and best-fit  Allocate and award supplemental energy payments pursuant to Chapter 8.6 (commencing with Section 25740) of Division 15 of the Public Resources Code, to  eligible renewable energy resources to cover above-market costs of renewable energy. A project selected by an electrical corporation may receive supplemental energy payments only if it results from a competitive solicitation that is found by the commission to  comply with the California Renewables Portfolio Standard Program obligations on a total cost and best-fit basis. This process shall take into account all of the following: under this article and the project has entered into an electricity purchase agreement resulting from that solicitation that is approved by the commission. A project selected for an electricity purchase agreement by another retail seller may receive supplemental energy payments only if the retail seller demonstrates to the commission that the selection of the project is consistent with the results of a least-cost and best-fit process, and that the supplemental energy payments are reasonable in comparison to those paid under similar contracts with other retail sellers. 
(i) Estimates of indirect costs associated with needed transmission investments.
(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 supplied as required by the contract.
(iv) Workforce recruitment, training, and retention efforts, including the employment growth associated with the construction and operation of eligible renewable energy resources and goals for recruitment and training of women, minorities, and disabled veterans.
(v) (I) Estimates of electrical corporation expenses resulting from integrating and operating eligible renewable energy resources, including, but not limited to, any additional wholesale energy and capacity costs associated with integrating each eligible renewable resource.
(II) No later than December 31, 2015, the commission shall approve a methodology for determining the integration costs described in subclause (I).
(vi) Consideration of any statewide greenhouse gas emissions limit established pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code).
(vii) Consideration of capacity and system reliability of the eligible renewable energy resource to ensure grid reliability.
(B) Rules permitting retail sellers to accumulate, beginning January 1, 2011, excess procurement in one compliance period to be applied to any subsequent compliance period. The rules shall apply equally to all retail sellers. In determining the quantity of excess procurement for the applicable compliance period, the commission shall retain the rules adopted by the commission and in effect as of January 1, 2015, for the compliance period specified in subparagraphs (A) to (C), inclusive, of paragraph (1) of subdivision (b) of Section 399.15. For any subsequent compliance period, the rules shall allow the following:
(i) For electricity products meeting the portfolio content requirements of paragraph (1) of subdivision (b) of Section 399.16, contracts of any duration may count as excess procurement.
(ii) Electricity products meeting the portfolio content requirements of paragraph (2) or (3) of subdivision (b) of Section 399.16 shall not be counted as excess procurement. Contracts of any duration for electricity products meeting the portfolio content requirements of paragraph (2) or (3) of subdivision (b) of Section 399.16 that are credited towards a compliance period shall not be deducted from a retail seller’s procurement for purposes of calculating excess procurement.
(iii) If a retail seller notifies the commission that it will comply with the provisions of subdivision (b) for the compliance period beginning January 1, 2017, the provisions of clauses (i) and (ii) shall take effect for that retail seller for that compliance period.
(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, at a minimum, shall 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. This paragraph does not preclude an electrical corporation from voluntarily proposing a margin of procurement above the appropriate minimum margin established by the commission.
(6) Consistent with the goal of increasing California’s reliance on eligible renewable energy resources, the renewable energy procurement plan 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 (5) 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.
(7) In soliciting and procuring eligible renewable energy resources, each electrical corporation shall offer contracts of no less than 10 years duration, unless the commission approves of a contract of shorter duration.
(8) (A) 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) Subparagraph (A) applies to all procurement of eligible renewable energy resources for California-based projects, whether the procurement occurs through all-source requests for offers, eligible renewable resources only requests for offers, or other procurement mechanisms. This subparagraph is declaratory of existing law.
(9) In soliciting and procuring eligible renewable energy resources, each retail seller shall consider the best-fit attributes of resource types that ensure a balanced resource mix to maintain the reliability of the electrical grid.
(b) A retail seller may enter into a combination of long- and short-term contracts for electricity and associated renewable energy credits. Beginning January 1, 2021, at least 65 percent of the procurement a retail seller counts toward the renewables portfolio standard requirement of each compliance period shall be from its contracts of 10 years or more in duration or in its ownership or ownership agreements for eligible renewable energy resources.
(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. The commission shall assess adherence to the approved renewable energy resource procurement plans in determining compliance with the obligations of this article.
(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) If an electrical corporation fails to comply with a commission order adopting a renewable energy resource procurement plan, the commission shall exercise its authority to require compliance.
(f) (1) The commission may authorize a procurement entity to enter into contracts on behalf of customers of a retail seller for electricity products from eligible renewable energy resources to satisfy the retail seller’s renewables portfolio standard procurement requirements. The commission shall 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 contracts entered into by an electrical corporation for eligible renewable energy resources pursuant to this article and approved by the commission are reasonable and prudent 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, are “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 of the Public Utilities Code is amended to read:

399.14.
 (a) (1) An electrical corporation, pursuant to Chapter 5 (commencing with Section 1001), and in order to meet its unmet renewables portfolio standard procurement requirements, may apply to the commission for approval to construct, own, and operate an eligible renewable energy resource. 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.
(2) (D)  If the proposed  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 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, and thereafter. 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) The commission may approve additional applications for eligible renewable energy resources once the commission has approved sufficient applications for  Consistent with the goal of procuring the least-cost and best-fit  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, and thereafter. 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 shall not approve any application by an electrical corporation pursuant to subdivision (a) unless both of the following conditions are met: may authorize a retail seller to enter into a contract of less than 10 years’ duration with an eligible renewable energy resource, subject to the following conditions: 
(1) The eligible renewable energy resource utilizes a viable technology at a reasonable cost. No supplemental energy payments shall be awarded for a contract of less than 10 years’ duration. The ineligibility of contracts of less than 10 years’ duration for supplemental energy payments pursuant to this paragraph does not constitute an insufficiency in supplemental energy payments pursuant to paragraph (4) or (5) of subdivision (b) of Section 399.15. 
(2) The commission has established, for each retail seller, minimum quantities of  eligible renewable energy resource provides comparable or superior value to ratepayers when compared to then recent contracts for generation provided by eligible renewable energy resources. 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 amongst 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.
(3) A project selected for a long-term electricity purchase contract of more than 10 years’ duration by a procurement entity through a competitive solicitation, and approved by the commission, may receive supplemental energy payments from the Energy Commission if the transaction satisfies the requirements of subdivision (b) of Section 25743 of the Public Resources Code.
(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, 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.
(c) (h)  In approving any application by an electrical corporation for approval to construct, own, and operate  Construction, alteration, demolition, installation, and repair work on  an eligible renewable energy resource, the commission shall apply traditional cost-of-service ratemaking. When applying traditional cost-of-service ratemaking, the commission, in the certificate authorizing the new construction, shall specify the maximum cost determined to be reasonable and prudent for the construction of the facility and the cost of initial operation of the facility. Upon a filing by the electrical corporation, the commission may authorize an increase in the maximum cost of construction if it determines that the cost has in fact increased, that the cost increase is determined to be reasonable and prudent, and that the present or future public convenience or necessity require construction of the project at the increased cost. resource that receives production incentives or supplemental energy payments pursuant to Sections 25742 and 25743 of the Public Resources Code, including work performed to qualify, receive, or maintain production incentives or supplemental energy payments is “public works” for the purposes of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of the Labor Code. 

SEC. 17.

 Section 399.15 of the Public Utilities Code is amended 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 electrical corporations  to procure a minimum quantity of electricity products from 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. For any retail seller procuring at least 14 percent of retail sales from  calendar year, if sufficient funds are made available pursuant to Section 399.6 and Chapter 8.6 (commencing with Section 25740) of Division 15 of the Public Resources Code, to cover the above-market costs of  eligible renewable energy resources in 2010, the deficits associated with any previous renewables portfolio standard shall not be added to any procurement requirement pursuant to this article. resources. 
(b) The commission shall implement renewables portfolio standard procurement requirements only  annual procurement targets for each retail seller  as follows:
(1) Each retail seller shall procure a minimum quantity of eligible renewable energy resources for each of the following compliance periods:
(A) January 1, 2011, to December 31, 2013, inclusive.
(B) January 1, 2014, to December 31, 2016, inclusive.
(C) January 1, 2017, to December 31, 2020, inclusive.
(D) January 1, 2021, to December 31, 2024, inclusive.
(E) January 1, 2025, to December 31, 2027, inclusive.
(F) January 1, 2028, to December 31, 2030, inclusive.
(2) (A) No later than January 1, 2017, the commission shall establish the quantity of electricity products from eligible renewable energy resources to be procured by the retail seller for each compliance period. These quantities shall be established in the same manner for all retail sellers and result in the same percentages used to establish compliance period quantities for all retail sellers.
(B) (1)  In establishing quantities for the compliance period from January 1, 2011, to December 31, 2013, inclusive, the commission shall require procurement for each retail seller equal to an average of 20  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. For the following compliance periods, the quantities shall reflect reasonable progress in each of the intervening years sufficient to ensure that the procurement of electricity products  sales per year so that 20 percent of its retail sales are procured  from eligible renewable energy resources achieves 25  no later than December 31, 2010. A retail seller with 20  percent of retail sales by December 31, 2016, 33 percent by December 31, 2020, 44 percent by December 31, 2024, 52 percent by December 31, 2027, and 60 percent by December 31, 2030. The commission shall establish appropriate three-year compliance periods for all subsequent years that require retail sellers to procure not less than 60 percent of retail sales of electricity products from eligible renewable energy resources. 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. 
(C) Retail sellers shall be obligated to procure no less than the quantities associated with all intervening years by the end of each compliance period. Retail sellers shall not be required to demonstrate a specific quantity of procurement for any individual intervening year.
(3) (2)  The commission may require the procurement of  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 excess of the quantities specified in paragraph (2). 2001, and to the extent applicable, adjusted going forward pursuant to Section 399.12. 
(4) (3)  Only for purposes of establishing the renewables portfolio standard procurement requirements of paragraph (1) and determining the quantities pursuant to paragraph (2), the  these targets, the  commission shall include all electricity sold to retail customers by the Department of Water Resources pursuant to Division 27 (commencing with Section 80000) Section 80100  of the Water Code in the calculation of retail sales by an electrical corporation.
(5) The commission shall waive enforcement of this section if it finds that the retail seller has demonstrated any of the following conditions are beyond the control of the retail seller and will prevent 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. 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, in a timely fashion, reasonable measures under its control and consistent with its obligations under local, state, and federal laws and regulations, to develop and construct new transmission lines or upgrades to existing lines intended to transmit electricity generated by eligible renewable energy resources. In determining the reasonableness of a retail seller’s actions, the commission shall consider the retail seller’s expectations for full-cost recovery for these transmission lines and upgrades.
(ii) Whether the retail seller has taken all reasonable operational measures to maximize cost-effective deliveries of electricity from eligible renewable energy resources in advance of transmission availability.
(B) Permitting, interconnection, or other circumstances that delay procured eligible renewable energy resource projects, or there is an insufficient supply of eligible renewable energy resources available to the retail seller. In making a finding that this condition prevents timely compliance, the commission shall consider whether the retail seller has done all of the following:
(i) Prudently managed portfolio risks, including relying on a sufficient number of viable projects.
(ii) Sought to develop one of the following: its own eligible renewable energy resources, transmission to interconnect to eligible renewable energy resources, or energy storage used to integrate eligible renewable energy resources. This clause shall not require an electrical corporation to pursue development of eligible renewable energy resources pursuant to Section 399.14.
(iii) 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.
(iv) Taken reasonable measures, under the control of the retail seller, to procure cost-effective distributed generation and allowable unbundled renewable energy credits.
(C) Unanticipated curtailment of eligible renewable energy resources if the waiver would not result in an increase in greenhouse gas emissions.
(D) Unanticipated increase in retail sales due to transportation electrification. In making a finding that this condition prevents timely compliance, the commission shall consider both of the following:
(i) Whether transportation electrification significantly exceeded forecasts in that retail seller’s service territory based on the best and most recently available information filed with the State Air Resources Board, the Energy Commission, or another state agency.
(ii) Whether the retail seller has taken reasonable measures to procure sufficient resources to account for unanticipated increases in retail sales due to transportation electrification.
(6) If the commission waives the compliance requirements of this section, the commission shall establish additional reporting requirements on the retail seller to demonstrate that all reasonable actions under the control of the retail seller are taken in each of the intervening years sufficient to satisfy future procurement requirements.
(7) The commission shall not waive enforcement pursuant to this section, unless the retail seller demonstrates that it has taken all reasonable actions under its control, as set forth in paragraph (5), to achieve full compliance.
(8) (4)  If  In the event that  a retail seller fails to procure sufficient eligible renewable energy resources to comply with a procurement requirement pursuant to paragraphs (1) and (2) and fails to obtain an order from the commission waiving enforcement pursuant to paragraph (5), the commission shall assess penalties for noncompliance. A schedule of penalties shall be adopted by the commission that shall be comparable for electrical corporations and other retail sellers. For electrical corporations, the cost of any penalties shall not be collected in rates. Any penalties collected under this article shall be deposited into the Electric Program Investment Charge Fund and used for the purposes described in Chapter 8.1 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 if sufficient funds are made available pursuant to Section 399.6 and Chapter 8.6  (commencing with Section 25710) 25740)  of Division 15 of the Public Resources Code. Code, to cover any above-market costs of eligible renewable energy resources. 
(9) (5)  Deficits associated with the compliance period shall not be added to a future compliance period. If supplemental energy payments from the Energy Commission, in combination with the market prices approved by the commission, are insufficient to cover any above-market costs of electricity procured from eligible renewable energy resources through an electricity purchase agreement of at least 10 years’ duration, the commission shall allow a retail seller to limit its annual procurement obligation to the quantity of eligible renewable energy resources that can be procured with available supplemental energy payments. A retail seller shall not be required to enter into long-term contracts with operators of eligible renewable energy resources that exceed the market prices established pursuant to subdivision (c). 
(c) The commission shall establish a limitation for each electrical corporation on the procurement expenditures for all methodology to determine the market price of electricity for terms corresponding to the length of contracts with  eligible renewable energy resources used to comply with the renewables portfolio standard. This limitation shall be set at a level that prevents disproportionate rate impacts. 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) If the cost limitation for an electrical corporation is insufficient to support the projected costs of meeting the renewables portfolio standard procurement requirements, the electrical corporation may refrain from entering into new contracts or constructing facilities beyond the quantity that can be procured within the limitation, unless  The Energy Commission shall provide supplemental energy payments from funds in the New Renewable Resources Account of the Renewable Resource Trust Fund to eligible renewable energy resources pursuant to Chapter 8.6 (commencing with Section 25740) of Division 15 of the Public Resources Code, consistent with this article, for any above-market costs. Indirect costs associated with the purchase of  eligible renewable energy resources can be procured without exceeding a de minimis increase in rates, consistent with the long-term procurement plan established for the electrical corporation pursuant to Section 454.5. by an electrical corporation, including imbalance energy charges, sale of excess energy, decreased generation from existing resources, or transmission upgrades, shall not be eligible for supplemental energy payments, but are recoverable in rates, as authorized by the commission. The Energy Commission shall not award supplemental energy payments to service load that is not subject to the renewable energy public goods charge. 
(e) (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 both 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) Notify the appropriate policy and fiscal committees of the Legislature that the electrical corporation may exceed its cost limitation, and include the reasons why the electrical corporation may exceed its cost limitation.
(f) (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 399.16 of the Public Utilities Code is repealed.

SEC. 19.

 Section 399.16 is added to the Public Utilities Code, to read:

399.16.
 (a) The commission, by rule, may authorize the use of renewable energy credits to satisfy the requirements of the renewables portfolio standard 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 commission and the Energy Commission shall conclude that the tracking system established pursuant to subdivision (c) of Section 399.13, is operational, is capable of independently verifying the electricity generated by an eligible renewable energy resource and 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).
(2) A 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) All revenues received by an electrical corporation for the sale of a renewable energy credit shall be credited to the benefit of ratepayers.
(5) 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 and included in the baseline quantity of eligible renewable energy resources of the purchasing retail seller pursuant to Section 399.15.
(6) 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 towards 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 retail seller shall be obligated to procure renewable energy credits to satisfy the requirements of this article in the event that supplemental energy payments, in combination with the market prices approved by the commission, are insufficient to cover the above-market costs of long-term contracts, of more than 10 years’ duration, with eligible renewable energy resources.
(9) 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.

 Article 9 (commencing with Section 635) is added to Chapter 3 of Part 1 of Division 1 of the Public Utilities Code, to read:

Article  9. Long-Term Plans and Procurement Plans
635.
 In a long-term plan adopted by an electrical corporation or in a procurement plan implemented by a local publicly owned electric utility, the electrical corporation or local publicly owned electric utility shall adopt a strategy applicable both to newly constructed or repowered generation owned and procured by the electrical corporation or local publicly owned electric utility to achieve efficiency in the use of fossil fuels and to address carbon emissions.

SEC. 21.

 Section 2854 is added to Chapter 9 of Part 2 of Division 1 of the Public Utilities Code, to read:

2854.
 (a) Notwithstanding Section 7550.5 of the Government Code, on or before January 1, 2008, the commission shall report to the Legislature on the feasibility, desirability, and design of performance-based incentives for solar energy systems of less than 30 kilowatt.
(b) This section shall remain in effect only until January 1, 2009, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2009, deletes or extends that date.
SEC. 22.
 By June 30, 2007, the Public Utilities Commission, in consultation with the State Energy Resources Conservation and Development Commission, shall review the impact of allowing supplemental energy payments to be applied toward contracts for the procurement of eligible renewable energy resources that are of a duration of less than 10 years, and to report to the Legislature with the results of the review, including both of the following:
(a) The impact that higher priced short-term contracts may have on the allocation of supplemental energy payments.
(b) Recommended methods to fairly allocate supplemental energy payments for the above-market costs of short-term contracts that ensure that no more supplemental energy payments are paid for those contracts than would have been allocated for an equivalent long-term contract.
SEC. 23.
 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution for certain costs that may be incurred by a local agency or school district because, in that regard, 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.
However, if the Commission on State Mandates determines that this act contains other costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.